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Northland Reports Second Quarter Results

by pmnationtalk on August 9, 201881 Views

August 08, 2018

1,044 MW of Offshore Wind Projects Allocated in Taiwan

TORONTO, Aug. 08, 2018 — Northland Power Inc. (“Northland” or the “Company”) (TSX:NPI) today reported financial results for the three and six months ended June 30, 2018.

“We continue to make great progress on our 2018 priorities,” said Mike Crawley, Chief Executive Officer. “In addition to the 300 MW allocated to the Hai Long offshore wind project in April under Taiwan’s Feed-In-Tariff program, Northland and its partner were allocated an additional 744 MW in June under Taiwan’s offshore wind auction program, increasing the projects’ total allocation to 1,044 MW. We continue to advance the Hai Long projects toward securing PPAs. Furthermore, we entered into a new $1.25 billion corporate credit facility and secured 17 MW of additional capacity on our Deutsche Bucht offshore wind project, which is advancing on schedule and on budget. These achievements, together with our second quarter financial results, reflect our ongoing commitment to balancing significant growth with stable returns.”

Second Quarter Highlights:


  • Sales of $338.2 million increased 5% or $15.8 million and gross profit of $314.7 million increased 11% or $31.1 million compared to the same quarter last year primarily due to higher production at Nordsee One, which was partially complete last year and reached full commercial operations in December 2017, and higher production at the solar facilities. These variances were partially offset by lower wind resource in the North Sea, a reduced rate escalation estimate related to sales at Iroquois Falls, and a longer scheduled maintenance outage at Kirkland Lake.
  • Adjusted EBITDA (a non-IFRS measure) of $183.0 million increased 9% or $14.8 million compared to the same quarter last year primarily due to the same factors described above.
  • Free cash flow per share (a non-IFRS measure) of $0.21 decreased by 63% compared to $0.57 for the same quarter last year primarily as a result of the commencement of scheduled principal repayments for Gemini and Nordsee One as well as several one-time items such as finance costs paid as a result of a new corporate credit facility and the impact of last year’s €31 million cash distribution received from Gemini.
  • Net income of $69.0 million increased 12% or $7.3 million compared to $61.7 million for the same quarter last year primarily due to a non-cash fair value gain on derivative contracts partially offset by lower operating income, a higher tax expense, and higher finance costs.

Sales and net income, as reported under IFRS, include consolidated results of entities not wholly-owned by Northland, whereas the above non-IFRS measures, adjusted EBITDA and free cash flow only include Northland’s proportionate interest.

Development and Construction

  • Hai Long – 1,044 MW offshore wind projects, Taiwan Strait – During the quarter, Northland and its 40% partner, Yushan Energy Co. Ltd. (“Yushan Energy”), were allocated a total of 1,044 MW (626 MW net to Northland) by the Bureau of Energy of Taiwan under a Feed-in-Tariff (“FIT”) program and an offshore wind auction program. The combined allocations are significant milestones since they advance the projects’ ability to execute 20-year power purchase agreements, subject to permitting and financial close. Northland and Yushan Energy have economic interests in the Hai Long projects of 60% and 40%, respectively. Key aspects of the Hai Long projects are presented below:
Project Awarded MW Procured (Gross) MW Procured (Net) (1) Year of Grid Connection Type of Procurement
Hai Long 2A April 2018 300 180 2024 FIT
Hai Long 2B June 2018 232 139 2025 Auction
Hai Long 3 June 2018 512 307 2025 Auction
Total 1,044 626
(1) Represents Northland’s 60% economic interest.
  • Deutsche Bucht – 269 MW offshore wind project, German North Sea – The Deutsche Bucht offshore wind project is progressing according to schedule and on budget. Offshore installation of the foundation structures will commence within the third quarter of 2018, ahead of schedule. Project completion is expected by the end of 2019. On July 19, 2018, the previously announced Deutsche Bucht demonstrator project reached financial close, with all debt required fully committed by project lenders. Under the pilot project, two additional wind turbines using ‘mono bucket foundations’ will contribute an additional 17 MW of capacity to the base 252 MW project for a total of 269 MW and bring the total project cost to approximately €1.4 billion (CAD $2.0 billion). Deutsche Bucht will be the first offshore wind farm worldwide to test this new type of foundation structure under commercial operating conditions.
  • Increase in 2020 Guidance for Deutsche Bucht – As a result of the financial close of the Deutsche Bucht demonstrator project in July 2018, once the construction of the offshore wind project is completed and is fully operational in 2020, management expects Deutsche Bucht to generate adjusted EBITDA of approximately €165 to €185 million annually, up from the range disclosed in the 2017 Annual Report of €155 to €175 million annually.


  • New Corporate Credit Facility – In June 2018, Northland entered into a new $1.25 billion corporate credit facility with a syndicate of financial institutions. The new credit facility consists of a $1.0 billion revolving facility and $250 million term loan and replaces Northland’s previous $700 million syndicated credit facility (which comprised a $450 million revolving facility and a $250 million term loan). The revolving facility will be used to fund development opportunities and acquisitions, provide letters of credit to secure obligations that would otherwise be funded in cash, and for general corporate purposes including working capital. The term loan was used to replace the previous term loan.
  • Retirement of John Brace and Appointment of Mike Crawley as Chief Executive Officer – Following the May 2018 announcement, Northland’s former Chief Executive Officer, John Brace, retired effective August 4, 2018, after 30 years with the Company. Mike Crawley, formerly Executive Vice President, Development of Northland, has been appointed to the role of Chief Executive Officer. Mr. Brace will continue to serve as a Director on Northland’s board.
  • Northland Renews Base Shelf Prospectus – In May 2018, Northland filed a short form base shelf prospectus to replace the expiring $500 million base shelf prospectus and to enable the Company to offer an aggregate of up to $1.0 billion of debentures, preferred shares, common shares and subscription receipts, or any combination thereof, over a 25-month period. Northland has no immediate intent to issue securities as a result of this renewal filing. The increase in size from $500 million to $1.0 billion is commensurate with the relative growth in Northland’s enterprise value since the previous base shelf prospectus filed in 2012.
Summary of Consolidated Results
(in thousands of dollars, except per share amounts) Three months ended June 30, Six months ended June 30,
2018 2017 2018 2017
Sales $ 338,177 $ 322,351 $ 824,549 $ 686,402
Gross profit 314,694 283,603 769,251 606,685
Operating income 130,532 144,527 411,686 332,159
Net income (loss) 69,024 61,733 246,979 161,845
Adjusted EBITDA (1) 182,991 168,158 473,412 366,275
Cash provided by operating activities 343,320 142,155 633,085 418,860
Free cash flow (1) 36,969 99,717 185,016 141,265
Cash dividends paid to common and class A shareholders 40,108 33,298 79,239 66,853
Total dividends declared (2) 52,938 46,964 105,693 93,769
Per share information
Net income (loss) – basic $ 0.29 $ 0.19 $ 0.90 $ 0.49
Free cash flow – basic (1) $ 0.21 $ 0.57 $ 1.05 $ 0.81
Total dividends declared (2) $ 0.30 $ 0.27 $ 0.60 $ 0.54
Electricity production in gigawatt hours (GWh) (3) 1,790 1,431 4,117 3,325
(1) Refer to the Non-IFRS Financial Measures section of this press release for additional information.
(2) Represents total dividends declared to common and class A shareholders including dividends in cash or in shares under the DRIP.
(3) For 2017, includes Gemini and Nordsee One pre-completion production volumes. Refer to SECTION 4.1 Operating Facilities’ Results of the Management’s Discussion and Analysis for the three and six months ended June 30, 2018, for additional information.

Second Quarter Results Summary

Offshore wind facilities
Electricity production, including pre-completion production, increased 172 GWh or 33% compared to the same quarter last year primarily due to all of Nordsee One’s turbines producing power during the quarter, whereas the project was under construction last year, partially offset by lower wind resource in the North Sea.

Sales and adjusted EBITDA of $192.6 million and $103.7 million, respectively, increased $31.9 million and $21.1 million compared to the same quarter last year as a result of Nordsee One having reached full commercial operations in December 2017, partially offset by lower wind resource in the North Sea. Foreign exchange rate fluctuations resulted in $11.0 million higher revenue compared to the same quarter last year.

Thermal facilities
Electricity production increased 160 GWh or 27% compared to the same quarter last year primarily due to higher production at Thorold and higher on-peak production at North Battleford, partially offset by a longer scheduled maintenance outage at Kirkland Lake.

Sales of $84.7 million decreased $21.6 million compared to the same quarter last year primarily due to lower natural gas resales at Iroquois Falls due to the expiration of a natural gas contract in October 2017 ($11.5 million) and a reduced rate escalation estimate from the system operator under the Enhanced Dispatch Contract (EDC) at Iroquois Falls (including a $4.1 million adjustment related to 2017). A longer scheduled maintenance outage at Kirkland Lake ($3.3 million), and lower flow-through natural gas costs at North Battleford ($3.9 million) also contributed to lower sales. Operating income and adjusted EBITDA of $36.1 million and $51.1 million, respectively, decreased $7.9 million and $6.4 million primarily as a result of lower gross profit.

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