Northland Power Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 10, 2023

There are 9 speakers on the call.

Operator

Welcome to the Northland Power Conference Call to discuss the Third Quarter 2023 Results. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising your heinous raise. As a reminder, this conference is being recorded Friday, November 10, 2023, at 10 am Eastern Standard Time.

Operator

Conducting this call for Northland Power are Mike Krawley, President and Chief Chief Officer, Pauline Alamchandidani, Chief Financial Officer. Before we begin, Northland's management has asked me to remind listeners that all figures Presented are in Canadian dollars and are cautioned that certain information presented and responses to questions may contain forward looking statements that include assumptions and are subject to various risks. Actual results may differ materially from management's expected or forecasted results. Please read the forward looking statements section in yesterday's news press release announcing Northland Power's results can be guided by its contents and making investment decisions or recommendations. The release is available atwww.northlandpower.com.

Operator

I would now turn the call over to Mike Crawley.

Speaker 1

Thank you very much, and good morning, everyone, and welcome to Northland's Third Quarter 2023 Earnings Call. Before we start, I want to reiterate that the health Safety of our employees and stakeholders always comes first. This is particularly important now that we have 3 significant projects in construction. As always, I will provide you with the business updates before passing things over to Pauline, who will walk you through our financial results. Let me first start with an update on our offshore wind business.

Speaker 1

There's no question that it's been a tough year for the offshore wind sector. Supply chain constraints and macroeconomic conditions have hit offshore wind, the most of all of the different renewable technologies. Despite the challenges faced in the sector, I'm pleased to announce that in September, we signed and closed the financings on both the Baltic Tower And Hai Long Offshore Wind Projects, representing over 2 gigawatts of additional offshore wind capacity. These are significant milestones for Northland and a big positive marker for the offshore wind sector. We are particularly proud to have financed Both projects for more than 20 year terms totaling over $10,000,000,000 of non recourse project level debt, with the support from our global financial partners at a competitive all in rate 5%.

Speaker 1

What is important to note is that we have already secured funding for our portion of equity for these projects under construction, including Oneida. Both Baltic Power and Hai Long are progressing well in construction, which I'll speak to shortly. Once they reach full commercial operations In 2026 and 2027, with First Turbines generating power in 2025, they will provide a material amount of EBITDA And free cash and cash flow growth for our business. Recognizing the adversities within the sector, we identified and actioned several measures early to counter changing dynamics in the space to limit potential negative impacts to our projects. For example, we locked in the supply chain early and secured enhancements to the revenue contracts.

Speaker 1

On Baltic Power, this included moving inflation indexation back 1 year in the 25 year PPA that we have on the project and changing the base currency from Polish slaty to euros, which enabled increased amount of liquidity from debt lenders. Similarly, on Hai Long, we were able to secure changes to the corporate PPA, including moving the term from 20 to 30 years, which helped us offset the impact of cost increases. We also secured other optimizations on the project itself. We already have an attractive visible growth profile once we achieve commercial operations for Baltic Power and Hai Long by 2026 and 2027, respectively, and remain disciplined on our pipeline to ensure that the growth we pursue is profitable and balanced. Earlier in the year, we did not hesitate to walk away from projects like the Nordsee cluster that no longer met our investment criteria As market conditions changed and we were also able to recover our sunk cost on that project and secure a premium.

Speaker 1

We also exited early stage non core offshore wind projects like Katagami in Japan. As well, Deciding not to participate in any offshore wind development in the U. S. With a nascent supply chain and expensive upfront lease payments is just another example of us remaining selective and disciplined in our approach to growth. As I alluded to at our offshore wind investor update in September, We are focused squarely on execution of our projects under construction to be delivered on time and on budget.

Speaker 1

This is the same as we have done in the past. We will continue to take a diligent and disciplined approach to capital allocation, ensuring that we invest in high quality, Profitable for projects that drive value for our shareholders. A large and diversified development pipeline, including solar, onshore wind Energy Storage provides us the ability to dedicate our resources at any time to the projects and the investments that are most attractive. This is what makes Northland positioned well for success over the long term. Hai Long and Baltic Power are advanced projects The secured construction contracts and financing costs locked down.

Speaker 1

Therefore, Northland does not see any further offshore wind procurement Our financings for the next 3 years that enables us the flexibility to wait for not just the supply chain bottlenecks to be resolved, but also for a more stable interest rate environment. Subsequent to the Hai Long Financial close, our teams have been focused on closing The sale of the 29.4% stake interest in Hai Long to Gentari announced last year in December. The sell down transaction is currently targeted for the Q4 of Strategic partnership formed with Jantari during the Q3, we also closed on a 49% sell down in 2 early stage offshore wind development projects in Taiwan, Northwind and CanWynd. Jattari's participation in these projects further demonstrates strong interest in the Taiwanese offshore wind sector and in a longer term broader partnership with Northland overall and beyond Taiwan. Now shifting to the onshore renewables business.

Speaker 1

Last quarter, we achieved financial close on Oneida, one of North America's largest energy storage projects totaling 2 50 gigawatts. Construction is progressing as planned with commercial operations expected in 2025. The contracted portion of the project is partially inflation protected. Subsequent to the end of the quarter, our Bluestone and Ball Hill projects in New York Commenced early revenue. Both projects totaling 220 Megawatts have 20 year revenue contracts with inflation protection and are expected to contribute an aggregate of $42,000,000 $15,000,000 of adjusted EBITDA and free cash flow, respectively.

Speaker 1

We are presently working towards substantial completion at which point we will finalize our tax equity funding with all this We've achieved a great deal this year across both our offshore wind and onshore renewables business. The 2023 goals we stated at our Investor Day earlier this year are being achieved, and we are looking to close on a few more before the end of the year. Now looking at the headline numbers in the quarter, we delivered adjusted EBITDA of $267,000,000 in the 3rd quarter, along with adjusted free cash flow and free cash flow of Moving to updates on the construction progress for our 3 projects under construction, Hai Long, Baltic Power and Oneida. At Hai Long, fabrication of key components and in water horizontal drilling has commenced. Hai Long has already logged 5,000,000 working hours while adhering Strong health and safety standards.

Speaker 1

Foundations for the turbines and offshore substation work has significantly advanced And the offshore jacket foundations are in final outfitting and close to being ready to sail out to Taiwan. Fabrication of key components have also begun at Baltic Power. At the Oneida Energy Storage Project, the road and the pond Construction and Equipment Foundation has commenced along with preparation of site for receiving major equipment in the spring. Execution for these Three projects is our top priority. We maintain very close communications with the major contractors in our supply chain at both project and corporate level.

Speaker 1

This is crucial to ensure the quality of construction and that our projects are delivered on time and on budget. The contractors in our supply chain are reputable With strong track record and expertise, in most cases, we have worked with them on previous projects. Most of you may have seen recent media reports There is no indication that this will impact the delivery of turbines to our Hai Long project. SUE have reiterated and confirmed to Hai Long The program remains unaffected and is currently tracking on schedule for material deliveries that they are fully underway for the plant installation In 2025, and of course, there was some further news yesterday on discussions between Siemens Energy and the German government in the news. Delivering these 3 projects into operation, they are expected to collectively generate an aggregate adjusted EBITDA and free cash flow of 570 $615,000,000 $185,000,000 to $210,000,000 respectively on a 5 year average basis, resulting in significant value creation and accretion for Northland's shareholders.

Speaker 1

With that, I will turn the call over to Pauline for a more detailed review of our financial results.

Speaker 2

Thank you, Mike, and good morning, everyone. Before diving into the quarterly results, I want to take a moment to emphasize the immense Quarter we have had with the closing of the financings on more than 2 gigawatts of offshore wind projects. The team worked with more than 20 financial institutions each for Hai Long and Baltic Power, which included building new relationships with over 15 commercial global banks and export credit agencies. Developing these new relationships and bolstering existing ones will go a long way in building an ecosystem of partners Closing over $10,000,000,000 of project financings in the current market is a testament Of the high quality projects we own and is a positive reflection on the capability of our teams, our partners, our reputation as a sponsor, leading both financing on behalf of the project and our partners. As Mike noted, all projects in Instructions have been funded through approximately $900,000,000 in proceeds raised on our ATM program in 2022 and through the $500,000,000 corporate hybrid debt at a net cost of approximately 6.2%.

Speaker 2

The remaining element of the funding plan Is the closing of the 49% sell down of Hai Long to Gentari, which is targeted for the Q4 subject to achieving closing conditions as Mike discussed? Northland had access to $563,000,000 of available liquidity at September 30, including $63,000,000 of cash on hand and approximately $500,000,000 of capacity on its corporate revolving credit facilities as of today. Northland also had a $500,000,000 short term corporate credit facility to help fund its equity contribution in Hai Long, of which $344,000,000 was utilized at September 30. This facility is intended to be repaid subject to the receipt of the proceeds from the sell down of Hai Long to Gentari. The facility matures at the end of November of 2023 and may need to be extended or refinanced if there is a delay in the closing of the sell down.

Speaker 2

In addition, Northland has secured a $1,000,000,000 Hai Long related corporate LC facility To support Hai Long credit requirements during construction, Hai Long Northland's Hai Long related letter of credit obligations and this facility would decrease by 49% upon closing of the Gyntari sell down. Looking at financial results released last night, our Q3 2023 results were lower compared to Q3 last year, but were in line with our expectations. We generated adjusted EBITDA of approximately $267,000,000 in the quarter, representing a decrease of approximately 8% or $23,000,000 compared to the same period last year. The key factors that contributed to the lower EBITDA year over year included a $50,000,000 decrease in operating results at the Offshore Wind Facilities, primarily due to the non recurrence of the unprecedented spike in market prices realized in 2022. This decline was partially offset by higher turbine availability at Nordsee 1 following the completion of the RSA replacement campaign in 2022 and the effect of foreign exchange fluctuations due to the strengthening of the euro and other items and a $14,000,000 increase in G and A costs and development expenditures, primarily due to higher costs to support operating projects and the latter driven by the timing of the spend.

Speaker 2

The factors partially offsetting the decrease in EBITDA were a $29,000,000 increase in the contribution from the Spanish Renewables portfolio, primarily due to the increase in band adjustment, partially offset by the decrease in both merchant revenue and RI, dollars 19,000,000 in gains from partial asset sell downs. With respect to our free cash flow and adjusted free cash flow, Northland generated approximately $36,000,000 $64,000,000 in the quarter respectively. This compares to $44,000,000 $66,000,000 in the same period a year ago. The significant contributors resulting to the lower adjusted free cash flow and free cash flow in A decrease in contribution from the operating facilities leading to lower adjusted EBITDA, a decrease in the result The decrease is a result of higher net proceeds from the EPSA refinancing that were recognized last year and the decreases were partially offset from partial asset Sell down gains and lower finance costs. On a per share basis, these figures translated into free cash flow of $0.14 and adjusted free cash flow of 0.2 $0.05 in the quarter compared to free cash flow of $0.19 and adjusted free cash flow of $0.28 per share in the same time last year.

Speaker 2

These results generated a rolling 4 quarter adjusted free cash flow and free cash flow net payout ratios of 59% and 82%, respectively, calculated

Speaker 1

on the

Speaker 2

basis of cash dividends paid compared to 32% and 37% for the same period ending September 30, 2022. We continue to focus on managing our balance sheet and we will commit to new projects in future periods only being convinced of locking down financing Further, as Mike mentioned, in addition to working on the closing of the Hai Long Sell down transaction with Gentari that is targeted for the Q4, we also closed on the 49% sale Turning to our 2023 financial guidance, as noted in our press release, Despite the regulatory changes in Spain, which materially impacted our results last quarter and the macroeconomic challenges posed this year, We are reaffirming our 2023 financial guidance, albeit at the lower end of the range. For adjusted EBITDA, we expect to generate The low end of the range of $1,200,000,000 $1,300,000,000 this year. For free cash flow, we expect the range to be At the low end of $1.30 $1.50 per share, while for adjusted free cash flow, we expect to be at the lower end of the range of $1.70 to $1.90 per share. The low end of the ranges include sell down gains.

Speaker 2

To conclude, it has been a significant quarter for Northland with derisking and the achievement of financial goals of our To Marche Offshore Wind Projects. Going forward, our focus remains on the execution of our 3 projects under construction within schedule and budget, which will allow us to potentially enhance project returns further with the optimization levers we have available that were discussed on our offshore wind investor call last month. I will now turn the call back over to Mike for his concluding remarks.

Speaker 1

Thank you, Pauline. And picking up on Pauline's point, going forward, we intend to focus on the Construction and execution of our projects in progress. In these uncertain times, it's especially crucial to stay constantly engaged with our suppliers throughout the management Through management and the project team level conversations to ensure we are on track to stay on schedule and our budget on our budget and manage the impact of any setbacks. Northland has no further committed equity for the subsequent years, and we intend to take full advantage of the optionality provided by our growth pipeline. We are focused on being disciplined and selecting the right growth projects that meet our investment criteria in the current environment.

Speaker 1

This concludes our prepared remarks, and we'd be happy to take your questions. Please open up the lines.

Operator

Thank you. Our first question comes from the line of Nicholas Boychuk With Cormark Securities, your line is open.

Speaker 3

Thanks. Good morning, everyone. Can you please expand a little bit on the curtailment issue Seeing in Germany this quarter, whether anything can be done to improve transmission or maybe even add battery energy storage to monetize that production?

Speaker 1

So we understand there's still further transmission upgrades being pursued over the coming years. In Germany, there's also other enhancements to the grid Being proposed, including, I think some announcements recently of adding additional gas capacity to the German grid as well. So all of that, in our view, would reduce curtailment in the years ahead or at least be a positive Factor in terms of curtailment risk in the years ahead. We have a storage team, which looks at all of our assets in terms of whether or not storage And we added to our projects to manage or mitigate curtailment, but I don't have anything further to say at this point.

Speaker 3

Okay. Thanks, Mike. On the development costs in that earlier stage segment of the pipeline, Is it fair to say that some heavy lifting was done with projects this year and that project development and development overhead costs might Roll over a little bit into 2024 or are you expecting a similar investment to be made in the coming year?

Speaker 1

I think you should expect to see a smaller investment In the next couple of years, just given that we're moving more into an execution phase than a development phase, we still have some Development activities going on, but the weighting will be more towards execution on projects that are of course now capitalized.

Speaker 3

Got it. Thanks. And then last for me. It just it seems like a lot of regulatory bodies are becoming more open to revising and revisiting previously awarded PPA prices Just to better reflect the cost of developing new projects, I'm curious if you're seeing the same dynamic in the Colombian market and whether or not you might be able to rebid Suba or other solar projects over the coming years.

Speaker 1

We haven't seen anything in Colombia or in the Colombian market. What we have seen is in the Northeast of the U. S, there is a recent, as you know, maybe offshore wind auction, which came in at, I think, USD 140 USD per megawatt hour, I think, on average price. I could be wrong on that exact price, but it came in substantially higher than previous auctions. There's recent news out of the U.

Speaker 1

K. Around potentially lifting the ceiling on offshore wind bids going forward in future auctions By 30% or 40%, I can't remember the exact amount, but by a substantial amount. So all of those for us are indications that Energy prices and PPA prices are adjusting to the new capital cost and cost of capital in the sector.

Speaker 4

Great. Thanks, Mike.

Operator

Thank you. One moment for our next question, please. Our next question comes from the line of Rupert Merer with National Bank. Your line is now open.

Speaker 5

Hi, good morning everyone. With the equity investment from Gentari, can you give us more Color on the closing conditions to get that deal done and what's your comfort level with completing it this quarter?

Speaker 2

So as part of the transaction, Chantari needs to meet certain requirements in order to be part of the debt financing, which is taking More time to finalize given they are multiparty arrangements. Also, as you know, we've got ECAs involved. So right now, I mean, the Discussions and the work streams are progressing and we're still targeting to complete that in the 4th quarter.

Speaker 5

And Pauline, if it is delayed, is there anything you have to do regarding the financing that's in place?

Speaker 2

Yes. We've got short term bridge financing that's currently in place. So I think the simplest thing to do would be likely to extend that financing that we have in place.

Speaker 5

Okay. Thank you. And Mike, I know you've given us some color on Siemens already. It does remain a topic of interest with investors. And with that, I wonder if you can give us a little more color on the plan for producing turbines for High Long.

Speaker 5

I know they're not supposed to be delivered until 2025, but can you give us some color on where they're going to be assembled? Anything unique to the supply chain for those turbines? And again, remind us of the carrots and the sticks that you have with Siemens to ensure delivery?

Speaker 1

Yes. So the bulk of the components are coming from European manufacturing facilities. There is a nacelle fabrication facility in Taiwan as well, where There's some of the nacelles are going to be sourced. We have typical LDs and penalties In the contract, supply contract to incentivize on time delivery by Siemens Gamesa, we also have buffers in the contract schedule Give us further assurance in terms of being able to make sure there's no knock on effects in terms of delays. I think I'd probably leave it at that other than the fact that we are, as you can imagine, have been in regular contact with Seamus Gamesa, including me with my equivalent at Seamus Gamesa, given the news of 1 or 2 months ago to ensure that our order was still moving ahead on schedule and we've been given every assurance and confirmation At my level, but also at the project level that, that is the case.

Speaker 1

And of course, we take some comfort from the news yesterday And I think a Reuters story around where discussions are at with the German government, obviously, that's To be confirmed in the days weeks ahead, I presume, but generally, we are confident in Siemens Dumesa's ability to

Speaker 5

All right, great. Thanks for the color. I'll get back in the queue.

Operator

Thank you. One moment for our next question please. Our next question comes from the line of Sean Steuart with TD Securities. Your line is now open.

Speaker 6

Thank you. Good morning. Mike, wondering if you can give any general commentary on The potential for rationalization of the existing operating platform to backstop liquidity, any New thoughts with respect to the thermal portfolio, potentially ebbsa, streamlining the The portfolio, is that at all on the radar at this point?

Speaker 1

Yes. Fair question, Shaun. Listen, we've been clear in the last 6 months Last year that we are looking to for ways to simplify the business moving forward. We the business did a lot of prospecting over the last few years, and some markets have turned out very well for us. And we've either Like Poland, developing a very attractive project and constructing a very attractive project in that market and other areas like Alberta where We've secured a strong pipeline of projects that can be built out at our discretion over the next 5, 6, 7 years.

Speaker 1

So But other markets perhaps have been turned out to be less attractive. And so I think what you'll see is us pulling back from Some markets that have been proven less attractive and looking to simplify the business moving forward. But in terms of specific assets, I wouldn't have anything I would say on the thermal assets, I mean, they are an important part of our fleet, and they do still deliver meaningful cash flow.

Speaker 7

Yes. Okay.

Speaker 6

And then any comments on and appreciating your shifting to more of an execution versus development phase, at least in the midterm. Comfort with the overall liquidity position adjusted for the Gentari proceeds to come, Do you feel comfortable that whatever equity investment needs you might have, your balance sheet

Speaker 1

Let me just on investment decisions, anything that we do on investment decisions is completely discretionary moving forward. So it and then one of the points I was just I think we made at our Investor call in September is that we have the we're in a position now where we've got 3 large projects True financial flows into construction over the last year that will deliver meaningful cash flow in 2 to 3 years' time as they come online. We don't need to source new growth. We don't need to fund new growth over that next 2 to 3 years. If we do, it will be if market conditions are favorable, if the projects have attractive economics And but we don't need to pursue any projects during that period of time.

Speaker 1

So anything we do, like I said, would be entirely discretionary. I'll leave it to Pauline to answer the rest of the question.

Speaker 2

Yes. I mean, I think as Mike mentioned, we are looking at simplifying the business overall, which will include either further sell downs and our asset So that would be a focus over the next 1 to 2 years, which will Generate some liquidity for the business and how we deploy that will be in the best interest of the company, the balance sheet, Ongoing liquidity and what's most accretive for us at the time.

Speaker 6

Okay. That's all I have. Thanks very much.

Operator

Thank you. One moment for our next question, please. Our next question comes from the line of Mark Jarvi with CIBC. Your line is now open.

Speaker 7

Yes. Good morning. So, I know you guys are winding down the hydrogen initiatives. Obviously, it's very early days and not a lot of meaningful capital. But just what does that mean For any future options around the existing offshore wind farms in Germany, I think at one point there was talks about using sort of that power to move towards Green hydrogen production or even some of the efforts in Atlantic Canada, any thoughts on those two aspects where you were looking at green hydrogen?

Speaker 1

Yes. That's a good question, Mark. The so we folded in perhaps the hydrogen business unit. And As we said, I think, in the last quarter, we would no longer be looking at any export, hydrogen export projects or large scale Standalone hydrogen projects. We have retained some talent in hydrogen within the company, which is now embedded within The thermal scheme, which understands fuels well, to look at opportunities like you described in terms of whether or not there is an offtake, Recontracting opportunity that could involve hydrogen going forward for any of our facilities.

Speaker 1

You referenced N1, but Over the next decade for any of our facilities, so we thought it was important to retain some expertise and knowledge in that area and that is for that reason.

Speaker 7

So just to clarify, Mike, you're saying that there still is some options in Nordsee One as using that power supply Do you do something around green hydrogen as another option for an offtake?

Speaker 1

Yes, to be clear, so we would we certainly will be exploring Opportunities to sell electrons to a hydrogen producer depending on how that market Develops in the coming years. So understanding green hydrogen and the market for green hydrogen It's important in that respect as projects over the next 10 years like with all of the IPPs start to gradually Come off of their initial contract and need to be re contracted. So it's about having different options and making sure we have The full knowledge and expertise of markets that you could sell the electrons to a marketer, you could sell the electrons To corporate off taker, you could, in some cases, maybe rebid them in for a sovereign contract or possibly for the green hydrogen market develops Over the next few years, you could sell them to a green hydrogen producer as well. So we just want to make sure that we understand the market And are in touch with what's going on in the market so that we can choose the most profitable and the most Attractive opportunity for recontracting any of our projects over the next 10 years, including Nordsee One.

Speaker 7

Okay. Makes sense. And then A handful of years ago, there was some conversation around Northland maybe getting paid for its development and asset management capabilities. So sort of an asset light, We're a survival consulting development expertise model. Obviously, in light of the scarcity of capital or I guess the discipline you're showing now, Are you getting any inbounds?

Speaker 7

Do you have capacity

Speaker 6

with your teams to do any of those sorts of initiatives?

Speaker 7

Or is that just something that's really not on your radar at this point?

Speaker 1

I didn't quite hear at all. Was it to do development on a fee for service basis? Is that what it was?

Speaker 7

Yes. Yes, exactly.

Speaker 1

Yes, yes. So I mean effectively what we're doing in a way with the sell downs and by bringing in partner equity into some of our projects is developing projects And getting a premium for the sweat equity and the derisking and the value creation We do through development. So in a way, that's what we're doing. We're still retaining a portion on those projects for our own capital. And also as we look at our development pipeline and rationalizing our development pipeline, if we divest certain development assets effectively, that's what we're doing is monetizing the value created by those development pipelines if we decide that there's a better owner or a better constructor and operator of that asset than us.

Speaker 1

So we certainly would be looking at Those types of opportunities as well. We haven't looked at this point at doing kind of almost just a pure development model where we're developing projects With no intention of deploying our capital into those projects at any time. I mean, like I said, in some cases, the pieces may change and we may decide that There's a better owner for that asset and we'll be disciplined in that respect, but not at this point in terms of doing fee for service development.

Speaker 7

Yes. I'm just trying to understand that there's obviously been some disruption, some firms backing a little bit away from offshore wind. And I just wonder whether or not your skill set without extending yourselves from a balance sheet perspective could be leveraged going forward?

Speaker 1

I think it could be and I think the question I mean, a sell down could I mean, a sell down on any project, it could be 25% sell down, 50% sell down, it could be even greater, right? And so I suppose to your point, it could be all the way to 0 given our skill set that we have. I think those decisions don't necessarily have to be made at this point in time, but there is a few point, I think as you're alluding to, A lot of large players with significant balance sheets and a lot of capital that want to deploy That capital and offshore wind, but don't have the expertise to develop those projects. And arguably, maybe there may be an opportunity there for sure.

Speaker 7

Okay. Thanks for the

Operator

time today. Thank you. One moment for our next question please. Our next question comes from the line of Nelson Ng with RBC Capital Markets. Your line is now open.

Speaker 7

Great.

Speaker 4

Thanks. Just a quick question on the CanWinn and Northwind sell down. So can you just give a bit more color in terms of the Mechanics of how the sell down went and how you recognized $19,000,000 of gains, like did any Cash change hands or will Gentari just mainly fund the next, chunk of development costs?

Speaker 2

No, cash did change hands and we received that cash in the quarter. And I would say that it followed a very typical valuation process And going forward, now we will share

Speaker 1

the costs going forward. Okay.

Speaker 4

Makes sense. And then I know Mike mentioned that you guys are not looking to close any new Offshore wind projects for the next few years. But for CanWind and Northwind, are you still actively Developing that project or is it on hold or can you just give us an update on timing and process for those 2 projects?

Speaker 1

Yes. I think there's still some clarity and information that everybody who has any The next round projects in Taiwan is waiting for from the Taiwanese government in terms of what the rules are going to be, when the auction is going to be, when the bid is going to be. So there's Still a lot of information missing to determine, even if, the projects are something that we would want to proceed with. So I think it's pretty early days.

Speaker 4

Okay, got it. And then my next question relates to the New York wind projects. Congrats on completing those projects. I think previously you guys talked about a project cost of about US600 $1,000,000 Is it still around that level or is it a bit higher given that there was some delay? And then also can you just talk about The funding or capital structure, I think there was about $190,000,000 of tax equity or so?

Speaker 2

Yes. No change to the capital costs from the prior disclosures. So all that is still in line. The tax equity piece It's about US150 million

Speaker 4

dollars Okay, got it. And then last question, we've heard a lot of so I guess first of all, I think it's You guys made the right decision to not get involved in any of the U. S. Northeast offshore wind developments. And I know a lot of companies are No longer pursuing it or just getting out of there out of those developments.

Speaker 4

But are you Are you currently looking at any opportunities in the U. S. Northeast given that, like maybe it's the right time to get involved As others are exiting the sector, can you give some comments on that potential or opportunity?

Speaker 1

No, we're not looking at anything there. The I mean, our focus not I think I probably said it about 20 times in my script, but the Our focus is really truly on executing on the three projects that we have in front of us. I think the as we've already Seeing the reference to the future round auction prices in the Northeast of the U. S. Certainly will rise Up and move up, I think, and you've already seen some evidence of that.

Speaker 1

So I think the market will improve. And I think it's good in the long run for offshore wind That the projects in the Northeast of the U. S. Eventually get built, it will take longer and they'll be built maybe in different forms and maybe there'll be different capital and different The owners coming into some of the projects, I don't know. But for the near term, we wouldn't be prospecting around looking for that.

Speaker 4

Okay. Thanks, Mike. I'll leave it there.

Operator

Thank you. One moment for our next question. Our next question comes from the line of Ben Pham with BMO. Your line is now open.

Speaker 7

Hi. Excuse me. Thanks. On some optimizations you've mentioned in the past, I'd say, on the offshore wind Ross, are you able to quantify a directory point to where returns could be in that The 10% to 14% targeted range?

Speaker 1

I didn't quite hear the question. Can you Ben, can you repeat it, please? Did you hear it, Pauline?

Speaker 2

I think you're looking for us to quantify the direction of the optimizations. Is that right?

Speaker 1

That's right. On High Long, Yes.

Speaker 2

So I think what we did at the Investor Day was we tried to say how much In terms of basis points, we were able to get when you look at North Sea or some of the other projects on the debt optimization, which is probably the most significant optimization beyond that would be, you know, PCRs It would be an optimization for Hai Long, which again, just relies on the project being built on schedule, On or ahead of budget. And then last one always remains is sort of sell downs and then construction Optimization, but I think on the debt refinancing side, I think we quoted 50 basis points to 75 basis points is what we've been able to achieve historically. Obviously, we just closed the financings, but as of today, I mean, I think that that's a fair assumption to use.

Speaker 1

And the only thing well, we didn't we only I spoke to, but we didn't give any ranges to because I mean, everybody would have to come up with their own view on it is on any reamortization of the debt to

Speaker 7

Okay. Can you also talk about Your exposure to the carbon tax in Canada with your gas fleet,

Speaker 1

do you

Speaker 7

think about the

Speaker 8

government's Clean standard after next year?

Speaker 1

So I believe and we'll follow-up after the call. On most of our It is a pass through. I think it is on a couple of our facilities, it is not. But I think The one I'm thinking of doesn't run all the time, but we can get back to you on that just to confirm that 1 on 1.

Speaker 8

Okay. All right. Thank you.

Operator

Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Mike Crawley for closing remarks.

Speaker 1

Well, thanks for everybody for joining the call today and we look forward to reengaging with you on our Q4 call coming up in February. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

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Key Takeaways

  • Northland closed CA$10 billion of non-recourse project debt at a ~5 % all-in rate to fund its 2 GW Baltic Power and Hai Long offshore wind projects, which target first power in 2025 and full commercial operations in 2026–27.
  • The company took a disciplined growth approach—locking in supply chains early, enhancing PPAs (e.g., shifting Baltic Power’s indexation and currency, extending Hai Long’s term to 30 years), and exiting non-core projects like Nordsee cluster, Katagami and U.S. offshore wind.
  • In onshore renewables, Northland achieved financial close on the 250 MW Oneida energy storage project (ops in 2025) and kicked off early revenues from the 220 MW Bluestone and Ball Hill solar/wind portfolio, expected to add CA$42 million of EBITDA and CA$15 million of free cash flow.
  • Third-quarter results: CA$267 million adjusted EBITDA (down 8 % YoY), CA$64 million adjusted free cash flow and CA$36 million free cash flow, while reaffirming 2023 guidance at the low end of CA$1.2–1.3 billion EBITDA and CA$1.30–1.50 FCF per share.
  • Construction on Hai Long, Baltic Power and Oneida remains on time and on budget, with the trio projected to generate a combined 5-year average of CA$570–615 million EBITDA and CA$185–210 million free cash flow.
AI Generated. May Contain Errors.
Earnings Conference Call
Northland Power Q3 2023
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