TORONTO, ON--(Marketwired - August 10, 2016) -
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Northland Power Inc. ("Northland" or "the Company") today reported financial results for the three and six months ended June 30, 2016.
"Northland continues to deliver on advancing our $6 billion construction portfolio on time and on budget," said John Brace, Chief Executive Officer. "We again saw an increase in our gross profit, adjusted EBITDA and free cash flow financial results. We achieved significant milestones on both offshore wind projects, continuing at a rapid pace with over 90% of the total wind turbines installed at Gemini, and installation of the offshore substation for Nordsee One successfully completed last month. These results demonstrate our ability to balance strong returns with steady growth."
Second Quarter Highlights:
|Three months ended June 30||Six months ended June 30|
|In thousands of dollars except per share and energy unit amounts||2016||2015||2016||2015|
|Net Income (Loss)||23,376||140,281||(68,275)||109,665|
|Cash Provided by Operating Activities||107,762||88,237||216,582||207,849|
|Free Cash Flow(1)||46,316||34,584||91,182||84,829|
|Cash Dividends Paid to Common and Class A Shareholders||34,559||35,141||71,025||65,253|
|Total Dividends Declared to Common and Class A Shareholders(2)||46,318||45,681||92,486||88,021|
|Free Cash Flow(1)||0.270||0.204||0.531||0.520|
|Total Dividends Declared to Common and Class A Shareholders(2)||0.270||0.270||0.540||0.540|
|Electricity (megawatt hours)||1,204,987||1,137,123||2,614,710||2,687,299|
|(1)||See Non-IFRS Measures for a detailed description.|
|(2)||Total dividends to Common and Class A Shareholders represent dividends declared irrespective of whether the dividend is received in cash or in shares as part of the DRIP program.|
Second Quarter Results - Summary
Electricity production during the second quarter of 2016 was 16,487 MWh higher than the same quarter of 2015 largely due to additional economic production periods at the Thorold facility. Sales were $2.3 million higher than the second quarter of 2015 primarily due to an increase in the electricity revenue earned at the Iroquois Falls facility ($5.1 million) associated with the price escalation resulting from the OEFC court decision and an increase in the electricity revenue earned at the Thorold facility ($1.2 million) as a result of higher electricity production volumes. These results were partially offset by decreased electricity revenue at the North Battleford facility ($4.7 million) as a result of lower flow-through natural gas costs. Gross profit at $71.6 million was $7.7 million higher than the comparable period in 2015 primarily due to Iroquois Falls' contribution ($5.4 million) arising from increased volume and a higher PPA price. As a result of the above factors, operating income and adjusted EBITDA were $8 million and $7.8 million, respectively, higher than the second quarter of 2015.
Electricity production during the three months ended June 30, 2016 was 51,377 MWh higher than the comparable period in 2015 primarily due to a 37,586 MWh contribution from the Grand Bend facility as well as an additional 26,654 MWh of production primarily from four additional ground-mounted solar sites in operation compared to the same quarter of 2015, as well as higher solar resources and more favourable weather conditions. These results were partially offset by a 12,863 MWh decrease in production at the other wind facilities caused by lower wind resources. Sales for the second quarter of 2016 were $18 million higher and plant operating costs were $1 million higher than the second quarter of 2015, primarily due to the incremental contribution from the Grand Bend facility and the additional ground-mounted solar facilities in operation. Operating income and adjusted EBITDA were $8.3 million and $10.5 million, respectively, higher than the second quarter of 2015 as a result of the inclusion of the Grand Bend facility and additional ground-mounted solar facilities.
Management and administration costs
Management and administration costs at $14.8 million were $5.3 million higher than the second quarter of 2015, largely due to additional effort associated with early-stage development activities.
Finance costs, net
Finance costs, net (primarily interest expense), increased by $11 million from the second quarter of 2015 due to the inclusion of interest from Gemini, Grand Bend and the additional four ground-mounted solar facilities debt.
Non-cash fair value losses
Non-cash fair value gains of $18.3 million in the second quarter of 2016 (compared to a $167.5 million gain in the second quarter of 2015) is comprised of a $17.3 million gain in the fair value of Northland's financial derivative contracts combined with a $1 million unrealized foreign exchange gain.
The factors described above, combined with a $3.9 million provision for current and deferred income taxes, resulted in net income of $23.4 million for the second quarter of 2016, compared to $140.3 million for the second quarter of 2015.
Northland's adjusted EBITDA for the three months ended June 30, 2016 was $12.6 million higher than the second quarter of 2015. Significant factors increasing and decreasing adjusted EBITDA for the comparative quarter are described below:
These favourable results were partially offset by:
Free Cash Flow, Payout Ratio and Dividends to Shareholders
Free cash flow of $46.3 million for the second quarter of 2016 was $11.7 million higher than the corresponding period in 2015; significant factors increasing or decreasing free cash flow are described below.
Factors increasing free cash flow were:
Factors decreasing free cash flow were:
For the three months ended June 30, 2016, common share and Class A Share dividends declared for the quarter totalled $0.27 per share. The increase in quarterly free cash flow from 2015, described above, was the primary reason for the decrease in the quarterly cash payout ratio to 75% or 100% if all dividends were paid out in cash (i.e. excluding the effect of dividends re-invested through Northland's DRIP).
Sales and cost of sales were lower in the first six months of 2016 compared to the prior year primarily due to lower sales at Kirkland Lake resulting from the amended baseload gas-fired PPA rates, the expiration of Cochrane's PPA in May 2015, lower production and dispatch opportunities at Thorold (affecting sales but not gross profit), and lower flow-through of natural gas costs and electricity prices at North Battleford (affecting sales but not gross profit). These variances were partially offset by positive contributions from Iroquois Falls associated with the OEFC court decision and the additional contributions from the Grand Bend wind farm and ground-mounted solar facilities.
Net loss for the six months ended June 30, 2016 of $68.3 million was primarily due to the non-cash fair value loss associated with Northland's derivative contracts ($122.7 million loss in the first six months of 2016 versus an $83 million gain in the first six months of 2015). Of the non-cash fair value loss on the derivative contracts for the first six months of 2016, $153.1 million was associated with Gemini's and Nordsee One's interest rate swap contracts.
Northland's adjusted EBITDA for the six months ended June 30, 2016 was $19.4 million higher than the same period of 2015. Significant factors increasing and decreasing adjusted EBITDA for the comparative period are described below:
These favourable results were partially offset by:
Free cash flow for the six months ended June 30, 2016 was $6.4 million higher than the same period in 2015. Favourable changes from the same period for 2015 included:
Partially offsetting these favourable variances were:
Northland's cash dividend payout ratio for the six months ending June 30, 2016 was 78% of free cash flow (101% excluding the effect of dividends re-invested through the DRIP) compared to 77% and 102%, respectively in 2015.
Northland actively pursues new power development opportunities that encompass a range of clean technologies, including natural gas, wind, solar and hydro.
During the first six months of 2016 and through the date of this press release, Northland continued to expand its earlier-stage development pipeline, pursuing opportunities that meet the Company's investment criteria in targeted markets including, but not limited to, Canada, United States, Europe, Mexico, and Taiwan. Northland has identified a number of new opportunities in these jurisdictions, in addition to several projects already under development. Northland's sustained focus is on purposefully advancing those development opportunities that align with the Company's business strategy while prudently managing the cost exposure of earlier-stage projects.
Management continues to expect adjusted EBITDA in 2016 to be approximately $500 to $530 million. This adjusted EBITDA guidance includes Northland's share of pre-completion revenues from Gemini (EUR80 to EUR90 million at an assumed average exchange rate of CA$1.43/euro) but excludes the lump-sum retroactive payments to Northland from past amounts owed by the OEFC pursuant to the global adjustment decision which is estimated at approximately $95 million. Northland expects to include the retroactive payments in income when received.
In 2016, commensurate with adjusted EBITDA guidance, management continues to estimate the free cash flow per share range guidance of $0.93 to $1.08 per share. This free cash flow per share guidance includes a $28 million partial payment against the purchase price of the sale of 37.5% of four ground-mounted solar projects that is subject to meeting certain conditions. Similar to adjusted EBITDA guidance, free cash flow per share guidance excludes the impact from the expected lump-sum retroactive payments pursuant to the global adjustment settlement.
Northland's Board and management are committed to maintaining the current monthly dividend of $0.09 per share ($1.08 per share on an annual basis). Northland's management and Board have anticipated the impact of growth and are confident that Northland has adequate access to funds to meet its dividend commitment, including operating cash flows, cash and cash equivalents on hand and, if necessary, use of its line of credit or external financing. Management expects to continue its DRIP to provide an additional source of liquidity.
This press release includes references to Northland's free cash flow, free cash flow payout ratio, free cash flow per share and adjusted EBITDA which are not measures prescribed by International Financial Reporting Standards (IFRS). Free cash flow, free cash flow payout ratio, free cash flow per share and adjusted EBITDA, do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These measures should not be considered alternatives to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of Northland's results of operations from management's perspective. Management believes that free cash flow, free cash flow payout ratio, free cash flow per share, and adjusted EBITDA are widely accepted financial indicators used by investors to assess the performance of a company and its ability to generate cash through operations.
Earnings Conference Call
Northland will hold an earnings conference call on August 11 at 10:00 am EDT to discuss its first quarter financial results. John Brace, Northland's Chief Executive Officer, Paul Bradley, Northland's Chief Financial Officer and Mike Crawley, Northland's Executive Vice President, Business Development will discuss the financial results and company developments before opening the call to questions from analysts and members of the media.
Conference call details are as follows:
Date: Thursday, August 11, 2016
Start Time: 10:00 a.m. EDT
Phone Number: Toll free within North America: 1-844-284-3434
For those unable to attend the live call, an audio recording will be available on Northland's website at (www.northlandpower.ca) from the afternoon of August 11 until August 25, 2016.
Northland is an independent power producer founded in 1987, and publicly traded since 1997. Northland develops, builds, owns and operates facilities that produce 'clean' (natural gas) and 'green' (wind, solar, and hydro) energy, providing sustainable long-term value to shareholders, stakeholders, and host communities.
The Company owns or has a net economic interest in 1,394 MW of operating generating capacity and 932 MW (642 MW net to Northland) of generating capacity under construction, including a 60% equity stake in Gemini, a 600 MW offshore wind project, and an 85% equity stake in Nordsee One, a 332 MW offshore wind project, both located in the North Sea.
Northland's cash flows are diversified over four geographically separate regions and regulatory jurisdictions in Canada and Europe.
Northland's common shares, Series 1, Series 2 and Series 3 preferred shares and Series B and Series C convertible debentures trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A, NPI.PR.B, NPI.PR.C, NPI.DB.B, and NPI.DB.C, respectively.
This release contains certain forward-looking statements which 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. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as "expects," "anticipates," "plans," "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, free cash flows, free cash flow payout ratio, free cash flow per share, dividend payment and dividend payout ratios, the construction, completion, attainment of commercial operations, cost and output of development projects, the resolution of the legal claims and proceedings, plans for raising capital, and the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of Northland and its subsidiaries. These statements are based upon certain material factors or assumptions that were applied in developing the forward-looking statements, including the design specifications of development projects, the provisions of contracts to which Northland or a subsidiary is a party, management's current plans, its perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate in the circumstances. Although these forward-looking statements are based upon management's current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties. Some of the factors that could cause results or events to differ from current expectations include, but are not limited to, construction risks, counterparty risks, operational risks, foreign exchange rates, regulatory risks, maritime risks for construction and operation, and the variability of revenues from generating facilities powered by intermittent renewable resources and the other factors described in the "Risks and Uncertainties" section of Northland's 2015 Annual Report and Annual Information Form, both of which can be found at www.sedar.com under Northland's profile and on Northland's website www.northlandpower.ca. 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.