Northland Power Inc. (Northland) (TSX: NPI) today announced that
its Hai Long offshore wind project (Hai Long or the project) in
Taiwan has signed a credit agreement to secure 118 billion New
Taiwan Dollars long-term over 20 year non-recourse financing
(equivalent of $5 billion CAD). The weighted average all-in
interest cost for the term of the financing is expected to be
approximately five per cent.
The non-recourse project financing will be
provided by over 15 international and local lenders with support
from multiple Export Credit Agencies (ECAs) from six different
countries. The project is expected to reach financial close
shortly, upon satisfaction of all relevant conditions precedent to
the financing being achieved. Upon the achievement of
financial close, total debt and equity required for the project are
expected to be fully funded, which includes future cash flows
expected to be received from sell-down proceeds and pre-completion
revenues.
“Today’s announcement is a major achievement for
Northland, our partners, and the offshore wind industry, globally
and in Taiwan,” said Mike Crawley, President and Chief Executive
Officer of Northland. “We are progressing yet another world-class
offshore wind project despite a challenging market environment. The
project will produce high quality and stable cashflow over a
30-year period with further optimization opportunities. Offshore
wind is necessary to meet global renewable energy demand in the
years ahead and Northland is one of the few companies able to
originate, develop, finance, construct, and operate such
facilities.”
Hai Long’s total cost is projected to be
approximately $9 billion, with funding from its $5 billion of
non-recourse debt by the project lenders, approximately $1 billion
of pre-completion revenues, and the remaining equity investment
contributed by the project’s partners. Northland’s equity
investment has been fully secured through funds raised under its
At-the-Market equity (ATM) program in 2022 and its minority stake
sale to Gentari International Renewables Pte. Ltd. (Gentari), which
is anticipated to close during the fourth quarter of 2023, subject
to satisfaction of all closing conditions pursuant to the terms of
the purchase and sale agreement. Upon closing of the sell-down
transaction, Gentari will hold a 29.4 per cent indirect equity
interest in the project and Northland will own 30.6 per cent and
will continue with the lead role in construction and operation.
“This financing is Northland’s first in Asia
and, once closed, will be the largest non-recourse offshore wind
project financing to date in the region,” said Pauline
Alimchandani, Northland’s Chief Financial Officer. “We would like
to thank the project team, our partners, and all the financial and
capital providers for working together to achieve this significant
milestone. Once operational, Hai Long is expected to provide
significant, long-term contracted Adjusted EBITDA and Free Cash
Flow to our business and shareholders.”
Northland’s interest in Hai Long is expected to
generate a five-year average of approximately $230 to $250 million
of Adjusted EBITDA (a non-IFRS measure)4 and $75 to $85 million of
Free Cash Flow (a non-IFRS measure)4 per year once operational,
delivering significant long-term value for Northland’s
shareholders. Hai Long’s project financing is denominated primarily
in New Taiwan Dollars, along with Japanese yen and European euros.
Interest rate exposures are being managed with a combination of
fixed rate tranches and long-term interest rate hedges in line with
Northland’s risk management strategy and project finance terms. Hai
Long is also entering into currency hedges to manage foreign
exchange exposures associated with certain construction contracts.
In addition, Northland will use currency hedges to stabilize the
Canadian dollar equivalent for a large portion of its projected
repatriated cash distributions, projected through 2033, and will
enter into additional hedges beyond this time period, on an ongoing
basis.
Hai Long is located approximately 45 – 70
kilometers off the Changhua coast in the Taiwan Strait and consists
of two phases, Hai Long 2 and Hai Long 3, with an expected combined
generating capacity of 1,022 MW. Hai Long 2A was awarded up to 300
MW of grid capacity under a Feed-in-Tariff, while Hai Long 2B and 3
were awarded up to 744 MW of grid capacity in Taiwan’s first
competitive price-based auction in 2018. Hai Long subsequently
signed a CPPA for the 744 MW auction portion in 2022. The project
has obtained all environmental approvals and its major construction
permit and has commenced with early construction work and
fabrication for components. Completion of construction activities
and full commercial operations are expected in 2026/2027. In
addition, the project secured a 15-year operations and maintenance
agreement with the turbine supplier, with options to extend.
Hai Long will play an important role in helping
the Government of Taiwan achieve its renewable energy target of 15
GW of offshore wind to be constructed between 2026 and 2035. Once
operational, Hai Long will be one the largest offshore wind
facilities in Asia, and provide enough clean energy to power more
than one million Taiwanese households.
Project Overview
(C$) |
Total Project |
Northland’s Interest1 |
Installed Capacity |
1,022 MW |
313 MW |
Hai Long 2A |
294 MW |
n/a |
Hai Long 2B & 3 |
728 MW |
n/a |
Contracted Life |
|
|
Hai Long 2A |
20 years |
n/a |
Hai Long 2B & 3 |
30 years |
n/a |
|
|
|
Total Capital Costs |
$9 billion |
$2.7 billion |
Non-Recourse Project Financing |
$5 billion |
$1.5 billion |
Total Equity |
$3 billion |
$0.9 billion |
Pre-Completion Revenues used to fund Capital costs |
$1 billion3 |
$0.3 billion3 |
|
|
|
5-year Average Annual Adjusted EBITDA (a non-IFRS measure)4 |
n/a |
$230 -250 million2 |
5-year Average Annual Free Cash Flow (a non-IFRS measure)4 |
n/a |
$75-85 million |
|
|
|
Estimated annual net production |
4,500 GWh |
n/a |
Non-Recourse Debt Term |
Over 20 years |
n/a |
Weighted Average All-in Interest Cost |
~5 per cent |
n/a |
1. |
Northland’s interest reflects sell-down of a 49% interest to
Gentari expected in the fourth quarter of 2023, resulting in net
interest of 30.6%. |
2. |
Assumed NTD/CAD exchange rate at 0.046. |
3. |
It is projected a total of $1.1 billion Pre-Completion Revenues
will be generated prior to full commercial operations. $1.0 billion
of those Pre-Completion Revenues will be assumed to be part of Hai
Long’s funding plan with the remainder to be distributed to
sponsors at commercial operations (approximately $30 million net to
Northland). |
4. |
See Non-IFRS Financial Measures and Forward-Looking Statements
below. |
|
|
Expected Financial Contribution from
Oneida, Baltic Power and Hai Long
In 2023, Northland has achieved or expects to
achieve financial close on three projects: Oneida, Baltic Power and
Hai Long. These projects have and/or will be funded through an
aggregate equity investment by Northland, net of sell-down
proceeds, of $1.75 billion. The net proceeds have been fully
secured primarily through: ATM proceeds in 2022, corporate hybrid
issuance in 2023, and available cash and liquidity on hand. Once
all three projects are fully operational, anticipated by 2027, they
are expected to collectively generate an aggregate Adjusted EBITDA
and Free Cash Flow (non-IFRS measures)4 of $570 to $615 million 5 6
and $185 to $210 million 5 6, respectively, resulting in
significant value creation and accretion for Northland’s
shareholders.
5. |
Based on a 5-year annual average from the completion date. |
6. |
The projected Adjusted EBITDA and Free Cash Flow are presented to
provide additional information relating to the projects’
contributions to the Company’s results of operations. This
information may not be appropriate for other purposes. |
|
|
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 3.2 GW (net 2.7 GW) of operating
capacity. The company also has a significant inventory of projects
in construction and in various stages of development encompassing
approximately 16 GW 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”) and Free Cash
Flow, 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 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. For a detailed description of
each of the non-IFRS financial measures referred to above,
including the reconciliations for such non-IFRS financial measure
to their most directly comparable IFRS financial measure, see
Section 1: Non-IFRS Financial Measures, Section 4.5: Adjusted
EBITDA, and Section 4.6: Adjusted Free Cash Flow and Free Cash Flow
in our MD&A for the three and six-month periods ended June 30,
2023, which is incorporated by reference and available under the
Company’s profile on SEDAR+ at www.sedarplus.com.
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. 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. Readers are cautioned
that such statements may not be appropriate for other purposes.
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 guidance, the completion of construction, the
timing for and attainment of commercial operations, the project’s
anticipated contributions to Adjusted EBITDA and Free Cash Flow,
the expected generating capacity of the project, and the future
operations, business, financial condition, financial results,
priorities, ongoing objectives, strategies and outlook of Northland
and its subsidiaries, all of which may differ from the expectations
stated herein. 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 the projects, issuance of notices to proceed to
contractors in accordance with contractual milestones, 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, 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 and Free Cash Flow,
counterparty risks, impacts of regional or global conflicts,
contractual operating performance, variability of sales from
generating facilities powered by intermittent renewable resources,
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, procurement and supply chain risk, project
development risks, disposition and joint venture risk, competition
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, 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, 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 2022 Annual
Information Form, which can be found at 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 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. Adam Beaumont, Vice PresidentMr. Dario Neimarlija, Vice
President647-288-1019investorrelations@northlandpower.com
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