Northland Power Inc.

TSX : NPI
TSX : NPI.PR.A
TSX : NPI.PR.C
TSX : NPI.DB.A


Northland Power Inc.

February 21, 2013 19:09 ET

Northland Power Announces 2012 Full Year and Fourth Quarter Results

TORONTO, ONTARIO--(Marketwire - Feb. 21, 2013) -

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.PR.C)(TSX:NPI.DB.A) today reported its financial results for the fourth quarter and year ended December 31, 2012. Total cash dividends declared to shareholders for the year amounted to $1.08 per share.

"Northland had a successful year in 2012," said John Brace, Northland's President and CEO. "Our diverse fleet of operating facilities largely performed according to expectations, construction progressed on our North Battleford and first six ground-mounted solar projects, and we delivered a 10% annual return to our shareholders. Looking ahead, Northland is well-positioned to deliver another year of strong growth and stable returns as we complete our current construction projects, break ground on our McLean's Mountain wind project, the next phase of solar projects, and advance our pipeline of new development opportunities."

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.

Construction of Northland's 260 megawatt (MW) North Battleford project proceeded as expected, with approximately 97% of the construction contractor's milestones completed by December 31, 2012. All major equipment is installed, the balance-of-plant ancillary equipment has been completed and the utility interconnections are in place. Subsequent to year end, first fire of the gas turbine, an important commissioning milestone, was completed on January 26, 2013.

McLean's Mountain completed its environmental permitting with the receipt of its renewable energy approval on October 31, 2012. The $190 million project has a 20-year power purchase agreement (PPA) with the Ontario Power Authority under Ontario's renewable energy Feed-In Tariff (FIT) program. In December 2012, 24 wind turbines were ordered and site clearing commenced with major construction activities planned for early spring 2013. Commercial operation is scheduled for early 2014.

Construction of the ground-mounted solar projects commenced in April of 2012 and all foundations are nearly complete and construction of the substation, electrical cabling and utility interconnections are on schedule. All six projects are expected to be on-budget and achieve commercial operations sequentially from early to mid 2013.

Subsequent Events

On January 21, 2013, Northland announced the closing of a $156.3 million 4.14% senior secured amortizing Series A bond issue offered by its wholly owned subsidiary, Spy Hill Power L.P. ("Spy Hill"). The bonds have been provisionally rated A (stable) by DBRS and will be fully amortized by their maturity in March 2036. The proceeds were used to repay Spy Hill's existing bank debt; the remainder will be used by Northland for general corporate purposes.

Summary of Financial Results

3 Months Ended
Dec. 31
12 Months Ended
Dec. 31
2012 2011 2012 2011
FINANCIAL (in thousands of dollars, except per share and energy unit amounts)
Sales 93,246 98,848 362,303 356,221
Gross profit 60,053 59,302 230,811 203,301
EBITDA(1) 43,462 45,256 178,620 150,704
Operating income 28,592 30,784 114,791 94,410
Net loss (2,538 ) (23,243 ) (9,913 ) (63,109 )
Free cash flow(1) 17,733 22,775 63,723 54,850
Cash Dividends paid to common and Class A shareholders 22,458 18,771 88,734 80,727
Total Dividends paid to common and Class A shareholders(2) 31,138 22,717 121,551 84,673
Per share
Free cash flow 0.15 0.29 0.55 0.71
Dividends declared to shareholders(2) 0.27 0.27 1.08 1.08
Energy Volumes
Electricity sales volume (megawatt hours) 777,443 973,004 3,139,031 3,137,548
(1) See "Non-IFRS measures"
(2) Total dividends to common and Class A Shareholders represent cash dividends plus dividends re-invested in common shares issued as part of Northland's dividend re-investment plan

The following comments are made with reference to the attached unaudited consolidated financial statements of Northland.

Full Year 2012 Results

Earnings before interest, taxes, depreciation and amortization (EBITDA)

In 2012 all facilities operated within management's expectations and EBITDA exceeded the prior year by $27.9 million. The operating facilities contributed $19.7 million higher EBITDA in 2012 due to a full year of operations at Mont Louis and Spy Hill, favourable operating results from Kingston due to PPA rate increases related to the pass-through of 2011 TransCanada toll increases, partially offset by lower results at Iroquois Falls and Thorold. Management and performance incentive fees from Kirkland Lake and Cochrane, Northland's managed facilities, were up $14.6 million. Management and administration expenses in 2012 increased by $5.5 million largely due to increased head-count and professional fees associated with on-going operations and development activities on early-stage prospects. Northland also expensed $1.7 million of previously deferred development costs for a project which no longer qualifies for capitalization under Northland's deferred development policy.

Net Income

The net loss for 2012 at $9.9 million includes the following significant items:

Depreciation of property, plant and equipment at $62.6 million was $5.6 million higher due to the inclusion of charges related to Mont Louis.

Non-cash fair value adjustments recorded during 2012 were $13.9 million and comprised: (i) a $2 million gain on the change in fair value of Northland's interest rate swaps associated with non-recourse project debt, offset by: (ii) a $14.2 million loss in the fair value of Northland's Class B Convertible Shares due to an increase in Northland's common share price and a shorter discounting period and (iii) a $1.7 million expense of deferred development costs, as previously discussed.

Non-cash impairments of $23.1 million were lower than 2011 and relate to Northland's contracts and other intangible assets, goodwill and Panda equity investment. It is anticipated that there will be annual impairments as future cash flows (which are used to determine an asset's recoverable amount) are realized, unless there are changes in discount rates or updates to long-term forecasts and market estimates are made.

Finance lease income of $14.1 million was up $10.6 million as a result of the inclusion of Spy Hill for a full year.

Finance costs, primarily interest expense, at $63.2 million increased by $8.9 million from 2011 due to the recognition of a full year of interest charges on the Spy Hill and Mont Louis debt. A substantial portion of the 2011 interest on these facilities was capitalized during the construction period. The increase in interest expense was partially offset by lower convertible debenture interest due to conversions of the 2014 debentures into Shares.

Amortization of contracts and other intangible assets at $19.4 million decreased during the year largely as a result of the impairments to contracts identified in 2011.

Other income decreased $0.9 million due to proceeds from the sale of Northland's South Kent wind development project recognized in 2011.

The factors described above, combined with a current tax provision of $5 million, a $2 million increase from 2011 associated with the additional preferred share dividends from the May 2012 issuance of the Series 3 Preferred Shares, and a $3.2 million deferred tax provision resulted in the $9.9 million net loss for the year.

Free Cash Flow, Payout Ratio and Dividends to Shareholders

Free cash flow of $63.7 million was $8.9 million higher than in 2011; significant factors increasing and decreasing free cash flow for the year are described below.

Factors increasing free cash flow in 2012 compared to 2011:

  • $19.7 million of higher EBITDA from Northland's operating facilities;
  • $3.7 million net change in major maintenance cash reserves related to Kingston utilizing a significant portion of its maintenance reserve in 2012 to partially fund its planned major outage; and
  • $14.6 million increase in management and performance incentive fees from Northland's managed facilities.

Factors decreasing free cash flow in 2012 compared to 2011:

  • $11.7 million higher net interest expense and scheduled loan repayments, largely due to a full year inclusion of Spy Hill and Mont Louis;
  • $3.6 million increase in preferred share dividends due to the issuance of the Series 3 Preferred Shares;
  • $6.5 million net, higher corporate management and administration costs, which includes increased development prospecting expenditures. In addition, 2011 included a $0.9 million gain on the South Kent project;
  • $3.2 million increase in operations-related capital expenditures, largely associated with Kingston's planned major outage;
  • $2.4 million reduction in long term liabilities associated with Kingston's GE milestone payment related to its gas turbine maintenance agreement; and
  • $1.7 million of other items, including higher current income taxes associated with the Series 3 Preferred Shares.

For 2012, Northland's dividend payments were 139% of free cash flow, or 191% on an all-cash dividend basis (if the impact of the DRIP was excluded). 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.

Fourth Quarter Results

EBITDA

In the fourth quarter of 2012, EBITDA at $43.5 million decreased by $1.8 million as described below.

Thermal Facilities

Northland's thermal facilities were down $5 million in EBITDA from 2011 as lower electricity production due to a scheduled major maintenance outage at Kingston in October 2012 and fewer dispatch hours at Thorold due to unseasonably warm weather and low spot gas prices reduced electricity prices and demand, combined with lower PPA prices at Iroquois Falls that were only partially offset by lower natural gas costs. Plant operating costs increased due to equipment inspections and repairs at Iroquois Falls and Thorold.

Wind Facilities

Electricity production and EBITDA at the wind farms during the three months ended December 31, 2012 exceeded the prior year by $1 million primarily due to a higher wind resource at Jardin and Mont Louis. Quarterly production was below the long-term forecasts due to: (i) calm winds at the Quebec wind farms; (ii) several outages at Mont Louis for Hydro-Québec to complete various system upgrades; and (iii) downtime at both Mont Louis and Jardin for equipment repairs and to complete end of warranty maintenance work, respectively. Operating expenses were down from the prior year largely due to lower insurance and GE warranty costs at Jardin and two gearbox repairs in 2011 at the German wind farms.

Management, Administration and Other

Northland's operations-related management and administration costs for the quarter were flat relative to 2011, while development related management and administration costs for the quarter were up $3.1 million largely due to the increased expenses related to development activity on early stage prospects, as well as higher 2012 compensation costs. Fourth quarter development activity in 2011 was more focused on advanced development projects which are capitalized as deferred development costs into contracts and other intangible assets, rather than expensed. As discussed previously, Northland also expensed $1.7 million of deferred development costs during the quarter.

Northland's Kirkland Lake and Cochrane quarterly management and performance incentive fee income increased $5.3 million. Northland became eligible to receive performance incentive fees from Kirkland Lake during the fourth quarter of 2011. The performance incentive fee entitles Northland to share in Kirkland Lake's cash flows after all operating and financing expenditures.

Net Income

The fourth quarter 2012 net loss of $2.5 million includes the following major items:

Non-cash adjustments of: (i) $14.5 million in gains associated with changes in fair value, including $13.6 million related to Northland's interest rate swaps and a $0.9 million gain related to the Class B convertible Shares and (ii) a $0.7 million exchange gain on Northland's U.S. and euro foreign exchange contracts not designated as a part of a hedging relationship.

Non-cash impairments of $23.1 million as discussed earlier were the result of forecasted cash flows being realized and continued updates to long term forecasts and other market estimates.

Finance costs of $15.3 million decreased by $0.5 million largely due to 2014 Debentures being converted into common shares during the year.

The above factors, combined with a $4.6 million provision for current and deferred taxes and $0.2 million of dividend income from Northland's Panda-Brandywine investment resulted in a net loss for the fourth quarter of 2012 being $20.7 million lower than the fourth quarter of 2011.

Free Cash Flow, Payout Ratio and Dividends to Shareholders

Free cash flow of $17.7 million was $5 million lower than the same period in 2011. The factors affecting the quarter were: lower cash flows from the facilities ($4.1 million), higher corporate costs which were mainly development related ($3.1 million), and increased capital expenditures due to Kingston's major maintenance outage ($4.7 million), partially offset by increased management and performance incentive fees ($5.3 million), lower net finance costs ($0.6 million) and restricted cash funding ($1.3 million). For 2012, Northland's payout ratio in the fourth quarter was 127% of free cash flow (176% if the impact of the DRIP is excluded) compared to 82% in 2011.

OUTLOOK

Northland actively pursues new power development opportunities that encompass a range of clean technologies, including natural gas, wind, solar, and hydro, to provide a sustainable source of energy in various geographic regions and political jurisdictions. Northland believes this diversified strategy will mitigate the risk of adverse changes to local demographics or governmental policies.

Throughout 2012, Northland continued to execute on its strategy of expanding its earlier stage development pipeline in its targeted market areas. Examples of new initiatives include a working arrangement with a First Nations group in Quebec, and the acquisition of rights to develop two gas-fired peaking plants in Illinois. Additional progress has been made on wind power projects in both Quebec and British Columbia, and on additional hydroelectric power projects in British Columbia. Northland continues to seek opportunities for new natural gas-fired power projects and renewable energy projects in the U.S. Northland also continues to consider its Ontario developments, particularly the Oshawa and Queen's Quay cogeneration projects, the Marmora pumped storage project, and other projects to be excellent prospects in the medium to longer-term, despite the difficult political climate that has emerged over the last several months. Northland's approach continues to be one of ensuring a balance between pursuing and progressing development opportunities which meet the company's investment criteria, while prudently managing the company's cost exposure to early-stage projects.

In 2013, management expects Northland to generate EBITDA of approximately $255 million to $265 million compared to $178.6 million in 2012. This estimate reflects the following anticipated changes:

  • $80 to $85 million in additional EBITDA from North Battleford and the ground-mounted solar projects once they reach commercial operations;
  • $2 to $5 million lower EBITDA from Northland's operating thermal facilities as higher EBTIDA from Kingston due to higher PPA prices and no planned major maintenance outages in 2013 will be more than offset by reduced EBITDA at Iroquois Falls due to lower PPA prices and higher gas costs and a 16-day outage at Thorold;
  • $2 to $5 million higher EBITDA from Northland's wind farms as they are anticipated to operate closer to their long-term production forecasts and significant downtime in 2012 associated with Hydro-Québec system repairs and end of warranty inspections are not expected to recur;
  • A net reduction in EBITDA from management and administration and other sales and income of $2 million, as management and performance incentive fees are anticipated to be lower and management expects slightly higher corporate management and administration costs; and
  • 2012 EBITDA included a $1.7 million write off of deferred development costs.

Management expects that EBITDA will increase to a range of $360 to $400 million on an annualized basis starting in 2014 once the projects in construction and advanced development are complete and begin commercial operations.

Northland's 2013 dividend payments, on a total dividend basis 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 2013, management expects the cash dividends to be 75-85% of free cash flow including the impact of reinvested dividends, and 105-115% of free cash flow on a total dividend basis (compared to 139% and 191%, respectively, in 2012). Management expects the 2014 dividend payout ratio to drop below 100% on a total dividend basis. Dividend payments could continue to exceed free cash flow if significant additional equity investments are made as a result of future development successes.

The 2013 payout ratio reflects the higher forecasted EBITDA as described previously, along with the following noteworthy changes in free cash flows and dividend payments:

  • $40 to $45 million in free cash flow from North Battleford and ground-mounted solar projects once they reach commercial operations;
  • $15 to $20 million higher free cash flow from the current Thermal facilities due to: (i) reduced debt service at Spy Hill related to its bond refinancing on January 21, 2013; and (ii) minimal debt service and reduced capital expenditures at Kingston due to its full loan repayment on January 23, 2013 and no planned major maintenance outages in 2013;
  • $3 million lower free cash flow due to a full year of Series 3 Preferred Share dividends, including applicable taxes;
  • An increase in cash and share dividends as a result of recognizing Replacement Rights, Class B and C Shares and LTIPs once North Battleford and the ground-mounted solar projects reach commercial operations; and
  • Other items, including higher interest costs that are expected to negatively 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, including operating cash flows, cash and cash equivalents on hand and, if necessary, use of its line of credit or external financing. Management expects the Company's improved DRIP (announced on November 9, 2011) to provide an additional source of liquidity.

NON-IFRS MEASURES

This 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 22 at 10 a.m. EST to discuss its 2012 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: Friday, February 22, 2013
Start Time: 10:00 a.m. eastern standard time
Phone Number: Toll free within North America: 1-800-741-4871 or Local 416-641-6202

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 22 until March 15, 2013.

ABOUT NORTHLAND

Northland Power is an independent power producer founded in 1987, and publicly traded since 1997. Northland produces '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 1,005 MW of operating generating capacity, with an additional 380 MW of generating capacity currently in construction, and another 220 MW of wind, solar and run-of-river hydro projects with awarded power contracts. Northland's cash flows are diversified over five geographically separate regions and regulatory jurisdictions in Canada, Germany and the United States.

Northland Power's common shares, Series 1 and Series 3 preferred shares and convertible debentures trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A, NPI.PR.C 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 2011 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 21, 2013. 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 of Canadian dollars)
ASSETS
Dec. 31, 2012 Dec. 31, 2011
Current
Cash and cash equivalents 32,348 49,505
Restricted cash 27,285 9,613
Trade and other receivables 125,841 120,819
Inventories 7,468 7,249
Prepayments 11,181 13,850
Lease receivable 2,989 2,704
Total current assets 207,112 203,740
Lease receivable 163,764 166,655
Investment in Panda-Brandywine 3,500 5,400
Property, plant and equipment 1,722,123 1,419,095
Contracts and other intangible assets 199,608 217,295
Goodwill 222,574 241,843
Total assets $ 2,518,681 $ 2,254,028
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness 1,071 8,257
Trade and other payables 92,888 101,378
Interest-bearing loans and borrowings 39,998 76,355
Dividends payable 10,430 7,022
Total current liabilities 144,387 193,012
Interest-bearing loans and borrowings 1,225,132 938,874
Convertible debentures 26,668 36,405
Other liabilities 2,056 2,636
Provisions 12,437 12,040
Derivative financial instruments 215,566 217,093
Deferred tax liability 44,890 42,001
Liabilities excluding those attributed to shareholders 1,671,136 1,442,061
Convertible shares 146,429 132,230
Liabilites attributed to shareholders 146,429 132,230
Total liabilities 1,817,565 1,574,291
Shareholders' equity
Preferred shares 262,195 145,638
Common shares 964,311 844,360
Long-term incentive plan reserve 9,391 2,485
Convertible shares 499,033 499,033
Replacement Rights 11,098 88,169
Accumulated other comprehensive income 1,018 752
Deficit (1,045,930 ) (900,700 )
Total shareholders' equity 701,116 679,737
Total liabilities and shareholders' equity $ 2,518,681 $ 2,254,028
NORTHLAND POWER INC.
Consolidated Statements of Income (Loss)
(unaudited, stated in thousands of Canadian dollars except per share amounts)
Three Months Ended
Dec. 31,
Twelve Months Ended
Dec. 31,
2012 2011 2012 2011
Sales
Electricity 82,593 92,276 326,349 328,020
Steam and natural gas 3,194 4,472 15,673 22,551
Management fees and other 7,459 2,100 20,281 5,650
Total sales 93,246 98,848 362,303 356,221
Cost of sales 33,193 39,546 131,492 152,920
Gross profit 60,053 59,302 230,811 203,301
Expenses
Plant operating costs 10,666 10,035 40,496 33,526
Management and administration costs - operations 3,888 3,862 13,736 12,911
Management and administration costs - development 5,044 1,967 13,714 9,085
Depreciation of property, plant and equipment 15,562 16,064 62,558 56,986
Impairment of property, plant and equipment - 164 - 164
35,160 32,092 130,504 112,672
Investment income 189 16 355 223
Finance lease income 3,510 3,558 14,129 3,558
Operating income 28,592 30,784 114,791 94,410
Finance costs 15,294 15,822 63,966 55,041
Amortization of contracts and other intangible assets 4,855 4,855 19,422 20,077
Write-off of deferred development costs 1,661 1,697 1,661 1,697
Impairment of contracts and other intangible assets 1,684 25,466 1,684 25,466
Impairment of goodwill 19,269 7,689 19,269 7,689
Foreign exchange (gain) loss (690 ) 2,547 (55 ) (3,625 )
Finance (income) (215 ) (168 ) (815 ) (744 )
Fair value (gain) loss on interest rate swaps (13,603 ) 27,496 (1,955 ) 129,000
Fair value (gain) loss on convertible shares (888 ) 5,083 14,199 14,308
Write down in Panda-Brandywine equity investment 2,100 - 2,100 -
Lease accounting (gain) (2,964 ) (35,003 ) (2,964 ) (35,003 )
Other (income) - - - (900 )
Income (loss) before income taxes 2,089 (24,700 ) (1,721 ) (118,596 )
Provision for (recovery of) income taxes
Current 1,448 711 4,990 2,955
Deferred 3,179 (2,168 ) 3,202 (58,442 )
4,627 (1,457 ) 8,192 (55,487 )
Net (loss) for the year (2,538 ) (23,243 ) (9,913 ) (63,109 )
Weighted average number of shares outstanding - basic 120,855 117,992 120,538 117,037
Weighted average number of shares outstanding - diluted 120,855 117,992 120,538 117,037
(Loss) per share - basic $ (0.05 ) $ (0.21 ) $ (0.18 ) $ (0.61 )
(Loss) per share - diluted $ (0.05 ) $ (0.21 ) $ (0.18 ) $ (0.61 )
NORTHLAND POWER INC.
Consolidated Statements of Cash Flows
(unaudited, stated in thousands of Canadian dollars except per share amounts)
Three Months Ended
Dec. 31,
Twelve Months Ended
Dec. 31,
2012 2011 2012 2011
Operating activities
Net (loss) for the year (2,538 ) (23,243 ) (9,913 ) (63,109 )
Items not involving cash or operating activities:
Depreciation of property, plant and equipment 15,562 16,064 62,558 56,986
Amortization of contracts and other intangible assets 4,855 4,855 19,422 20,077
Impairment of property, plant and equipment, intangible assets and goodwill 22,614 35,016 22,614 35,016
Finance costs, net 19,187 8,777 64,118 47,420
Finance lease 643 (59 ) 2,606 (59 )
Lease accounting (gain) (2,964 ) (35,003 ) (2,964 ) (35,003 )
Foreign exchange (gain) loss (364 ) 2,547 271 (3,625 )
Fair value (gain) loss of interest rate swaps (13,603 ) 27,496 (1,955 ) 129,000
Fair value (gain) loss on convertible shares (888 ) 5,083 14,199 14,308
Write down in Panda-Brandywine equity investment 2,100 - 2,100 -
Deferred income tax (recovery) 3,179 (2,168 ) 3,202 (58,442 )
Other 161 (291 ) (1,489 ) 9
47,944 39,074 174,769 142,578
Net change in non-cash working capital balances related to operating activities (2,361 ) (14,740 ) (13,092 ) (15,105 )
Cash provided by operating activities 45,583 24,334 161,677 127,473
Investing activities
Purchase of property, plant and equipment (132,088 ) (67,312 ) (303,738 ) (362,259 )
Restricted cash utilization (funding) 18,501 6,268 (17,672 ) 62,538
Increase in intangible assets (5,529 ) (7,060 ) (60,705 ) (13,376 )
Interest received 215 168 815 744
Net change in working capital related to investing activities 4,824 (8,157 ) 7,200 (23,647 )
Cash used in investing activities (114,077 ) (76,093 ) (374,100 ) (336,000 )
Financing activities
Preferred share issuance, net - - 116,037 -
Proceeds from borrowings 103,300 64,400 327,617 300,400
Repayment of borrowings (15,012 ) (3,570 ) (80,360 ) (28,637 )
Increase (decrease) in indebtedness 1,071 8,257 (7,186 ) 8,257
Maturity of convertible debentures - - - (1,221 )
Interest paid (18,278 ) (7,876 ) (60,620 ) (43,731 )
Preferred share dividends (3,469 ) (1,969 ) (11,484 ) (7,875 )
Common share dividends (22,458 ) (18,771 ) (88,734 ) (80,727 )
Cash provided by financing activities 45,154 40,471 195,270 146,466
Effect of exchange rate differences on cash and cash equivalents 40 (54 ) (4 ) 20
Net change in cash and cash equivalents (23,300 ) (11,342 ) (17,157 ) (62,041 )
Cash and cash equivalents, beginning of year 55,648 60,847 49,505 111,546
Cash and cash equivalents, end of year 32,348 49,505 32,348 49,505
PER SHARE
Dividends declared to shareholders $ 0.27 $ 0.27 $ 1.08 $ 1.08
NORTHLAND POWER INC.
FREE CASH FLOW AND DIVIDENDS TO SHAREHOLDERS
(stated in thousands of Canadian dollars except per share amounts)
Three Months ended
Dec. 31,
Twelve Months ended
Dec. 31,
2012 2011 2012 2011
Cash provided by operating activities 45,583 24,334 161,677 127,473
Northland adjustments:
Net change in non-cash working capital balances related to operations 2,361 14,740 13,092 15,105
Capital expenditures, net-non-expansionary (5,140 ) (1,102 ) (6,281 ) (3,100 )
Interest paid, net (18,063 ) (7,709 ) (59,805 ) (42,988 )
Scheduled principal repayments on term loans (15,012 ) (3,569 ) (34,720 ) (28,636 )
Funds set aside for quarterly scheduled principal repayments 9,653 (1,669 ) 1,669 (1,669 )
Write-off of deferred development costs (1,661 ) (1,697 ) (1,661 ) (1,697 )
Perferred share dividends (3,469 ) (1,969 ) (11,484 ) (7,875 )
Restricted cash utilization (funding) for major maintenance 2,731 1,416 1,986 (1,763 )
Funds set aside for asset purchase 750 - (750 ) -
Free cash flow 17,733 22,775 63,723 54,850
Cash Dividends paid to common and Class A shareholders 22,458 18,771 88,734 80,727
Free cash flow payout ratio (1) 127 % 82 % 139 % 147 %
Total Dividends(2)paid to common and Class A shareholders 31,138 22,717 121,551 84,673
Free cash flow payout ratio (1) 176 % 100 % 191 % 154 %
Free cash flow payout ratio since inception 101 % 97 %
Average number of shares - basic (thousands of share) (3) 115,288 77,818 115,058 76,863
Average number of shares - fully diluted (thousands of shares) (4) 115,288 77,818 115,058 76,863
Per share ($/share)
Free cash flow - basic 0.15 0.29 0.55 0.71
Free cash flow - fully diluted 0.15 0.29 0.55 0.71
(1) A payout ratio in excess of free cash flow generally results from the payment of interest on subordinated convertible debt and dividends on preferred shares and common shares raised to fund construction projects prior to those projects generating cash flows, as well as the funding of development activities.
(2) Total dividends to common and Class A shareholders represent cash dividends plus dividends re-invested in common shares issued as part of Northland's DRIP.
(3) The number of shares and the related per share numbers for 2012 is the sum of the weighted average number of common shares and Class A shares of Northland, both of which are eligible to receive dividends and do not include any convertible debentures, Class B or Class C shares or contingent Replacement Rights.
(4) Average number of shares diluted is the sum of the weighted average number of common shares and Class A shares in the basic calculation plus the number of common shares that would be issued assuming conversion of the convertible unsecured subordinated debentures.

Contact Information