Company Delivers Strong Full-Year Financial Results, Achieving Record Level for Adjusted EBITDA in 2022
TORONTO, Feb. 23, 2023 (GLOBE NEWSWIRE) — Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) reported today financial results for the three months and year ended December 31, 2022. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.
“Strong performance across all our facilities drove superior financial results in 2022, allowing the Company to achieve the upper end of our 2022 financial guidance ranges,” said Mike Crawley, Northland’s President and Chief Executive Officer. “De-carbonization and energy security imperatives opened up new growth opportunities for Northland as we expanded our offshore wind and onshore renewables pipelines including in Canada with our acquisition of a 1.6GW Alberta solar development portfolio and our lead participation in a contracted 250MW battery storage project in Ontario. We continue to focus more towards project execution as large projects within our growth pipeline progress to construction and operations. As always, we strive to continually improve across all key metrics with none being more important than the health and safety of our employees.”
Fourth Quarter and Full-Year 2022 Financial Results
Financial Results
The Company’s strong performance through the year contributed to full-year financial results that were at the upper end of the guidance range with full-year Adjusted EBITDA of nearly $1.4 billion, setting a record level for Northland.
- Sales of $641 million in the fourth quarter of 2022, were in line with 2021. Sales increased on a full-year basis to $2,449 million from $2,093 million in 2021.
- Adjusted EBITDA (a non-IFRS measure) decreased in the fourth quarter to $353 million from $364 million in 2021 and increased on a full-year basis to $1,398 million from $1,137 million in 2021.
- Adjusted Free Cash Flow per share (a non-IFRS measure) decreased in the fourth quarter to $0.16 from $0.80 in 2021 and increased on a full-year basis to $1.95 from $1.77 in 2021.
- Free Cash Flow per share (a non-IFRS measure) decreased in the fourth quarter to $0.06 from $0.69 in 2021 and increased on a full-year basis to $1.61 from $1.40 in 2021.
- Net income increased in the fourth quarter to $324 million from $130 million in 2021 and increased on a full-year basis to $955 million from $270 million in 2021.
Sales and net income, as reported under IFRS, include consolidated results of entities not wholly owned by Northland, whereas non-IFRS financial measures include Northland’s proportionate ownership interest.
| Summary of Consolidated Results | ||||||||||||
| (in thousands of dollars, except per share amounts) | Three months ended December 31, | Year ended December 31, | ||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| FINANCIALS | ||||||||||||
| Sales | $ | 641,115 | $ | 640,090 | $ | 2,448,815 | $ | 2,093,255 | ||||
| Gross profit | 573,571 | 579,878 | 2,178,389 | 1,879,762 | ||||||||
| Operating income | 269,195 | 301,074 | 1,051,307 | 785,366 | ||||||||
| Net income (loss) | 323,922 | 129,528 | 955,457 | 269,879 | ||||||||
| Net income (loss) attributable to common shareholders | 278,898 | 103,893 | 827,733 | 189,559 | ||||||||
| Adjusted EBITDA (a non-IFRS measure) | 353,070 | 363,648 | 1,398,176 | 1,137,004 | ||||||||
| Cash provided by operating activities | 550,689 | 559,368 | 1,832,983 | 1,609,295 | ||||||||
| Adjusted Free Cash Flow (a non-IFRS measure) | 40,529 | 182,012 | 460,892 | 386,366 | ||||||||
| Free Cash Flow (a non-IFRS measure) | 15,883 | 156,341 | 380,472 | 307,401 | ||||||||
| Cash dividends paid | 51,337 | 44,688 | 196,845 | 172,755 | ||||||||
| Total dividends declared (1) | $ | 74,172 | $ | 68,001 | $ | 284,582 | $ | 264,200 | ||||
| Per Share | ||||||||||||
| Weighted average number of shares – basic (000s) | 246,378 | 226,568 | 236,157 | 218,861 | ||||||||
| Net income (loss) attributable to common shareholders – basic and diluted | $ | 1.12 | $ | 0.45 | $ | 3.46 | $ | 0.82 | ||||
| Adjusted Free Cash Flow – basic (a non-IFRS measure) | $ | 0.16 | $ | 0.80 | $ | 1.95 | $ | 1.77 | ||||
| Free Cash Flow – basic (a non-IFRS measure) | $ | 0.06 | $ | 0.69 | $ | 1.61 | $ | 1.40 | ||||
| Total dividends declared | $ | 0.30 | $ | 0.30 | $ | 1.20 | $ | 1.20 | ||||
| ENERGY VOLUMES | ||||||||||||
| Electricity production in gigawatt hours (GWh) | 3,009 | 2,828 | 10,139 | 8,757 | ||||||||
| (1) Represents total dividends paid to common shareholders including dividends in cash or in shares under the DRIP. | ||||||||||||
Fourth Quarter Results Summary
Offshore wind facilities
Electricity production for the three months ended December 31, 2022, increased 6% or 86GWh compared to the same quarter of 2021, primarily due to higher wind resource, higher turbine availability at Nordsee One due to the completion of the RSA replacement campaign ahead of schedule and fewer uncompensated grid outages at the German facilities, partially offset by higher unpaid curtailments related to negative prices in Germany.
Sales of $339 million for the three months ended December 31, 2022, increased 2% or $5 million compared to the same quarter of 2021, primarily due to higher market prices and electricity production across all offshore wind facilities, partially offset by the foreign exchange rate fluctuations due to weakening of the Euro. Adjusted Free Cash Flow and Free Cash Flow are largely hedged and therefore virtually unaffected by foreign exchange rate fluctuations.
Adjusted EBITDA of $221 million for the three months ended December 31, 2022, increased 7% or $15 million compared to the same quarter of 2021, due to higher wind resource, higher market prices across all offshore wind facilities and fewer unpaid curtailments related to grid outages in Germany, partially offset by foreign exchange rate fluctuations due to weakening of the Euro.
An important indicator for performance of offshore wind facilities is the current and historical average power production of the facility. The following tables summarize actual electricity production and the historical average, high and low for the applicable operating periods of each offshore facility:
| Three months ended December 31, | 2022 (1) | 2021 (1) | Historical Average (2) | Historical High (2) | Historical Low (2) | ||||
| Electricity production (GWh) | |||||||||
| Gemini | 794 | 743 | 775 | 824 | 739 | ||||
| Nordsee One | 362 | 333 | 332 | 362 | 298 | ||||
| Deutsche Bucht | 326 | 320 | 314 | 326 | 300 | ||||
| Total | 1,482 | 1,396 | |||||||
| (1) Includes GWh produced and attributed to paid curtailments. | |||||||||
| (2) Represents the historical power production for the period since the commencement of commercial operation of the respective facility (2017 for Gemini and Nordsee One, and 2020 for Deutsche Bucht) and excludes unpaid curtailments. | |||||||||
Regulatory Market Price Cap Changes Effective from December 1, 2022 to June 30, 2023
In September 2022, in response to the surge in wholesale electricity markets, the EU Council established a cap on market revenues on renewable energy producers effective from December 1, 2022, to June 30, 2023 (the “EU price cap”). EU member states have flexibility to adapt the EU price cap for their markets.
In January 2023, the mechanism for the EU price cap was finalized by the majority of member states. Gemini will be eligible to receive merchant revenue of up to €211/MWh and Nordsee One and Deutsche Bucht will be eligible to receive merchant revenue up to €30/MWh above their respective FIT plus 6% of the wholesale price. In both countries, only 10% of any revenue above the cap can be earned and retained by the facilities.
Onshore renewable facilities
Electricity production was 6% or 34GWh higher than the same quarter of 2021, due to higher wind resource across all onshore facilities, partially offset by lower solar resource at the Spanish facilities.
Sales of $132 million were 16% or $19 million higher than the same quarter of 2021, primarily due to the increased contribution from the Spanish portfolio and taking into account the increase in 2022 posted prices in the current regulatory period in Spain. Effective mid-2022, these regulatory amendments raised the posted price from €49/MWh to €122/MWh, retroactive from January 1, 2022, thus allowing generation facilities to realize higher sales in 2022.
Adjusted EBITDA of $96 million was higher than the same quarter of 2021. Excluding the contribution from the Spanish portfolio, sales and Adjusted EBITDA in the fourth quarter would have been 4% and 4% higher, respectively, compared to the same quarter of 2021, primarily due to higher wind and solar resource.
Efficient natural gas facilities
Electricity production increased 7% or 60GWh compared to the same quarter of 2021, due to higher market demand.
Sales of $111 million decreased 13% or $17 million compared to the same quarter of 2021, primarily due to the sale of Iroquois Falls.
Adjusted EBITDA of $49 million decreased 41% or $34 million compared to the same quarter of 2021, primarily due to the sale of Iroquois Falls.
Utility
Sales and Adjusted EBITDA of $64 million and $27 million, respectively, increased 9% or $5 million and 13% or $3 million compared to the same quarter of 2021, largely due to rate escalations, driven by a higher Colombian producer price index, positively affecting EBSA’s financial performance, partially offset by foreign exchange fluctuations due to weakening of Colombian Peso.
In December 2021, Northland restructured and upsized EBSA’s long-term, non-recourse financing (the “EBSA Facility”), resulting in $84 million of incremental cash proceeds to Northland, net of closing costs (the “EBSA Refinancing”). The upsizing of the EBSA Facility was completed on the basis of growth in EBSA’s projected EBITDA growth for 2022, based on increases in the rate base. Net upsizing proceeds of $47 million, in excess of EBSA’s expansionary capital expenditure needs were included in Adjusted Free Cash Flow and Free Cash Flow for the year ended December 31, 2022.
Consolidated statement of income (loss)
General and administrative (“G&A”) costs of $25 million in the fourth quarter increased 15% or $3 million compared to the same quarter of 2021, primarily due to personnel costs and other costs supporting Northland’s global growth, in-line with management’s expectations.
Development costs of $25 million decreased 8% or $2 million compared to 2021, primarily due to higher capitalization of development cost relating to development projects, as a result of projects advancing to required milestones.
Net finance costs of $87 million in the fourth quarter decreased 13% or $13 million compared to the same quarter of 2021, primarily due to scheduled repayments on facility-level loans.
Fair value gain on derivative contracts was $141 million in the fourth quarter primarily due to net movement in the fair value of derivatives related to commodity, interest rates and foreign exchange contracts.
Foreign exchange gain of $69 million in the fourth quarter was primarily due to unrealized gain from fluctuations in the closing foreign exchange rates.
Net income of $324 million in the fourth quarter increased by $194 million compared to the same quarter of 2021, primarily as a result of the factors described above.
Adjusted EBITDA
The following table reconciles net income (loss) to Adjusted EBITDA:
| Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Net income (loss) | $ | 323,922 | $ | 129,528 | $ | 955,457 | $ | 269,879 | |||||||
| Adjustments: | |||||||||||||||
| Finance costs, net | 86,578 | 99,611 | 323,632 | 342,417 | |||||||||||
| Gemini interest income | 2,265 | 3,843 | 13,065 | 15,810 | |||||||||||
| Acquisition costs | 138 | 1,659 | 895 | 7,666 | |||||||||||
| Provision for (recovery of) income taxes | 70,990 | 79,888 | 304,662 | 153,352 | |||||||||||
| Depreciation of property, plant and equipment | 146,645 | 155,356 | 571,090 | 612,755 | |||||||||||
| Amortization of contracts and intangible assets | 13,966 | (5,594 | ) | 53,611 | 23,284 | ||||||||||
| Fair value (gain) loss on derivative contracts | (147,414 | ) | (78,047 | ) | (482,351 | ) | (153,536 | ) | |||||||
| Foreign exchange (gain) loss | (69,073 | ) | 29,429 | (41,792 | ) | 81,318 | |||||||||
| Impairment loss | — | — | — | 29,981 | |||||||||||
| Elimination of non-controlling interests | (73,692 | ) | (74,593 | ) | (272,407 | ) | (260,567 | ) | |||||||
| Finance lease (lessor) | (1,511 | ) | (1,113 | ) | (6,352 | ) | (7,137 | ) | |||||||
| Others(1) | 256 | 23,681 | (21,334 | ) | 21,782 | ||||||||||
| Adjusted EBITDA | $ | 353,070 | $ | 363,648 | $ | 1,398,176 | $ | 1,137,004 | |||||||
| (1) Others primarily include share of results from equity investments, loss (gain) on sale of assets and share of joint venture project development costs. | |||||||||||||||
Adjusted EBITDA of $353 million for the three months ended December 31, 2022, decreased 3% or $11 million compared to the same quarter of 2021. The significant factor decreasing Adjusted EBITDA includes:
- $25 million decrease in operating results due to the loss in contribution as a result of the expiry of the PPA and subsequent sale of Iroquois Falls in April 2022.
Factors partially offsetting the decrease in Adjusted EBITDA were:
- $15 million increase in operating results at the offshore wind facilities primarily due to higher turbine availability at Nordsee One, strong wind resource and high APX above the SDE at Gemini; and
- $12 million higher contribution from the Spanish renewables portfolio primarily resulting from higher regulated posted prices for the portfolio at €122/MWh compared to €52/MWh in 2021.
Adjusted Free Cash Flow and Free Cash Flow
The following table reconciles cash flow from operations to Adjusted Free Cash Flow and Free Cash Flow:
| Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Cash provided by operating activities | $ | 550,689 | $ | 559,368 | $ | 1,832,983 | $ | 1,609,295 | |||||||
| Adjustments: | |||||||||||||||
| Net change in non-cash working capital balances related to operations | (141,244 | ) | (111,986 | ) | (289,875 | ) | (292,499 | ) | |||||||
| Non-expansionary capital expenditures | (10,675 | ) | (7,734 | ) | (56,248 | ) | (40,558 | ) | |||||||
| Restricted funding for major maintenance, debt and decommissioning reserves | (6,531 | ) | 2,294 | (17,857 | ) | (7,505 | ) | ||||||||
| Interest | (112,927 | ) | (100,842 | ) | (336,356 | ) | (277,908 | ) | |||||||
| Scheduled principal repayments on facility debt | (439,185 | ) | (278,667 | ) | (839,614 | ) | (635,901 | ) | |||||||
| Funds set aside (utilized) for scheduled principal repayments | 170,661 | 119,951 | — | 635 | |||||||||||
| EBSA Refinancing proceeds, net of growth capital expenditures | 20,078 | 3,827 | 46,974 | 3,827 | |||||||||||
| Preferred share dividends | (2,954 | ) | (2,710 | ) | (11,206 | ) | (10,811 | ) | |||||||
| Consolidation of non-controlling interests | (31,707 | ) | (40,240 | ) | (75,217 | ) | (90,022 | ) | |||||||
| Investment income(1) | 12,214 | 4,750 | 24,880 | 20,153 | |||||||||||
| Proceeds under NER300 and warranty settlement at Nordsee One | 14,530 | 10,764 | 70,317 | 38,636 | |||||||||||
| Others(2) | (7,066 | ) | (2,434 | ) | 31,691 | (9,941 | ) | ||||||||
| Free Cash Flow | $ | 15,883 | $ | 156,341 | $ | 380,472 | $ | 307,401 | |||||||
| Add back: Growth expenditures | 24,646 | 25,671 | 80,420 | 78,965 | |||||||||||
| Adjusted Free Cash Flow | $ | 40,529 | $ | 182,012 | $ | 460,892 | $ | 386,366 | |||||||
| (1) Investment income includes Gemini interest income. | |||||||||||||||
| (2) Others mainly include effect of foreign exchange rates and hedges, Nordsee One interest on shareholder loans, share of joint venture project development costs, acquisition costs, lease payments, interest income, and other non-cash expenses adjusted in working capital excluded from Free Cash Flow in the period. | |||||||||||||||
Adjusted Free Cash Flow of $41 million for the three months ended December 31, 2022, was 78% or $141 million lower than the same quarter of 2021.
The significant factors decreasing Adjusted Free Cash Flow were:
- $97 million increase in scheduled and one-time refinancing related debt repayments on facility-level loans, mainly at Gemini and the Spanish portfolio;
- $38 million increase in current taxes primarily at the offshore wind facilities and the Spanish portfolio as a result of better financial results; and
- $11 million decrease in contribution from the efficient natural gas facilities leading to lower Adjusted EBITDA, partially offset by higher contribution from offshore wind and onshore renewable facilities.
The factor partially offsetting the decrease in Adjusted Free Cash Flow was:
- $20 million increase primarily from the proceeds of the EBSA refinancing net of expansionary capital expenditures.
Free Cash Flow, which includes growth expenditures, totaled $16 million for the three months ended December 31, 2022, and was 90% or $140 million lower than the same quarter of 2021, due to the same factors as Adjusted Free Cash Flow.
The following table reconciles Adjusted EBITDA to Adjusted Free Cash Flow.
| Three months ended December 31, | Year ended December 31, | ||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Adjusted EBITDA | $ | 353,070 | $ | 363,648 | $ | 1,398,176 | $ | 1,137,004 | |||||||
| Adjustments: | |||||||||||||||
| Scheduled debt repayments | (225,131 | ) | (128,450 | ) | (684,630 | ) | (507,759 | ) | |||||||
| Interest expense | (37,235 | ) | (61,992 | ) | (220,347 | ) | (243,597 | ) | |||||||
| Current taxes | (70,309 | ) | (32,205 | ) | (192,953 | ) | (74,957 | ) | |||||||
| Non-expansionary capital expenditure | (9,266 | ) | (7,051 | ) | (48,094 | ) | (36,695 | ) | |||||||
| Utilization (funding) of maintenance and decommissioning reserves | (6,092 | ) | 2,667 | (16,550 | ) | (6,195 | ) | ||||||||
| Lease payments, including principal and interest | (2,996 | ) | (1,570 | ) | (10,353 | ) | (7,169 | ) | |||||||
| Preferred dividends | (2,954 | ) | (2,710 | ) | (11,206 | ) | (10,811 | ) | |||||||
| Foreign exchange hedge gain (loss) | (18,730 | ) | 10,844 | 37,486 | 23,053 | ||||||||||
| Proceeds under NER300 and warranty settlement at Nordsee One | 12,349 | 9,956 | 59,769 | 33,648 | |||||||||||
| EBSA Refinancing proceeds, net of growth capital expenditures | 20,078 | 3,827 | 46,974 | 3,827 | |||||||||||
| Others(1) | 3,099 | (623 | ) | 22,200 | (2,948 | ) | |||||||||
| Free Cash Flow | $ | 15,883 | $ | 156,341 | $ | 380,472 | $ | 307,401 | |||||||
| Add Back: Growth expenditures | 24,646 | 25,671 | 80,420 | 78,965 | |||||||||||
| Adjusted Free Cash Flow | $ | 40,529 | $ | 182,012 | $ | 460,892 | $ | 386,366 | |||||||
| (1) Others mainly include Gemini interest income, shareholder loan to Kirkland Lake and interest received on third-party loans to partners. | |||||||||||||||
Refer to Northland’s 2022 Annual Report for additional information on sources of liquidity in addition to Adjusted Free Cash Flow.
Significant Events and Updates
Northland’s global activities are exposed to general economic and business conditions, including elevated inflation levels, higher interest rates and capital costs, fluctuations in currency, economic conditions in the countries and regions in which the Company conducts business, and potential interruptions to the global supply chains. The Company’s activities are also subject to regulatory risks and changes in regulation or legislation affected by political developments and by national and local laws and regulations. This could include restrictions on production, changes in taxes, and other amounts payable to governments or governmental agencies, price or rate controls that result in changes to market prices for power generated, reduced revenues or cash flows for operating assets, higher cost of operations, and the introduction of legal and administrative hurdles. The Company’s ability to execute on large development projects is also dependent on its ability to secure project financing, which may not always be available or available on terms acceptable to Northland. Should one or more of these risks or uncertainties materialize, or should any of the Company’s assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements.
The Company continues to monitor these and other developments and is taking actions intended to minimize exposure to and impact of these global macroeconomic events. These actions include, but are not limited to, conducting targeted debt refinancing for existing operating facilities to enhance cash flows and corporate liquidity, and implementing hedging strategies on development assets to provide certainty to costs and to preserve economic returns of the projects. In addition, the Company consistently looks for opportunities to optimize its portfolio to create value, enhance financial flexibility and drive enhanced performance in line with its strategic objectives.
Balance Sheet:
- Redemption of Series 3 Preferred Shares – On January 3, 2023, Northland redeemed all 4,800,000 of its issued and outstanding Cumulative Rate Reset Preferred Shares, Series 3 (the “Series 3 Preferred Shares”) at a price of $25.00 per Series 3 Preferred Share together with all accrued and unpaid dividends of $0.3175 per Series 3 Preferred Share for an aggregate total of $121.5 million.
- Amendment to Spain Debt Facilities – As disclosed in the third quarter, Northland restructured the multiple long-term debts of its Spanish portfolio in order to optimize the structure into a single facility-level loan as well as optimizing the tax structure. The restructured loan resulted in a one-time principal payment that reduced Adjusted Free Cash Flow in 2022 by €61 million (approximately $82 million), which was paid in the fourth quarter.
- Amendment to Gemini Debt Facilities – Also disclosed in the third quarter, Northland successfully restructured €1.6 billion of its senior and junior debt relating to Gemini. The restructuring resulted in a one-time principal payment that reduced Adjusted Free Cash Flow in 2022 by €72 million ($68 million at Northland’s share), which was paid in the fourth quarter.
- At-The-Market Equity Program – During the third quarter, Northland renewed its at-the-market equity program (“ATM program”), allowing the Company to issue up to an additional $750 million of common shares from treasury, at the Company’s discretion. The ATM program was renewed following the termination of the previous ATM program as a result of having exercised the full allotment permitted under the program. As at February 23, 2023, the Company issued a total of 21,111,582 common shares for gross proceeds of $871 million under both ATM programs at an average price of $41.27 per share. The proceeds raised to date are intended to be used to fund projects that are expected to achieve financial close in 2023.
Renewables Growth:
- CanWind Offshore Wind Project – In December 2022, Taiwan’s Ministry of Economic Affairs (the “MOEA”) announced the results of the first round of the country’s Phase 3 Zonal Development offshore wind auction. Northland’s CanWind project, a 100% owned early-stage development project, was awarded a total of 500MW of capacity under the auction. Northland is evaluating the viability of the project.
- Oneida Battery Storage Project – In December 2022, Northland entered into an agreement to acquire a majority interest in the Oneida Battery Storage Project, a late-stage, grid-connected battery energy storage project in southern Ontario, Canada. The Oneida Energy Storage Project is a 250MW/1GWh battery storage facility and is being developed in partnership with NRStor Inc. and the Six Nations of the Grand River Development Corporation. The 1GWh is the total quantity of energy stored with 250MW of highest capacity rating/output at any given moment. The project will benefit from a 20-year fixed price contract for revenue payments with the Independent Electricity System Operator (“IESO”) in Ontario for the majority of the capacity from the project. Financial close for the project is expected in 2023 with full commercial operations to commence in 2025.
- Alberta Portfolio – In December 2022, Northland acquired a development platform in Alberta, Canada, which establishes Northland as a leading developer in the province. The acquisition adds a solar and battery energy storage pipeline encompassing over 1.6GW and 1.2GWh, respectively, of which the 220MW Jurassic Project could reach commercial operations as early as 2025.
- Hai Long Offshore Wind Project – The project executed all contracts with suppliers and commenced with early construction works including starting the fabrication of key components. The financing of the project is progressing towards financial close in 2023, albeit at a slower pace and under more challenging conditions than initially expected due to market specific factors. In December, 2022, Northland signed an agreement with Gentari International Renewables Pte. Ltd (“Gentari”) to sell 49% of Northland’s ownership interest in Hai Long, which upon closing, subject to various conditions, will result in Gentari holding a 29.4% indirect equity interest in Hai Long, with Northland holding a 30.6% interest.
- Baltic Power Offshore Wind Project – The project’s 25-year Contract for Difference (“CfD”) offtake agreement, which was initially denominated in Polish Zloty will now be denominated in Euros at effectively the same rate and inflation indexation will commence with a base year of 2022 (from 2023 previously), providing offsetting benefits to the higher inflationary price pressures experienced. The project continues to advance towards financial close, expected in 2023. Northland holds a 49% interest in the project with PKN Orlen holding 51%.
- South Korean Offshore Wind Project – The Dado offshore wind project has been awarded its Electricity Business License (“EBL”) for 900MW of the 1,000MW capacity, providing exclusivity on the leases for the project. Northland’s second project, the 600MW Bobae project, has been awarded EBLs for approximately 400MW and work continues on securing EBLs for the remaining 200MW. Northland is pursuing additional early-stage development opportunities located in South Korea’s Wando County for multiple projects with the potential for up to 1.8GW of operating capacity.
- La Lucha Mexican Solar Project – Northland continues to work to achieve commercial operations at its 130MW La Lucha solar project in Mexico. In January 2023, the relevant Mexican permitting authority approved extension of the generation permit for La Lucha. The Company is now coordinating with the appropriate regulatory authorities to initiate testing of the project in order to achieve commercial operations in the second half of 2023.
- New York Onshore Wind Projects – Construction activities at the Ball Hill and Bluestone onshore wind projects in New York State continues with commercial operations expected in 2023 for both projects. On February 17, 2023, Northland entered into an agreement to sell the entire stake in the Highbridge project. The transaction is expected to close in the second half of 2023.
Other:
- Business Realignment – As of January 2023, Northland implemented a new organizational structure that changes the way work will be done to create clearer accountability and position the Company for targeted growth and dedicated execution. Northland has formally commenced operating under a business unit (BU) structure focused by technology. The BU’s encompass Offshore Wind, Onshore Renewables, Efficient Natural Gas and Utilities and Hydrogen/Renewable Fuels. This new operating structure is expected to result in a more streamlined business that is better oriented towards the expected growth by technology. Each BU is led by an experienced Executive, with support by a dedicated global team including a dedicated chief financial officer (CFO), operations, project execution, legal and human resource leads which collectively form the dedicated management team of each BU. The Hydrogen BU is earlier stage in its formation but is expected to follow suit with onboarding of dedicated team members as its mandate scales.
2023 Financial Outlook – Key Highlights
Adjusted EBITDA
For 2023, management expects Adjusted EBITDA to be in the range of $1.20 billion to $1.30 billion.
Adjusted Free Cash Flow and Free Cash Flow
In 2023, management expects Adjusted Free Cash Flow to be in the range of $1.70 to $1.90 per share and Free Cash Flow to be in the range of $1.30 to $1.50 per share.
Adjusted Free Cash Flow excludes approximately $100 million (approximately $0.40 per share) in growth expenditures that support growth and new initiatives. These growth expenditures are expected to support secured projects including: Scotwind, Nordsee 3 and Delta within the Nordsee Cluster, the Korean projects, the recently acquired Alberta solar portfolio, in addition to other Canadian and US opportunities.
The Company remains well positioned to fund its growth objectives. Northland has access to $1,014 million of available liquidity, including $431 million of cash on hand and an approximately $583 million of capacity on its corporate revolving credit facility as at December 31, 2022, which can be utilized to fund growth projects that ultimately advance to financial close.
Northland also intends to execute a selective partnership strategy of partial interests of certain of its development projects on or before financial close. The Company will assess each opportunity individually and intends to remain a long-term owner in the renewable projects it develops. Any gains and losses from the future sell-down of ownership interests in development assets would be included in Free Cash Flow and Adjusted Free Cash Flow as they relate to capturing development profits at key milestones. Currently, the Company has two sell-downs in progress and expects to launch more processes in 2023. The expected net proceeds from these sell-downs would increase reported Free Cash Flow in the event they occur in 2023.
Northland is focused on achieving financial close on the Baltic Power and Hai Long offshore wind projects in 2023. Both projects are progressing towards financial close in 2023, though Hai Long continues to be more challenging than expected due to market specific factors.
Over the longer-term, Northland remains in a strong position to achieve substantial growth in Adjusted EBITDA by 2027. With 3 gigawatts (GW) of gross operating capacity and a robust development pipeline of nearly 20GW, the Company is well positioned for an accelerating global energy transition. Northland intends to be selective and pursue only the projects within its pipeline that meet its strategic objectives and targeted returns. With growth in offshore wind set to outpace all other renewables, Northland’s leading position in offshore wind positions the Company to be a significant player in this segment through the decade. As the Company was with offshore wind, Northland intends to continue to be at the forefront of emerging renewable energy asset classes.
Fourth-Quarter Earnings Conference Call
Northland will hold an earnings conference call on February 24, 2023, to discuss its fourth quarter and full year 2022 results. The call will be hosted by Northland’s Senior Management, who will discuss the Company’s financial results and developments as well as answering questions from analysts.
Conference call details are as follows:
Friday, February 24, 2023, 10:00 a.m. ET
Participants wishing to join the call and ask questions must register using the following URL below:
https://register.vevent.com/register/BIa47067890c9042e784cc4bdeef4f2684
For all other attendees, the call will be broadcast live on the internet, in listen-only mode and can be accessed using the following link:
Webcast URL: https://edge.media-server.com/mmc/p/6ckp7bg4
For those unable to attend the live call, an audio recording will be available on northlandpower.com on February 27, 2023.
Northland’s audited consolidated financial statements for the year ended December 31, 2022, and related Management’s Discussion and Analysis can be found on SEDAR at www.sedar.com under Northland’s profile and on northlandpower.com.
ABOUT NORTHLAND POWER
Northland Power is a global power producer dedicated to helping the clean energy transition by producing electricity from clean renewable resources. Founded in 1987, Northland has a long history of developing, building, owning and operating clean and green power infrastructure assets and is a global leader in offshore wind. In addition, Northland owns and manages a diversified generation mix including onshore renewables, efficient natural gas energy, as well as supplying energy through a regulated utility.
Headquartered in Toronto, Canada, with global offices in eight countries, Northland owns or has an economic interest in 3.0GW (net 2.6GW) of operating capacity. The Company also has a significant inventory of projects in construction and in various stages of development encompassing over 20GW of potential capacity.
Publicly traded since 1997, Northland’s common shares, Series 1 and Series 2 preferred shares trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A and NPI.PR.B, respectively.
NON-IFRS FINANCIAL MEASURES
This press release includes references to the Company’s adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”), Adjusted Free Cash Flow, Free Cash Flow and applicable payout ratios and per share amounts, which are measures not prescribed by International Financial Reporting Standards (“IFRS”), and therefore do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. Non-IFRS financial measures are presented at Northland’s share of underlying operations. These measures should not be considered alternatives to net income (loss), cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of Northland’s results of operations from management’s perspective. Management believes that Northland’s non-IFRS financial measures and applicable payout ratio and per share amounts are widely accepted and understood financial indicators used by investors and securities analysts to assess the performance of a company, including its ability to generate cash through operations.
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”) that are provided for the purpose of presenting information about management’s current expectations and plans. Readers are cautioned that such statements may not be appropriate for other purposes. Northland’s actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, the events anticipated by the forward-looking statements may or may not transpire or occur. Forward-looking statements include statements that are not historical facts and are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects,” “anticipates,” “plans,” “predicts,” “believes,” “estimates,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These statements may include, without limitation, statements regarding future Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, respective per share amounts, dividend payments and dividend payout ratios, guidance, the completion of construction, acquisitions, dispositions, investments or financings and the timing thereof, attainment of commercial operations, the potential for future production from project pipelines, cost and output of development projects, litigation claims, plans for raising capital, and the future operations, business, financial condition, financial results, priorities, ongoing objectives, strategies and the outlook of Northland and its subsidiaries. These statements are based upon certain material factors or assumptions that were applied in developing the forward-looking statements, including the design specifications of development projects, the provisions of contracts to which Northland or a subsidiary is a party, management’s current plans and its perception of historical trends, current conditions and expected future developments, the ability to obtain necessary approvals, satisfy any closing conditions, or obtain adequate financing regarding contemplated construction, acquisitions, dispositions, investments or financings, as well as other factors, estimates and assumptions that are believed to be appropriate in the circumstances. Although these forward-looking statements are based upon management’s current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties. Some of the factors include, but are not limited to, risks associated with sales contracts, Northland’s reliance on the performance of its offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht for approximately 50% of its Adjusted EBITDA, counterparty risks, contractual operating performance, variability of sales from generating facilities powered by intermittent renewable resources, offshore wind concentration, natural gas and power market risks, operational risks, recovery of utility operating costs, Northland’s ability to resolve issues/delays with the relevant regulatory and/or government authorities, permitting, construction risks, project development risks, acquisition risks, financing risks, disposition and joint-venture risks, competition risks, interest rate and refinancing risks, liquidity risk, inflation risks, impacts of regional or global conflicts, credit rating risk, currency fluctuation risk, variability of cash flow and potential impact on dividends, taxation, natural events, environmental risks, health and worker safety risks, market compliance risk, government regulations and policy risks, utility rate regulation risks, international activities, reliance on information technology, labour relations, reputational risk, insurance risk, risks relating to co-ownership, bribery and corruption risk, legal contingencies, and the other factors described in the “Risks Factors” section of Northland’s Management’s Discussion and Analysis and Annual Information Form for the year ended December 31, 2022, which can be found at www.sedar.com under Northland’s profile and on Northland’s website at northlandpower.com. Northland has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations. Northland’s actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, and Northland cautions you not to place undue reliance upon any such forward-looking statements.
The forward-looking statements contained in this release are, unless otherwise indicated, stated as of the date hereof and are based on assumptions that were considered reasonable as of the date hereof. Other than as specifically required by law, Northland undertakes no obligation to update any forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
For further information, please contact:
Mr. Wassem Khalil, Senior Director, Investor Relations
647-288-1019
[email protected]
northlandpower.com
