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Financial report summary
?Competition
Ellomay CapitalRisks
- The announcement and pendency of our agreement to be acquired could have an adverse effect on our business.
- The failure to complete the merger could adversely affect our business and financial condition.
- We have become the target of securities class action lawsuits, and may become the target of derivative lawsuits, that could result in substantial costs and may delay or prevent the Merger Agreement from being consummated.
- Electricity generated from wind and solar energy depends heavily on suitable wind and solar conditions, respectively. If such conditions are unfavorable or below our expectations, our projects’ electricity generation and the revenue generated from our projects may be substantially below our expectations.
- We have invested in Pattern Development which exposes us directly to project development risks.
- A prolonged environment of low prices for natural gas, other conventional fuel sources, or competing renewable resources could have a material adverse effect on our long-term business prospects, financial condition and results of operations.
- Climate change may have the long-term effect of changing meteorological patterns at our projects which could have a material adverse effect on our business prospects, financial condition, results of operations and ability to make cash distributions to our investors
- Our operations are subject to numerous environmental, health and safety laws and regulations.
- Construction projects may not be completed on time, and construction costs could increase to levels that make a project too expensive to complete or make the return on investment in that project less than expected.
- The expansion of our international operations into Japan subjects us to a number of risks, and if we are unable to effectively manage these risks, and similar risks if we expand into other markets outside of the United States and Canada, our business prospects, financial condition and results of operations and liquidity could be materially and adversely affected.
- Our projects rely on interconnections to transmission lines and other transmission facilities that are owned and operated by third parties which exposes us to risks. Our projects are also exposed to interconnection and transmission facility development and curtailment risks, which may delay the completion of any construction projects or reduce the return to us on those investments.
- New projects being developed that we may acquire may need governmental approvals and permits, including environmental approvals and permits, for construction and operation. Any failure to obtain or maintain in effect necessary permits could adversely affect the amount of our growth.
- The loss of one or more of our or Pattern Development's executive officers or key employees may adversely affect the ability to effectively complete the development of projects, implement our growth strategy, complete construction projects on schedule, or manage our operating projects.
- The employee transfer may adversely affect our costs.
- Our use and enjoyment of real property rights for our projects may be adversely affected by the rights of lienholders and leaseholders that are superior to those of the grantors of those real property rights to our projects.
- Our operating projects are, and other future projects may be, subject to various governmental regulations, approvals, and compliance requirements that regulate the sale of electricity, which could have a material adverse effect on our business prospects, financial condition and results of operations.
- Our industry could be subject to increased regulatory oversight or changes in government policies that could have adverse effects.
- Our projects are not able to insure against all potential risks and may become subject to higher insurance premiums.
- Currency exchange rate fluctuations may have an impact on our financial results and condition.
- Impairment in the carrying value of long-lived assets and goodwill could negatively affect our operating results and reduce our earnings.
- Our cross-border operations require us to comply with anti-corruption laws and regulations of the U.S. government and various non-U.S. jurisdictions.
- We own, and in the future may acquire, certain projects in joint ventures, and our joint venture partners’ interests may conflict with our and our stockholders’ interests.
- An inability of Pattern Development to obtain the requisite financing to develop and construct projects could have a material adverse effect on our ability to grow our business.
- Steps we take in response to developments in the market, such as the potential inclusion of energy storage and battery systems in our projects, expose us to risks.
- Security breaches, including cybersecurity breaches, and other disruptions could compromise our business operations and critical and proprietary information and expose us to liability, which could adversely affect our business prospects, financial condition and reputation.
- The growth of our business depends in part on locating and acquiring interests in additional attractive independent power and transmission projects.
- Capital market conditions can have an effect on both our timing and ability to consummate future acquisitions. We must also potentially anticipate obtaining funds from equity or debt financings to complete construction or pay capital costs of an acquired project which exposes us to financing risks.
- Acquisition and disposal of power projects involves numerous risks.
- Our ability to grow our cash available for distribution is substantially dependent on our ability to make acquisitions on economically favorable terms.
- The energy industry in the markets in which we operate, as well as the markets we are looking to expand into, benefit from governmental support that is subject to change. Regulatory uncertainty in the clean energy sector, including with respect to environmental and tax policies, may have adverse impacts on the renewable energy industry and our business.
- Wind power procurement in Canada is a provincial matter, with relatively irregular, infrequent and competitive procurement windows.
- We face competition primarily from infrastructure funds and IPPs focused on renewable energy generation.
- Any change in power consumption levels could have a material adverse effect on our business prospects, financial condition and results of operations.
- Some states and provinces with renewable energy targets have met their targets, or will meet them in the near future, which could cause demand for new wind and solar power capacity to decrease.
- In spite of our Pattern Development Purchase Rights, it is possible that Pattern Development might be sold to third parties. In addition, each of our Project Purchase Rights and Pattern Development Purchase Rights may expire, and the Second Amended and Restated Non-Competition Agreement with Pattern Energy Group LP and Pattern Development might terminate.
- We may decide to further expand our acquisitions of non-wind power projects which may present unforeseen challenges.
- We are subject to risks associated with litigation or administrative proceedings that could materially impact our operations, including proceedings in the future related to power projects we subsequently acquire.
- The Series A Perpetual Preferred Stock gives the holders thereof liquidation and distribution preferences, certain rights relating to our business and management, and under certain circumstances, the conversion of such shares potentially causing dilution to our common stockholders.
- Our substantial amount of indebtedness may adversely affect our ability to operate our business and impair our ability to pay dividends.
- Our indebtedness may limit the amount of cash flow available to invest in the ongoing needs of our business which could have a material adverse effect on business prospects, financial condition and results of operations.
- We may not have the ability to raise the funds necessary to make payments in cash which may be required under the terms of the notes we have issued upon conversion settlement, repayment at maturity, or upon exercise of a repurchase obligation, and our debt agreements may limit our ability to pay cash upon conversion, repurchase or redemption of these notes.
- The conditional conversion feature of the convertible notes we have issued, if triggered, may adversely affect our financial condition and operating results.
- Provisions in the indentures governing our outstanding notes may deter or prevent a business combination that may be favorable to investors.
- If our subsidiaries default on their obligations under their project-level debt, we may decide to make payments to lenders to prevent foreclosure on the collateral securing the project-level debt, which would, without such payments, cause us to lose certain of our projects.
- We are subject to indemnity and guarantee obligations.
- Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
- Our hedging activities may not adequately manage our exposure to commodity and financial risk, which could result in significant losses or require us to use cash collateral to meet margin requirements, each of which could have a material adverse effect on our business prospects, financial condition, results of operations and liquidity, which could impair our ability to execute favorable financial hedges in the future.
- We are a holding company with no operations of our own, and we depend on our power projects for cash to fund all of our operations and expenses, including to make dividend payments.
- Our cash available for distribution to holders of our Class A shares may be reduced as a result of restrictions on our subsidiaries’ cash distributions to us under the terms of their indebtedness, or in the event certain specified events occurred under our tax equity arrangements that change the percentage of cash distributions to be made to the tax equity investors.
- Our ability to pay regular dividends on our Class A shares is subject to the discretion of our Board of Directors, and our cash dividend policy is subject to change. In addition, subject to certain exceptions, so long as any Preferred Shares remain outstanding, we may not declare any dividend or distribution on our Class A shares unless all accumulated and unpaid dividends have been declared and paid on the Preferred Shares.
- If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired and investors’ views of us could be harmed.
- We are an SEC foreign issuer under Canadian securities laws and, therefore, are exempt from certain requirements of Canadian securities laws applicable to other Canadian reporting issuers.
- Pattern Energy Group LP’s and Pattern Development’s general partners and their officers and directors have fiduciary or other obligations to act in the best interests of the owners of such entities, which could result in a conflict of interest with us and our stockholders.
- The share ownership of each of PSP Investments and the holders of the Preferred Shares may limit other stockholders’ ability to influence corporate matters, and the interests of such stockholder may differ from or conflict with the interests of other stockholders.
- Certain of our executive officers will continue to have an economic interest in, and all of our executive officers will continue to provide services to, Pattern Energy Group LP and Pattern Development, which could result in conflicts of interest.
- Riverstone is under no obligation to offer us an opportunity to participate in any business opportunities that it may consider from time to time, including those in the energy industry, and, as a result, Riverstone’s existing and future portfolio companies may compete with us for investment or business opportunities.
- Our actual or perceived failure to deal appropriately with conflicts of interest with the Pattern Development Companies could damage our reputation, increase our exposure to potential litigation and have a material adverse effect on our business prospects, financial condition and results of operations.
- Market interest and foreign exchange rates may have an effect on the value of our Class A shares.
- The price of our Class A shares may fluctuate significantly, and stockholders could lose all or part of their investment.
- We incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could harm our operating results.
- As a result of the FPA and FERC’s regulations in respect of transfers of control, absent prior authorization by FERC, we cannot convey, and an investor in our company will generally not be permitted to obtain, a direct and/or indirect voting interest in 10% or more of our issued and outstanding voting securities, and a violation of this limitation could result in civil or criminal penalties under the FPA and possible further sanctions imposed by FERC under the FPA.
- Provisions of our organizational documents, Delaware law, and certain contractual provisions we are subject to might discourage, delay or prevent a change of control of our company or changes in our management and, as a result, depress the trading price of our Class A shares.
- Future sales of our shares in the public market could lower our Class A share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute stockholders’ ownership in us and may adversely affect the market price of our Class A shares.
Management Discussion
- Total revenue for the year ended December 31, 2019 was $532 million compared to $475 million for the year ended December 31, 2018, an increase of $57 million, or approximately 12%. The increase in total revenue for the year ended December 31, 2019 as compared to the prior year was primarily attributable to:
- These increases in revenues were offset by a $21 million decrease in revenue due to the divestiture of El Arrayán in 2018.
- Cost of revenue for the year ended December 31, 2019 was $515 million compared to $428 million for the year ended December 31, 2018, an increase of $87 million, or approximately 20%. The increase in cost of revenue during 2019 as compared to 2018 was primarily attributable to: