Jacket for offshore sub-station - marking the first major piece of equipment
heading to Taiwan (Hai Long)
TORONTO, Feb. 21, 2024 (GLOBE NEWSWIRE) -- Northland Power Inc. ("Northland" or
the "Company") (TSX: NPI) reported today financial results for the three months
and year ended December 31, 2023. All dollar amounts set out herein are in
thousands of Canadian dollars, unless otherwise stated.
Financial Results
* Sales were $626 million in the fourth quarter of 2023 compared to $641
million in 2022. On a full-year basis, sales were $2,233 million in 2023
compared to $2,449 million in 2022.
* Gross Profit was $566 million in the fourth quarter of 2023 compared to $574
million in 2022. On a full-year basis, gross profit was $2,021 million in
2023 compared to $2,178 million in 2022.
* Net loss was $268 million in the fourth quarter of 2023 compared to net
income of $324 million in 2022. On a full-year basis, net loss was $96
million in 2023 compared to net income of $955 million in 2022.
* Adjusted EBITDA (a non-IFRS measure) was $389 million in the fourth quarter
of 2023 compared to $353 million in 2022. On a full-year basis, Adjusted
EBITDA was $1,240 million in 2023 compared to $1,398 million in 2022.
* Adjusted Free Cash Flow per share (a non-IFRS measure) was $0.75 in the
fourth quarter of 2023 compared to $0.16 in 2022. On a full-year basis,
Adjusted Free Cash Flow per share was $1.97 in 2023 compared to $1.95 in
2022.
* Free Cash Flow per share (a non-IFRS measure) was $0.75 in the fourth
quarter of 2023 compared to $0.06 in 2022. On a full-year basis, Free Cash
Flow per share was $1.68 compared to $1.61 in 2022.
"Northland performed well in 2023. We achieved Adjusted EBITDA and exceeded
guidance for Adjusted Free Cash Flow and Free Cash Flow. The financial and
operating performance for 2023 is a testament to both the capability of our team
and the resilience of our business. Notwithstanding the challenges experienced
within the industry and the economy more broadly, Northland demonstrated our
resilience achieving several significant milestones in 2023, including reaching
financial close on our two major offshore wind projects, Hai Long and Baltic
Power, and our energy storage project, Oneida. Construction for all three
projects is now underway and progressing well. In addition, we successfully
executed several partnership agreements within our offshore wind projects in
Scotland and Taiwan. These accomplishments continue to reinforce our capability
and expertise to develop, secure strong partnerships, and finance and execute
upon complex, large-scale projects," Mike Crawley, Northland's President and
Chief Executive Officer noted.
Fourth Quarter and Full-Year 2023 Financial Results
Northland successfully achieved original 2023 guidance for Adjusted EBITDA and
exceeded guidance for Adjusted Free Cash Flow and Free Cash Flow per share.
Performance in the fourth quarter was particularly strong, driven by higher-
than-expected sell-down gains and higher production from its offshore wind
facilities, partially offset by lower onshore renewables production due to lower
wind and solar resources.
On a year-over-year basis, full year Adjusted EBITDA decreased primarily due to
the non-recurrence of the unprecedented spike in market prices realized in 2022
in Europe, partially offset by higher band adjustment revenue recognized from
Northland's Spanish portfolio and sell-down gains realized on our development
assets in Europe and Asia. With respect to Adjusted Free Cash Flow and Free Cash
Flow per share, in addition to the same factors as above, both the Spanish
portfolio debt optimization completed in the fourth quarter of 2023 and gains
from foreign exchange hedge settlements resulted in higher reported results
compared to 2022.
The following table presents key IFRS and non-IFRS financial measures and
operational results. Sales, gross profit, operating income and net income, as
reported under IFRS, include consolidated results of entities not wholly owned
by Northland, whereas Northland's non-IFRS financial measures include only
Northland's proportionate ownership interest.
Summary of Consolidated Results
-------------------------------------------------------------------------------
(in thousands of
dollars, except per Three months ended
share amounts) December 31, Year ended December 31,
2023 2022 2023 2022
-------------------------------------------------------------------------------
FINANCIALS
Sales $ 626,221 $ 641,115 $ 2,232,779 $ 2,448,815
Gross profit 566,354 573,571 2,021,041 2,178,389
Operating income 219,802 269,794 741,157 1,050,784
Net income (loss) (267,918 ) 323,922 (96,132 ) 955,457
Net income (loss)
attributable to common
shareholders (285,595 ) 278,898 (175,194 ) 827,733
Adjusted EBITDA (a non-
IFRS measure) ((2)) 388,658 353,070 1,239,871 1,398,176
Cash provided by
operating activities 135,869 550,689 785,214 1,832,983
Adjusted Free Cash Flow
(a non-IFRS measure)
((2)) 191,289 40,529 497,978 460,892
Free Cash Flow (a non-
IFRS measure) ((2)) 191,448 15,883 423,744 380,472
Cash dividends paid 51,740 51,337 205,072 196,845
Total dividends
declared ((1)) $ 76,368 $ 74,172 $ 303,469 $ 284,582
Per Share
Weighted average number
of shares - basic and
diluted (000s) 254,368 246,378 252,710 236,157
Net income (loss)
attributable to common
shareholders - basic
and diluted $ (1.13 ) $ 1.12 $ (0.72 ) $ 3.46
Adjusted Free Cash Flow
- basic (a non-IFRS
measure) ((2)) $ 0.75 $ 0.16 $ 1.97 $ 1.95
Free Cash Flow - basic
(a non-IFRS measure) $ 0.75 $ 0.06 $ 1.68 $ 1.61
Total dividends
declared $ 0.30 $ 0.30 $ 1.20 $ 1.20
ENERGY VOLUMES
Electricity production
in gigawatt hours (GWh) 3,353 3,009 10,380 10,139
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Represents total dividends paid to common shareholders, including
dividends in cash or in shares under Northland's dividend reinvestment
(1) plan.
See Forward-Looking Statements and Non-IFRS Financial Measures below.
Further, note that non-IFRS measures during the three months and year
ended December 31, 2023, include the effect of changes in the definition
of non-IFRS measures. For a reconciliation of these non-IFRS financial
measures to the same measures before the definition changes, please refer
to Northland's Management's Discussion and Analysis ("MD&A") for the three
(2) months and year ended December 31, 2023.
Fourth Quarter Results Summary
Offshore wind facilities
Electricity production for the three months ended December 31, 2023, decreased
by 3% or 39GWh compared to the same quarter of 2022. This was primarily due to
an expected 21-day grid outage required by the TenneT for maintenance at
Deutsche Bucht, as well as higher unpaid curtailments due to negative prices and
grid outages at German offshore wind facilities. These declines were partially
offset by higher production from Nordsee One and Gemini.
Sales of $341 million for the three months ended December 31, 2023, increased
1% or $2 million, compared to the same quarter of 2022, primarily due to foreign
exchange gains due to the strengthening of the Euro, partially offset by the
non-recurrence of the unprecedented spike in market prices realized in 2022 and
an expected 21-day grid outage required by the TenneT for maintenance at
Deutsche Bucht.
Adjusted EBITDA of $218 million for the three months ended December 31, 2023,
decreased 1% or $3 million compared to the same quarter of 2022, due to the same
factors as noted above.
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 Historical Historical Historical
December 31, 2023 ((1)) 2022 ((1)) Average ((2)) High ((2)) Low ((2))
-------------------------------------------------------------------------------
Electricity
production (GWh)
Gemini 832 794 783 832 739
Nordsee One 379 362 340 379 298
Deutsche Bucht 233 326 300 326 233
-------------------------------------------------------------------------------
Total 1,444 1,482
-------------------------------------------------------------------------------
(1) Includes GWh produced and attributed to paid curtailments.
Represents the historical power production since the commencement of
commercial operation of the respective facility (2017 for Gemini and
(2) Nordsee One and 2020 for Deutsche Bucht) and excludes unpaid curtailments.
Onshore renewable facilities
Electricity production was 17% or 107GWh higher than the same quarter of 2022,
primarily due to the contribution from the recently completed New York onshore
wind projects which achieved commercial operation in October 2023 and higher
wind resource across Spanish onshore wind facilities, partially offset by lower
wind resource at Canadian onshore renewable facilities.
Sales of $104 million were 21% or $28 million lower than the same quarter of
2022, primarily due to the lower pool prices and lower Ri revenue from the
Spanish portfolio, partially offset by the contribution from the recently
completed New York onshore wind projects. Please refer to the MD&A for further
breakdown of Spanish portfolio revenue by component.
Adjusted EBITDA of $69 million was 29% or $28 million lower than the same
quarter of 2022, due to the same factors as above.
Adjusted EBITDA from the Spanish portfolio of $34 million for the three months
ended December 31, 2023, decreased 49% or $33 million compared to the same
quarter of 2022, primarily due to lower pool prices decreasing market revenue
and Ri, and lower band adjustments by $12 million, $8 million and $15 million
respectively. Free Cash Flow from the Spanish portfolio of $31 million for the
three months ended December 31, 2023, increased by $98 million compared to the
same quarter of 2022 due to higher debt repayments in the fourth quarter of
2022, as well as the impact from a debt optimization completed in the fourth
quarter of 2023. Further details on the debt optimization, are included below.
Efficient natural gas facilities
Electricity production increased 7% or 66GWh compared to the same quarter of
2022, mainly due to higher market demand for dispatchable power.
Sales of $88 million decreased 20% or $22 million compared to the same quarter
of 2022, primarily due to lower natural gas prices resulting in lower energy
rates.
Adjusted EBITDA of $44 million for the three months ended December 31, 2023,
decreased 9% or $4 million, compared to the same quarter of 2022, due to the
same factors as above.
Utility
Sales of $85 million for the three months ended December 31, 2023, increased
33% or $21 million compared to the same quarter of 2022, primarily due to the
higher market demand, rate escalations and foreign exchange gains as a result of
the strengthening of the Colombian peso.
Adjusted EBITDA of $32 million for the three months ended December 31, 2023,
increased 19% or $5 million compared to the same quarter of 2022, due to the
same factors as above.
Consolidated statement of income (loss)
General and administrative ("G&A") costs of $38 million in the fourth quarter
increased $13 million compared to the same quarter of 2022, primarily due to
increased costs and resources to support Northland's projects and global
platform and additional projects entering operation during the period, including
La Lucha solar project and New York onshore wind projects.
Development costs of $27 million increased $3 million compared to the same
quarter of 2022, primarily due to timing of spending to advance development
projects.
Net finance costs of $111 million in the fourth quarter increased $24 million
compared to the same quarter of 2022, primarily due to the issuance of the Green
Notes, partially offset by scheduled repayments on facility-level loans and
higher loan repayments related to loan restructurings that occurred in 2022.
Fair value loss on derivative contracts was $190 million compared to a $141
million gain in the same quarter of 2022, primarily due to net movement in the
fair value of derivatives related to interest rate and foreign exchange
contracts.
Foreign exchange gain of $4 million in the fourth quarter was primarily due to
unrealized gain from fluctuations in the closing foreign exchange rates.
Other income of $183 million increased by $184 million compared to the same
quarter of 2022, was primarily due to the accounting gains recorded as a result
of the sell-down of Hai Long offshore wind projects to Gentari in the fourth
quarter of 2023. The sell-down transaction was treated as a disposition of a
business interest under IFRS. Further details are included below.
Impairment expense of $163 million represents goodwill write-off related to the
Spanish portfolio. As communicated previously, the recent regulatory framework
changes are not expected to impact the overall regulatory return over the life
of the Spanish portfolio. However, because of the fixed return construct of the
regulatory regime in Spain, the benefits of much higher-than-expected pool
prices and cash flows received by Northland since its acquisition are being
offset by lower regulated cash flows over the remaining contractual life of the
portfolio. The goodwill write-off reflects the diminished value of lower future
cash flows resulting from the fixed return regulatory framework.
Net loss of $268 million in the fourth quarter of 2023 compared to net income of
$324 million in the same quarter of 2022, was 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,
2023 2022 2023 2022
-------------------------------------------------------------------------------
Net income (loss) $ (267,918 ) $ 323,922 $ (96,132 ) $ 955,457
Adjustments:
Finance costs, net 111,113 86,578 321,812 323,632
Gemini interest
income 1,991 2,265 8,103 13,065
Provision for
(recovery of)
income taxes (55,577 ) 70,990 39,129 304,662
Depreciation of
property, plant
and equipment 156,619 146,645 595,600 571,090
Amortization of
contracts and
intangible assets 14,510 13,966 57,015 53,611
Fair value (gain)
loss on derivative
contracts 187,830 (147,414 ) 294,544 (482,351 )
Foreign exchange
(gain) loss (3,570 ) (69,073 ) (39,732 ) (41,792 )
Impairment loss 163,169 - 163,169 -
Elimination of
non-controlling
interests (71,813 ) (73,692 ) (258,202 ) (272,407 )
Finance lease
(lessor) (1,291 ) (1,511 ) (5,609 ) (6,352 )
Others ((1)) 153,595 394 160,174 (20,439 )
-------------------------------------------------------------------------------
Adjusted EBITDA
((2)) $ 388,658 $ 353,070 $ 1,239,871 $ 1,398,176
-------------------------------------------------------------------------------
Others primarily include Northland's share of profit (loss) from equity
accounted investees, Northland's share of Adjusted EBITDA from equity
accounted investees, gains from partial asset sell-downs, acquisition
(1) costs and other expenses (income).
See Forward-Looking Statements and Non-IFRS Financial Measures below.
Further, note that non-IFRS measures during the three months and year
ended December 31, 2023, include the effect of changes in the definition
of non-IFRS measures. For a reconciliation of these non-IFRS financial
measures to the same measures before the definition changes, please refer
(2) to the MD&A.
Adjusted EBITDA of $389 million for the three months ended December 31, 2023,
increased 10% or $36 million compared to the same quarter of 2022. The
significant factors increasing Adjusted EBITDA include:
* $74 million in gains (calculated for non-IFRS financial measures) from the
partial sell-down of Hai Long offshore wind project to Gentari, including
the historically incurred growth expenditures' recovery due to sell-down;
and
* $7 million increase due to the contribution of New York Wind onshore wind
facilities, which achieved commercial operations in the fourth quarter of
2023.
The factors partially offsetting the increase in the Adjusted EBITDA were:
* $33 million decrease in the contribution from the Spanish renewables
portfolio, as described above; and
* $15 million increase in G&A costs and development expenditures, as described
above.
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,
2023 2022 2023 2022
-------------------------------------------------------------------------------
Cash provided by
operating
activities $ 135,869 $ 550,689 $ 785,214 $ 1,832,983
Adjustments:
Net change in non-
cash working
capital balances
related to
operations 231,350 (141,244 ) 466,313 (289,875 )
Non-expansionary
capital
expenditures (1,947 ) (10,675 ) (3,215 ) (56,248 )
Restricted funding
for major
maintenance, debt
and decommissioning
reserves (8,200 ) (6,531 ) (11,435 ) (17,857 )
Interest (142,890 ) (112,927 ) (325,841 ) (336,356 )
Scheduled principal
repayments on
facility debt (323,800 ) (439,185 ) (705,119 ) (839,614 )
Funds set aside
(utilized) for
scheduled principal
repayments 158,020 170,661 - -
Preferred share
dividends (1,573 ) (2,954 ) (6,103 ) (11,206 )
Consolidation of
non-controlling
interests (22,194 ) (31,707 ) (87,380 ) (75,217 )
Investment income
((1)) 7,374 12,214 29,685 24,880
Proceeds under
NER300 and warranty
settlement at
Nordsee One - 14,530 - 70,317
Others ((2)) 159,439 13,012 281,625 78,665
-------------------------------------------------------------------------------
Free Cash Flow
((3)) $ 191,448 $ 15,883 $ 423,744 $ 380,472
Add back: Growth
expenditures 26,635 24,646 112,786 80,420
Less: Historical
growth
expenditures'
recovery due to
sell-down (26,794 ) - (38,552 ) -
-------------------------------------------------------------------------------
Adjusted Free Cash
Flow ((3)) $ 191,289 $ 40,529 $ 497,978 $ 460,892
-------------------------------------------------------------------------------
Investment income includes Gemini interest income and repayment of Gemini
(1) subordinated debt.
Others mainly include the effect of foreign exchange rates and hedges,
interest rate hedge, Nordsee One interest on shareholder loans, share of
joint venture project development costs, acquisition costs, lease
payments, interest income, Northland's share of Adjusted Free Cash Flow
from equity accounted investees, gains and losses from sell-downs of
development assets, interest on corporate-level debt raised to finance
capitalized growth projects and other non-cash expenses adjusted in
(2) working capital excluded from Free Cash Flow in the period.
See Forward-Looking Statements and Non-IFRS Financial Measures below.
Further, note that non-IFRS measures during the three months and year
ended December 31, 2023, include the effect of changes in the definition
of non-IFRS measures. For a reconciliation of these non-IFRS financial
measures to the same measures before the definition changes, please refer
(3) to the MD&A.
Adjusted Free Cash Flow of $191 million for the three months ended December
31, 2023, was 372% or $151 million higher than the same quarter of 2022.
The significant factors increasing Adjusted Free Cash Flow were:
* $96 million decrease in scheduled debt repayments primarily due to the
Spanish portfolio, as discussed above;
* $49 million gain from foreign exchange hedge settlements as a result of
unwinding over hedged Euro positions;
* $24 million decrease in current taxes primarily at offshore wind facilities
and the Spanish portfolio as a result of lower operating results; and
* $36 million increase in Adjusted EBITDA primarily due to the factors
described above.
The factors partially offsetting the increase in Adjusted Free Cash Flow were:
* $20 million decrease primarily as a result of lower net upfinancing proceeds
from EBSA due to settlement of realized maturity hedge losses; and
* $15 million increase in net finance cost primarily due to the higher short-
term financing activity at Corporate, partially offset by scheduled
repayments on facility-level loans and higher loan repayments related to
loan restructurings that occurred in 2022.
Free Cash Flow, which is reduced by growth expenditures, totaled $191 million
for the three months ended December 31, 2023, and was $176 million higher than
the same quarter of 2022, 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,
2023 2022 2023 2022
-------------------------------------------------------------------------------
Adjusted EBITDA
((2)) $ 388,658 $ 353,070 $ 1,239,871 $ 1,398,176
Adjustments:
Scheduled debt
repayments (129,002 ) (225,131 ) (579,445 ) (684,630 )
Interest expense (52,309 ) (37,235 ) (195,328 ) (220,347 )
Current taxes (46,558 ) (70,309 ) (137,460 ) (192,953 )
Non-expansionary
capital
expenditure (1,938 ) (9,266 ) (3,016 ) (48,094 )
Utilization
(funding) of
maintenance and
decommissioning
reserves (6,816 ) (6,092 ) (10,044 ) (16,550 )
Lease payments,
including
principal and
interest (2,365 ) (2,996 ) (8,677 ) (10,353 )
Preferred
dividends (1,574 ) (2,954 ) (6,103 ) (11,206 )
Foreign exchange
hedge gain (loss) 5,873 (18,730 ) 36,908 37,486
Proceeds under
NER300 and
warranty
settlement at
Nordsee One - 12,349 - 59,769
EBSA Refinancing
proceeds, net of
growth capital
expenditures - 20,078 - 46,974
Others ((1)) 37,479 3,099 87,038 22,200
-------------------------------------------------------------------------------
Free Cash Flow
((2)) $ 191,448 $ 15,883 $ 423,744 $ 380,472
Add Back: Growth
expenditures 26,635 24,646 112,786 80,420
Less: Historical
growth
expenditures'
recovery due to
sell-down (26,794 ) - (38,552 ) -
-------------------------------------------------------------------------------
Adjusted Free Cash
Flow ((2)) $ 191,289 $ 40,529 $ 497,978 $ 460,892
-------------------------------------------------------------------------------
Others mainly include Gemini interest income, repayment of Gemini
subordinated debt, interest rate hedge settlement, gains and losses from
sell-downs of development assets, and interest received on third-party
(1) loans to partners.
See Forward-Looking Statements and Non-IFRS Financial Measures below.
Further, note that non-IFRS measures during the three months and year
ended December 31, 2023, include the effect of changes in the definition
of non-IFRS measures. For a reconciliation of these non-IFRS financial
measures to the same measures before the definition changes, please refer
(2) to the MD&A.
Significant Events and Updates
Balance Sheet:
* Optimization of Spanish Portfolio's Debt Facility - On December 21, 2023,
Northland amended its Spanish portfolio's debt agreement to optimize debt
repayments and address recent regulatory changes and market pool price
volatility. As a result of this optimization, the debt repayment of EUR21
million ($33 million) scheduled in the fourth quarter of 2023 was deferred
to future periods.
* Upfinancing of EBSA's Credit Facility - On December 18, 2023, the EBSA
facility was upfinanced by $190 million, to an aggregate amount of $711
million and the maturity date was extended to December 18, 2026. The all-in
average annual cost increased from 6.3% to 8.6%, due to a combination of a
higher estimated cost for Northland to maintain currency hedges to protect
100% of the Canadian dollar-denominated debt balance against changes in
Colombian peso, increased underlying interest rates, and slightly higher
loan margin. The increase in costs is expected to be more than offset by
higher cash flows due to growth in and indexation of EBSA's regulatory asset
base. The Colombian peso has strengthened in 2023, leading to an increase in
EBSA's upfinancing capability that was offset by a hedge settlement outflow
of $144 million while a $44 million excess was distributed to Northland.
There was no impact on Adjusted Free Cash Flow or Free Cash Flow as the
upfinancing proceeds are offset by expansionary capital investments
scheduled at EBSA.
Renewables Growth:
* Hai Long Offshore Wind Project - On December 28, 2023, Northland closed its
previously announced transaction with Gentari International Renewables Pte.
Ltd., a subsidiary of clean energy solutions company Gentari Sdn Bhd
("Gentari"), pursuant to which Gentari acquired 49% of Northland's 60%
ownership in the Hai Long offshore wind project. Northland now holds a
30.6% ownership interest in the overall project and will continue to take
the lead role in Hai Long's construction and operation. This transaction
resulted in Gentari contributing a final equity consideration of
approximately NTD23 billion (equivalent to $1.0 billion) and assuming its
pro rata share of credit support for the project.
The accounting gain from the sell-down of Hai Long was recorded at $192
million, which includes $118 million of fair value gain in respect of
Northland's retained interest in Hai Long in accordance with IFRS. Adjusted
EBITDA and Free Cash Flow sell-down gain of $74 million excludes this fair
value gain in accordance with Northland's non-IFRS financial measures
policy.
* New York Onshore Wind Projects - In October 2023, the 112MW Bluestone and
108MW Ball Hill onshore wind projects commenced commercial operations under
the 20-year PPA with the New York State Energy Research and Development
Authority ("NYSERDA").
On December 19, 2023, Northland successfully secured final tax equity
funding of US$219 million ($298 million) with a conversion of term loan on
both the Bluestone and Ball Hill projects. Upon achieving the commercial
operations of these projects, Northland is deemed to have earned the
investment tax credits of US$178 million ($242 million), 99% of which were
allocated to the tax equity partner, reducing the tax equity loan in the
same amount as at December 31, 2023. Following the conclusion of this tax
equity investment, the financing structure of the projects comprises tax
equity, back-levered non-recourse debt and equity to fund the capital costs.
* Construction Updateon Hai Long, Baltic Power, and Oneida - The Hai Long
project continues to advance its construction activities with progress being
made on the fabrication of foundations, cables and onshore and offshore
substations and preparatory works for further in-water construction during
the spring of 2024. Completion of construction activities and full
commercial operations are expected in 2026/2027. The project is progressing
according to the planned schedule.
At Baltic Power, early construction activities have commenced, with the
fabrication of onshore substation, foundations and export cables underway.
Full commercial operations are expected in the latter half of 2026. The
project is progressing according to the planned schedule.
At Oneida, construction activities have commenced, including fabrication of
battery packs and transformers and pouring of foundation pads. Full
commercial operations for the project are expected to commence in 2025. The
project is progressing according to the planned schedule.
Other:
Board of Directors
On November 29, 2023, Northland announced the expansion of its Board of
Directors from nine to ten members and the immediate appointment of Ellen Smith
as a Director. Ms. Smith brings over 35 years of leadership experience within
the power and utilities sector.
Project Delivery Committee
During the fourth quarter of 2023, the Board of Directors formed a new
subcommittee: the Project Delivery Committee. The purpose of the Project
Delivery Committee is to assist the Board of Directors with monitoring and
overseeing projects in which the Company has an interest during construction.
Executive Changes
On January 15, 2024, Northland announced several changes to its executive team.
Pauline Alimchandani, CFO will be departing the Company effective February
22, 2024, to pursue another opportunity. Until a new CFO is appointed, Adam
Beaumont, Vice President Finance & Head of Capital Markets, will oversee the
finance function on an interim basis. David Povall, Executive Vice President of
Offshore Wind departed the company as well. Toby Edmonds will join Northland as
Executive Vice President of Offshore Wind, bringing essential offshore project
execution and operational experience. In addition, Yonni Fushman, who joined
Northland in January 2023 as Chief Legal Officer and Executive Vice President of
Sustainability, has been promoted to Chief Administrative and Legal Officer and
will continue to serve as Corporate Secretary.
2024 Financial Targets
Management's 2024 financial targets are described below:
Adjusted EBITDA
For 2024, management expects Adjusted EBITDA to be in the range of $1.20 billion
to $1.30 billion, comparable to 2023 Adjusted EBITDA of $1.24 billion. The major
factors expected to increase Adjusted EBITDA include (all amounts are
approximate):
* Higher contribution from New York Onshore Wind Projects that commenced
operations in the fourth quarter of 2023 and contribution from other onshore
renewable assets as a result of normalized production ($30 million);
* Higher contribution from offshore wind assets as a result of normalized
production or outages ($20 million);
* Lower development expenditures ($50 million) primarily as a result of focus
on construction execution in 2024; and
* Higher cash flows from EBSA results expected due to favourable foreign
exchange rate ($20 million).
These factors will be offset by the non-recurrence of sell-down gains and
development expenditure recovery recognized in 2023 related to offshore wind
projects ($110 million).
Adjusted Free Cash Flow and Free Cash Flow
In 2024, management expects Adjusted Free Cash Flow to be in the range of $1.30
to $1.50 per share, down from $1.97 per share in 2023. The major factors
contributing to the year-over-year expected decline in Adjusted Free Cash flow
include (all amounts are approximate):
* Lower gains from Hai Long sell-down and other transactional and hedging
gains ($120 million);
* Lower contribution from EBSA as a result of higher upfinancing proceeds in
2023 ($15 million); and
* Lower interest income earned on temporary cash balances on hand ($15
million).
Factors expected to offset the aforementioned decreases include:
* Higher contribution from New York Onshore Wind Projects that commenced
operations in the fourth quarter of 2023 and contribution from other assets
as a result of normalized production ($10 million - $15 million).
Management expects Free Cash Flow, which includes growth expenditures, to be in
a range of $1.10 to $1.30 per share, down from $1.68 per share in 2023. The
reduction is due to the same factors noted above, partially offset by lower
growth expenditures. Development expenditures are expected to be approximately
$60 million in 2024. This represents a lower level of spend than in prior years
as Northland focuses on the successful construction execution of its three key
projects, ceases all development activities in Mexico, Colombia and Japan, and
focuses development expenditures on secured projects in its pipeline including:
ScotWind, the Korean offshore wind projects, the Alberta, New York and Ontario
onshore renewable energy opportunities. These development expenditures will
reduce near-term free cash flow until the projects achieve commercial operations
but are expected to deliver accretive long-term growth in earnings and free cash
flow.
Corporate G&A costs are expected to be $3 million lower than 2023, at
approximately $75 million in 2024.
In addition, any gains from the future sell-down of ownership interests in
development assets would be included in Adjusted EBITDA, Adjusted Free Cash Flow
and Free Cash Flow as they relate to capturing development profits at key
milestones. Currently, the 2024 guidance for Adjusted EBITDA, Adjusted Free Cash
Flow and Free Cash Flow does not incorporate any sell-down proceeds and as such,
net proceeds from any sell-down would increase reported Adjusted EBITDA,
Adjusted Free Cash Flow, and Free Cash Flow in the event they occur in 2024.
Northland continues to implement a selective partnership strategy to sell
interests in certain development projects on or before financial close. In
certain situations, Northland may decide to exit certain markets or reduce
development activities within certain jurisdictions. Northland will assess each
opportunity individually and intends to remain a long-term owner of the
renewable power assets it develops.
Over the longer term, Northland remains positioned to achieve substantial growth
in Adjusted EBITDA by 2027, upon achieving targeted commercial operations of
Oneida, Baltic Power and Hai Long, each with long-term contracted revenues of
between 20 to 30 years.
The expected 2024 payout ratio, which may be closer to or above 100%, largely
reflects the level of spending on growth initiatives and the equity capital
raised for our projects currently under construction, for which corresponding
cash flows will not be received until 2026 and 2027. Northland management
expects that the Company will continue to pay dividends annually at the rate of
$1.20 per share.
Once the projects under construction, including Hai Long, Baltic Power, and
Oneida battery storage, are fully completed, they are collectively expected to
deliver, on a five-year annual average basis, approximately $570 million to $615
million of Adjusted EBITDA and $185 million to $210 million of Free Cash Flow by
2027.
With over 3 gigawatts (GW) of current gross operating capacity and a development
pipeline of approximately 12GW, including 2.4GW under construction and expected
to be operational by 2026/2027, the Company is well positioned for an
accelerating global energy transition. Northland intends to be selective and
pursue only projects within its pipeline that meet its strategic objectives and
targeted returns and closely monitor macroeconomic conditions surrounding
renewables development globally.
This Outlook is subject to the Forward-Looking Statements proviso herein as well
as the Risk Factors in Northland's most recent Annual Information Form for the
year ended December 31, 2023, dated February 21, 2024 ("2023 AIF").
Fourth-Quarter Earnings Conference Call
Northland will hold an earnings conference call on February 22, 2024, to discuss
its fourth quarter and full-year 2023 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:
Thursday, February 22, 2024, 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/BIc547b4ada08048c08f0cc894f9ea16dc
(https://protect-
ca.mimecast.com/s/lrvqCoVzqOsrL0DDsz6EjH?domain=register.vevent.com)
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/djphevny (https://protect-
ca.mimecast.com/s/U4RcCnxypzu7qYXXH9chER?domain=edge.media-server.com)
For those unable to attend the live call, an audio recording will be available
on northlandpower.com (https://www.northlandpower.com) on Friday, February
23, 2024.
Northland's audited consolidated financial statements for the year ended
December 31, 2023, and related Management's Discussion and Analysis can be found
on SEDAR+ at www.sedarplus.ca (https://www.sedarplus.ca/) under Northland's
profile and on northlandpower.com (https://www.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 approximately 3.4GW (net 2.9GW) of
operating capacity. The Company also has a significant inventory of projects in
construction and in various stages of development encompassing approximately
12GW 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, including respective per share amounts, dividend payments and
dividend payout ratios, the timing for and attainment of the Hai Long and Baltic
Power offshore wind and Oneida energy storage projects' anticipated
contributions to Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow,
the expected generating capacity of certain projects, guidance, the completion
of construction, acquisitions, dispositions, whether partial or full,
investments or financings and the timing thereof, the timing for and attainment
of financial close and commercial operations, for each project, the potential
for future production from project pipelines, cost and output of development
projects, the all-in interest cost for debt financing, the impact of currency
and interest rate hedges, litigation claims, anticipated results from the
optimization of the Thorold Co-Generation facility and the timing related
thereto, future funding requirements, and the future operations, business,
financial condition, financial results, priorities, ongoing objectives,
strategies and the outlook of Northland, its subsidiaries and joint ventures.
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, satisfy any project finance lender conditions to closing sell-downs
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 that could cause results or events to differ
from current expectations include, but are not limited to, risks associated with
further regulatory and policy changes in Spain which could impair current
guidance and expected returns, risks associated with merchant pool pricing and
revenues, risks associated with sales contracts, the emergence of widespread
health emergencies or pandemics, Northland's reliance on the performance of its
offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht for over 50%
of its Adjusted EBITDA, counterparty and joint venture risks, contractual
operating performance, variability of sales from generating facilities powered
by intermittent renewable resources, wind and solar resource risk, unplanned
maintenance risk, offshore wind concentration, natural gas and power market
risks, commodity price 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, integration and acquisition risks, procurement and supply
chain risks, financing risks, disposition and joint-venture risks, competition
risks, interest rate and refinancing risks, liquidity risk, inflation risks,
commodity availability and cost risk, construction material cost 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, climate change, health and worker safety risks,
market compliance risk, government regulations and policy risks, utility rate
regulation risks, international activities, cybersecurity, data protection and
reliance on information technology, labour relations, labour shortage risk,
management transition risk, geopolitical risk in and around the regions
Northland operates in, large project risk, reputational risk, insurance risk,
risks relating to co-ownership, bribery and corruption risk, terrorism and
security, litigation risk and 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, 2023,
which can be found at www.sedarplus.ca (https://www.sedarplus.ca/) 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.
Certain forward-looking information in this release and the MD&A, including, but
not limited to the information in Section 10: Outlook of the MD&A and our
projected Adjusted EBITDA and Free Cash Flow expected to be generated from
Northland's interest in Hai Long, Baltic Power and Oneida may also constitute a
"financial outlook" within the meaning of applicable securities laws. Financial
outlook involves statements about Northland's prospective financial performance,
financial position or cash flows and is based on and subject to the assumptions
about future economic conditions and courses of action and the risk factors
described above in respect of forward-looking information generally, as well as
any other specific assumptions and risk factors in relation to such financial
outlook noted in this release and the MD&A. Such assumptions are based on
management's assessment of the relevant information currently available and any
financial outlook included in this release and the MD&A is provided for the
purpose of helping readers understand Northland's current expectations and plans
for the future. Readers are cautioned that reliance on any financial outlook may
not be appropriate for other purposes or in other circumstances and that the
risk factors described above or other factors may cause actual results to differ
materially from any financial outlook. The actual results of Northland's
operations will likely vary from the amounts set forth in any financial outlook
and such variances may be material.
For further information, please contact:
Dario Neimarlija, Vice President, FP&A and Investor Relations
647-288-1019
investorrelations@northlandpower.com
northlandpower.com
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/39b9fc4b-0bcd-4805-b122-
daa9304d05cf
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