Energia
Northland Power Reports Fourth Quarter 2023 Results and Announces 2024 Financial Outlook
Jacket for offshore sub-station - marking the first major piece of equipment heading to Taiwan (Hai Long)
TORONTO, Feb. 21, 2024 (GLOBE NEWSWIRE) -- Northland Power Inc. ( “Northland” or the
“Company” ) (TSX: NPI ) reported today financial results for the three months and year ended December 31, 2023. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.
Financial Results
“Northland performed well in 2023. We achieved Adjusted EBITDA and exceeded guidance for Adjusted Free Cash Flow and Free Cash Flow. The financial and operating performance for 2023 is a testament to both the capability of our team and the resilience of our business. Notwithstanding the challenges experienced within the industry and the economy more broadly, Northland demonstrated our resilience achieving several significant milestones in 2023, including reaching financial close on our two major offshore wind projects, Hai Long and Baltic Power, and our energy storage project, Oneida. Construction for all three projects is now underway and progressing well. In addition, we successfully executed several partnership agreements within our offshore wind projects in Scotland and Taiwan. These accomplishments continue to reinforce our capability and expertise to develop, secure strong partnerships, and finance and execute upon complex, large-scale projects,” Mike Crawley, Northland's President and Chief Executive Officer noted.
Fourth Quarter and Full-Year 2023 Financial Results
Northland successfully achieved original 2023 guidance for Adjusted EBITDA and exceeded guidance for Adjusted Free Cash Flow and Free Cash Flow per share. Performance in the fourth quarter was particularly strong, driven by higher-than-expected sell-down gains and higher production from its offshore wind facilities, partially offset by lower onshore renewables production due to lower wind and solar resources.
On a year-over-year basis, full year Adjusted EBITDA decreased primarily due to the non-recurrence of the unprecedented spike in market prices realized in 2022 in Europe, partially offset by higher band adjustment revenue recognized from Northland's Spanish portfolio and sell-down gains realized on our development assets in Europe and Asia. With respect to Adjusted Free Cash Flow and Free Cash Flow per share, in addition to the same factors as above, both the Spanish portfolio debt optimization completed in the fourth quarter of 2023 and gains from foreign exchange hedge settlements resulted in higher reported results compared to 2022.
The following table presents key IFRS and non-IFRS financial measures and operational results. Sales, gross profit, operating income and net income, as reported under IFRS, include consolidated results of entities not wholly owned by Northland, whereas Northland's non-IFRS financial measures include only Northland's proportionate ownership interest.
Fourth Quarter Results Summary
Offshore wind facilities
Electricity production for the three months ended December 31, 2023, decreased by 3% or 39GWh compared to the same quarter of 2022. This was primarily due to an expected 21-day grid outage required by the TenneT for maintenance at Deutsche Bucht, as well as higher unpaid curtailments due to negative prices and grid outages at German offshore wind facilities. These declines were partially offset by higher production from Nordsee One and Gemini.
Sales of $341 million for the three months ended December 31, 2023, increased 1% or $2 million, compared to the same quarter of 2022, primarily due to foreign exchange gains due to the strengthening of the Euro, partially offset by the non-recurrence of the unprecedented spike in market prices realized in 2022 and an expected 21-day grid outage required by the TenneT for maintenance at Deutsche Bucht.
Adjusted EBITDA of $218 million for the three months ended December 31, 2023, decreased 1% or $3 million compared to the same quarter of 2022, due to the same factors as noted above.
An important indicator for performance of offshore wind facilities is the current and historical average power production of the facility. The following tables summarize actual electricity production and the historical average, high and low, for the applicable operating periods of each offshore facility:
Onshore renewable facilities
Electricity production was 17% or 107GWh higher than the same quarter of 2022, primarily due to the contribution from the recently completed New York onshore wind projects which achieved commercial operation in October 2023 and higher wind resource across Spanish onshore wind facilities, partially offset by lower wind resource at Canadian onshore renewable facilities.
Sales of $104 million were 21% or $28 million lower than the same quarter of 2022, primarily due to the lower pool prices and lower Ri revenue from the Spanish portfolio, partially offset by the contribution from the recently completed New York onshore wind projects. Please refer to the MD&A for further breakdown of Spanish portfolio revenue by component.
Adjusted EBITDA of $69 million was 29% or $28 million lower than the same quarter of 2022, due to the same factors as above.
Adjusted EBITDA from the Spanish portfolio of $34 million for the three months ended December 31, 2023, decreased 49% or $33 million compared to the same quarter of 2022, primarily due to lower pool prices decreasing market revenue and Ri, and lower band adjustments by $12 million, $8 million and $15 million respectively. Free Cash Flow from the Spanish portfolio of $31 million for the three months ended December 31, 2023, increased by $98 million compared to the same quarter of 2022 due to higher debt repayments in the fourth quarter of 2022, as well as the impact from a debt optimization completed in the fourth quarter of 2023. Further details on the debt optimization, are included below.
Efficient natural gas facilities
Electricity production increased 7% or 66GWh compared to the same quarter of 2022, mainly due to higher market demand for dispatchable power.
Sales of $88 million decreased 20% or $22 million compared to the same quarter of 2022, primarily due to lower natural gas prices resulting in lower energy rates.
Adjusted EBITDA of $44 million for the three months ended December 31, 2023, decreased 9% or $4 million, compared to the same quarter of 2022, due to the same factors as above.
Utility
Sales of $85 million for the three months ended December 31, 2023, increased 33% or $21 million compared to the same quarter of 2022, primarily due to the higher market demand, rate escalations and foreign exchange gains as a result of the strengthening of the Colombian peso.
Adjusted EBITDA of $32 million for the three months ended December 31, 2023, increased 19% or $5 million compared to the same quarter of 2022, due to the same factors as above.
Consolidated statement of income (loss)
General and administrative ( “G&A” ) costs of $38 million in the fourth quarter increased $13 million compared to the same quarter of 2022, primarily due to increased costs and resources to support Northland's projects and global platform and additional projects entering operation during the period, including La Lucha solar project and New York onshore wind projects.
Development costs of $27 million increased $3 million compared to the same quarter of 2022, primarily due to timing of spending to advance development projects.
Net finance costs of $111 million in the fourth quarter increased $24 million compared to the same quarter of 2022, primarily due to the issuance of the Green Notes, partially offset by scheduled repayments on facility-level loans and higher loan repayments related to loan restructurings that occurred in 2022.
Fair value loss on derivative contracts was $190 million compared to a $141 million gain in the same quarter of 2022, primarily due to net movement in the fair value of derivatives related to interest rate and foreign exchange contracts.
Foreign exchange gain of $4 million in the fourth quarter was primarily due to unrealized gain from fluctuations in the closing foreign exchange rates.
Other income of $183 million increased by $184 million compared to the same quarter of 2022, was primarily due to the accounting gains recorded as a result of the sell-down of Hai Long offshore wind projects to Gentari in the fourth quarter of 2023. The sell-down transaction was treated as a disposition of a business interest under IFRS. Further details are included below.
Impairment expense of $163 million represents goodwill write-off related to the Spanish portfolio. As communicated previously, the recent regulatory framework changes are not expected to impact the overall regulatory return over the life of the Spanish portfolio. However, because of the fixed return construct of the regulatory regime in Spain, the benefits of much higher-than-expected pool prices and cash flows received by Northland since its acquisition are being offset by lower regulated cash flows over the remaining contractual life of the portfolio. The goodwill write-off reflects the diminished value of lower future cash flows resulting from the fixed return regulatory framework.
Net loss of $268 million in the fourth quarter of 2023 compared to net income of $324 million in the same quarter of 2022, was primarily as a result of the factors described above.
Adjusted EBITDA
The following table reconciles net income (loss) to Adjusted EBITDA:
Adjusted EBITDA of $389 million for the three months ended December 31, 2023, increased 10% or $36 million compared to the same quarter of 2022. The significant factors increasing Adjusted EBITDA include:
The factors partially offsetting the increase in the Adjusted EBITDA were:
Adjusted Free Cash Flow and Free Cash Flow
The following table reconciles cash flow from operations to Adjusted Free Cash Flow and Free Cash Flow:
Adjusted Free Cash Flow of $191 million for the three months ended December 31, 2023, was 372% or $151 million higher than the same quarter of 2022.
The significant factors increasing Adjusted Free Cash Flow were:
The factors partially offsetting the increase in Adjusted Free Cash Flow were:
Free Cash Flow, which is reduced by growth expenditures, totaled $191 million for the three months ended December 31, 2023, and was $176 million higher than the same quarter of 2022, due to the same factors as Adjusted Free Cash Flow.
The following table reconciles Adjusted EBITDA to Adjusted Free Cash Flow.
Significant Events and Updates
Balance Sheet:
Renewables Growth:
Other:
Board of Directors
On November 29, 2023, Northland announced the expansion of its Board of Directors from nine to ten members and the immediate appointment of Ellen Smith as a Director. Ms. Smith brings over 35 years of leadership experience within the power and utilities sector.
Project Delivery Committee
During the fourth quarter of 2023, the Board of Directors formed a new subcommittee: the Project Delivery Committee. The purpose of the Project Delivery Committee is to assist the Board of Directors with monitoring and overseeing projects in which the Company has an interest during construction.
Executive Changes
On January 15, 2024, Northland announced several changes to its executive team. Pauline Alimchandani, CFO will be departing the Company effective February 22, 2024, to pursue another opportunity. Until a new CFO is appointed, Adam Beaumont, Vice President Finance & Head of Capital Markets, will oversee the finance function on an interim basis. David Povall, Executive Vice President of Offshore Wind departed the company as well. Toby Edmonds will join Northland as Executive Vice President of Offshore Wind, bringing essential offshore project execution and operational experience. In addition, Yonni Fushman, who joined Northland in January 2023 as Chief Legal Officer and Executive Vice President of Sustainability, has been promoted to Chief Administrative and Legal Officer and will continue to serve as Corporate Secretary.
2024 Financial Targets
Management's 2024 financial targets are described below:
Adjusted EBITDA
For 2024, management expects Adjusted EBITDA to be in the range of $1.20 billion to $1.30 billion, comparable to 2023 Adjusted EBITDA of $1.24 billion. The major factors expected to increase Adjusted EBITDA include (all amounts are approximate):
These factors will be offset by the non-recurrence of sell-down gains and development expenditure recovery recognized in 2023 related to offshore wind projects ($110 million).
Adjusted Free Cash Flow and Free Cash Flow
In 2024, management expects Adjusted Free Cash Flow to be in the range of $1.30 to $1.50 per share, down from $1.97 per share in 2023. The major factors contributing to the year-over-year expected decline in Adjusted Free Cash flow include (all amounts are approximate):
Factors expected to offset the aforementioned decreases include:
Management expects Free Cash Flow, which includes growth expenditures, to be in a range of $1.10 to $1.30 per share, down from $1.68 per share in 2023. The reduction is due to the same factors noted above, partially offset by lower growth expenditures. Development expenditures are expected to be approximately $60 million in 2024. This represents a lower level of spend than in prior years as Northland focuses on the successful construction execution of its three key projects, ceases all development activities in Mexico, Colombia and Japan, and focuses development expenditures on secured projects in its pipeline including: ScotWind, the Korean offshore wind projects, the Alberta, New York and Ontario onshore renewable energy opportunities. These development expenditures will reduce near-term free cash flow until the projects achieve commercial operations but are expected to deliver accretive long-term growth in earnings and free cash flow.
Corporate G&A costs are expected to be $3 million lower than 2023, at approximately $75 million in 2024.
In addition, any gains from the future sell-down of ownership interests in development assets would be included in Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow as they relate to capturing development profits at key milestones. Currently, the 2024 guidance for Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow does not incorporate any sell-down proceeds and as such, net proceeds from any sell-down would increase reported Adjusted EBITDA, Adjusted Free Cash Flow, and Free Cash Flow in the event they occur in 2024.
Northland continues to implement a selective partnership strategy to sell interests in certain development projects on or before financial close. In certain situations, Northland may decide to exit certain markets or reduce development activities within certain jurisdictions. Northland will assess each opportunity individually and intends to remain a long-term owner of the renewable power assets it develops.
Over the longer term, Northland remains positioned to achieve substantial growth in Adjusted EBITDA by 2027, upon achieving targeted commercial operations of Oneida, Baltic Power and Hai Long, each with long-term contracted revenues of between 20 to 30 years.
The expected 2024 payout ratio, which may be closer to or above 100%, largely reflects the level of spending on growth initiatives and the equity capital raised for our projects currently under construction, for which corresponding cash flows will not be received until 2026 and 2027. Northland management expects that the Company will continue to pay dividends annually at the rate of $1.20 per share.
Once the projects under construction, including Hai Long, Baltic Power, and Oneida battery storage, are fully completed, they are collectively expected to deliver, on a five-year annual average basis, approximately $570 million to $615 million of Adjusted EBITDA and $185 million to $210 million of Free Cash Flow by 2027.
With over 3 gigawatts (GW) of current gross operating capacity and a development pipeline of approximately 12GW, including 2.4GW under construction and expected to be operational by 2026/2027, the Company is well positioned for an accelerating global energy transition. Northland intends to be selective and pursue only projects within its pipeline that meet its strategic objectives and targeted returns and closely monitor macroeconomic conditions surrounding renewables development globally.
This Outlook is subject to the Forward-Looking Statements proviso herein as well as the Risk Factors in Northland's most recent Annual Information Form for the year ended December 31, 2023, dated February 21, 2024 ( “ 2023 AIF” ).
Fourth-Quarter Earnings Conference Call
Northland will hold an earnings conference call on February 22, 2024, to discuss its fourth quarter and full-year 2023 results. The call will be hosted by Northland's Senior Management, who will discuss the Company's financial results and developments as well as answering questions from analysts.
Conference call details are as follows:
Thursday, February 22, 2024, 10:00 a.m. ET
Participants wishing to join the call and ask questions must register using the following URL below:
https://register.vevent.com/register/BIc547b4ada08048c08f0cc894f9ea16dc
For all other attendees, the call will be broadcast live on the internet, in listen-only mode and can be accessed using the following link:
Webcast URL: h ttps://edge.media-server.com/mmc/p/djphevny
For those unable to attend the live call, an audio recording will be available on northlandpower.com on Friday, February 23, 2024.
Northland's audited consolidated financial statements for the year ended December 31, 2023, and related Management's Discussion and Analysis can be found on SEDAR+ at www.sedarplus.ca under Northland's profile and on northlandpower.com .
ABOUT NORTHLAND POWER
Northland Power is a global power producer dedicated to helping the clean energy transition by producing electricity from clean renewable resources. Founded in 1987, Northland has a long history of developing, building, owning and operating clean and green power infrastructure assets and is a global leader in offshore wind. In addition, Northland owns and manages a diversified generation mix including onshore renewables, efficient natural gas energy, as well as supplying energy through a regulated utility.
Headquartered in Toronto, Canada, with global offices in eight countries, Northland owns or has an economic interest in approximately 3.4GW (net 2.9GW) of operating capacity. The Company also has a significant inventory of projects in construction and in various stages of development encompassing approximately 12GW of potential capacity.
Publicly traded since 1997, Northland's common shares, Series 1 and Series 2 preferred shares trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A and NPI.PR.B, respectively.
NON-IFRS FINANCIAL MEASURES
This press release includes references to the Company's adjusted earnings before interest, income taxes, depreciation and amortization ( “Adjusted EBITDA” ), Adjusted Free Cash Flow, Free Cash Flow and applicable payout ratios and per share amounts, which are measures not prescribed by International Financial Reporting Standards ( “IFRS” ), and therefore do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. Non-IFRS financial measures are presented at Northland's share of underlying operations. These measures should not be considered alternatives to net income (loss), cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of Northland's results of operations from management's perspective. Management believes that Northland's non-IFRS financial measures and applicable payout ratio and per share amounts are widely accepted and understood financial indicators used by investors and securities analysts to assess the performance of a company, including its ability to generate cash through operations.
FORWARD-LOOKING STATEMENTS
This press release contains statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”) that are provided for the purpose of presenting information about management's current expectations and plans. Readers are cautioned that such statements may not be appropriate for other purposes. Northland's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, the events anticipated by the forward-looking statements may or may not transpire or occur. Forward-looking statements include statements that are not historical facts and are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects,” “anticipates,” “plans,” “predicts,” “believes,” “estimates,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These statements may include, without limitation, statements regarding future Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, including respective per share amounts, dividend payments and dividend payout ratios, the timing for and attainment of the Hai Long and Baltic Power offshore wind and Oneida energy storage projects' anticipated contributions to Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, the expected generating capacity of certain projects, guidance, the completion of construction, acquisitions, dispositions, whether partial or full, investments or financings and the timing thereof, the timing for and attainment of financial close and commercial operations, for each project, the potential for future production from project pipelines, cost and output of development projects, the all-in interest cost for debt financing, the impact of currency and interest rate hedges, litigation claims, anticipated results from the optimization of the Thorold Co-Generation facility and the timing related thereto, future funding requirements, and the future operations, business, financial condition, financial results, priorities, ongoing objectives, strategies and the outlook of Northland, its subsidiaries and joint ventures. These statements are based upon certain material factors or assumptions that were applied in developing the forward-looking statements, including the design specifications of development projects, the provisions of contracts to which Northland or a subsidiary is a party, management's current plans and its perception of historical trends, current conditions and expected future developments, the ability to obtain necessary approvals, satisfy any closing conditions, satisfy any project finance lender conditions to closing sell-downs or obtain adequate financing regarding contemplated construction, acquisitions, dispositions, investments or financings, as well as other factors, estimates and assumptions that are believed to be appropriate in the circumstances. Although these forward-looking statements are based upon management's current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties. Some of the factors that could cause results or events to differ from current expectations include, but are not limited to, risks associated with further regulatory and policy changes in Spain which could impair current guidance and expected returns, risks associated with merchant pool pricing and revenues, risks associated with sales contracts, the emergence of widespread health emergencies or pandemics, Northland's reliance on the performance of its offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht for over 50% of its Adjusted EBITDA, counterparty and joint venture risks, contractual operating performance, variability of sales from generating facilities powered by intermittent renewable resources, wind and solar resource risk, unplanned maintenance risk, offshore wind concentration, natural gas and power market risks, commodity price risks, operational risks, recovery of utility operating costs, Northland's ability to resolve issues/delays with the relevant regulatory and/or government authorities, permitting, construction risks, project development risks, integration and acquisition risks, procurement and supply chain risks, financing risks, disposition and joint-venture risks, competition risks, interest rate and refinancing risks, liquidity risk, inflation risks, commodity availability and cost risk, construction material cost risks, impacts of regional or global conflicts, credit rating risk, currency fluctuation risk, variability of cash flow and potential impact on dividends, taxation, natural events, environmental risks, climate change, health and worker safety risks, market compliance risk, government regulations and policy risks, utility rate regulation risks, international activities, cybersecurity, data protection and reliance on information technology, labour relations, labour shortage risk, management transition risk, geopolitical risk in and around the regions Northland operates in, large project risk, reputational risk, insurance risk, risks relating to co-ownership, bribery and corruption risk, terrorism and security, litigation risk and legal contingencies , and the other factors described in the “Risks Factors” section of Northland's Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2023 , which can be found at www.sedarplus.ca under Northland's profile and on Northland's website at northlandpower.com. Northland has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations. Northland's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, and Northland cautions you not to place undue reliance upon any such forward-looking statements.
The forward-looking statements contained in this release are, unless otherwise indicated, stated as of the date hereof and are based on assumptions that were considered reasonable as of the date hereof. Other than as specifically required by law, Northland undertakes no obligation to update any forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
Certain forward-looking information in this release and the MD&A, including, but not limited to the information in Section 10: Outlook of the MD&A and our projected Adjusted EBITDA and Free Cash Flow expected to be generated from Northland's interest in Hai Long, Baltic Power and Oneida may also constitute a “financial outlook” within the meaning of applicable securities laws. Financial outlook involves statements about Northland's prospective financial performance, financial position or cash flows and is based on and subject to the assumptions about future economic conditions and courses of action and the risk factors described above in respect of forward-looking information generally, as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this release and the MD&A. Such assumptions are based on management's assessment of the relevant information currently available and any financial outlook included in this release and the MD&A is provided for the purpose of helping readers understand Northland's current expectations and plans for the future. Readers are cautioned that reliance on any financial outlook may not be appropriate for other purposes or in other circumstances and that the risk factors described above or other factors may cause actual results to differ materially from any financial outlook. The actual results of Northland's operations will likely vary from the amounts set forth in any financial outlook and such variances may be material.
For further information, please contact :
Dario Neimarlija, Vice President, FP&A and Investor Relations
647-288-1019
investorrelations@northlandpower.com
northlandpower.com
A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/39b9fc4b-0bcd-4805-b122-daa9304d05cf
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