Northland Power Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
May 16, 2024

There are 8 speakers on the call.

Operator

Welcome to the Northland Power Conference Call to discuss the First Quarter 2024 Results. As a reminder, this conference is being recorded on Thursday, May 16, 2024 at 10 am Eastern Standard Time. Conducting this call for NASH Northland Power are Mike Crawley, President and Chief Executive John Brace, Executive Chair and Adam Beaumont, Interim Chief Financial Officer. Before we begin, Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward looking statements that include assumptions and are not subject to various risks. Actual results may differ materially from management's expected or forecasted results.

Operator

Please read the forward looking statements section in yesterday's press release announcing Northland Power's results and be guided by its content when making investment decisions or recommendations. The release is available at www.northlandpower.com. I will now turn the call over to Mr. Mike Crawley. Please begin, sir.

Speaker 1

Okay. Thank you very much, and thanks to everybody for joining us this morning. As always, I'd like to start by taking a moment to emphasize that the health and safety of our people is our top priority at Northland. We have 3 construction projects now well underway and we have now close to 50 well trained health and safety professionals working closely with our project teams, our contractors and our partners to ensure that our health and safety program is best in class. So now jumping to our quarterly updates.

Speaker 1

We have a strong start in 2024 with Q1 financial results better than expected. Our results were higher than last year primarily due to higher wind resources across all offshore wind facilities as well as the contribution from our New York onshore wind facilities, which began operating in October of 2023. All our operating offshore wind facilities experienced strong electricity production in the Q1 with our Deutsche Bucht offshore wind farm in Germany achieving an all time high production level. The strong operating performance results in our first quarter adjusted EBITDA of over $450,000,000 an increase of close to 30% or approximately $100,000,000 compared to the same quarter of 2023. On adjusted free cash flow and free cash flow per share, they were $0.88 $0.85 per share respectively in the quarter compared to 0.72 dollars and $0.62 per share respectively during the same period the year earlier.

Speaker 1

As noted in our press release yesterday, we are reaffirming our 2024 financial guidance and outlook. Adam Beaumont will provide more details on financial information later in the call. So moving into construction updates. We continue to make good progress on our construction program for the 2 large offshore wind projects in Taiwan and Poland and the battery storage project in Canada. As you recall, in our Investor Day, we provided a great level of detail on what has been done and what are some of the critical milestones for all our 3 construction projects.

Speaker 1

To illustrate how advanced the projects were, we gave a percentage of completion as we wanted to outline what had already been achieved as of December 31, 2023 as a baseline. Moving forward, we'll report on the status of our key milestones on each of the 3 projects. This will give our investors and stakeholders a very good and ongoing overview of our construction progress. With that, I'm going to start with our Hai Long project in Taiwan. This 1 gigawatt offshore wind project, which is 30.6% owned by Northland, continues to progress well.

Speaker 1

The project continues to make progress with fabrication of foundations, cables and the onshore and offshore substations well underway. Turbine component manufacturing has also commenced. Offshore construction work has continued to advance with the installation of both offshore substation jacket foundations and pin tiles, which is what's used to anchor in the jacket foundations at multiple turbine locations. Other major components of the wind park are arriving in Taiwan, including turbine jackets and the 1st offshore substation topside, which is a substantial structure. Full commercial operations are expected to commence in 2026, 2027 according to the schedule.

Speaker 1

Overall cost continues to be aligned with original expectations. Once operational, Hai Long will be one of the largest offshore wind facilities in Asia and will provide enough clean energy to power more than 1,000,000 Taiwanese households. Standard metric used to measure output from a wind farm or renewable energy facility. And of course, a lot of the demand growth and demand for energy in Taiwan is actually fueled by the technology sector there. Moving to Baltic Power, our 1.1 gigawatt offshore wind project in Poland, which is 49% owned by Northland.

Speaker 1

On that project, it is Baltic Power is one of the 1st large scale offshore wind projects. Indeed, it's the 1st offshore wind project to go to construction in Poland, and it will play a key role in the country's energy transition and in the country's decarbonization program. The project continues to make progress on the fabrication of onshore and offshore substations, foundations, export cables and inter array cables. Turbine manufacturing as well has commenced and the onshore substation construction is well underway. The full commercial operations are expected to commence in the latter half of twenty twenty six, which is according to the schedule, and overall project cost continues to be aligned with the original expectations.

Speaker 1

So lastly, the Oneida battery energy storage project in Ontario, which is 72% owned by Northland. This project is one of the largest battery storage projects in the world and will provide essential grid services and reliability to the Ontario electricity system. It's also important to note that this is an asset class that is important expected to see lots of growth over the next decade as grids seek to balance intermittent renewables. The project continues to make progress with its construction activities. All foundations for the battery packs and transformers have been installed.

Speaker 1

All battery packs, this is important, have been delivered to site and medium voltage transformers have started to arrive as well. Full commercial operations are expected to commence in 2025, which again is according to the schedule. Overall project cost continues to be aligned with original expectations for this project. As you can tell, we have good momentum on our construction program, but we do continue to be vigilant, disciplined and focused on these programs to ensure that these projects come in on time, on budget and deliver the material boost in cash flow that NPI is expecting. As such, project execution for the company does remain our number one priority.

Speaker 1

Moving on to other significant Q1 events. In March, we entered into an agreement to sell 100% of the 130 Megawatt La Lucha Solar Facility in Mexico. The sale is expected to close in 2024 on satisfaction of customary closing conditions. Now this transaction is all about rationalization of the markets that we're in as well as recycling capital. And as we said at Investor Day recently, we remain disciplined and prudent in managing our capital and financing needs, and we have no further requirement to access equity or debt markets for additional growth.

Speaker 1

And we will continue to be highly disciplined and selective in pursuit of any new opportunities to only move forward on such opportunities that demonstrate value accretion to shareholders. Now before I finish, as most of you are aware from our announcement at the end of March, the Board and I came to a decision in March that Northland would undergo a well planned leadership transition over the next several months. So as such, I will be transitioning out of my role as President and CEO effective September 30. Now, it's not goodbye quite yet, but I do want to say on this call, that it has been a great honor to work with such a talented and dedicated team at Northland over the last 9 years, including 6 as CEO. We've all achieved a lot working together.

Speaker 1

And I'd like to thank all of our shareholders, partners, lenders and employees for their trust and support over the years. All of these projects, these investments and the strong availability that we've been able to deliver consistently from our operating facilities, that involves not just the employees of Northland, but a lot of our partners and suppliers as well. As part of the transition plan, John Brace, many of you know, has served as CEO of Northland from 2,003 to 2018 and as Board Chair since 2019 will take on the role of Executive Chairman until the next CEO is selected and starts. Now I've known John for over 20 years and I think a number of you on the call would know John as well. He's been a key figure in Northland's history and will provide strong leadership and guidance as Interim Executive Chair during this transition period to act as a bridge between myself and the next President and CEO.

Speaker 1

It's almost like the relay race with me handing up that on to John and then John handing that off to the next President and CEO, all to ensure that this transition moves as smoothly as possible with no impact on the business, no impact on employees. So on that note, I'll hand things over to John.

Speaker 2

Thank you, Mike, and good morning, everyone. I would like to start by expressing my gratitude to Mike for his outstanding leadership and immense contribution to Northland. As the Board and I continue to attest, Mike has been instrumental in expanding our global presence, diversifying our portfolio and developing our long term growth pipeline. As Mike mentioned, the company is in a position of strength with growth locked in through 2027 and our major construction programs for Hai Long, Alta Power and Oneida well underway and all progressing according to schedule. As mentioned already, there are no changes to guidance or outlook for the year.

Speaker 2

And Northland remains extremely well placed for the future as governments and corporations globally work towards their energy transition targets. And as Mike mentioned, through discussions between him and the Board about the future, we felt that this was the right time to initiate a leadership transition given the strong position of the company. As we go through this transition period, I want to emphasize that we remain committed to our strategy and priorities as presented at our recent Investor Day. We will continue to focus on enhancing shareholder value and fostering strategic accretive growth and builds on Mike's many successes. We are progressing with a comprehensive global search for our new President and CEO with a top tier executive search firm actively leading these efforts.

Speaker 2

We are targeting a leader who align with our company's values, complement the exceptional talent that we have at Northland and drive shareholder value as we prepare for our next phase of growth. On behalf of the Board and everyone at Northland, I would once again like to thank Mike for his dedication and service and wish him all the very best. Northland has a best in class leadership team who I've known for some time in my role as Chairman and who I have now had the pleasure of working more closely with over the past month. Supplementing our leadership strength, we've welcomed our newest addition to the executive team earlier this week, Toby Edmonds. Toby is the new Executive Vice President of our Offshore Wind Business Unit, whose primary focus will be on the successful project execution of Hai Long and Baltic Power.

Speaker 2

Philby has an outstanding track record in offshore wind and we are both fortunate and delighted to have Kim Bavorek. With that, I will now turn the call over to Adam, who will provide a more detailed review of our financial results.

Speaker 3

Thank you, John, and good morning, everyone. Before jumping into the financial details for the quarter, I would like to echo John's remarks and thank Mike for his leadership. On a personal level, his mentorship has been invaluable and his achievements will continue to fuel Northland's future success. Turning to the quarter, we are pleased with our strong results to start the year. Strong wind resources in the North Sea was the primary driver with our projects in Germany experiencing one of the highest wind production quarters since it began our commercial operations.

Speaker 3

The strong winds also continued into April. As a result, our financial results were better than the same quarter last year on all three of our key financial reporting metrics, adjusted EBITDA, adjusted free cash flow and free cash flow. We generated adjusted EBITDA for the quarter of over $450,000,000 representing an increase of nearly 30% compared to last year. The key factors contributing to the higher adjusted EBITDA included a $71,000,000 increase at our offshore wind facilities, primarily due to the higher wind resources a $10,000,000 decrease in development expenditures, partially offset by higher G and A costs. The focusing of our growth efforts on our key identified key markets has enabled the reduction in development expenditures compared to the prior year.

Speaker 3

And the higher G and A relates to some one time non reoccurring costs. Results were higher by $9,000,000 from the New York onshore wind facilities, which achieved commercial operations in October of last year and an $8,000,000 increase in operating results at IPSA, primarily related to inflation escalation and the appreciation of the Colombian peso. The results were partially offset by $6,000,000 lower results from our Spanish renewable portfolio, primarily due to the lower market prices experienced across Europe as a result of the warmer winter. With respect to adjusted free cash flow and free cash flow, Northland generated approximately $226,000,000 $217,000,000 which is an increase of 25% 41% from last year. The increase in adjusted free cash flow was primarily due to $85,000,000 higher EBITDA from operations, net of growth expense since which was offset by a $23,000,000 increase in current taxes resulting from higher results at our offshore wind projects and a $15,000,000 decrease primarily from foreign hedge foreign exchange hedge settlements realized last year.

Speaker 3

On a per share basis, these figures translated into adjusted free cash flow of $0.88 and free cash flow of $0.85 in the quarter. This compares to adjusted free cash flow of $0.72 and free cash flow of $0.62 per share last year. As Mike noted earlier, we announced the sale of the La Lucha project in March. Upon closing, Northland expects to receive $205,000,000 in cash after taxes and transaction fees. This will result in a small cash on cash gain.

Speaker 3

The proceeds are planned to be used to repay amounts drawn on our corporate credit facility and for general corporate purposes. Looking further to the balance sheet, as of today, Northland continues to be in a strong position with access to approximately 7 $60,000,000 of cash and liquidity. The liquidity is comprised of funds available on our revolving facility and corporate cash on hand. As Mike and John noted, we reaffirmed our 2024 financial guidance, which is adjusted EBITDA in the range of $1,200,000,000 to $1,300,000,000 adjusted free cash flow per share of $1.30 to 1 0.50 and free cash flow per share of $1.10 to 1 $0.30 Overall, it has been a good quarter underpinned by strong results and continued progress being made on the 3 construction projects. I will now turn the call back over to Mike for his concluding remarks.

Speaker 1

Okay. Thank you, Adam. And nobody joined the call to hear a bunch of executives talk about each other. But I will say one thing about Adam is that the company is in very good hands with Adam as Interim CEO. Nobody at Northland knows the company better than Adam, has a deeper knowledge of how the company makes money, how the company operates and is able to navigate across the company and pull people together to make things happen.

Speaker 1

And that was abundantly clear. Last year, we had a lot to get done. We achieved it all and all of us, including me, would never have been able to get that done without Adam standing with us and that's going to be very important for the company moving forward. And Adam is also, as you would know on the call, very well connected to the market and is always a voice of the market within any discussion that we have at Northland. So we've got a very solid start to the year.

Speaker 1

Both our strategy and long term guidance remain unchanged. We feel good about the progress on our construction program so far as you can probably tell. And it's going to materially increase our cash flow, but we do remain very focused and vigilant on execution. Our growth is locked into the next 3 years to achieve a 7% to 10% EBITDA CAGR through 2027 and this is important because it means we don't need to tap equity markets, debt markets, supply chains or originate new investment opportunities to reach our new term growth targets. You need to execute on our construction program, but we don't need to go out and find anything else new.

Speaker 1

Anything further that we may do will be discretionary, incremental and disciplined. And this is different than some of our other peers in the sector. We'll only pursue additional projects, as I said earlier, that are accretive to our shareholders during this period. We have an established and talented team and the progress we're making on constructing 2 large and complex offshore wind projects evidences the strength of that team. We're also in the process, as I said earlier, of constructing 1 of North America's largest energy battery storage facilities.

Speaker 1

Our in house talent demonstrates that we continue to have what it takes to be a leader in originating, developing, constructing and operating large and complex renewable energy projects. You'll also have seen the recent announcements from our peers related to AI and data center growth, demand growth for power. And like our peers, we see this as a very positive trend and trajectory for the industry overall. In 2022, data centers consumed approximately 2.5% of total electricity in the U. S, just to give you one stat.

Speaker 1

And data centers portion of this is expected to triple to 7 point 5% by 2,030. Now this equates to electricity consumption of about 40,000,000 U. S. Households, which is almost a third of the total nation's households in the U. S.

Speaker 1

Number of households in the U. S. So we are tracking this growing demand for power closely and we do have the talent to execute large and complex PPAs as has already been demonstrated by the 7 44 Megawatt corporate PPA that we entered into on the Hai Long Offshore Wind Project, which at the time I think was one of the largest, not the largest corporate PPA in the world. We have a large and exciting pipeline of which 2 4 gigawatts is currently under construction. The world needs a lot more power generation built over the next 10 to 15, 20 years and that's exactly what we do and that's what we do at scale.

Speaker 1

We are excited about the future this brings to Northland our shareholders and our stakeholders. This concludes our prepared remarks and we'd now be happy to take your questions. Please open the

Operator

line. Thank Our first question will come from the line of Eli Rodney with National Bank Financial. Your line is now open.

Speaker 4

Good morning, everyone, and congrats on a great quarter. Just filling in for Rupert here. On the offshore projects, Hai Long in particular, it sounds like you're making great progress. And correct me if I'm wrong, but it seems that work has continued through that winter buffer period outlined in the project schedule. Is there any room for upside in construction and commissioning if you continue at the current pace there?

Speaker 1

What we've disclosed is that we're continuing to progress according to the schedule and that cost for the project remain in line with our expectations. And I think we just leave it at that at this point. I mean, we obviously always look for opportunities to secure projects and secure cash flow sooner than forecast. But at this point, we're just reiterating that the projects are progressing according to schedule and according to the original cost estimates.

Speaker 2

I would just maybe add to that, that the buffers primarily apply to offshore work and there's lots of things that happen in factories and onshore that continue on through that period of time.

Speaker 4

Okay, great. And then maybe moving over to DevEx then, obviously way down year over year at roughly $8,000,000 With the focus on the in construction projects now that being the number one priority, is that a good run rate level to assume going forward?

Speaker 1

I think DevEx moves up and moves down depending on where the business is at. So right now, the business is harvesting on some opportunities that were developed over the last few years by converting them into projects and into cash flow within a short period of time. So certainly for this year, we've disclosed what Devex is and going forward we would include that with part of our guidance for future years.

Speaker 3

Yes. No, we have the details disclosed in our February results and when we're setting out our guidance and we're in line with that.

Speaker 4

Great. Thanks guys. I'll leave it there.

Operator

Thank you. One moment for our next question please. Our next question will come from the line of Nicholas Boychuk with Cormark Securities. Your line is now open.

Speaker 5

Thanks. Good morning. Coming back to that question about the project development costs, I wonder if you guys can expand a little bit just on how you're thinking about the pace of that and whether or not the correct read through is that kind of looking into the future, you've got the Alberta Renewables Scott Wind, Round 3 Taiwan, it says green offshore opportunities. Is it fair to say that once you finish this current round of execution, those would be the primary focuses and then you'll try to backfill additional development projects afterwards?

Speaker 1

I think what we've said in the remarks at the beginning is that we will be disciplined in any new investment opportunities that we pursue during this construction period. It doesn't mean we won't necessarily pursue anything, but it would have to be a meaningful investment that would have that would be accretive to shareholders. A lot of the pipeline that we described at Investor Day would be delivering cash flow after these projects come online. But I I'll probably leave it at that. Do you have anything else to say, John?

Speaker 1

I'd just like to

Speaker 2

add or elaborate a bit in the sense that development continues. We are trying to be very focused on what we do and pursuing projects that will deliver meaningful value to our shareholders. As we focus on construction, there is a deemphasis of development naturally as a consequence, but we do have to think of the future. We do have to think about continuing on. And as the construction projects mature and we have additional opportunity and appropriate financial resources to invest in development, we will perhaps ramp up to higher levels than we anticipate over the next shortest period of time.

Speaker 1

And we did signal Nick at Investor Day that we would be looking at opportunities to potentially recycle capital. Lalouch is the first example of that as we focus in on markets that we see better prospects moving forward with than others and pull back from markets where we see more headwinds. So Valeooche is the first example, but there is always the opportunity to gradually and prudently reconfigure the business over the next few years by recycling capital as well.

Speaker 5

Okay, got it. Thanks. And kind of in that thought of recycling capital, can you kind of share your thoughts on how you're thinking about EBSA right now? Obviously, you've had a great quarter. I'm curious if you could break down the 36% year over year gain on the top line between volume price FX, the sustainability of that and how you're thinking about that segment moving forward?

Speaker 1

Adam can talk to the results maybe.

Speaker 3

Yes. In terms of the results, I think when you're looking year over year, you're seeing the increase, which is related to inflation, the escalation, which is inherent in the regulated return and as well as the appreciation of the Colombia peso. I don't have the specific numbers in front of me, but those are the two drivers for the increase year over year.

Speaker 1

And on any transactions or anything that we're looking at, we wouldn't comment on those. At this stage. I think what we said at Investor Day, which we would say again is that we will always you should not be surprised that we would be testing the market on various different options moving forward, but I would not read through that we necessarily will pursue every option that we test.

Operator

Our next question comes from the line of Mark Jarvi with CIBC. Your line is now open.

Speaker 6

Yeah, thanks. Good morning, everyone. So just coming back to the comment about asset sales in CalPERSIAC, and I know you don't want to talk about specific assets, but can you just walk me through your thought process in terms of if you did sell someone sort of the triage of where those proceeds would go today? Is it onshore growth? Is it tied in the balance sheet just to have some buffer for any contingencies?

Speaker 6

Is there any other uses? And given there's a CO transition going right now, how do you think about proceeds coming in before they're actually deployed during that period?

Speaker 1

Let me start and then I'll hand it off to Adam. So, I mean, during the construction period, we are very much focused on ensuring strength of balance sheet that we have adequate bumpers in case anything unexpected happens and so that we can continue forward with the construction and bring it to a conclusion. So that's important just from a simple resilience standpoint and a prudent management of the business. Otherwise, there are we have a robust pipeline, a diversified pipeline across offshore, onshore. We have a team that is dedicated and focused on looking at ways actually to optimize the existing facility facilities we have and extract more value out of those, which arguably should be kind of your first stop in terms of allocation of capital.

Speaker 1

So there's lots of options, but I'll turn it over to Adam.

Speaker 3

Yes. I mean, as said in the comments, I think that our current liquidity position is strong with $760,000,000 of liquidity. And as Mike said, we won't we're exploring asset recycling as an option to create options for the future and how we redeploy it will depend and we'll just make sure that we have the right interest of the company at mind at that time.

Speaker 6

Just to make sure that the balance sheet is well protected, if you did sell an asset, some foregone free cash flow, you'd be fine with that for a temporary period as you see through the major projects and then look to deploy that capital to bring back the free cash flow?

Speaker 3

Yes. I think again, it would be a part of the consideration. So any cash that would be lost from a sale will be part of the factor when we're looking at it and making sure we're making the right decision going forward. So I think that's what's important looking ahead.

Speaker 6

Okay. And this question is for John. The CEO's transition maybe caught the market by a bit of a surprise. You've probably heard some feedback from investors. Just wondering how you've integrated any feedback from stakeholders, investors into how you're now thinking about the CEO search?

Speaker 6

Any updated views in terms of how you're seeing the candidate pool and checklists for the qualities that you'd like to see in an ideal CEO?

Speaker 2

I think the feedback frankly was generally focused on CEO and a CFO search going on at the same time. There are many questions related to that. And as we said then and I'll repeat now, I think we're in good hands with as Mike has already waxed eloquently about Adam and his capabilities as CFO. And I certainly subscribe to everything that Mike said. Adam is fantastic.

Speaker 2

So we will change to a permanent CFO in the due course of time. In terms of the CEO search, I kind of described it as an onion, as it were, the outer layer of the onion being finding somebody who is reflective of the high quality of management that we have already. The next kind of layer of the onion is somebody who has demonstrated the creation of shareholder value and strong leadership of a complex organization and who has familiarity with capital markets and experience there. And finally, then you start to get into more detailed components of what kind of experience set are you looking for. And as I've said before, one might immediately assume that it would be an absolute requirement that the person have experience in the electricity industry in a very direct fashion.

Speaker 2

But when you think about it a little bit more, you realize that there are other industries that display similar characteristics of high capital costs, long development times, long operating lives and so on. And they are what comes to mind are places like mining and oil and gas and infrastructure. That's not to say that we would like to have someone with electricity experience. So I think the feedback we've received hasn't really modified much about the criteria we're looking for in a CEO. The search is underway and I think it would be inappropriate for me to comment any information about the state of the search or the progress underway while we are actively talking to people.

Speaker 6

That's helpful context, Sean. Maybe just one follow-up would just be global sort of experience in terms of obviously Northland has expanded all over the world. That sort of, I guess, appreciation and understanding for a CEO having managed across different jurisdictions, is that key element versus someone who's maybe been a single jurisdiction, maybe on the Canadian exposure, U. S. Exposure or something like that?

Speaker 2

Yes. International, global, whatever you want to call it, that's certainly one of our list of search criteria.

Speaker 6

Okay. Thanks for the time today. Appreciate

Operator

it. Thank you. One moment for our next question. Our next question will come from the line of Jessica Hoyle with Scotiabank. Your line is now open.

Speaker 7

Great. Thanks. Good morning and thanks so much for taking my question. So just to start maybe on offshore wind, can you give an update or any commentary on how the supply chain is getting set up in Taiwan as it relates to the Hai Long project?

Speaker 1

So, we Hai Long is probably the last of the original grouping of kind of round 1 projects that has moved forward. So Hai Long is benefiting to some extent from the establishment of a local supply chain for some of the local requirements. So there's a lot of learnings that we were able to gain by observing how the other projects engaged with the local suppliers and the supply chain also matured to some extent. Hai Long is also 300 Megawatts plus 744 and the 744 Megawatts actually doesn't have any local content requirements. So we also have a substantial international supply chain as well, Vietnam, Korea, from Europe.

Speaker 1

And overall, as I reported in my opening remarks, we are pleased with how the fabrication is progressing, whether it's the pin piles that hold the jacket foundations in place or the 2 jacket foundations for the OSS that have both been now installed actually not just fabricated but installed and the OSS, one of the 2 OSS platforms, which is a 6 story structure has now been fully fabricated and delivered to Taiwan for installation in the near future. So overall, we appreciate that some of the early stage projects had some issues with the local supply chain, but I think we benefited from observing that and also from commercially and contractually negotiating in some flexibility to our local content obligations to allow us, for example, to swing in international components in some cases for local components if the local supply chain is delayed just to add buffer and reduce risk on the construction program.

Speaker 7

Thanks for that. And then I think you mentioned that some of the strong wind conditions for offshore continued into April. So just looking at your guidance for the year, how do you think you're positioned within the range just given the strength in Q1 and then some of that favorable some of those favorable conditions in April as well?

Speaker 3

Yes. I think that yes, like you said, the results have been pretty strong so far to start the year, but it is the Q1. And we like to look things on a risk adjusted basis. And we're kind of holding forward to the guidance that we've set at this time. Obviously, for future quarters, we'll continue to revisit that, but that's where we're holding to right now.

Speaker 1

What's important when you look at the production from the Q1 even from April, I guess, those who will follow the Gemini app to see, we don't control the wind, but we control the availability of our facilities. And the operations team did a very good job in making sure that the facilities were operating at a high level of availability so that we could capture that resource.

Speaker 2

And finally, if I can add to that. Remember that wind the wind resource is generally higher in the winter than it is in the summer. So, we did extremely well in the time that already was expected to do extremely well. We did better than expected. But there is a seasonality to this and it's early in the year.

Speaker 2

So we're not trying to counter eggs before they're hatched or chickens before they're hatched, I should say.

Operator

Our next question comes from the line of John Moll with TD Securities. Your line is now open.

Speaker 4

Hey, good morning, guys. Maybe just one question on your Alberta pipeline and the power market restructuring that's going on there. I think it's safe to say that you're not looking at an FID on something like Jurassic this year, just given the focus on construction execution. I think you've been pretty clear there. But I'm just wondering if that power market restructuring potentially pushes out the timeline where you might look to move forward with a project in Alberta and just how you're thinking about your pipeline there more broadly given the potential changes we're seeing?

Speaker 1

Yes. I mean, there's 2 sets of changes broadly speaking in Alberta. The first was the moratorium and then the conclusion of the moratorium with new sets of rules around development, right. And on that, our approximately 1.5 gigawatt pipeline was largely unaffected, insofar as we already had our AUC permits on about a gigawatt of it and then we also had some battery storage projects as well within that pipeline which were unaffected by the rule changes. So that element of the changes in Alberta were neutral or you could even argue net positive to us as far as it put us in an advantageous position relative to other projects that weren't as advanced in Alberta.

Speaker 1

With respect to the market redesign, it's something that we are tracking very closely and we're very much involved in the stakeholdering process. Michelle Chislet, who heads up our onshore business unit is actually out in Calgary today. I think she's just staying in a roundtable with government officials later today as well as that gets further developed. And we'll certainly be tracking to see what impact that has on the merchant market there. Our intent, if we move forward with those projects is to contract the majority of the output from them.

Speaker 1

And so there is some latitude in terms of determining how much we contract them based on the around the final market design and the impact that we see that on having on market prices going forward. But that's kind of where it's at right now, John.

Speaker 4

Hey, that's great. All my other questions were answered. I'll leave it there. Thanks very much.

Operator

Thank you. One moment for our next question. Our next question is a follow-up with Eli Rodney from National Bank Financial. Your line is open.

Speaker 4

Hi. Yes. So back on the offshore portfolio, Germany in specific, could you give us some insight on to what level of curtailment you saw in Q1 and then maybe extrapolating that into April May?

Speaker 3

I don't unfortunately have the April May numbers, but I think you'll see in the notes, the amount of revenue curtailed overall was $21,000,000 for the 3 months ended March 31.

Speaker 1

Speaking broadly, unpaid curtailment tends to happen during periods of high production and particularly when they overlap with holidays or with periods of low industrial demand. So we'll see what happens over the next few months, but broadly speaking.

Speaker 4

Okay, great. And then one more on asset recycling. I might have missed this, but it seems that the market sentiment today is broadly in favor of buyers. And I think, Adam, you mentioned taking a few year approach on your view to selling down stakes or complete asset recycling. With rates coming down now, is it fair to say that Northland is taking a bit more patient of an approach to selling down additional assets after La Lucha?

Speaker 4

Maybe 25% or 26% would be a target year. Are you still seeing good value for some of the non core assets in the portfolio?

Speaker 1

I'd be very conscious of on any asset recycling of value for shareholders. I mean, we have a diversified portfolio across a number of different jurisdictions. So what you said is perhaps broadly true. But once you start piercing into different markets and different specific assets, there could be different it may not necessarily always be the case, but our criteria or our screen is making sure that we do achieve what we believe is a good value on any divestment because we look at the full cycle economics on recycling from that divestment into the reinvestment into a new opportunity. And so the divestment economics are equally important to the investment economics, right?

Speaker 4

Right. Thanks. Okay. I'll leave it there.

Operator

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

Speaker 1

Yes. Well, thank you for everyone for joining us today. We're going to hold our next earnings call following the results of our Q2 2024 results in August. And in the meantime, we want to thank everybody on the call for their continued support.

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Key Takeaways

  • Northland delivered a 30% year-over-year increase in Q1 adjusted EBITDA to over C$450 million, driven by stronger wind resources and new onshore wind contributions, alongside adjusted free cash flow per share rising to C$0.88.
  • The company reaffirmed its 2024 financial guidance, targeting adjusted EBITDA of C$1.2–1.3 billion, adjusted free cash flow per share of C$1.30–1.50 and free cash flow per share of C$1.10–1.30.
  • All three major construction projects—Hai Long (1 GW offshore wind in Taiwan), Baltic Power (1.1 GW offshore wind in Poland) and the 572 MW Oneida battery storage in Ontario—are progressing on schedule and on budget, with commercial operations expected between 2025 and 2027.
  • Northland signed an agreement to sell the 130 MW La Lucha solar facility in Mexico to recycle capital, with net proceeds of approximately C$205 million to be used to reduce debt and for general corporate purposes.
  • CEO Mike Crawley will transition out on September 30, with Executive Chair John Brace serving as Interim Executive Chairman while a global search is conducted for the next President and CEO.
AI Generated. May Contain Errors.
Earnings Conference Call
Northland Power Q1 2024
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