Pattern Energy operates fourteen wind power facilities across the U.S., Canada, Chile and Puerto Rico. Another two facilities are under construction. With exotic names like Logan’s Gap Wind in Comanche County, Texas and Lost Creek Wind in DeKalb County, Missouri, the wind power sites have a total capacity to generate 2,282 megawatts.
Far away from the windy stretches where its wind turbines spin out electricity, Pattern Energy’s management team is installed in offices at San Francisco’s historic Embarcadero. Most members hail from Babcock & Brown, the Australia-based investment and advisory firm that went bust during the financial crisis in 2009. The post mortem for Babcock & Brown suggests it was poorly run, with little regard for prudent leverage or risk management practices. Reportedly, the Wind Group at Babcock & Brown was central to the problems, paying out substantially more dividends than was earned as operating cash flow. While normally prohibited, such excessive payments were made by setting up the Wind Group in an off-shore ownership structure. The ruse allowed Babcock & Brown to portray the company as highly profitable so the company could borrow more from banks as well as pay out management fees and bonuses to senior executives.
Investors have been squirming under the added risk associated with higher leverage as well as the specter of losses during the last year. PEGI began trading downward in mid-July 2015 when the rest of the U.S. equity market took a nose dive. With a beta of 1.04 we would expect a decline commensurate with the broader market. However, PESI has not recovered with the rest of the market, leaving the stock price closer to its 52-week low price than it is to the high price.