Northland Expands Offshore Wind Leadership Position with Almost 3 GW of Projects Advancing Towards Financial Close or Operations Over the Next 24 Months

2022 Financial Guidance and Outlook Provides for Continued Execution on Growth and Operational Excellence

TORONTO, Feb. 08, 2022 (GLOBE NEWSWIRE) -- 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)

1. Nordsee Two has secured grid interconnection rights for zero subsidy bid, with intention to secure a long-term corporate power purchase contract
2. 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:

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 Relations
647-288-1019
investorrelations@northlandpower.com