UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): March 14, 2019

TerraForm Power, Inc.

(Exact name of registrant as specified in its charter)

200 Liberty Street, 14th Floor, New York, New York 10281

(Address of principal executive offices, including zip code)

646-992-2400

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

o                               Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o                               Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o                               Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o                               Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02 Results of Operations and Financial Condition.

On March 14, 2019, TerraForm Power, Inc. (the “Company”) issued a press release announcing the reporting of its financial results for the quarter and year ended December 31, 2018. The press release also reported certain financial and operating metrics of the Company as of or for the quarters and years ended December 31, 2018 and 2017. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

Note Regarding Non-GAAP Financial Measures.  In the attached press release, presentations, and letter, the Company discloses items not prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), or non-GAAP financial measures (as defined in Regulation G promulgated by the U.S. Securities and Exchange Commission). A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is contained in the attached press release and presentations.

Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in this Form 8-K and the press release, presentations, and letter attached as exhibits hereto, this Form 8-K and the press release, presentations, and letter contain forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the press release and presentations regarding these forward-looking statements.

Item 7.01 Regulation FD.

On March 14, 2019, the Company also posted presentation materials to the Investors section of its website at www.terraformpower.com, which were made available in connection with a previously announced March 15, 2019 investor conference call. A copy of the presentation is furnished herewith as Exhibit 99.2.

On March 14, 2019, the Company also posted a letter to shareholders to the Investors section of its website at www.terraformpower.com. A copy of the letter is furnished herewith as Exhibit 99.3.

The information in Exhibits 99.2 and 99.3 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in Exhibits 99.2 and 99.3 shall not be incorporated by reference into any filing or other document under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing or document.

Item 9.01 Financial Statement and Exhibits.

(d) Exhibits

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

3

Exhibit 99.1

TerraForm Power Reports Fourth Quarter and Full Year 2018 Results

NEW YORK, NY, Mar. 14, 2019 (BUINESS WIRE) — TerraForm Power, Inc. (Nasdaq: TERP) (“TerraForm Power”) today reported financial results for the quarter and year ended December 31, 2018.

Highlights

·                  Invested $1.2 billion to acquire Saeta Yield, S.A.U. (“Saeta”), a 1,000 MW portfolio of high-quality wind and solar assets located primarily in Spain that established a scale operating platform in Europe

·                  Invested ~$28 million in organic growth initiatives with an average return on equity of ~19%

·                  Progressed efforts to execute long term service agreements with General Electric (“GE”) for North American wind fleet that are expected to lock in annual cost savings of ~$20 million and enhance revenues through performance guarantees backed by liquidated damages

·                  Completed solar performance improvement plan, expected to increase annual production by ~61 GWh and revenue by ~$11 million

·                  Issued $650 million in equity to fund the Saeta acquisition at attractive terms pursuant to backstop arrangement with affiliates of Brookfield Asset Management

·                  Raised ~$160 million of non-recourse debt in conjunction with the financing plan for the Saeta acquisition

·                  Achieved upgrade of corporate credit rating from Moody’s to Ba3

·                  Repriced $350 million Term Loan B yielding projected annual savings of approximately $2.5 million

·                  Declared a Q1 2019 dividend of $0.2014 per share, an increase of 6% from Q4 2018, and implying $0.8056 per share on an annual basis

“During 2018, we made significant progress building the foundation to transform TerraForm Power into a fully-integrated renewable power company that delivers a sustainable, total return in the low teens to our shareholders,” said John Stinebaugh, CEO of TerraForm Power. “In 2019, we look forward to reaping the benefits from this foundation and further investing in our repowerings and other growth opportunities.”

Results

(1) Loss per share is calculated using a weighted average diluted Class A common stock shares outstanding. CAFD per share is calculated using a weighted average diluted Class A common stock and weighted average Class B common stock shares outstanding. For the twelve months ended December 31, 2018, weighted average diluted Class A common stock shares outstanding totaled 182 million, including issuance of 61 million to affiliates (for the twelve months ended December 31, 2017, this amount was 104 million). For the twelve months ended December 31, 2018, there were no weighted average Class B common stock shares outstanding (for the twelve months ended December 31, 2017, this amount was 38 million).

(2) Non-GAAP measures. See “Calculation and Use of Non-GAAP Measures” and “Reconciliation of Non-GAAP Measures” sections. Amounts in 2017 adjusted for sale of our UK and Residential portfolios.

Financial Results

While we made much progress, 2018 was a transitional year for TerraForm Power. During the course of the year, we accelerated our blade inspection and repair program due to the Raleigh outage and to prepare to turn over operations of our wind farms to GE. This resulted in a significant increase in turbine downtime. In addition, we lost a considerable amount of production from our solar fleet, which operated at an availability of 91% in the first half of the year prior to the initiation of our performance improvement plan.

For the full year 2018, TerraForm Power delivered Net Loss, Adjusted EBITDA and cash available for distribution (“CAFD”) of $(153) million, $590 million and $126 million, respectively. This represents a decrease in Net Loss of $83 million, an increase in Adjusted EBITDA of $152 million and an increase in CAFD of $38 million, compared to 2017. The improvement in our results primarily reflects two fiscal quarters of contribution from Saeta. This contribution was offset by below average North American wind production in part due to an especially strong El Niño and challenging ERCOT pricing dynamics as a result of maintenance of the transmission system, which reduced transfer capacity during peak wind resource season. Thus far in 2019, power prices in the Texas panhandle have improved as the transmission system has been fully on-line.

In 2018, North American wind production was 10% below our LTA. Of the shortfall, 4% can be attributed to poor wind resource, particularly in Hawaii and the Midwest, 2% to abnormally high non-reimbursable curtailment, 2% to the impact of the Raleigh-related outages and 2% to downtime for blade inspections and repairs. Our solar and regulated platforms performed in-line with expectations for the most part. In our solar platform, significantly reduced curtailment in Chile due to debottlenecking of the transmission grid offset low availability in the first half of the year. In our regulated platform, lower than expected solar resource was offset by wholesale electricity prices that averaged 10% higher than the prior year.

Liquidity Update

We continue to progress the execution of the $350 million non-recourse debt component of our financing plan for the Saeta acquisition. We expect to close our third and fourth project financings, raising proceeds of ~$100 million and $90 million, respectively by the end of the first half of 2019.

We also recently launched the refinancing of our wind facility in Uruguay (~95 MW). Based on negotiations with lenders, we are planning on extending the tenor, improving sizing parameters and reducing the margin. Upon expected closing in the second quarter, we anticipate upsizing the financing by approximately $60 million. To further support corporate liquidity, we released $24 million in cash in December by collateralizing reserve accounts with letters of credit at two wind projects in North America. In addition, we launched the consent process for certain Spanish projects to replace cash funded reserve accounts with letters of credit.

Operations

To date, we have signed LTSAs with GE for 10 of 16 projects in our North American wind fleet. In parallel, we have made significant progress obtaining the required lender and tax equity partner consents and are in negotiations with service providers for the early termination of existing service contracts. GE is now fully operating six sites, and we anticipate handing over the remaining sites in the first half of this year.

Beginning in Q3 2018, we solicited proposals for LTSAs for 500 MW of our Spanish wind fleet. The fleet is comprised of turbines manufactured by Vestas, GE, Siemens and Gamesa. Based on proposals that we have received, we are in the process of replacing the current operator of the wind farms with the respective manufacturers. In December, we reached a preliminary agreement with Vestas to extend the O&M contract for our Uruguayan wind farms in exchange for an improvement in technical and economic terms. Finally, we recently launched an RFP to improve the O&M contract terms for our North American solar fleet. Thus far, there has been very strong interest from large third-party providers. Our goal is to lower our cost and improve the alignment of interests by implementing production guarantees with penalties and bonuses based upon performance, similar to our North American wind LTSAs. As a result of these initiatives, we believe that we will be able to reduce annual O&M costs by approximately $6 million, commencing in the second half of this year.

Finally, for our North American and European wind farms, we have commenced the technical analysis and permitting to implement turbine optimization technology, including GE’s Power Up offering. Upon completion, we expect to increase production across our wind fleet and generate approximately $2 million of incremental revenue.

Growth Initiatives

During the year, we continued to advance the 160 MW repowering of our New York wind farms. We believe that there is strong support in the state for investment in renewable power, particularly with Governor Cuomo’s vision for a “Green New Deal” to achieve a 100% carbon-free power grid by 2040. Through engagement with key government stakeholders, including the Governor’s office, the Department of Public Service, and the New York State Energy Research and Development Authority (“NYSERDA”), we have built a strong base of support for a proposal that would benefit our repowerings. In January 2019, NYSERDA expressed support for a plan which includes a greater allocation of renewable energy credits (“RECs”) for repowerings based on their projected increase in production over the status quo, which was largely based on our proposal. On a parallel path, there is a bill in the New York State legislature that would require all electricity suppliers to procure RECs from renewable generators built before 2015. While it is unclear how these processes will unfold, it is encouraging that both the key regulatory agencies and the state legislature are looking to create a competitive market for RECs generated by repowered facilities.

In light of our progress to date, we have accelerated the pace of our repowering efforts in New York. Since we can build these wind farms at a 40% discount to greenfield projects, we plan to replace the existing Clipper turbines that have been derated and have significant operating risk going forward, and we expect to utilize production tax credit (“PTC”) safe-harbored turbines that would increase production by 25% to 30%, we believe we can earn returns above our target range of 9% to 11% on equity based on the existing incentive regime and current wholesale power market prices. If we are able to obtain additional incentives and/or we are able to obtain premium pricing for renewable power, we could achieve significant upside. Finally, we are in discussions with Hawaiian Electric to evaluate options for repowering our Kahuku wind facility on Oahu island. We believe that this project has an attractive value proposition for all stakeholders. Hawaii has a very aggressive goal of 100% carbon free power generation by 2040. This repowering would increase production from Kahuku by 30%, and similar to New York, we would reduce prospective operating cost and risk by replacing the existing Clipper turbines.

During 2018, we invested ~$28 million in organic growth initiatives, which we expect will earn a return on equity of approximately 19%. Highlights include acquiring 6 MW of solar assets under a legacy right of first offer for $4 million, investing $4 million to acquire minority interests, including tax equity interests, investing $4 million in the expansion of one of our solar farms and investing $11 million in our battery energy storage project in Hawaii. Furthermore, in December 2018, we invested $4 million to acquire a regulated 4 MW solar PV asset as part of our consolidation strategy in the fragmented Spanish renewables market.

Regulatory and Counterparty Update

In December 2018, the Spanish Government published a proposed law, which provides the option of keeping the regulated return at its current level of 7.4% for the next 12 years commencing 2020 for all renewable assets in operation before September 2013. This applies to all of our Spanish assets. In February 2019, following the failure to ratify its budget, the Spanish government announced that new elections will be held on April 28, 2019. Despite this uncertainty, we are optimistic that a favorable outcome on the regulated return will be achieved, in light of broad based support for renewable power amongst Spanish political parties as well as the recommendation of a 7.1% regulated return put forward by the CNMV, which is an independent Spanish state agency. However, with the pending election, this could delay the timeline for ratification of the law and could also result in a change to the proposed regulated rate of return.

Facing billions of dollars in claims over deadly wildfires in California, PG&E filed for bankruptcy on January 29, 2019. The bankruptcy filing has not resulted in an event of default for any of our projects with PG&E as an offtaker. At this stage, it is unclear whether PG&E will be able to reject its existing renewable power contracts. Even though our PG&E exposure is less than 1% of our portfolio, we have joined with other industry players to advocate for continuing to honor existing renewable power contracts.

Announcement of Quarterly Dividend

TerraForm Power today announced that, on March 13, 2019, its Board declared a quarterly dividend with respect to TerraForm Power’s Class A common stock of $0.2014 per share. The dividend is payable on March 29, 2019, to stockholders of record as of March 24, 2019. This dividend represents TerraForm Power’s fifth consecutive quarterly dividend payment under Brookfield’s sponsorship.

About TerraForm Power

TerraForm Power owns and operates a best-in-class renewable power portfolio of solar and wind assets located primarily in the U.S. and E.U., totaling more than 3,700 MW of installed capacity. TerraForm Power’s goal is to acquire operating solar and wind assets in North America and Western Europe. TerraForm Power is listed on the Nasdaq stock exchange (Nasdaq: TERP). It is

sponsored by Brookfield Asset Management, a leading global alternative asset manager with more than $350 billion of assets under management.

For more information about TerraForm Power, please visit: www.terraformpower.com.

Contacts for Investors / Media:

Chad Reed

TerraForm Power

investors@terraform.com

Quarterly Earnings Call Details

Investors, analysts and other interested parties can access TerraForm Power’s 2018 Full Year and Fourth Quarter Results as well as the Letter to Shareholders and Supplemental Information on TerraForm Power’s website at www.terraformpower.com.

The conference call can be accessed via webcast on March 15, 2019 at 9:00 a.m. Eastern Time at https://event.on24.com/wcc/r/1868899/535D3AA90E42BFE84348A1E0721D4251, or via teleconference at 1-844-464-3938    toll free in North America. For overseas calls please dial 1-765-507-2638, at approximately 8:50 a.m. Eastern Time. A replay of the webcast will be available for those unable to attend the live webcast.

Safe Harbor Disclosure

This communication contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. These statements involve estimates, expectations, projections, goals, assumptions, known and unknown risks, and uncertainties and typically include words or variations of words such as “expect,” “anticipate,” “believe,” “intend,” “plan,” “seek,” “estimate,” “predict,” “project,” “opportunities,” “goal,” “guidance,” “outlook,” “initiatives,” “objective,” “forecast,” “target,” “potential,” “continue,” “would,” “will,” “should,” “could,” or “may” or other comparable terms and phrases. All statements that address operating performance, events, or developments that TerraForm Power expects or anticipates will occur in the future are forward-looking statements. They may include estimates of expected cash available for distribution (CAFD), dividend growth, earnings, Adjusted EBITDA, revenues, income, loss, capital expenditures, liquidity, capital structure, margin enhancements, cost savings, future growth, financing arrangements and other financial performance items (including future dividends per share), descriptions of management’s plans or objectives for future operations, products, or services, or descriptions of assumptions underlying any of the above. Forward-looking statements provide TerraForm Power’s current expectations or predictions of future conditions, events, or results and speak only as of the date they are made. Although TerraForm Power believes its expectations and assumptions are reasonable, it can give no assurance that these expectations and assumptions will prove to have been correct and actual results may vary materially.

By their nature, forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. Factors that might cause such differences include, but are not limited to: risks related to weather conditions at our wind and solar assets; the willingness and ability of counterparties to fulfill their obligations under offtake agreements; price fluctuations, termination provisions and buyout provisions in offtake agreements; our ability to enter into contracts to sell power on acceptable prices and terms, including as our offtake agreements expire; government regulation, including compliance with regulatory and permit requirements and changes in tax laws, market rules, rates, tariffs, environmental laws and policies affecting renewable energy; our ability to compete against traditional utilities and renewable energy companies; pending and future litigation; our ability to successfully integrate projects we acquire from third parties, including Saeta Yield S.A.U., and our ability to realize the anticipated benefits from such acquisitions; our ability to implement and realize the benefit of our cost and performance enhancement initiatives, including the long-term service agreements with an affiliate of General Electric; risks related to the ability of our hedging activities to adequately manage our exposure to commodity and financial risk; risks related to our operations being located internationally, including our exposure to foreign currency

exchange rate fluctuations and political and economic uncertainties, the regulated rate of return of renewable energy facilities in our Regulated Wind and Solar segment, a reduction of which could have a material negative impact on our results of operations; the condition of the debt and equity capital markets and our ability to borrow additional funds and access capital markets, as well as our substantial indebtedness and the possibility that we may incur additional indebtedness in the future; operating and financial restrictions placed on us and our subsidiaries related to agreements governing indebtedness; our ability to identify or consummate any future acquisitions, including those identified by Brookfield; our ability to grow and make acquisitions with cash on hand, which may be limited by our cash dividend policy; risks related to the effectiveness of our internal control over financial reporting; and risks related to our relationship with Brookfield, including our ability to realize the expected benefits of the sponsorship.

The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions, factors, or expectations, new information, data, or methods, future events, or other changes, except as required by law. The foregoing list of factors that might cause results to differ materially from those contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties, which are described in our most recent Annual Report on Form 10-K and any subsequent Quarterly Report on Form 10-Q, as well as additional factors we may describe from time to time in other filings with the SEC. We operate in a competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and you should understand that it is not possible to predict or identify all such factors and, consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

TERRAFORM POWER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

TERRAFORM POWER, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

TERRAFORM POWER, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Reconciliation of Non-GAAP Measures

This communication contains references to Adjusted Revenue, Adjusted EBITDA, and cash available for distribution (“CAFD”), which are supplemental Non-GAAP measures that should not be viewed as alternatives to GAAP measures of performance, including revenue, net income (loss), operating income or net cash provided by operating activities. Our definitions and calculation of these Non-GAAP measures may differ from definitions of Adjusted Revenue, Adjusted EBITDA and CAFD or other similarly titled measures used by other companies. We believe that Adjusted Revenue, Adjusted EBITDA and CAFD are useful supplemental measures that may assist investors in assessing the financial performance of the Company. None of these Non-GAAP measures should be considered as the sole measure of our performance, nor should they be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with GAAP, which are available on our website at www.terraform.com, as well as at www.sec.gov.  We encourage you to review, and evaluate the basis for, each of the adjustments made to arrive at Adjusted Revenue, Adjusted EBITDA and CAFD.

Calculation of Non-GAAP Measures

We define Adjusted Revenue as operating revenues, net, adjusted for non-cash items, including (i) unrealized gain/loss on derivatives, (ii) amortization of favorable and unfavorable rate revenue contracts, net, and (iii) an adjustment for wholesale market revenues to the extent above or below the regulated price bands.

We define Adjusted EBITDA as net income (loss) plus (i) depreciation, accretion and amortization, (ii) non-cash general and administrative costs, (iii) interest expense, (iv) income tax (benefit) expense, (v) acquisition related expenses, and (vi) certain other non-cash charges, unusual or non-recurring items and other items that we believe are not representative of our core business or future operating performance.

We define “cash available for distribution” or “CAFD” as Adjusted EBITDA (i) minus cash distributions paid to non-controlling interests in our renewable energy facilities, if any, (ii) minus annualized scheduled interest and project level amortization payments in accordance with the related borrowing arrangements, (iii) minus average annual sustaining capital expenditures (based on the long-sustaining capital expenditure plans) which are recurring in nature and used to maintain the reliability and efficiency of our power generating assets over our long-term investment horizon, (iv) plus or minus operating items as necessary to present the cash flows we deem representative of our core business operations.

As compared to the prior year periods, we revised our definition of CAFD to (i) exclude adjustments related to deposits into and withdrawals from restricted cash accounts, required by project financing arrangements, (ii) replace sustaining capital expenditures payment made in the year with the average annualized long-term sustaining capital expenditures to maintain reliability and efficiency of our assets, and (iii) annualized debt service payments.  We revised our definition of CAFD as we believe the revised definition provides a more meaningful measure for investors to evaluate our financial and operating performance and ability to pay dividends.  For items presented on an annualized basis, we present actual cash payments as a proxy for an annualized number until the period commencing January 1, 2018.

Furthermore, to provide investors with the most appropriate measures to assess the financial and operating performance of our existing fleet and the ability to pay dividends in the future, we have excluded results associated with our U.K. solar and Residential portfolios, which were sold in 2017, from Adjusted Revenue, Adjusted EBITDA and CAFD reported for all periods.

Use of Non-GAAP Measures

We disclose Adjusted Revenue because it presents the component of operating revenue that relates to energy production from our plants, and is, therefore, useful to investors and other stakeholders in evaluating performance of our renewable energy assets and comparing that performance across periods in each case without regard to non-cash revenue items.

We disclose Adjusted EBITDA because we believe it is useful to investors and other stakeholders as a measure of our financial and operating performance and debt service capabilities. We believe Adjusted EBITDA provides an additional tool to investors and securities analysts to compare our performance across periods without regard to interest expense, taxes and depreciation and amortization. Adjusted EBITDA has certain limitations, including that it: (i) does not reflect cash expenditures or future requirements for capital expenditures or contractual liabilities or future working capital needs, (ii) does not reflect the significant interest expenses that we expect to incur or any income tax payments that we may incur, and (iii) does not reflect depreciation and amortization and, although these charges are non-cash, the assets to which they relate may need to be replaced in the future, and (iv) does not take into account any cash expenditures required to replace those assets. Adjusted EBITDA also includes adjustments for goodwill impairment charges, gains and losses on derivatives and foreign currency swaps, acquisition related costs and items we believe are infrequent, unusual or non-recurring, including adjustments for general and administrative expenses we have incurred as a result of the SunEdison bankruptcy.

We disclose CAFD because we believe cash available for distribution is useful to investors and other stakeholders in evaluating our operating performance and as a measure of our ability to pay dividends. CAFD is not a measure of liquidity or profitability, nor is it indicative of the funds needed by us to operate our business. CAFD has certain limitations, such as the fact that CAFD includes all of the adjustments and exclusions made to Adjusted EBITDA described above.

The adjustments made to Adjusted EBITDA and CAFD for infrequent, unusual or non-recurring items and items that we do not believe are representative of our core business involve the application of management judgment, and the presentation of Adjusted EBITDA and CAFD should not be construed to infer that our future results will be unaffected by infrequent, non-operating, unusual or non-recurring items.

In addition, these measures are used by our management for internal planning purposes, including for certain aspects of our consolidated operating budget, as well as evaluating the attractiveness of investments and acquisitions. We believe these Non-GAAP measures are useful as a planning tool because it allows our management to compare performance across periods on a consistent basis in order to more easily view and evaluate operating and performance trends and as a means of forecasting operating and financial performance and comparing actual performance to forecasted expectations. For these reasons, we also believe these Non-GAAP measures are also useful for communicating with investors and other stakeholders.

The following tables present a reconciliation of operating revenues to Adjusted Revenue and net loss to Adjusted EBITDA and to CAFD and has been adjusted to exclude asset sales in the U.K. and Residential portfolios:

(a)         Represents unrealized (gain) loss on commodity contracts associated with energy derivative contracts that are accounted for at fair value with the changes recorded in operating revenues, net. The amounts added back represent changes in the value of the energy derivative related to future operating periods, and are expected to have little or no net economic impact since the change in value is expected to be largely offset by changes in value of the underlying energy sale in the spot or day-ahead market.

(b)         Represents net amortization of purchase accounting related to intangibles arising from past business combinations related to favorable and unfavorable rate revenue contracts.

(c)          Represents Regulated Solar and Wind Price Band Adjustment to Return on Investment Revenue as dictated by market conditions. To the extent that the wholesale market price is greater or less than a price band centered around the market price forecasted by the Spanish regulator during the preceding three years, the difference in revenues assuming average generation accumulates in a tracking account. The Return on Investment is either increased or decreased in order to amortize the balance of the tracking account over the remaining regulatory life of the assets.

(d)         Primarily represents recognized deferred revenue related to the upfront sale of investment tax credits, insurance compensation for revenue losses, and adjustments for SREC replacements.

(e)          In the three months ended December 31, 2017, reclassifies $1 million wind sustaining capital expenditure into direct operating costs, which will now be covered under long-term service contracts (“LTSA”) with General Electric (“GE”). In the twelve months ended December 31, 2017, reclassifies $6 million wind sustaining capital expenditure into direct operating costs.

(f)           Pursuant to the historical management services agreement (the “Management Services Agreement”) with SunEdison, Inc. (“SunEdison”), SunEdison agreed to provide or arrange for other service providers to provide management and administrative services to us in 2017. In the twelve months ended December 31, 2017, we accrued costs incurred for management and administrative services that were provided by SunEdison under the Management Services Agreement that were not reimbursed by TerraForm Power and were treated as an addback in the reconciliation of net loss to Adjusted EBITDA. In addition, non-operating items and other items incurred directly by TerraForm Power that we do not consider indicative of our core business operations are treated as an addback in the reconciliation of net loss to Adjusted EBITDA. These items include, but are not limited to, extraordinary costs and expenses related primarily to restructuring, IT system arrangements, relocation of the headquarters to New York, legal, advisory and contractor fees associated with the bankruptcy of SunEdison and certain of its affiliates (the “SunEdison bankruptcy”) and investment banking, and legal, third party diligence and advisory fees associated with the Brookfield and Saeta transactions, dispositions and financings. The

Company’s normal general and administrative expenses in Corporate, paid by Terraform Power, are the amounts shown below and were not added back in the reconciliation of net loss to Adjusted EBITDA ($ in millions):

(g)          Includes reductions (increases) within operating revenues due to net amortization of favorable and unfavorable rate revenue contracts as detailed in the reconciliation of Adjusted Revenue.

(h)         Represents other non-cash items as detailed in the reconciliation of Adjusted Revenue and associated footnote and certain other items that we believe are not representative of our core business or future operating performance, including but not limited to: loss (gain) on foreign exchange (“FX”), unrealized loss on commodity contracts, loss on investments and receivables with affiliate, loss on disposal of renewable energy facilities, and wind sustaining capital expenditure previously reclassified.

(i)             Represents project-level and other interest expense and interest income attributed to normal operations. The reconciliation from Interest expense, net as shown on the Consolidated Statements of Operations to adjusted interest expense applicable to CAFD is as follows:

(j)            Represents levelized project-level and other principal debt payments to the extent paid from operating cash.

(k)         Represents cash distributions paid to non-controlling interests in our renewable energy facilities. The reconciliation from Distributions to non-controlling interests as shown on the Consolidated Statement of Cash Flows to Cash distributions to non-controlling interests, net for the three months ended December 31, 2018 and 2017 is as follows:

(l)             Represents long-term average sustaining capex starting in 2018 to maintain reliability and efficiency of the assets.

(m)     Represents other cash flows as determined by management to be representative of normal operations including, but not limited to, wind plant “pay as you go” contributions received from tax equity partners, interconnection upgrade reimbursements, major maintenance reserve releases or (additions), releases or (postings) of collateral held by counterparties of energy market hedges for certain wind plants, and recognized SREC gains that are covered by loan agreements.

(n)         CAFD in 2017 was recast as follows to present the levelized principal payments, adjusted interest expense, and incentive revenue recognition recast to provide period to period comparisons that are consistent and more easily understood. The 2017 incentive revenue was recast based on an estimate in the same proportions as the 2018 phasing, which differs from the actual 2017 phasing due to the adoption of the revenue recognition standard. In the twelve months ended December 31, 2017, CAFD remained $88 million as reported previously.

(o)         Represents management fee that is not included in Direct operating costs.

Exhibit 99.2

Exhibit 99.3

Letter to Shareholders

Upon becoming our sponsor in late 2017, Brookfield articulated a strategy to transform TerraForm Power into a fully-integrated renewable power company that delivers an annual total return in the low teens to our shareholders. The total return will be comprised of a dividend backed by a payout ratio of 80% to 85% of CAFD and a dividend growth rate of 5% to 8% per year. Three simple pillars underpin our strategy: first, investing on a value basis in operating wind and solar assets in North America and Western Europe; second, enhancing the value of our existing assets by optimizing costs, increasing revenue and investing in organic growth; and third, strengthening our balance sheet. During 2018, we made significant progress in building the foundation to deliver on this long-term strategy.

1)             Investing on a value basis

·                  Deployed $1.2 billion to increase our asset base by 40%: With the acquisition of Saeta, we acquired a ~1,000 MW portfolio of high-quality wind and solar assets primarily in Spain at a very attractive value, and we established a scale operating platform from which we will continue to build our European operations. When we acquired Saeta, there was considerable uncertainty regarding the reset of the regulatory return in Spain in 2020. We priced the deal such that in a conservative downside case we would earn a return on equity within our target range of 9% to 11%. Despite uncertainty regarding the elections in Spain that will take place on April 28, 2019, we are optimistic that the outcome will be significantly better than our underwriting assumption, as there is broad-based support for renewable power amongst the political parties in Spain.

2)             Enhancing the value of our existing assets

·                  Executed an outsourcing agreement for our North American wind fleet that locks in cost savings and enhances revenues: We executed an 11-year Framework Agreement with GE to enter into Long-Term Service Agreements (“LTSAs”) for turbine operations and maintenance as well as other balance of plant services for our 1.6 GW North American wind fleet. Once the LTSAs are fully implemented, which we anticipate will occur in the first half of this year, we expect to realize ~$20 million of annual cost savings on a full-wrap basis. The LTSAs also contain performance guarantees, backed by liquidated damages, that will increase to a level that is in-line with our estimated long term average (“LTA”) generation.

·                  Completed our solar performance improvement plan to enhance revenue: Following irradiation scans of nearly all of our North American solar facilities, we have identified and remediated all high priority issues that caused production deficiencies within our solar fleet. On an annual basis, production from our fleet is expected to increase by 61 GWh per year, which should equate to ~$11 million of revenue on an annual basis. As a result, we anticipate that revenue in 2019 will increase by approximately $8 million compared to 2018 on a resource adjusted basis.

3)             Strengthening our balance sheet

·                  Deleveraged our balance sheet: Our financing plan for the Saeta acquisition was comprised of the issuance of equity and project financings of existing, unlevered assets rather than any new corporate debt commitments. Once we close the final project financings in the first half of 2019 and our results reflect a full year of contribution from Saeta, our balance sheet should deleverage significantly. As a result of this expected deleveraging, Moody’s upgraded TERP’s corporate credit rating to Ba3 following the close of the acquisition.

Financial Results

While we made much progress, 2018 was a transitional year for TerraForm Power. During the course of the year, we accelerated our blade inspection and repair program due to the Raleigh outage and to prepare to turn over operations of our wind farms to GE. This resulted in a significant increase in turbine downtime. In addition, we lost a considerable amount of production from our solar fleet, which operated at an availability of 91% in the first half of the year prior to the initiation of our performance improvement plan.

For the full year 2018, TerraForm Power delivered Net Loss, Adjusted EBITDA and cash available for distribution (“CAFD”) of $(153) million, $590 million and $126 million, respectively. This represents a decrease in Net Loss of $83 million, an increase in Adjusted EBITDA of $152 million and an increase in CAFD of $38 million, compared to 2017. The improvement in our results primarily reflects two fiscal quarters of contribution from Saeta. This contribution was offset by below average North American wind production in part due to an especially strong El Niño and challenging ERCOT pricing dynamics as a result of maintenance of the transmission system, which reduced transfer capacity during peak wind resource season. Thus far in 2019, power prices in the Texas panhandle have improved as the transmission system has been fully on-line.

In 2018, North American wind production was 10% below our LTA. Of the shortfall, 4% can be attributed to poor wind resource, particularly in Hawaii and the Midwest, 2% to abnormally high non-reimbursable curtailment, 2% to the impact of the Raleigh-related outages and 2% to downtime for blade inspections and repairs. Our solar and regulated platforms performed in-line with expectations for the most part. In our solar platform, significantly reduced curtailment in Chile due to debottlenecking of the transmission grid offset low availability in the first half of the year. In our regulated platform, lower than expected solar resource was offset by wholesale electricity prices that averaged 10% higher than the prior year.

Liquidity Update

We continue to progress the execution of the $350 million non-recourse debt component of our financing plan for the Saeta acquisition. We expect to close our third and fourth project financings, raising proceeds of ~$100 million and $90 million, respectively by the end of the first half of 2019.

We also recently launched the refinancing of our wind facility in Uruguay (~95 MW). Based on negotiations with lenders, we are planning on extending the tenor, improving sizing parameters and reducing the margin. Upon expected closing in the second quarter, we anticipate upsizing the financing by approximately $60 million. To further support corporate liquidity, we released $24 million in cash in December by collateralizing reserve accounts with letters of credit at two wind projects in North America. In addition,

we launched the consent process for certain Spanish projects to replace cash funded reserve accounts with letters of credit.

Operations

To date, we have signed LTSAs with GE for 10 of 16 projects in our North American wind fleet. In parallel, we have made significant progress obtaining the required lender and tax equity partner consents and are in negotiations with service providers for the early termination of existing service contracts. GE is now fully operating six sites, and we anticipate handing over the remaining sites in the first half of this year.

Beginning in Q3 2018, we solicited proposals for LTSAs for 500 MW of our Spanish wind fleet. The fleet is comprised of turbines manufactured by Vestas, GE, Siemens and Gamesa. Based on proposals that we have received, we are in the process of replacing the current operator of the wind farms with the respective manufacturers. In December, we reached a preliminary agreement with Vestas to extend the O&M contract for our Uruguayan wind farms in exchange for an improvement in technical and economic terms. Finally, we recently launched an RFP to improve the O&M contract terms for our North American solar fleet. Thus far, there has been very strong interest from large third-party providers. Our goal is to lower our cost and improve the alignment of interests by implementing production guarantees with penalties and bonuses based upon performance, similar to our North American wind LTSAs. As a result of these initiatives, we believe that we will be able to reduce annual O&M costs by approximately $6 million, commencing in the second half of this year.

Finally, for our North American and European wind farms, we have commenced the technical analysis and permitting to implement turbine optimization technology, including GE’s Power Up offering. Upon completion, we expect to increase production across our wind fleet and generate approximately $2 million of incremental revenue.

Growth Initiatives

During the year, we continued to advance the 160 MW repowering of our New York wind farms. We believe that there is strong support in the state for investment in renewable power, particularly with Governor Cuomo’s vision for a “Green New Deal” to achieve a 100% carbon-free power grid by 2040. Through engagement with key government stakeholders, including the Governor’s office, the Department of Public Service, and the New York State Energy Research and Development Authority (“NYSERDA”), we have built a strong base of support for a proposal that would benefit our repowerings. In January 2019, NYSERDA expressed support for a plan which includes a greater allocation of renewable energy credits (“RECs”) for repowerings based on their projected increase in production over the status quo, which was largely based on our proposal. On a parallel path, there is a bill in the New York State legislature that would require all electricity suppliers to procure RECs from renewable generators built before 2015. While it is unclear how these processes will unfold, it is encouraging that both the key regulatory agencies and the state legislature are looking to create a competitive market for RECs generated by repowered facilities.

In light of our progress to date, we have accelerated the pace of our repowering efforts in New York. Since we can build these wind farms at a 40% discount to greenfield projects, we plan to replace the existing Clipper turbines that have been derated and have significant operating risk going forward, and we expect to utilize production tax credit (“PTC”) safe-harbored turbines that would increase production by 25% to

30%, we believe we can earn returns above our target range of 9% to 11% on equity based on the existing incentive regime and current wholesale power market prices. If we are able to obtain additional incentives and/or we are able to obtain premium pricing for renewable power, we could achieve significant upside. Finally, we are in discussions with Hawaiian Electric to evaluate options for repowering our Kahuku wind facility on Oahu island. We believe that this project has an attractive value proposition for all stakeholders. Hawaii has a very aggressive goal of 100% carbon free power generation by 2040. This repowering would increase production from Kahuku by 30%, and similar to New York, we would reduce prospective operating cost and risk by replacing the existing Clipper turbines.

During 2018, we invested ~$28 million in organic growth initiatives, which we expect will earn a return on equity of approximately 19%. Highlights include acquiring 6 MW of solar assets under a legacy right of first offer for $4 million, investing $4 million to acquire minority interests, including tax equity interests, investing $4 million in the expansion of one of our solar farms and investing $11 million in our battery energy storage project in Hawaii. Furthermore, in December 2018, we invested $4 million to acquire a regulated 4 MW solar PV asset as part of our consolidation strategy in the fragmented Spanish renewables market.

Regulatory and Counterparty Updates

In December 2018, the Spanish Government published a proposed law, which provides the option of keeping the regulated return at its current level of 7.4% for the next 12 years commencing 2020 for all renewable assets in operation before September 2013. This applies to all of our Spanish assets. In February 2019, following the failure to ratify its budget, the Spanish government announced that new elections will be held on April 28, 2019. Despite this uncertainty, we are optimistic that a favorable outcome on the regulated return will be achieved, in light of broad based support for renewable power amongst Spanish political parties as well as the recommendation of a 7.1% regulated return put forward by the CNMV, which is an independent Spanish state agency. However, with the pending election, this could delay the timeline for ratification of the law and could also result in a change to the proposed regulated rate of return.

Facing billions of dollars in claims over deadly wildfires in California, PG&E filed for bankruptcy on January 29, 2019. The bankruptcy filing has not resulted in an event of default for any of our projects with PG&E as an offtaker. At this stage, it is unclear whether PG&E will be able to reject its existing renewable power contracts. Even though our PG&E exposure is less than 1% of our portfolio, we have joined with other industry players to advocate for continuing to honor existing renewable power purchase contracts.

Outlook

As we look forward, we are optimistic about TerraForm Power’s prospects in light of the foundation for growth that we built in 2018. The following table provides an illustrative run rate of Adjusted EBITDA and CAFD as a result of the strategic growth and margin enhancement initiatives we began to undertake in 2018.

(1)         Adjusted EBITDA and CAFD are supplemental Non-GAAP measures that should not be viewed as alternatives to GAAP measures of performance, including net income (loss), operating income or net cash provided by operating activities. Our definitions and calculation of these Non-GAAP measures may differ from definitions of Adjusted EBITDA and CAFD or other similarly titled measures used by other companies. We believe that Adjusted EBITDA and CAFD are useful supplemental measures that may assist investors in assessing the financial performance of the Company. None of these Non-GAAP measures should be considered as the sole measure of our performance, nor should they be considered in isolation from, or as a substitute for, analysis of our financial statements prepared in accordance with GAAP, which are available on our website at www.terraform.com, as well as at www.sec.gov. We encourage you to review, and evaluate the basis for, each of the adjustments made to arrive at Adjusted EBITDA and CAFD.

(2)         This amount represents what we believe is a reasonable estimate for Adjusted EBITDA and CAFD, based on the actual Adjusted EBITDA and CAFD for the year ended December 31, 2018, plus the estimated uplift for each metric based on our estimated value of a full year’s contribution of Saeta assets to each metric.

(3)         This amount represents what we believe to be the incremental value of normalization of resource availability and curtailment, assuming these amounts equal our LTA generation levels. Achieving LTA generation levels depends on, among other things, there being suitable wind conditions and suitable levels of irradiance at our facilities as well as on other factors over which we have no control. Please see Item 1A. Risk Factors in our most recent Annual Report on Form 10-K.

(4)         This amount represents what we believe to be the incremental value of the completion of certain of our margin enhancement initiatives, assuming (1) the LTSAs with GE (including the production guarantees provided for in certain of the LTSAs) have been in place for a full year, thereby allowing us to achieve our estimated target of a full year of savings in O&M costs as a result of the LTSAs, and (2) the solar performance improvement plan (“PIP”) has been in place for a full year, thereby allowing us to achieve our estimated target of a full year of additional revenue generated as a result of the solar PIP. In implementing these margin enhancement initiatives, we do not expect our fixed or variable operating costs to change significantly. The majority of our direct operating costs, interest expense and management fees for each of our facilities are fixed by contract. In addition, we do not expect there will be a material impact on our variable operating costs based on implementing these margin enhancement initiatives.

(5)         This amount represents the sum of the preceding three columns.

(6)         This is a forward-looking statement based on our expectations and assumptions at this time. While we believe these expectations and assumptions to be reasonable, we make no assurance that these expectations and assumptions will prove correct, and actual results may vary materially. For additional information regarding risks and uncertainties regarding our forward-looking statements, please also review Item 1A. Risk Factors of our most recent Annual Report on Form 10-K, as well as our subsequent filings with the SEC.

First of all, going forward TerraForm Power will benefit from a full year of contribution from the Saeta acquisition, which is very accretive. Secondly, in 2018 wind production was significantly below our LTA. Although it is inherently variable, we expect that wind resource should improve compared with 2018 levels. If wind resource reaches P50 production levels and we experience normalized curtailments, we believe our Adjusted EBITDA and CAFD will increase by $28 million. Finally, we expect to realize significant upside from the margin enhancement initiatives that we executed in the past year. Once we fully transition O&M of our North American wind fleet to GE, we will realize cost savings that we expect will approximate $20 million per year. In addition, we expect to benefit from production guarantees backed by liquidated damages that will increase to levels consistent with our LTAs, which we expect will yield $15 million in incremental revenue on an annual basis and significantly mitigate the risk of operational challenges like those experienced last year. We believe we will also realize incremental revenue of approximately $8 million over 2018 from the solar performance improvement plan. In total, these completed margin enhancement initiatives are expected to generate up to $43 million of additional run rate Adjusted EBITDA.

In addition to these building blocks, we expect to execute additional margin enhancement activities during 2019, primarily within our European portfolio, and to progress our repowerings in New York and Hawaii. We also expect to actively pursue opportunities to deploy capital on a value basis. As part of our Spanish renewable consolidation strategy, we are considering a number of acquisitions. We believe that the greater uncertainty regarding the regulated rate of return should lead to opportunities to acquire assets at more attractive prices. As we grow our business, we will strive to further strengthen our balance sheet, with a long-term objective of achieving an investment grade rating.

As a result of this progress, we are pleased to announce that, on March 13, 2019, our Board declared a quarterly dividend with respect to our Class A common stock of $0.2014 per share. This dividend represents a 6% increase over TerraForm Power’s Q4 2018 dividend — in line with our dividend growth target of 5% to 8% per year. We anticipate that this dividend amount will be within our targeted payout ratio range of 80% to 85% of CAFD.

As always, we look forward to updating you on our progress in executing our business plan over the coming quarters.

Sincerely,

John Stinebaugh

Chief Executive Officer

March 14, 2019