Northland Power Inc. (“
Northland” or the
“
Company”) (TSX: NPI) is pleased to announce its
2022 financial outlook ahead of the previously announced annual
Investor Day which will be held at 10:00 am EST today, in virtual
format. Members of the executive team will provide an update on
recent growth activities, Northland’s long-term plans and
objectives.
Government de-carbonization policies and
corporate net-zero plans are expected to further increase the need
for additional renewable energy over the next decade. With almost 3
gigawatts (GW) of installed capacity (over 95% with long-term
revenue contracts) and a 14 GW development pipeline, Northland is
well positioned as a leading global offshore wind developer and
operator and in addition, is establishing a strong presence in
select onshore renewable power markets. The Company had success in
2021 growing its pipeline by securing long-term contracted
renewable development projects in its target markets. Since last
year’s investor day held in February 2021, the Company has entered
the Polish offshore wind market through the 1,200 megawatt (MW)
Baltic Power offshore wind partnership and subsequently secured a
25-year government offtake agreement for the project; expanded its
onshore renewables portfolio through the acquisition of a 551 MW
portfolio of wind and solar assets in Spain; financed and commenced
construction on two of its New York onshore wind projects (220 MW)
which have a 20-year government contract with NYSERDA; exercised
its ‘step-in’ rights on the 433 MW Nordsee Two offshore wind lease;
and executed its largest ever bought deal equity financing (~$1.0
billion).
In terms of Financial Guidance, as detailed
further herein, Northland expects Adjusted EBITDA in 2022 to
increase relative to 2021, despite the expiry of a significant
Power Purchase Agreement (PPA) at Iroquois Falls. The Company’s
2021 results reported to date have been impacted by unusually low
wind in the North Sea and the 2022 guidance expects a return to
more normalized wind resource, as there are no significant changes
in Northland’s long-term estimates of wind resource for our assets
in the North Sea. Northland’s focus on operational excellence
and continuing to generate strong cash flows from its assets,
including increased contributions from the recently acquired Spain
portfolio and the EBSA utility, are also expected to contribute to
Adjusted EBITDA growth in 2022.
Over the next 24 months, Northland’s 14 GW
growth pipeline (Table 1) will begin entering a new phase as almost
3 GW of projects, offshore and onshore, reach financial close (FC)
or commercial operations. The estimated $600 million of annual
Adjusted EBITDA that these projects will deliver once in operations
will, in part, help fund the continued development of earlier-stage
projects in its pipeline such as the recently awarded Scottish
offshore wind leases and its growing Korean offshore wind
pipeline. Finally, Northland is executing on a diverse funding
strategy to source capital at both the corporate and asset levels
while optimizing returns and managing risk.
“Our continued focus on operational excellence,
including the Hamburg based offshore wind asset management
platform, and our recent M&A successes have allowed us to
forecast an increase in Adjusted EBITDA for 2022 despite the expiry
of the Iroquois Falls PPA at the end of 2021,” said Mike Crawley,
Northland’s President and Chief Executive Officer. “We expect to
add incremental cashflow in the near future through our four
onshore development platforms in Colombia, Northeast United States,
Spain and EU Eastern Europe. Looking forward, we see accelerating
demand for both renewable energy capacity and investment
opportunities in such assets. Through our 14 GW pipeline, including
several large offshore wind projects, Northland is well positioned
to meet both of those global needs. I am also very excited to see
almost 3 GW of that pipeline move towards FC or operations in the
coming 24 months. Finally, to remain at the forefront of the
energy transition, we have also added storage and hydrogen
expertise to our growth teams and will look to establish a presence
in these new technologies.”
Table 1 below outlines Northland’s project
pipeline including projects that are currently in construction,
projects that are being capitalized, identified projects that have
yet to be capitalized and additional early-stage pipeline
opportunities that could be realized with further development
efforts. Capitalized projects are generally those projects that
have secured a long-term offtake agreement or grid interconnection
rights and have demonstrated economic viability and are moving
towards achieving financial close. Currently, Northland has almost
3 GW of projects (gross) that have been capitalized.
Table 1. Northland’s Current Project Pipeline (under
construction and development)
Project |
Location |
Technology |
Size |
Northland Current Ownership |
Status |
Contract Type |
Est. COD |
Construction Projects |
Ball Hill |
United States |
Onshore Wind |
108MW |
100% |
Under Construction |
20-yr PPA |
2022 |
Bluestone |
United States |
Onshore Wind |
112MW |
100% |
Under Construction |
20-yr PPA |
2022 |
La Lucha |
Mexico |
Solar |
130MW |
100% |
Under Construction |
TBD |
2022 |
Helios |
Colombia |
Solar |
16MW |
100% |
Under Construction |
12-yr PPA |
2022 |
Total Construction Projects |
366MW |
|
|
|
|
Capitalized Growth Projects |
Hai Long |
Taiwan |
Offshore Wind |
1,044MW |
60% |
Late-Stage Development |
20-yr PPA |
2026/2027 |
Baltic Power |
Poland |
Offshore Wind |
Up to 1,200MW |
49% |
Mid/Late-Stage Development |
25-yr CfD |
2026 |
Nordsee Two |
Germany |
Offshore Wind |
433MW |
49% |
Mid Development |
TBD1 |
2026 |
Suba |
Colombia |
Solar |
130MW |
50% |
Late-Stage Development |
15-yr PPA |
2023 |
High Bridge |
United States |
Onshore Wind |
100MW |
100% |
Mid/Late-Stage Development |
20-yr PPA |
2023 |
Total Capitalized Projects |
2,907MW |
|
Identified Projects
|
Nordsee Three |
Germany |
Offshore Wind |
420MW |
49% |
Mid-Stage Development |
COD 2027 – 2030+ |
Nordsee Delta |
Germany |
Offshore Wind |
480MW |
49% |
Mid-Stage Development |
Chiba |
Japan |
Offshore Wind |
600MW |
50% |
Early/Mid-Stage Development |
Dado Ocean |
South Korea |
Offshore Wind |
Up to 1,000MW |
100% |
Early/Mid-Stage Development |
Scotwind |
Scotland |
Offshore Wind |
2,340MW |
100% |
Early-Stage Development |
Hecate |
Canada |
Offshore Wind |
400MW |
100% |
Early-Stage Development |
Total Identified Projects |
5,240MW |
|
Additional Pipeline |
Various |
~5,900MW |
|
Early-Stage Development |
TBD |
Total Pipeline (Under construction
Capitalized + Identified + Additional) |
~14,500MW |
|
- Nordsee Two has secured grid interconnection rights for zero
subsidy bid, with intention to secure a long-term corporate power
purchase contract
- PPA – Power Purchase Agreement; CfD – Contracts for
Difference
BUSINES UPDATE AND 2022 STRATEGIC
PRIORITIES
To further advance its strategic growth
initiatives, the Company is looking to accomplish the following
milestones in 2022:
- Further expansion of the Company’s
offshore wind portfolio through:
-
Progressing the 1,044 MW Hai Long offshore wind project towards
financial close, expected in the second half of 2022;
-
Progressing the 1,200 MW Baltic Power offshore wind project towards
financial close in 2023;
-
Advancing development on the 1,333 MW Nordsee offshore wind Cluster
in the German North Sea;
-
Progressing the development on the two offshore leases secured in
the recent Crown Estate Auction in Scotland with gross capacity of
approximately 2,340 MW, targeted to be brought into service in late
2020’s/early 2030’s;
-
Preparing bids for Taiwan’s round three offshore wind auction, with
two projects, CanWind and NorthWind with gross capacity of up to
1,800 MW;
-
Securing further Electricity Business Licenses in Korea and
advancing the interconnection and environmental permitting on those
projects;
-
Advancing our Japanese offshore wind projects and preparing for
future auctions; and
-
Planting low cost ‘seeds’ on development opportunities to extend
the back-end of our pipeline beyond 2030, similar to our Scotwind
development project.
- Successfully executing the Nordsee
One main rotorshaft assembly replacement campaign.
- Enhancing our near-term growth
objectives through:
-
Advancing the 130 MW Suba solar development project in Colombia to
financial close in 2022;
-
Completing the construction of 366 MW of projects including the 16
MW Helios solar project, the 220 MW Ball Hill and Bluestone onshore
wind projects, and along with the 130 MW La Lucha solar project,
bring all the projects into commercial operations;
- Expanding the
Company’s onshore greenfield development pipeline with additional
solar opportunities in the eastern United States as well as
opportunities in EU Eastern Europe; and
- Leveraging on the
recent Spanish acquisition by pursuing future growth opportunities
in that market.
- Establishing a
position in new initiatives such as storage and hydrogen to
complement the existing portfolio of offshore wind and onshore
renewables.
FINANCIAL STRATEGY
Northland’s financial position continues to be
strong and the Company remains in an excellent position to fund its
growth objectives. The Company manages its capital strategy with a
high degree of selectivity in funding its capitalized growth
projects, while maintaining an investment grade rating of BBB
(stable) from two rating agencies (S&P and Fitch Ratings Inc.).
Northland has no material maturities over the next five years and
over 95% of total debt is non-recourse to the Company. Northland
also has access to a $1.0 billion corporate revolving credit
facility (with approximately $0.8 billion of total
available liquidity as of December 31, 2021), which can be utilized
to fund growth projects that have a strong probability of advancing
to financial close. Borrowings under the credit facilities are
revolving, such that they are ultimately repaid from project
financings at financial close, corporate and/or project-level
financing/re-financing optimizations and/or sell downs at or before
financial close.
Northland’s Free Cash Flow finances growth
development expenditures (devex), corporate costs that support
growth and new initiatives. With a focus on its credit rating,
Northland considers it preferable to employ low-cost corporate
credit to fund investments in its capitalized growth projects, most
of which are targeted for financial close in either 2022 or
2023.
To complement its existing sources of funding,
the Company is enhancing its flexibility by considering partial
sell-down of ownership interests in certain development assets on
or before financial close; green financing instruments (including
green hybrid bonds); and other financing tools. These additional
sources are intended to improve Northland’s financial flexibility,
while supporting the capital and credit requirements for
development projects.
Asset Sell-downs
Northland intends to execute a selective
sell-down strategy of partial interests of certain of its
development projects on or before financial close to allow the
Company to: (i) manage jurisdictional exposures, (ii) crystalize
some development profit prior to construction as a result of the
de-risking of the project; (iii) enhance our free cash flow and
liquidity position; and (iv) increase project returns, amongst
other considerations. The Company will assess each opportunity
individually and intends to remain a long-term owner in the
renewable projects it develops. The Company’s first notable
development asset sell-down may occur as early as 2022, pending
satisfactory terms to Northland.
“In 2022, we are focused on achieving several
key value milestones for Northland including: financial close of
Hai Long, our largest offshore wind asset under development;
potentially securing our first partial asset sell-down; securing
tax equity funding for our 220 MW onshore wind assets in New York;
and achieving financial close for our 130 MW Suba solar project in
Colombia,” said Pauline Alimchandani, Northland’s Chief Financial
Officer. “Our balance sheet is in excellent position, with no
material maturities over the next five years and supported by
investment grade credit ratings. With Northland’s track record of
development, operating and financial discipline and success,
combined with our strong teams, we are in a solid position to
execute on the approximately $8.0 billion gross of new project
non-recourse and corporate financings planned for 2022 to fund our
renewable assets around the globe.”
2022 FINANCIAL OUTLOOK
Adjusted EBITDA
For 2022, management expects Adjusted EBITDA to
be in the range of $1.15 billion to $1.25 billion. Adjusted EBITDA
is expected to increase relative to the 2021 guidance range,
primarily due to the following factors (all amounts
approximate):
-
Higher contribution from German offshore wind facilities as a
result of more normalized wind resource ($50 million);
-
Contribution from the Spain portfolio ($75 million);
-
Contribution from a one-time asset management income from a natural
gas facility, as a result of financing and other optimizations ($30
million); and
-
Higher overall contribution from onshore renewables and the EBSA
utility ($35 million).
Factors offsetting the increase in 2022 Adjusted EBITDA
include:
-
Significantly lower contributions from Iroquois Falls following the
expiry of its original revenue contract at the end of 2021 ($75 to
$80 million); and
- Higher
expected growth expenditures to advance Northland’s projects ($25
million), as well as higher G&A and other costs to support this
growth ($25 million).
Free Cash Flow and Adjusted Free Cash
Flow
In 2022, management expects Free Cash Flow to be
in the range of $1.20 to $1.40 per share, in line with the lower
end of the 2021 guidance range primarily due to the following
factors (all amounts approximate):
-
Higher contribution from the offshore wind facilities as a result
of more normalized wind resource and including the impact of
foreign exchange hedges ($60 million);
-
Full year contribution from the Spain portfolio ($15 million);
-
Higher contribution from EBSA ($40 million), including enhanced
operations ($5 million) and net proceeds from refinancing of the
EBSA debt facility ($35 million) based on expected growth in EBSA’s
EBITDA; and
-
Contribution from a one-time asset management income from a natural
gas facility, as a result of financing and other optimizations ($30
million).
Factors more than offsetting the aforementioned
increases include:
-
Significantly lower contributions from Iroquois Falls following the
expiry of its original revenue contract at the end of 2021 ($75 to
$80 million); and
-
Higher expected growth expenditures to advance Northland’s projects
($25 million), as well as higher G&A and other costs to support
this growth ($25 million).
For Adjusted Free Cash Flow, which excludes
growth expenditures, management expects a range of $1.65 to $1.85
per share, which compares with a range of $1.60 to $1.70 per share
in 2021. The significant factors affecting Adjusted Free Cash Flow
were as described above for Free Cash Flow but exclude
approximately $100 million in growth expenditures.
As a growth company with a significant pipeline
of development projects, Northland is committed to unlocking the
value in this pipeline by deploying early-stage investment capital
(growth development expenditures) to advance its projects. As in
2021, with the regional development offices fully functional and
several growth opportunities secured, Northland expects to incur
higher development expenditures in 2022. These expenses are
expected to be approximately $100 million of 2022 Free Cash Flow,
which is included in the aforementioned variance explanations.
Early-stage development investments will reduce near-term free cash
flow until the projects achieve commercial operations but are
expected to deliver long-term, sustainable growth in earnings and
free cash flow.
In addition, any gains 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
2022 guidance for Free Cash Flow and Adjusted Free Cash Flow does
not incorporate any sell-down proceeds and as such, net proceeds
would increase reported Free Cash Flow in the event they occur in
2022.
LONG-TERM OUTLOOK
Currently Northland has 366 MW of additional
capacity in construction, with the expectation for completion in
2022. The Company also has almost 3 GW of gross capacity which are
projects that are scheduled for financial close and commencement of
construction within the next two years. Once these projects are
complete, Northland’s total gross capacity will nearly double to
more than 6.5 GW by 2027. Longer-term, the Company continues to
advance a pipeline of over 10 GW encompassing its identified
projects and additional opportunities to support the sustained
growth of the Company. Northland’s investor day materials will
provide more details on its growth ambitions including an
illustration of its funding plan and specific project milestones
achieved since last year that are expected to create value for
shareholders over the long-term.
Northland’s Investor Day Conference
Management will host a virtual investor conference today
at 10:00 a.m. ET. The conference will be webcast live and
can be accessed through Northland’s website at
www.northlandpower.com
Details of the webcast:
When: |
Tuesday, February 8, 2022 |
|
10:00 a.m. ET |
Webcast: |
https://onlinexperiences.com/Launch/QReg/ShowUUID=C9607E25-BDF2-487D-B516-DBE8B3BBC75B. |
Presentations and supporting materials will be posted on
Northland’s website at www.northlandpower.com
A webcast replay will be available after the conclusion of the
conference and posted to Northland’s website on February 9,
2022.
All dollar amounts in this press release
are in Canadian dollars, unless otherwise stated.
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 3.2 GW (net 2.8 GW) of operating capacity. The Company
also has a significant inventory of projects in construction and in
various stages of development encompassing over 14 GW of potential
capacity.
Publicly traded since 1997, Northland's common shares, Series 1,
Series 2 and Series 3 preferred shares trade on the Toronto Stock
Exchange under the symbols NPI, NPI.PR.A, NPI.PR.B and NPI.PR.C,
respectively.
NON-IFRS FINANCIAL MEASURES
This press release includes references to
Northland’s adjusted earnings before interest, income taxes,
depreciation and amortization (“Adjusted
EBITDA”), Free Cash Flow and Adjusted Free Cash
Flow, and per share amounts, which are not measures prescribed by
International Financial Reporting Standards
(IFRS). Adjusted EBITDA, Free Cash Flow (and as
adjusted) and Adjusted Free Cash Flow and per share amounts do not
have any standardized meaning under IFRS and as presented, may not
be comparable to similar measures presented by other companies.
These measures should not be considered alternatives to net income,
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 adjusted EBITDA, Free Cash Flow and
adjusted Free Cash Flow and per share amounts are widely accepted
financial indicators used by investors to assess the performance of
a company and its ability to generate cash through operations.
Refer to the SECTION 1: OVERVIEW, SECTION 4.4: Adjusted EBITDA,
SECTION 4.5: Free Cash Flow and SECTION 5: CHANGES IN FINANCIAL
POSITION of the current Management’s Discussion and Analysis, which
can be found on SEDAR at www.sedar.com under Northland’s profile
and on northlandpower.com, for an explanation of these terms and
for reconciliations to the nearest IFRS measure, except for
adjusted free cash flow that is introduced above.
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements including certain future oriented
financial information 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
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 Northland’s
expectations for future expected adjusted EBITDA, Free Cash Flows
(and as adjusted) and per share amounts, guidance, the completion
of construction, attainment of commercial operations which may
differ from expectations stated herein, 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 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, as well as other factors 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 revenue
contracts, impact of COVID-19 pandemic, 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 and
Free Cash Flow, counterparty risks, contractual operating
performance, variability of revenue from generating facilities
powered by intermittent renewable resources, offshore wind
concentration, natural gas and power market risks, operational
risks, recovery of utility operating costs, permitting,
construction risks, project development risks, acquisition risks,
financing risks, interest rate and refinancing risks, liquidity
risk, 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 2020 Annual
Information Form, which can be found at www.sedar.com under
Northland’s profile and on Northland’s website at
northlandpower.com. 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.
The forward-looking statements contained in this
release 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
Relations647-288-1019investorrelations@northlandpower.com
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