Northland Power Inc.

Northland Power Reports Third Quarter 2024 Results

Baltic Power, Hai Long and Oneida projects continue to make construction progress

TORONTO, Nov. 13, 2024 (GLOBE NEWSWIRE) -- Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) reported today financial results for the three and nine months ended September 30, 2024. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.

“Northland’s third quarter results were negatively impacted by the Gemini cable outage and lower offshore wind production but on a full year basis Northland continues to remain on track to achieve our full year guidance, given the strong performance in the first half of the year,” said John Brace, Northland’s Interim President and CEO. “We continue to make progress on our three construction projects in Taiwan, Poland and Canada. Following the regrettable safety incident in August, construction of the Hai Long onshore substation is progressing according to its recovery plans. We also have a number of exciting development opportunities in core markets across our development pipeline.”

Third Quarter Highlights

Financial results for the three months ended September 30, 2024 were lower compared to the same quarter of 2023, primarily due to lower production at offshore wind facilities and lower revenue from the Spanish portfolio. This decrease was partially offset by the contribution from the New York onshore wind projects that achieved commercial operations in October 2023 and higher revenue from EBSA due to growth in asset base and rate escalations.

Financial Results

• Sales decreased to $491 million from $513 million in 2023.
• Gross Profit decreased to $444 million from $458 million in 2023.
• Net Loss was $191 million compared to net income of $43 million in 2023.
• Adjusted EBITDA (a non-IFRS measure) decreased to $228 million from $267 million in 2023.
• Adjusted Free Cash Flow per share (a non-IFRS measure) decreased to $0.08 from $0.25 in 2023.
• Free Cash Flow per share (a non-IFRS measure) decreased to $0.00 from $0.14 in 2023.

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.

Third Quarter Results Summary

Offshore wind facilities

Electricity production for the three months ended September 30, 2024 decreased by 10% or 81GWh compared to the same quarter of 2023. This was primarily due to export cable damage at Gemini, and higher unpaid curtailments related to negative prices and grid outages, partially offset by higher wind resource at German offshore wind facilities.

Sales of $213 million for the three months ended September 30, 2024 decreased 8% or $18 million, compared to the same quarter of 2023, primarily due to the lower production by $26 million, partially offset by a $7 million P&I factor adjustment and various other items.

Adjusted EBITDA of $108 million for the three months ended September 30, 2024 decreased 15% or $19 million compared to the same quarter of 2023, 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 table summarizes actual electricity production and the historical average, high and low, for the quarter of each offshore facility:

In June 2024, one of Gemini’s export cables was damaged and taken out of service. On September 4, 2024, the cable was successfully repaired and energized, bringing Gemini back to full operations safely and without incident. During the repair, Gemini’s production continued via the second export cable. This was determined to be an isolated event and is expected to have a minimal impact on the Adjusted EBITDA and Adjusted Free Cash Flow for the full year, respectively, net of insurance proceeds, which are anticipated to be received by the end of the year.

Onshore renewable facilities

Electricity production was 20% or 86GWh higher than the same quarter of 2023, primarily due to the contribution from the New York onshore wind projects that achieved commercial operations in October 2023, and higher wind resource at the Canadian and Spanish onshore renewable facilities, partially offset by lower solar resource at the Spanish onshore renewable facilities.

Sales of $116 million were 1% or $2 million lower than the same quarter of 2023, primarily due to lower revenue from the Spanish facilities and Canadian onshore facilities, partially offset by the contribution from the New York onshore wind projects. Please refer to the MD&A for a further breakdown of Spanish portfolio revenue by component.

Adjusted EBITDA of $82 million was 8% or $7 million lower than the same quarter of 2023, primarily due to operating cost from New York onshore wind projects, in addition to the same factors as above.

Natural gas facilities

Electricity production of 944GWh for the three months ended September 30, 2024 was largely in line with the same quarter of 2023.

Sales of $74 million for the three months ended September 30, 2024 decreased 8% or $6 million as compared to the same quarter of 2023, primarily due to lower natural gas prices resulting in lower energy rates.

Adjusted EBITDA of $40 million for the three months ended September 30, 2024 was largely in line with the same quarter of 2023.

Utility

Sales of $85 million for the three months ended September 30, 2024 increased 9% or $7 million compared to the same quarter of 2023, primarily due to the growth in asset base and rate escalations.

Adjusted EBITDA of $35 million for the three months ended September 30, 2024 increased 18% or $5 million compared to the same quarter of 2023, primarily due to the same factors as above.

Consolidated statement of income (loss)

General and administrative (“G&A”) costs of $30 million in the third quarter increased $8 million compared to the same quarter of 2023, primarily due to increased personnel costs relating to one-time management changes and restructuring of operating and corporate functions.

Development costs of $18 million decreased $16 million compared to the same quarter of 2023, primarily due to focused spending on development activities and timing of the expenditures.

Finance costs of $108 million increased 22% or $20 million compared to the same quarter of 2023, primarily due to the contribution from New York onshore wind projects, partially offset by scheduled repayments on facility-level loans.

Fair value loss on financial instruments was $100 million, primarily due to net movement in the fair value of derivatives related to interest rate and foreign exchange contracts.

Foreign exchange gain of $9 million in the third quarter was primarily due to unrealized gain from fluctuations in the closing foreign exchange rates.

Other income was $19 million lower than the same quarter of 2023, primarily due to gains associated with the partial sell-down of development assets in 2023.

Net loss of $191 million in the third quarter of 2024 compared to net income of $43 million in the same quarter of 2023, was primarily as a result of the factors described above.

Adjusted EBITDA

The following table reconciles net income (loss) to Adjusted EBITDA:

Adjusted EBITDA of $228 million for the three months ended September 30, 2024 decreased 15% or $40 million compared to the same quarter of 2023. The significant factors decreasing Adjusted EBITDA include:

• $19 million in gains from partial sell-down of development assets in 2023;
• $19 million decrease in operating results at the offshore wind facilities, primarily due to export cable damage at Gemini, and higher unpaid curtailments related to negative prices and grid outages at German offshore wind facilities, as described above; and
• $9 million decrease in the contribution from the Spanish renewables portfolio, as described above.

The factor partially offsetting the decrease in the Adjusted EBITDA was:

• $8 million increase due to contribution of New York Wind onshore facilities and higher operating results at EBSA, 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:

Adjusted Free Cash Flow of $19 million for the three months ended September 30, 2024 was 70% or $44 million lower than the same quarter of 2023.

The significant factors decreasing Adjusted Free Cash Flow were:

• $49 million decrease in Adjusted EBITDA (gross of growth expenditures) primarily due to the factors described above; and
• $7 million decrease from foreign exchange and interest rate hedges, and other settlements.

The factor partially offsetting the decrease in Adjusted Free Cash Flow was:

• $12 million decrease in scheduled debt repayments on facility-level loans, mainly at the Spanish portfolio.

Free Cash Flow, which is reduced by growth expenditures, totaled $1 million for the three months ended September 30, 2024, and was $35 million lower than the same quarter of 2023, due to the same factors as Adjusted Free Cash Flow.

The following table reconciles Adjusted EBITDA to Adjusted Free Cash Flow:

Significant Events and Updates

Renewables Growth:

• Construction Update on Hai Long, Baltic Power and Oneida – The Hai Long project continued to make progress. Offshore construction at the project is advancing, with the completion of installation of both offshore substation foundation jackets, the first offshore substation topside, and two of three export cables. As planned, the project completed the installation of pin piles and turbine jacket foundations at approximately half of the turbine locations, which are ready for turbine installation in 2025, further de-risking the project. The fabrication of turbine components continues, including completion of the first sets of towers, generators and nacelles. On August 20, 2024, an incident occurred at the onshore substation due to a leak of carbon dioxide from the fire suppression system, which resulted in three fatalities. The project team is cooperating with local authorities to investigate the incident and ensure the safety of personnel and the surrounding community. The onshore substation construction work was initially suspended but is now progressing according to its recovery plans. First power is expected in the second half of 2025 with full commercial operations expected to commence in 2026/2027, according to schedule. Overall project cost is aligned with original expectations.
  
  The Baltic Power project continues to make progress on fabrication of onshore and offshore substations, foundations, export cables, multiple turbine components and inter-array cables. This quarter marked the fabrication completion of the first sets of monopile foundations and transition pieces, which are ready to be delivered to the project. Construction of the onshore substation and the operations and management building are progressing. Major in-water construction activity is expected to start in early 2025. Full commercial operations are expected to commence in the latter half of 2026, according to schedule. Overall project cost is aligned with original expectations.
  
  The Oneida project continues to make progress with its construction activities. The high-voltage transformers have arrived at site, and all cabling and grid interconnection works are being finalized. Commissioning activities have commenced. Full commercial operations are expected to commence in 2025, according to schedule. Overall project cost is aligned with original expectations.

• Other Growth Activity – Northland continues to make progress on its development activities in its core markets. For example, Northland signed a 15-year bilateral offtake agreement for 100% of the battery energy storage capacity from the Jurassic BESS project in Alberta with members of the Alberta Schools Commodities Purchasing Consortium. This is the first offtake agreement of its kind in Canada for a battery storage project and is a key milestone in the advancement of Northland’s Alberta portfolio.
• Increase in Corporate Credit Facility – During the quarter, Northland increased the size of its corporate revolving credit facility from $1.0 billion to $1.25 billion to continue to enhance available liquidity and support future growth opportunities in its core markets. Northland currently has available liquidity of $1.1 billion.
• Corporate credit rating re-affirmed – Credit rating agencies Standard & Poor and Fitch Ratings re-affirmed Northland’s corporate credit rating in 2024 at BBB (Stable).

2024 Financial Outlook

Northland’s outlook is underpinned by its commitment to operational excellence, prudent growth in key global markets and focus on the Company's three major renewable construction programs, ensuring their successful execution.

To prepare for further growth, the Company also continues to be active in pursuing various development opportunities in its core markets.

As of November 13, 2024, management’s 2024 financial outlook remains within the guidance range. This outlook reflects Northland’s commitment to strong operational performance, with key financial projections for 2024 including expected Adjusted EBITDA in the range of $1.2 billion to $1.3 billion and Adjusted Free Cash Flow per share to be in the range of $1.30 to $1.50. Furthermore, projected Free Cash Flow per share for 2024 is expected to be in the range of $1.10 to $1.30, reflecting the Company’s commitment to prudent financial management.

It is important to note that while Northland is confident in its outlook, it remains subject to the Forward-Looking Statements set forth herein as well as the Risk Factors outlined in Northland’s most recent Annual Information Form dated February 21, 2024 (“2023 AIF”).

Third-Quarter Earnings Conference Call

Northland will hold an earnings conference call on November 14, 2024, to discuss its third quarter 2024 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, November 14, 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/BI0cb4142cbd444fed88c4f0efe921cb3d

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/p7kuvn2d

For those unable to attend the live call, an audio recording will be available on northlandpower.com on Friday, November 15, 2024.

Northland’s unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2024, and related Management’s Discussion and Analysis can be found on SEDAR+ at www.sedarplus.ca 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, 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 3.2GW (net 2.8GW) 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 and other renewables growth activity, and the anticipated contributions therefrom to Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, the anticipated timing and attainment of insurance proceeds relating to the damage of one of Gemini’s export cables, the expected generating capacity of certain projects, guidance, anticipated dates of full commercial operations, forecasts as to overall project costs, 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 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 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