Northland Power Income Fund
TSX : NPI.UN
TSX : NPI.DB
TSX : NPI.DB.A

Northland Power Income Fund

November 12, 2009 17:52 ET

Northland Power Income Fund Announces Results for the Third Quarter of 2009

TORONTO, ONTARIO--(Marketwire - Nov. 12, 2009) -

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Northland Power Income Fund (TSX:NPI.UN)(TSX:NPI.DB)(TSX:NPI.DB.A) reported its financial results today for the quarter ended September 30, 2009. The report is the first by the Fund since its merger with Northland Power Inc. ("NPI") on July 16, 2009.

FINANCIAL AND OPERATING HIGHLIGHTS     
    
 3 Months Ended Sept. 30 9 Months Ended Sept. 30
 2009 2008 2009 2008
FINANCIAL (thousands, except per unit amounts)       
 Sales$45,233$44,258 $142,796 $141,579
 Income from operations$12,213$20,975 $48,215 $58,958
 Net income (loss)($4,640)$14,662 $9,176 $41,624
        
 Standardized distributable cash($101,677)$25,541 ($60,137)$82,155
 Distributable cash $10,348$20,842 $49,976 $63,635
        
 Cash distributions declared to Unitholders$17,459$16,836 $51,130 $50,506
        
        
Per Trust Unit – basic       
 Standardized distributable cash($1.5822)$0.4096 ($0.9546)$1.3176
 Distributable cash $0.1610$0.3343 $0.7933 $1.0206
 Cash distributions declared to Unitholders$0.2700$0.2700 $0.8100 $0.8100
OPERATIONS       
 Electricity sales volume (megawatthours)390,354275,791 1,128,196 961,574
 Steam sales volume (thousands of pounds)156,614278,983 760,216 931,904
 Fuel consumption (thousands of gigajoules)3,1872,314 9,018 7,927

Third Quarter Overview

Income from operations and distributable cash for Northland Power Income Fund (the "Fund") this quarter were lower than the same quarter last year, which included $8.7 million of one-time investment income associated with transactions entered into by Panda-Brandywine, L.P. Net income was further affected by negative non-cash mark-to-mark adjustments of $10.5 million related to foreign exchange and changes in the fair value of interest rate swaps. The merger with NPI had a small negative impact due largely to $1.3 million of development costs that were expensed this quarter, reflecting the current high level of development activities.

The positive impact of the NPI merger on financial results and distributable cash should be felt with the startup of the Jardin d'Éole wind farm, which is imminent, and commencement of operations at the Thorold facility, expected in the first quarter of 2010; both these projects remain well within both budget and schedule. The NPI merger will have little impact on cash distributions for the next two years (January 2012.)

The Fund's facilities operated well during the quarter. Consolidated sales were $45.2 million while income from operations was $12.2 million. Distributable cash as determined by the Fund was $10.3 million during the third quarter; $10.5 million lower than last year primarily because of the one-time income from Panda-Brandywine in 2008. Standardized distributable cash for the quarter was $127.2 million lower than 2008 largely due to expansionary capital expenditures associated with constructing the Thorold and Jardin d'Éole facilities. 

Cash and cash equivalents of $30.7 million at September 30th decreased by $14.8 million from December 31, 2008 as $48.1 million of cash generated by operations was more than offset by $46.5 million of investing activities and $16.3 million of financing activities.

Cash distributions to Unitholders declared for the quarter totalled $0.27 per unit. 

Spy Hill Project

During the quarter, the Fund announced that it has entered into a 25-year Power Purchase Agreement ("PPA") with the Saskatchewan Power Corporation ("SaskPower") to provide peaking power to the Saskatchewan energy system. A PPA for an 86 MW natural-gas-fired peaking plant was awarded to NPI following a successful bid into SaskPower's Request for Proposals. Under the PPA, the project will receive monthly payments that are designed to cover all fixed costs and investment returns. The PPA also provides protection against changes in the market price of natural gas, as fuel costs are passed through to SaskPower. The Fund will be responsible for operating the plant to achieve specified efficiency and reliability levels. The contractual structure of the project is designed to ensure predictable, stable and sustainable cash flows over the entire 25-year term of the PPA. The plant, to be built near Spy Hill, Saskatchewan, is expected to cost approximately $145 million and come into operation late in 2011, with construction slated to begin in June of 2010.

Merger with Northland Power Inc.

On July 16th the Fund merged with NPI by acquiring all of the issued and outstanding shares of NPI. The merger was paid for largely with securities that are exchangeable into trust units of the Fund on or after January 16, 2012. The conversion of some of those securities into trust units is contingent on the Fund recognizing value for the development portfolio NPI brought to the merger. The merger with NPI was approved by the requisite majorities of the Fund's Unitholders on July 16, 2009. The merger with NPI and all related transactions are described in detail in the Notice of Annual and Special Meeting and Management Information Circular dated May 1, 2009 and the Supplement to the Management Information Circular dated July 10, 2009, both of which have been posted on SEDAR, at www.sedar.com, and on the Fund's website, www.npifund.com.

With the merger, the Fund now has ownership or economic interests in 10 power projects totaling over 1,100 megawatts ("MWs") (net 872 MWs) that include clean natural-gas-fired plants as well as renewable wind and biomass projects. The merger has internalized management and created significant alignment through management's entitlement to approximately 36% of the Fund's trust units, potentially increasing to as much as 46% if all eligible securities convert. The Fund's average power purchase agreement duration has been extended to 14 years. In addition, the merger provides the Fund with the ability to grow organically by generating its own development opportunities, as well as bringing in a pipeline of high-quality development prospects.

The Fund's assets now include ownership of the 265 MW cogeneration facility being constructed in Thorold, Ontario and an ownership interest in the 127.5 MW Jardin d'Éole wind farm being constructed near Matane, Quebec. It also has an economic interest in natural-gas- and biomass-fired generation facilities in Kirkland Lake and Cochrane, Ontario that it manages on behalf of third-party owners, and receives management, gas purchase and performance incentive fees as a result of providing these services, as well as a small wood chipping facility located on Vancouver Island and an engineering services business. The Fund's assets also include a sizable portfolio of development prospects, of which the Spy Hill project is the first to proceed to PPA signing. 

Public Offerings

On October 15, 2009 the Fund raised $161.4 million through fully subscribed and simultaneous issues of 6.7 million trust units and $92 million of 6.25% debentures convertible into units at $12.42 per unit until December 31, 2014 and redeemable by the Fund under certain circumstances. The Fund intends to use the proceeds of the offerings to finance the equity requirements for the Spy Hill project, to fund its commitments with respect to the Jardin d'Éole and Thorold projects, and to repay existing indebtedness as well as for general business purposes of the Fund.

Outlook 

The benefits of the NPI merger will start to have a material favourable impact on the financial results of the Fund with the startup of the Thorold and Jardin d'Éole facilities. The combined $161 million trust unit and convertible debenture offerings in October 2009 were well received in the market and strengthen the Fund's financial standing and position it to move forward with its growth strategy, with the Spy Hill RFP win being the first of a number of successful transactions that management expects will be realized by the Fund as a result of the merger with NPI.

Balance of 2009 - The Fund's distributable cash is expected to exceed cash distributions for 2009, although dilution resulting from the merger and the October unit offering will compress the payout ratio compared to prior years. Due to the one-time payments from the Panda-Brandywine-related transactions in 2008, management expects the Fund's 2009 distributable cash to be lower than last year. Kingston LP has locked in a large portion of its gas resales at attractive prices for the balance of 2009 which will help protect margins against the forecasted continuation of low natural gas market prices. The Jardin d'Éole wind farm is expected to contribute to financial results starting in mid-November. 

2010 - Distributable cash is expected to increase significantly in 2010 due to contributions from the Jardin d'Éole wind farm and from the Thorold cogeneration facility, scheduled to be operational in early 2010. TransCanada PipeLine tariffs are expected to increase significantly in 2010; increases in effect as at January 1, 2010 would be directly recovered at Kingston through the terms of the PPA. Some mitigation is expected at Iroquois Falls through anticipated higher selling prices under its PPA, which are indirectly related to the wholesale cost of electricity in Ontario, which will be subject to upward pressure due to the entry into commercial operation of new power plants and wind farms contracted by the Ontario Power Authority as well as Ontario Power Generation's success in having its administered rates increased. 

Sustainability of Distributions

The Fund's investment objective is to produce stable and sustainable levels of cash available for distribution to Unitholders from assets, businesses and investments related to the production, conversion, transmission, distribution, purchase and sale of electricity and other forms of energy, energy-related projects and fuels.

The NPI merger has provided the Fund with an additional $600 million of tax deduction pools which, combined with cash flow from NPI's projects, will provide cash available for distribution to help maintain the Fund's distribution of $1.08 per unit even after the Fund becomes taxable in 2011. 

ABOUT THE FUND

Northland Power Income Fund is a Canadian income trust that has ownership or economic interests in 10 power projects totaling over 1,100 megawatts ("MWs") (net 872 MWs). The Fund's assets comprise natural-gas-fired plants which efficiently and cleanly produce electricity and steam as well as facilities generating renewable energy from wind and biomass. Sales are made almost entirely under long-term contracts with a current average duration of 14 years. The Fund's plants are located in Canada, the United States and Germany. The merger with NPI on July 16, 2009 internalized management and provided the Fund with the ability to grow organically by generating its own development opportunities, as well as bringing in NPI's sizeable portfolio of high-quality development prospects.

The Fund's trust units and convertible debentures, which trade on the Toronto Stock Exchange under the symbols NPI.UN, NPI.DB and NPI.DB.A, are qualified investments for RRSPs and DPSPs under the Canadian Income Tax Act. The Fund has in place a distribution re-investment plan that allows Unitholders who are residents of Canada to automatically have their monthly cash distributions reinvested in additional units. Participants do not pay any costs associated with the plan, including brokerage commissions. For further information or to join the plan, contact your financial advisor or broker.

FORWARD LOOKING STATEMENTS

Certain statements in this news release, other than statements of historical fact, are forward-looking statements based on certain assumptions and reflect the Fund's and its subsidiaries' current expectations. Forward-looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. These statements may include, without limitation, statements regarding the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of the Fund's and its subsidiaries' for the current fiscal year and subsequent periods. 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". This information is based upon certain material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking statements, including the 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, including those set out in the management's discussion and analysis section of the Fund's 2008 annual report, the Fund's Annual Information Form dated March 13, 2009, the Fund's Management Information Circular dated May 1, 2009, and the Supplement to the Management Information Circular dated July 10, 2009 certain of which are beyond management's control. The Fund'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, or what benefits, including the amount of distributions, the Fund and Unitholders will derive therefrom.

The forward-looking statements contained in this news release are made as of the date hereof for the purpose of providing readers with the Fund's expectations for the coming year. The forward-looking statements may not be appropriate for other purposes. Other than as specifically required by law, the Fund undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

Contact Information

  • Northland Power Income Fund
    Barb Bokla
    Manager, Investor Relations
    (416) 962-6262 x156
    (416) 962-6266 (FAX)
    or
    Northland Power Income Fund
    Boris Balan
    Director of Communications
    (416) 962-6262 x116
    (416) 962-6266 (FAX)
    info@NPIFund.com
    www.NPIFund.com