Northland Power Inc.
TSX : NPI
TSX : NPI.PR.A
TSX : NPI.DB.A

Northland Power Inc.

February 22, 2012 22:38 ET

Northland Power Announces 2011 Results

TORONTO, ONTARIO--(Marketwire - Feb. 22, 2012) -

Not for distribution to U.S. newswire services or for dissemination in the United States or its possessions. Any failure to comply with this restriction may constitute a violation of U.S. securities law.

Northland Power Inc. ("Northland") (TSX:NPI)(TSX:NPI.PR.A)(TSX:NPI.DB.A) today reported the financial results for the quarter and year ended December 31, 2011. Total cash dividends declared to Shareholders for the year amounted to $1.08 per share.

Significant Events

During the fourth quarter and until the date of this release, Northland achieved a number of milestones in its construction and development programs.

Northland's 86 megawatt (MW) Spy Hill gas-fired peaker project achieved commercial operations on October 19, 2011 ahead of schedule and under budget. Spy Hill's start-up brought Northland's total generation capacity over the 1,000 MW threshold.

Northland's 260 MW North Battleford combined-cycle gas facility remains ahead of schedule and within budget and is approaching 500 consecutive days without a lost-time injury among the site's more than 400 hourly and salaried workers. Construction of this project was 62% complete at December 31, 2011.

Permitting and other development activities continue to move forward on a further $1 billion of contracted projects under Ontario's feed-in tariff (FIT) program. These include 13 ground-mount solar projects at 10 MW each, the 60 MW McLean's Mountain wind project, the 26 MW Kabinakagami hydro projects, and the 100 MW Grand Bend wind project. Development activities also continue on the 24 MW Frampton wind farm in Quebec.

Northland expects to complete permitting, close financing and begin construction on the first five or six ground- mounted solar projects in the spring of 2012; on three projects Northland has received final environmental permits, placed panel orders and completed initial site preparation work. Development is progressing on the remaining projects with construction expected to commence later in 2012 or in early 2013.

In September 2011, Northland submitted bids to the Ontario Power Authority (OPA) under the 300 MW CHP IV request for proposals (RFP) for two combined heat and power (CHP) projects in Ontario: the Oshawa Cogen project under development with General Motors Oshawa plant as the thermal host, and the Queen's Quay Cogen project with Redpath Sugar's Toronto waterfront operation as the thermal host. The OPA has agreed to enter into bilateral negotiations with Northland for PPAs at both proposed projects. Pending the outcome of these negotiations, advanced development and construction of these CHP facilities could commence in the future.

The McLean's Mountain wind project is also expected to receive all required permits and begin construction in spring of 2012. Northland expects to begin construction of the Grand Bend wind project during 2013.

On October 18, 2011, Standard & Poor's revised its outlook on Northland's long-term debt to positive from stable and reaffirmed Northland's rating of BBB-, citing Northland's consistent financial strategy and improving diversification resulting from the addition of new facilities. Standard and Poor's report concluded that Northland had adequate sources of liquidity to cover its near-term needs, including dividends.

On November 9, 2011, Northland announced a change to its Dividend Reinvestment Plan (DRIP) whereby common shareholders and Class A shareholders may elect to reinvest their dividends in common shares of Northland at a 5% discount. Average uptake on Northland's revised DRIP to date has been 27%. While future uptake is uncertain, based on its review of comparable companies with similar DRIP programs, management expects the net result will be a material reinvestment of cash dividends into Northland, thus improving the efficiency and reducing the cost of raising equity for future projects.

On January 17, 2012 Northland announced the conversion of certain securities issued as part of the 2009 merger of the formerly private Northland Power Inc. and Northland Power Income Fund. The conversion resulted from the realization of value from certain development projects owned by Northland Power Inc. at the time of the merger.

Summary of Financial Results
3 Months Ended Dec. 31 12 Months Ended Dec. 31
2011 2010 2011 2010
FINANCIAL (thousands, except per unit amounts)
Sales $98,848 $92,607 $356,221 $312,491
Gross profit $59,302 $58,287 $203,301 $186,408
EBITDA(1) $45,256 $46,590 $150,704 $150,907
Operating income $30,784 $27,823 $94,410 $92,272
Net income (loss) ($23,243 ) $27,330 ($63,109 ) ($205,828 )
Free cash flow(1) $22,775 $12,007 $54,850 $63,816
Dividends declared to Shareholders $21,030 $20,137 $83,228 $78,312
Per Share
Free cash flow $0.29 $0.16 $0.71 $0.88
Dividends declared to Shareholders $0.27 $0.27 $1.08 $1.08
Energy Volumes
Electricity sales volume (megawatthours) 973,004 778,928 3,137,548 2,577,089
Steam sales volume (thousands of pounds) 492,272 516,244 1,914,168 1,625,182
Fuel consumption (thousands of gigajoules) 6,344 5,434 22,455 18,303
(1) See "Non-IFRS measures"

The following comments are made with reference to the attached unaudited consolidated financial statements of Northland. Where a comment refers to activities or events prior to January 1, 2011, "Northland" refers to Northland Power Income Fund.

Full Year 2011 Results

Earnings before interest, taxes, depreciation and amortization

In 2011 all facilities operated within management's expectations and earnings before interest, taxes, depreciation and amortization (EBITDA) at $150.7 million approximated the prior year. The operating facilities contributed $23 million higher EBITDA in 2011 compared to 2010 (after removing Panda-Brandywine and Mont Miller) due to a full year of operations and favourable market conditions at Thorold, a few months of operations at each of Mont Louis and Spy Hill, partially offset by a 40% increase in TransCanada transportation tolls, lower natural gas resale profits and weaker wind resources at the Quebec wind farms. Corporate activities in 2011 had a $2 million favourable impact on EBITDA as higher management and administration costs, largely due to higher compensation and costs related to stepped-up development activity on early-stage prospects, were offset by increased management fees from Northland's managed facilities, the gain on the sale of the South Kent wind development project and lower write offs of deferred development costs. Several one-time items occurred in 2010 including fees received on the prepayment of the Panda- Brandywine loan and interest on the loan prior to its prepayment ($12 million additional EBITDA in 2010) and the sale of Mont Miller, which reduced EBITDA in 2011 and produced a one-time gain in 2010 (combined EBITDA impact of $13 million less in 2011). Other miscellaneous items reduced EBITDA by approximately $0.2 million during 2011.

Net Income

The 2011 net loss of $63.1 million is reconciled to EBITDA by the following items.

Northland recorded the following non-cash adjustments during 2011: (i) a $129 million loss on the change in fair value of Northland's interest rate swaps on its project non-recourse debt due to the decrease in market interest rates, (ii) a $14.3 million loss in the fair value of Northland Class B Convertible Shares due to an increase in Northland's Share price and a shorter discounting period, (iii) a $3.6 million foreign exchange gain on Northland's U.S. and euro foreign exchange contracts, and (iv) a $33.2 million impairment of property, plant and equipment, intangible assets and goodwill. The interest rate swap and foreign exchange adjustments will reverse over time and have no impact on the cash obligations of Northland or its projects. Absent changes in discount rates, management anticipates there will be annual goodwill impairments as future cash flows (which are used to determine an asset's recoverable amount) are realized.

Finance costs, primarily interest expense, at $55 million decreased by $3.7 million from 2010 primarily due to a one- time fee of $5.5 million incurred in 2010 to prepay Thorold's $40 million subordinated loan. Other factors serving to reduce finance costs in 2011 were interest saved from the prepayment of Thorold's subordinated loan, the sale of Mont Miller in 2010 and the conversion and maturity of convertible, subordinated debentures in 2011. These savings were partially offset by the recognition of interest on the Mont Louis and Spy Hill loans once the facilities achieved commercial operations.

Spy Hill reached commercial operations on October 19, 2011. The long-term contract with SaskPower is considered a finance lease for accounting purposes. As a result, the fixed monthly capacity payments received from SaskPower are treated as lease income, while electricity sales are recognized in sales revenue. The transition to lease accounting resulted in a one-time $35 million non-cash gain in 2011. The accounting treatment of Spy Hill as a finance lease has no impact on Northland's EBITDA or free cash flow.

Amortization of intangible assets at $20 million increased during the year as a result of a full year of amortization of the Thorold facility's contracts. Depreciation of property, plant and equipment at $57 million increased due to the addition of the new facilities. Other miscellaneous items increased net income by approximately $0.8 million during 2011.

The factors described above, current taxes of $3 million and the reduction of $58.4 million on the future income tax liability resulted in the $63.1 million net loss for the year.

Dividends to Shareholders and Free Cash Flow

Free cash flow of $54.8 million was $9 million lower than in 2010 primarily by the items affecting EBITDA as well as increased preferred share dividends ($4.5 million), increased scheduled loan repayments ($11.3 million related mostly to Thorold), increased non-expansionary capital expenditures ($2.4 million), increased contributions to reserve accounts ($0.5 million), increased taxes ($1.4 million) offset by reduced expensing of previously deferred development costs ($1.7 million), lower interest costs ($8.3 million) primarily due to a one-time fee incurred in 2010 to prepay Thorold's $40 million subordinated loan and other miscellaneous operational items ($1.1 million).

For 2011, Northland's dividend payments were 147% of free cash flow (154% if the impact of the DRIP is excluded) compared to 122% in 2010. This payout in excess of free cash flow largely reflects the level of spending on growth initiatives and payments of dividends on equity capital raised for construction projects, for which corresponding cash flows will not be received until future years. Management believes Northland has adequate liquidity to maintain its current dividend rate, largely due to the impending receipt of significant cash flows from the North Battleford project scheduled for completion in 2013.

Fourth Quarter Results

Northland's fourth quarter consolidated sales and EBITDA were $98.8 million and $45.3 million respectively compared to $92.6 million and $46.6 million in the same quarter of 2010. Free cash flow of $22.8 million was up $10.8 million from the same period last year. Major variances at Northland facilities compared to the fourth quarter of 2010 are discussed below.

Earnings before interest, taxes, depreciation and amortization

In the fourth quarter of 2011, EBITDA decreased by $1.3 million as described below.

Northland's operating facilities contributed an additional $4.3 million in EBITDA over 2010. Among the thermal facilities, Thorold benefited from additional dispatch periods as a result of lower natural gas prices and lower operating expenses resulting from a municipal tax rate adjustment in 2011, whereas Thorold's 2010 fourth quarter sales were down due to a six-day maintenance outage during the quarter. Iroquois Falls' 2011 results were impacted by a downward PPA rate adjustment retroactive to the beginning of the year (compared to a positive adjustment in 2010) and the increase in TransCanada transportation tolls. Operating costs at Iroquois Falls were down due to reduced service agreement payments to GE and deferral of several maintenance items to 2012. Kingston's revenue decreased due to lower natural gas resale opportunities, but benefited from increased off-peak production. Natural gas costs were higher due to the increased production and the increase in TransCanada tolls. The Spy Hill quarterly results reflect the period from its October 19, 2011 commercial operations date and were consistent with management's expectations. Wind farm production was down at Jardin due primarily to a 10-day shutdown in late November for a substation capacitor bank installation while at Mont Louis production was below long-term expectations due to light winds and several outages related to the start of operations and Hydro-Québec grid issues. Production at the German wind farms was up due to more energetic winds compared to fourth quarter of 2010; operating costs were higher due to gearbox repairs on a turbine at Eckolstädt.

EBITDA increased from 2010 by $3.5 million due to lower corporate expenditures, as higher 2011 compensation costs were more than offset by lower write offs of deferred development costs, the deferral of consulting expenses related to the FIT projects. In addition, in 2010 Northland incurred one-time costs connected with corporatization, the transition to International Financial Reporting Standards (IFRS) and significant development activity.

During the fourth quarter of 2011, Northland became eligible to receive performance incentive fees from the Kirkland Lake facility that is managed on behalf of third-party owners. The incentive entitles Northland to share in Kirkland Lake's cash flows after all operating and financing expenditures. During the fourth quarter of 2011, Northland earned $1 million (2010 - $nil) in Kirkland Lake performance incentive fees.

The comparison to 2010 is impacted further by several one-time items that occurred in 2010 including the sale of Mont Miller ($9.2 million) and the $1.1 million accounts receivable write off related to Iroquois Falls' thermal host's reorganization under CCAA.

An additional $2 million of miscellaneous costs were incurred in 2011.

Net Income

The fourth quarter 2011 net loss of $23.2 million is reconciled to EBITDA by the following items.

Northland recorded the following non-cash adjustments during the quarter: (i) $32.6 million in losses associated with changes in fair value, including $27.5 million on the change in fair value of interest rate swaps and a $5.1 million loss on the change in fair value on convertible shares; and (ii) a $2.5 million exchange loss on Northland's U.S. and euro foreign exchange contracts not designated as a part of a hedging relationship. These non-cash amounts were the result of the continued strengthening of the Canadian dollar vs. the U.S. dollar and euro during the fourth quarter and changes in the interest rate forward yield curve. Northland recognized a $7.7 million impairment in goodwill and a $25.5 million impairment in contracts and other intangibles. The impairments also account for potential additional capital expenditures which may be required to maintain the life of the assets beyond the expiry of their respective PPAs and the undeterminable levels of post-PPA cash flows.

Finance costs at $15.8 million decreased by $4.3 million this quarter largely due to the repayment of Thorold's subordinated debt in December 2010, which included a one-time prepayment fee of $5.5 million.

As previously discussed, the transition to lease accounting resulted in a one-time $35 million non-cash gain in 2011. Amortization of intangible assets at $4.9 million and depreciation of property, plant and equipment at $16.1 million increased due to the addition of the new facilities. Other miscellaneous items of $0.4 million reduced the fourth quarter net loss.

The above factors combined with a $0.7 million provision for current taxes and $2.2 million recovery of future taxes resulted in a net loss for the fourth quarter of $23.2 million.

Dividends to Shareholders and Free Cash Flow

Free cash flow of $22.8 million was $10.8 million higher than in 2010 primarily by the items affecting EBITDA as well as reduced expensing of previously deferred development costs ($1.7 million), contributions from reserve accounts ($2.1 million), lower taxes ($0.7 million) and lower interest costs ($8.3 million), primarily due to a one-time fee incurred in 2010 to prepay Thorold's $40 million subordinated loan, partially offset by increased non-expansionary capital expenditures ($1 million), higher scheduled loan repayments ($0.9 million) and other miscellaneous operational items ($1.2 million). For 2011, Northland's payout ratio in the fourth quarter was 82% of free cash flow (100% if the impact of the DRIP is excluded) compared to 166% in 2010.

OUTLOOK

Northland pursues a proven business strategy that provides stability and long-term growth to its shareholders. Northland's primary focus is to develop new projects and the maximization of the results from its existing operating facilities in order to maintain stable long-term cash flow streams over their asset lives, while safeguarding the environment, health and safety of its employees and the communities in which it operates. Northland's proactive management of construction and established industry relationships are expected to maintain its record of on-time and on-budget project completion. For current and future development projects, Northland continues its strategy of utilizing long-term sales, supply and maintenance agreements to ensure stable margins and utilizing non-recourse project finance structures to reduce risk. Northland exercises judgment, discipline and acumen in its development activities to ensure maximum success. The discipline that has been applied to operations, construction and development underpins management's confidence in Northland's ability to continue to meet its commitments to its stakeholders.

In 2012, management expects Northland to generate EBITDA of approximately $170 million to $180 million compared to $150.7 million in 2011. This estimate reflects project and corporate operations similar to 2011, with the following noteworthy changes for 2012 EBITDA:

  • An increase from a full year of operations from the Spy Hill and Mont Louis facilities of approximately $11 - 12 million and $8-9 million, respectively;
  • An increase in the performance incentive fee from the Kirkland Lake facility of approximately $12 -13 million due to the final repayments associated with financing arrangements in November 2011;
  • An expected increase in wind production to meet long-term forecast levels at Northland's wind farms of up to $3 million;
  • Other miscellaneous items expected to increase EBITDA by approximately $1.1 million;
  • A decrease due to a planned major maintenance outage at the Kingston facility of approximately $6 million during the third quarter, which is partially offset by an approximately $2-3 million increase in EBITDA from January 1, 2012, PPA rate escalations to fully mitigate the 2011 TransCanada toll increase;
  • A decrease arising from a full year of the higher TransCanada gas transportation tolls at Iroquois Falls that became effective March 1, 2011, totaling approximately $1 million;
  • A decrease arising from annual changes to the Iroquois Falls PPA rates totalling approximately $1-2 million;
  • A decrease from recent changes to the Ontario electricity market rules and market forecasts expected to have a negative impact on Thorold's EBITDA by approximately $2-3 million; and
  • A decrease due to an expected increase in funds expended for development initiatives and miscellaneous growth initiatives totalling approximately $2-3 million.

Management expects the annualized EBITDA with the addition of the combined cash flows of the projects in construction and the advanced development pipeline, to be in the range of $360 million to $400 million on a full-year basis in 2014 when these projects are completed, an increase of 139% to 165% from 2011.

Northland's 2012 dividend payments are expected to exceed free cash flow due largely to the level of spending on growth initiatives and payments of dividends on equity capital raised for construction projects, for which corresponding cash flows will not be received until future years. For 2012, management expects the cash dividends to be 135-145% of free cash flow excluding reinvested dividends and 185-195% of free cash flow on an all-cash dividend basis (compared to 147% and 154%, respectively, in 2011, noting that dividend reinvestments applied to only one month in 2011). Management expects free cash flow to fully fund or exceed dividend payments on a full- year basis in the second half of 2013 with the addition of the combined cash flows of the ground mount solar projects and North Battleford projects, unless significant additional investments are made as a result of further development success.

The 2012 payout ratio reflects the higher forecasted EBITDA as described previously, along with the following noteworthy changes in free cash flows and dividend distributions:

  • Kingston's lower free cash flow due to reduced EBITDA, partially mitigated by funds previously set aside to fund the planned major maintenance outage (the net impact on 2012 free cash flow is approximately nil);
  • Decreased free cash flow due to the full year of scheduled loan repayments and interest at Spy Hill and Mont Louis totalling $8 million and $6 million, respectively;
  • Decreased free cash flow due to additional requirements to fund certain maintenance reserve accounts for projects totalling approximately $2-3 million;
  • An increase in cash and share dividends as a result of an additional 37 million shares from the dividend reinvestment plan, the long term incentive plan and those that became eligible to receive dividends in January, 2012 (i.e. the Class A shares and Common Shares acquired on the issuance of Replacement Rights); and
  • Other miscellaneous items expected to affect free cash flow up to approximately $2 million.

Northland's board and management are committed to maintaining the current dividend of $1.08 per share on an annual basis, payable monthly. Northland's management and board have anticipated the impact of growth on the payout ratio and are confident that Northland has adequate access to funds to meet its dividend commitment from operating cash flows, cash and cash equivalents on hand and, if necessary, use of its line of credit as a bridge to the completion of the North Battleford project. Management expects the Company's improved DRIP (announced on November 9, 2011) to provide an additional source of liquidity. Further information on Northland Power's liquidity and management of its committed dividend payments can be found in the September 26, 2011, Investor Day presentation and webcast on Northland's website www.northlandpower.ca.

NON-IFRS MEASURES

The press release includes references to Northland's free cash flow and EBITDA which are not measures prescribed by IFRS. Free cash flow and EBITDA, as presented, 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 and 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 February 23rd at 10am EST to discuss its 2011 annual financial results. John Brace, Northland president and chief executive officer and Paul Bradley, chief financial officer 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 February 23, 2012

State Time: 10:00 a.m. eastern standard time

Phone Number: Toll free with North America: 1-800-379-4140 or Local 416-981-9025

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 February 23rd until March 8, 2012.

ABOUT NORTHLAND

Northland Power Inc. (TSX:NPI) owns or has a net economic interest in 1,005 MW of operating generating capacity, and 260 MW of generating capacity in advanced construction. Northland is also actively developing 340 MW of wind, solar and run-of-river hydro projects awarded PPAs and approximately 2,200 MW of additional power generation opportunities. Northland's assets comprise facilities that produce electricity from "clean" natural gas and "green" renewable sources such as wind, solar and biomass. Electricity generation and capacity is primarily sold under long- term contracts with creditworthy customers. Northland's operating thermal power assets are located in the provinces of Ontario and Saskatchewan Canada, and include the 120 MW Iroquois Falls cogeneration facility, the 110 MW Kingston combined-cycle power facility, the 265 MW Thorold cogeneration facility, the 86 MW Spy Hill peaking facility and an economic interest in two natural-gas- and biomass-fired generation facilities as well as a 19% equity interest in the 230 MW Panda-Brandywine combined-cycle power facility located outside Washington, D.C. Northland's operating renewable power facilities include the 128 MW Jardin d'Éole wind farm and the 100 MW Mont Louis wind farm both located in Quebec, two wind farms totaling 22 MW of installed capacity located in Germany and several rooftop solar power facilities in Ontario. Northland owns the 260 MW North Battleford project, which is currently under construction in Saskatchewan, Canada. Northland's cash flows are diversified over five geographically separate regions and regulatory jurisdictions.

Northland's common shares, preferred shares and convertible debentures trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A and NPI.DB.A, respectively.

FORWARD-LOOKING STATEMENTS

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 EBITDA, cash flows and dividend payments, the construction, completion, attainment of commercial operations, cost and output of development projects, 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, 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 2010 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.

The forward-looking statements contained in this release are based on assumptions that were considered reasonable on February 22, 2012. 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.

NORTHLAND POWER INC.
Consolidated Balance Sheets
(unaudited, stated in thousands)
ASSETS
Dec. 31, 2011 Dec. 31, 2010
Current
Cash and cash equivalents $ 49,505 $ 111,546
Cash reserves 9,613 72,151
Trade and other receivables 120,819 78,339
Inventories 7,249 7,933
Prepayments 13,850 5,354
Lease receivable 2,704 -
Total current assets 203,740 275,323
Lease receivable 166,655 -
Investment in Panda-Brandywine 5,400 5,500
Property, plant and equipment 1,419,095 1,242,401
Contracts and other intangible assets 217,295 251,159
Goodwill 241,843 249,532
Total assets $ 2,254,028 $ 2,023,915
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank Indebtedness $ 8,257 $ -
Trade and other payables 101,378 91,120
Interest-bearing loans and borrowings 76,355 42,943
Dividend payable 7,022 6,753
Total current liabilities 193,012 140,816
Interest-bearing loans and borrowings 938,874 697,429
Convertible debentures 36,405 72,170
Other liabilities 2,636 2,051
Provisions 12,040 6,935
Derivative financial instruments 217,093 91,499
Deferred tax liability 42,001 100,674
Liabilities excluding those attributed to Shareholders 1,442,061 1,111,574
Exchangeable units - 616,955
Convertible Class Shares 132,230 -
Replacement Rights - 88,169
Liabilites attributed to Shareholders 132,230 705,124
Total liabilities 1,574,291 1,816,698
Shareholders Equity
Preferred Shares 145,638 145,946
Trust Units - 806,775
Common Shares 844,360 -
LTIP Reserve 2,485 -
Convertible Shares 499,033 -
Replacement Rights 88,169 -
Accumulated other comprehensive income 752 984
Deficit (900,700 ) (746,488 )
Total Shareholder equity 679,737 207,217
Total liabilities and Shareholder equity $ 2,254,028 $ 2,023,915
NORTHLAND POWER INC.
Consolidated Statements of Income and Deficit
(unaudited, stated in thousands except per share/unit amounts)
3 Months Ended Dec. 31 12 Months Ended Dec. 31
2011 2010 2011 2010
Sales
Electricity $ 92,276 $ 84,101 $ 328,020 $ 276,173
Steam 3,025 2,869 10,856 9,263
Natural gas 1,447 3,651 11,695 21,336
Other 2,100 1,986 5,650 5,719
Total sales 98,848 92,607 356,221 312,491
Cost of sales 39,546 34,320 152,920 126,083
Gross profit 59,302 58,287 203,301 186,408
Expenses
Plant operating costs 10,035 9,550 33,526 30,161
Management and administration costs - operations 3,862 4,290 12,911 13,774
Management and administration costs - development 1,967 2,341 9,085 6,688
Depreciation of property, plant and equipment 16,064 14,840 56,986 54,995
Write-off of accounts receivable - - - 1,111
Impairment of property, plant and equipment 164 - 164 -
32,092 31,021 112,672 106,729
Investment income 16 557 223 12,593
Finance lease income 3,558 - 3,558 -
Operating Income 30,784 27,823 94,410 92,272
Finance costs 15,822 20,163 55,041 58,734
Amortization of contracts and other intangible assets 4,855 5,152 20,077 19,614
Write off of deferred development costs 1,697 3,383 1,697 3,383
Impairment of contracts and other intangibles 25,466 - 25,466 -
Impairment of goodwill 7,689 - 7,689 -
Foreign exchange (gain)/loss 2,547 2,465 (3,625 ) 276
Finance (income) (168 ) (166 ) (744 ) (387 )
Fair value (gain)/loss of interest rate swaps 27,496 (28,744 ) 129,000 53,761
Fair value loss on Convertible shares and Replacement Rights 5,083 17,603 14,308 224,414
(Gain) on the sale of Mont Miller - (7,312 ) - (7,312 )
(Gain) on transition to lease accounting (35,003 ) - (35,003 ) -
Other (income) - - (900 ) -
Income (loss) before income taxes (24,700 ) 15,279 (118,596 ) (260,211 )
Provision for (recovery of) income taxes
Current 711 1,455 2,955 1,577
Deferred (2,168 ) (13,506 ) (58,442 ) (55,960 )
(1,457 ) (12,051 ) (55,487 ) (54,383 )
Net income (loss) for the period (23,243 ) 27,330 (63,109 ) (205,828 )
Net income (loss) attributed to
Non-controlling interests - - - 151
Common Shareholder (23,243 ) 27,330 (63,109 ) (205,979 )
Weighted average number of Shares outstanding - basic (000s) 117,992 74,218 117,037 72,290
Weighted average number of Shares outstanding - diluted (000s) 117,992 74,218 117,037 72,290
Earnings (loss) per Share - basic $ (0.21 ) $ 0.34 $ (0.61 ) $ (2.89 )
Earnings (loss) per Share - diluted $ (0.21 ) $ 0.34 $ (0.61 ) $ (2.89 )
NORTHLAND POWER INC.
Consolidated Statements of Cash Flows
(unaudited, stated in thousands except per share/unit amounts)
3 Months Ended Dec. 31 12 Months Ended Dec. 31
2011 2010 2011 2010
(Note 1) (Note 1)
Operating activities
Net income (loss) for the period $ (23,243 ) $ 27,330 $ (63,109 ) $ (205,828 )
Items not involving cash or operations:
Depreciation of property, plant and equipment 16,064 14,840 56,986 54,995
Amortization of intangible assets 4,855 5,152 20,077 19,614
Write off and impairment of property, plant and equipment, intangible
assets 35,016 3,383 35,016 3,383
Finance costs 12,515 20,943 53,820 61,007
Fair value (gain)/loss on interest rate swaps 27,496 (28,744 ) 129,000 53,761
Fair value loss on Convertible Shares and Replacement Rights 5,083 17,603 14,308 224,414
(Gain) on the sale of Mont Miller - (7,312 ) - (7,312 )
Finance lease (59 ) - (59 ) -
(Gain) on transition to lease accounting (35,003 ) - (35,003 ) -
Foreign exchange (gain) loss 2,547 2,465 (3,625 ) 1,212
Other long term liabilities (104 ) 172 526 563
Other (187 ) (96 ) (517 ) (1,942 )
Deferred income taxes (recovery) (2,168 ) (13,506 ) (58,442 ) (55,960 )
42,812 42,230 148,978 147,907
Net change in non-cash working capital balances related to operations (15,050 ) (6,132 ) (15,105 ) (575 )
Cash provided by operating activities 27,762 36,098 133,873 147,332
Investing activities
Purchase of property, plant and equipment (67,002 ) (118,657 ) (362,259 ) (321,046 )
Cash reserves utilization (funding) 6,268 12,914 62,538 (67,988 )
Receipts of principal on senior loan - - - 65,649
Net proceeds from sale of Mont Miller - 42,059 - 42,059
Purchase of non-controlling interest in Jardin - - - (21,500 )
Increase in intangible assets (7,061 ) (4,592 ) (13,376 ) (14,642 )
Interest received 168 166 744 387
Net change in working capital related to investing activities (8,157 ) (9,783 ) (23,647 ) 24,292
Cash used in investing activities (75,784 ) (77,893 ) (336,000 ) (292,789 )
Financing activities
Proceeds from borrowings 64,400 138,809 300,400 199,888
Repayment of borrowings (3,570 ) (50,421 ) (28,637 ) (65,057 )
Increase in bank indebtedness 8,257 - 8,257 -
Preferred share issuance, net - - - 144,843
Maturity of convertible debentures - - (1,221 ) -
Interest paid (11,614 ) (19,924 ) (50,131 ) (58,064 )
Preferred share dividends (1,969 ) (1,968 ) (7,875 ) (3,349 )
Common share dividends (18,770 ) (19,978 ) (80,727 ) (77,982 )
Cash provided by financing activities 36,734 46,518 140,066 140,279
Effect of exchange rate differences on cash and cash equivalents (54 ) (33 ) 20 (127 )
Net change in cash and cash equivalents during the period (11,342 ) 4,690 (62,041 ) (5,305 )
Cash and cash equivalents, beginning of the period 60,847 106,856 111,546 116,851
Cash and cash equivalents, end of period $ 49,505 $ 111,546 $ 49,505 $ 111,546
PER SHARE/UNIT
Dividends declared to Common Shareholders/ Unitholders $ 0.27 $ 0.27 $ 1.08 $ 1.08
Note 1: Certain comparative amounts have been reclassified to conform with the current quarter's presentation
NORTHLAND POWER INC.
Dividends to Shareholders and Free Cash Flow
(unaudited, stated in thousands except per share/unit amounts)
3 Months ended Dec. 31 12 Months ended Dec. 31
2011 2010 2011 2010
Cash provided by operating activities $ 27,762 $ 36,098 $ 133,873 $ 147,332
Capital expenditures (67,002 ) (118,657 ) (362,259 ) (321,046 )
(39,240 ) (82,559 ) (228,386 ) (173,714 )
Northland adjustments:
Net change in non-cash working capital balances related to operations 15,050 6,132 15,105 575
Expansionary capital expenditures 65,900 118,534 359,159 320,315
Interest paid, net (11,446 ) (19,758 ) (49,388 ) (57,683 )
Scheduled receipts of principal on Panda-Brandywine senior loan - - - 1,259
Scheduled repayment of Mont Miller debt - - - (948 )
Scheduled repayment of Jardin debt (1,201 ) (1,029 ) (4,694 ) (4,161 )
Scheduled repayment of Kingston debt - - (11,736 ) (10,556 )
Scheduled repayment of Thorold debt (1,719 ) (3,292 ) (11,555 ) (3,292 )
Scheduled repayment of Mont Louis debt (651 ) - (651 ) -
Write off of deferred development costs (1,697 ) (3,383 ) (1,697 ) (3,383 )
Funds set aside for quarterly scheduled debt repayment (1,669 ) - (1,669 ) -
Preferred share dividends (1,969 ) (1,968 ) (7,875 ) (3,349 )
Kingston cash reserve drawdown(funding) (437 ) (426 ) (1,180 ) (937 )
Thorold cash reserve funding 1,876 (222 ) (491 ) (222 )
Funds set aside for future maintenance (22 ) (22 ) (92 ) (88 )
Free cash flow/
Distributable cash
$ 22,775 $ 12,007 $ 54,850 $ 63,816
Cash Dividends/
Distributions paid to Shareholders/
Unitholders
$ 18,770 $ 19,978 $ 80,727 $ 77,982
Free cash flow/Distributable cash payout ratio 82% 166% 147% 122%
Total dividends(1)/distributions to common Shareholders/
Unitholders
22,716 19,978 84,673 77,982
Free cash flow/distributable cash payout ratio, excluding impact of DRIP 100% 166% 154% 122%
Cumulative - since inception
Free cash flow/distributable cash $ 752,595 $ 697,745
Dividends/
distributions paid to common Shareholders/
Unitholders
$ 732,114 $ 651,387
Free cash flow/distributable cash payout ratio 97% 93%
Average number of shares/units - basic (thousands of shares/units)(2) 77,818 74,218 76,863 72,290
Average number of shares/units - diluted (thousands of shares/units)(3) 77,818 79,199 76,863 81,821
Per share/unit
Free cash flow/distributable cash - basic $ 0.29 $ 0.16 $ 0.71 $ 0.88
Free cash flow/distributable cash - diluted $ 0.29 $ 0.15 $ 0.71 $ 0.85
1) Total dividends to common shareholders represents cash dividends plus share dividends issued as part of Northland's DRIP
2) The number of Shares/Units and the related per-Share/Unit amounts are based on common shares/trust units of Northland and do not include any convertible/ exchangeable Shares/Units
3) Average number of Shares/Units diluted is the sum of the weighted average number of Shares/Units used in the basic calculation plus the number of Shares/Units that would be issued assuming conversion of the convertible unsecured subordinated debentures.

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