Northland Power Inc. (“Northland” or the “Company”) reported financial results for the three and six months ended June 30, 2024. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.
“Northland’s strong performance in the second quarter has contributed to solid results for the first half of 2024, largely driven by high wind resource at our offshore wind facilities,” said John Brace, Northland’s Executive Chair. “We also continue to make progress on the construction of our two offshore wind projects in Taiwan and Poland, and our energy storage project in Canada. The execution of these three projects remains our top priority as we focus on their safe and successful delivery. At the same time, we remain active in pursuing various development opportunities in core markets across our 9GW development pipeline. We are also happy to report we completed the sale of our interest in the La Lucha Solar Facility in Mexico.”
Second Quarter Highlights
Financial results for the three months ended June 30, 2024, were higher compared to the same quarter of 2023, primarily due to higher wind resource across all offshore wind facilities, contribution from the New York onshore wind projects that achieved commercial operations in October 2023 and higher revenue from EBSA due to higher market demand, foreign exchange changes and rate escalations. This increase was partially offset by lower revenue generated from the Canadian solar facilities due to lower solar resource, and higher unpaid curtailments related to negative prices and grid outages at our German facilities.
Financial Results
Sales increased to $529 million from $472 million in 2023.
Gross Profit increased to $483 million from $427 million in 2023.
Net Income increased to $262 million from $22 million in 2023.
Adjusted EBITDA (a non-IFRS measure) increased to $268 million from $232 million in 2023.
Adjusted Free Cash Flow per share (a non-IFRS measure) increased to $0.27 from $0.25 in 2023.
Free Cash Flow per share (a non-IFRS measure) increased to $0.20 from $0.16 in 2023.
The following table presents key IFRS and non-IFRS financial measures and operational results. Sales, gross profit, operating income and net income, as reported under IFRS, include consolidated results of entities not wholly owned by Northland, whereas Northland’s non-IFRS financial measures include only Northland’s proportionate ownership interest.
Second Quarter Results Summary
Offshore wind facilities
Electricity production for the three months ended June 30, 2024, increased by 14% or 111GWh compared to the same quarter of 2023. This was primarily due to a higher wind resource across all offshore wind facilities, partially offset by higher unpaid curtailments related to negative prices and grid outages at our German facilities.
Sales of $241 million for the three months ended June 30, 2024, increased 9% or $20 million, compared to the same quarter of 2023, primarily due to higher production across all offshore wind facilities by $28 million, partially offset by a $5 million P&I factor adjustment and $3 million related to various other items.
Adjusted EBITDA of $131 million for the three months ended June 30, 2024, increased 8% or $10 million compared to the same quarter of 2023, due to the same factors as noted above.
An important indicator for performance of offshore wind facilities is the current and historical average power production of the facility. The following tables summarize actual electricity production and the historical average, high and low, for the applicable operating periods of each offshore facility:
In June 2024, one of Gemini’s two export cables was damaged and taken out of service. The subsea repair of the cable has commenced and completion is expected in the third quarter. Gemini’s production continued via the second export cable. This event occurred during the lower production season and is expected to have an immaterial impact, net of the anticipated insurance proceeds, to Northland’s full year results.
Onshore renewable facilities
Electricity production was 26% or 136GWh higher than the same quarter of 2023, primarily due to the contribution from the New York onshore wind projects that achieved commercial operations in October 2023, and higher wind and solar resource at the Spanish onshore renewable facilities, partially offset by lower wind and solar resource at the Canadian onshore renewable facilities.
Sales of $114 million were 17% or $16 million higher than the same quarter of 2023, primarily due to the contribution from the New York onshore wind projects and higher revenue from the Spanish portfolio. Please refer to the MD&A for a further breakdown of Spanish portfolio revenue by component.
Adjusted EBITDA of $78 million was 18% or $12 million higher than the same quarter of 2023, due to the same factors as above.
Natural gas facilities
Electricity production increased 26% or 186GWh compared to the same quarter of 2023, mainly due to higher market demand for dispatchable power.
Sales of $76 million for the three months ended June 30, 2024, were largely in line with the same quarter of 2023.
Adjusted EBITDA of $50 million for the three months ended June 30, 2024, was largely in line with the same quarter of 2023.
Utility
Sales of $91 million for the three months ended June 30, 2024, increased 24% or $18 million compared to the same quarter of 2023, 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 $40 million for the three months ended June 30, 2024, increased 34% or $10 million compared to the same quarter of 2023, primarily due to the same factors as above.
Consolidated statement of income (loss)
General and administrative (“G&A”) costs of $25 million in the second quarter decreased $6 million compared to the same quarter of 2023, primarily due to lower payroll costs and non-recurring expenditures.
Development costs of $17 million decreased $11 million compared to the same quarter of 2023, primarily due to focused spending on development activities and timing of the expenditures.
Net finance costs of $98 million in the second quarter increased $16 million compared to the same quarter of 2023, primarily due to the issuance of the Green Subordinated Notes (“Green Notes”) in June 2023, partially offset by scheduled repayments on facility-level loans.
Fair value gain on financial instruments was $82 million, primarily due to net movement in the fair value of derivatives related to interest rate and foreign exchange contracts.
Foreign exchange loss of $6 million in the second quarter was primarily due to unrealized loss from fluctuations in the closing foreign exchange rates.
Other income was $35 million higher than the same quarter of 2023, primarily due to the gain on disposal of La Lucha solar facility, partially offset by lower gains associated with the sale of two offshore wind assets in Europe in 2023.
Net income of $262 million in the second quarter of 2024 compared to net income of $22 million in the same quarter of 2023, was primarily as a result of the factors described above.
Adjusted EBITDA of $268 million for the three months ended June 30, 2024, increased 15% or $36 million compared to the same quarter of 2023. The significant factors increasing Adjusted EBITDA include:
$10 million increase in operating results at the offshore wind facilities, primarily due to higher wind resource, as described above;
$10 million increase in operating results at EBSA, as described above;
$17 million decrease in development expenditures and G&A costs, as described above;
$9 million increase due to the contribution of New York Wind onshore wind facilities; and
$6 million increase in the contribution from the Spanish renewables portfolio, primarily due to higher market revenue, as described above.
The factor partially offsetting the increase in the Adjusted EBITDA was:
$23 million in gains from partial asset sell-down in 2023.
Adjusted Free Cash Flow of $69 million for the three months ended June 30, 2024, was 9% or $6 million higher than the same quarter of 2023.
The significant factors increasing Adjusted Free Cash Flow were:
$32 million increase in Adjusted EBITDA (gross of growth expenditures) primarily due to the factors described above; and
$20 million increase from gain on disposal of La Lucha solar facility.
The factors partially offsetting the increase in Adjusted Free Cash Flow were:
$19 million increase in current taxes as a result of higher operating results;
$22 million decrease from foreign exchange and interest rate hedges, and other settlements; and
$11 million decrease from gain from sales of offshore wind development assets in Europe in 2023.
Free Cash Flow, which is reduced by growth expenditures, totaled $51 million for the three months ended June 30, 2024, and was $10 million higher than the same quarter of 2023, due to the same factors as Adjusted Free Cash Flow.
Significant Events and Updates
Balance Sheet:
La Lucha Solar Facility Sale – On June 28, 2024, Northland completed the sale of its 100% stake in the La Lucha solar facility to Cometa Energía, S.A. de C.V., wholly owned by Saavi Energía (“Saavi”) for approximately $215 million in cash after taxes, transaction fees and other customary adjustments. La Lucha is a 130MW solar facility located in Durango, Mexico. The facility achieved commercial operations in June 2023. A gain on disposal of $20 million was recorded in Adjusted Free Cash Flow and Free Cash Flow.
Renewables Growth:
Construction Update on Hai Long, Baltic Power, and Oneida – The Hai Long project continues to make progress with the fabrication of foundations, cables, and onshore and offshore substations. The onshore construction work has advanced well and is nearing mechanical completion. Offshore construction is advancing, with this quarter marking the completion of installation of offshore substation foundation jackets, the first offshore substation topside and continuing with pin piles installations at multiple turbine locations. Hai Long 2A and 2B pin pile installation is expected to be completed by the end of the third quarter. The pre-fabrication for the first batch of turbine components including towers, generators and nacelles is progressing well, with multiple parts en route to Taiwan. Full commercial operations are expected to commence in 2026/2027, according to schedule. Overall project cost is aligned with original expectations.
The Baltic Power project continues to make progress on fabrication of onshore and offshore substations, foundations, export cables, multiple turbine components and inter array cables. Construction of an onshore substation and the operations and management building are well underway. Major in-water offshore construction activity is expected to start in early 2025. Full commercial operations are expected to commence in the latter half of 2026, according to schedule. Overall project cost is aligned with original expectations.
The Oneida project continues to make progress with its construction activities. All the battery packs and medium-voltage transformers have been delivered and cabling installation continues across the site. The high-voltage transformers arrived in Canada and are expected to arrive at site in the third quarter. Full commercial operations are expected to commence in 2025, according to schedule. Overall project cost is aligned with original expectations.
Other Growth Activity – Northland continues to make progress on its development activities in core markets for onshore renewables including Alberta, Ontario, and New York, and offshore wind including Scotland and South Korea. For example, Northland signed a 15-year bilateral offtake agreement for 100% of the battery energy storage capacity from the Jurassic Battery Energy Storage System (“Jurassic BESS”) project in Alberta with members of the Alberta Schools Commodities Purchasing Consortium. This is the first offtake agreement of its kind in Canada for a battery storage project and is a key milestone in the advancement of Northland’s Alberta portfolio.
2024 Financial Outlook
Northland’s outlook is underpinned by its commitment to operational excellence, prudent growth in key global markets and focus on the Company's three major renewable construction programs, ensuring their successful execution.
To prepare for further growth, the Company also continues to be active in pursuing various development opportunities in its core markets. The Company has allocated $60 million of development expenditures in 2024 towards advancing the 9GW of development opportunities in markets including Alberta, New York, Ontario, Scotland, South Korea and other select jurisdictions.
As of August 14, 2024, management’s 2024 financial outlook remains unchanged from prior guidance. This outlook reflects Northland’s commitment to strong operational performance with key financial projections for 2024 including expected Adjusted EBITDA in the range of $1.2 billion to $1.3 billion and Adjusted Free Cash Flow per share to be in the range of $1.30 to $1.50. Furthermore, projected Free Cash Flow per share for 2024 is expected to be in the range of $1.10 to $1.30, reflecting the Company’s commitment to prudent financial management. Due to strong operating results experienced in the first half of 2024, management is currently projecting the financial outlook for 2024 to be at the higher end of the disclosed guidance range.
It is important to note that while Northland is confident in its outlook, it remains subject to the Forward-Looking Statements set forth herein as well as the Risk Factors outlined in Northland’s most recent Annual Information Form dated February 21, 2024 (“2023 AIF”).
Second-Quarter Earnings Conference Call
Northland will hold an earnings conference call on August 15, 2024, to discuss its second quarter 2024 results. The call will be hosted by Northland’s Senior Management, who will discuss the Company’s financial results and developments as well as answering questions from analysts.
Conference call details are as follows:
Thursday, August 15, 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/BI78c9f1b1d17e47499242d1b1147e8571
For all other attendees, the call will be broadcast live on the internet, in listen-only mode and can be accessed using the following link:
Webcast URL: https://edge.media-server.com/mmc/p/qinx7csg
For those unable to attend the live call, an audio recording will be available on northlandpower.com on Friday, August 16, 2024.
Northland’s unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2024, and related Management’s Discussion and Analysis can be found on SEDAR+ at www.sedarplus.ca under Northland’s profile and on northlandpower.com.
