Northland Power Inc.

Northland Power Inc.

August 15, 2011 06:20 ET

Northland Power Inc. Announces Results for the Second Quarter of 2011

TORONTO, ONTARIO--(Marketwire - Aug. 15, 2011) - Northland Power Inc. ("Northland") (TSX:NPI)(TSX:NPI.PR.A)(TSX:NPI.DB.A) announces second quarter operating results; construction projects remain on-time and within budget.

In thousands of dollars except per Share and energy unit amounts Three
June 30,
June 30,
June 30,
June 30,
Sales 80,248 77,865 176,519 140,910
Gross Profit 45,328 45,707 100,875 83,538
EBITDA(1) 31,503 39,200 75,399 69,667
Operating Income 17,365 24,556 47,389 44,563
Net Income (Loss) (23,627 ) (36,890 ) 31,681 (98,284 )
Free Cash Flow(1) 10,583 23,021 29,247 41,438
Dividends Declared to Shareholders 20,763 19,304 41,224 38,577
Per Share
Free Cash Flow 0.138 0.322 0.385 0.580
Dividends Declared to Shareholders 0.270 0.270 0.540 0.540
Electricity (megawatt hours) 571,305 551,879 1,454,918 1,049,108
Steam (thousands of pounds) 475,294 480,781 1,088,265 767,168
Fuel Consumption (thousands of gigajoules) 4,213 3,933 10,766 7,247
1) Included in this press release are references to Northland's free cash flow and EBITDA, which are not measures included in IFRS. Free cash flow and EBITDA, as presented, may not be comparable to similar measures presented by other companies. Management believes, however, that these measures are widely accepted financial indicators used by investors to assess the performance of a company and its ability to generate cash through operations.

Overview and Outlook

All Northland facilities operated within expected parameters and its $1 billion of construction projects continued on budget and on or ahead of their planned completion schedules. Permitting and other development activities are continuing apace on a further $1 billion of contracted projects (the 60 megawatt (MW) McLean's Mountain wind project, the 130 MW of solar ground mounted projects and the 100 MW Grand Bend wind farm). Construction is expected to commence later this year on the first of the solar ground mounted projects and early next year on the McLean's Mountain and most of the remaining ground mounted solar projects.

Consolidated sales for the three months ending June 30, 2011 exceeded the second quarter of 2010 primarily due to improved results from the Thorold facility. Gross profit was essentially unchanged as higher gross profit at Thorold was offset by a significant increase in TransCanada PipeLines (TCPL) natural gas transportation tolls at Northland's other thermal facilities. EBITDA and operating income were down primarily due to the absence of investment income from Northland's senior loan to Panda Energy Corporation ("the Panda senior loan"), which was repaid in May 2010, and sale of the Mont Miller wind farm in December 2010. In spite of lower operating income, the quarterly net loss was $13.3 million lower compared with 2010, due to a number of non-cash adjustments described in the 2011 second quarter report.

The complete second quarter and year-to-date reports for 2011, including management's discussion and analysis and unaudited condensed interim financial statements, are available at and

A summary comparison of Northland's full year 2010 results under International Financial Reporting Standards and Canadian Generally Accepted Accounting Principles is also available at

Free Cash Flow

Free cash flow (distributable cash in prior years) of $10.6 million for the quarter and $29.2 million for the year-to-date met management's expectations.

Compared to the first quarter of 2011, free cash flow for the second quarter was lower by $8 million primarily due to seasonality ($7.6 million - the Iroquois Falls facility power purchase agreement provides for more contracted electricity at higher rates in the winter and it tends to be windier in the winter months which impacts the results of Northland's wind farms).

Free cash flow for the second quarter was $12.4 million lower than the same period of 2010 largely due to the impact of three transactions in 2010 - the prepayment of the Panda senior loan in May 2010, the issuance of preferred shares in July 2010 and the sale of Miller LP in December 2010 (combined, $11.5 million lower free cash flow) - that generated $260 million of cash available for reinvestment.

Readers should refer to the "Cash Dividends to Shareholders and Free Cash Flow" section in Northland's second quarter report for additional details on Northland's free cash flow.

Dividends and Payout Ratio

Common share ("Share") dividends for the quarter totalled $0.27 per Share, representing a payout ratio of 195% of free cash flow. This payout in excess of free cash flow reflects (i) the lower level of free cash flow for the quarter compared to the prior quarter and the same quarter last year for the reasons described above, and (ii) the cash cost of funds raised for construction projects (interest on subordinated convertible debentures and dividends on preferred shares and incremental common Shares). For the six-month period ending June 30, 2011, the payout ratio was 140% of free cash flow which was within management's expectations.

Northland's management and board are committed to maintaining the current annual dividend of $1.08 per Share. As a result, management does not expect the payout ratio to drop below 100% until the second half of 2013 with the addition of the combined cash flows of the Mont Louis, Spy Hill and North Battleford projects. With the further anticipated addition of the cash flows from the solar projects and the McLean's Mountain and Grand Bend wind projects, all of which have signed power purchase agreements, management expects annual EBITDA to be in the range of $360 million to $400 million, an increase of 160% to 190% from 2010. Over the longer term, Northland expects its facilities' operations to entirely fund its cash dividends. Northland had cash and cash equivalents on hand of $98.6 million at June 30, 2011 and $190 million available on its line of credit to support its payment of the $1.08 annual Share dividend through 2013.


Mont Louis Project: Construction is proceeding on schedule and within its $180 million budget ($150 million after reimbursement of substation and collection system costs by Hydro-Québec). The project is expected to achieve full commercial operations by the end of the third quarter.

Spy Hill Project: Construction progressed significantly during the second quarter despite prolonged heavy rain around the site in May and June that impacted civil works completion. Spy Hill is proceeding on schedule and is within its $141 million budget. Commercial operations are expected early in the fourth quarter of 2011.

North Battleford Project: Construction progressed well during the quarter, with the project remaining within budget and ahead of schedule for a second quarter of 2013 start-up.

Significant Events during the Quarter

On May 31, 2011 Northland renewed and amended its corporate line of credit, increasing it to $250 million from $130 million. This credit facility, used for general corporate purposes, including letters of credit, was renewed until May 2015.

Subsequent Events

On July 6, 2011, Northland announced that the Ontario Power Authority (OPA) had accepted Northland's application for a contract under the feed-in-tariff (FIT) Program for a 100 MW wind farm in the Grand Bend area. The 20-year power purchase agreement with the OPA was executed July 14, 2011. The wind farm is estimated to cost $300 million and is expected to be in operation by the end of 2013.


Northland Power Inc. (TSX:NPI) owns or has a net economic interest in 818 MW of operating generating capacity, and 446 MW of generating capacity in advanced construction. Northland is also developing approximately 2,000 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 and biomass. Electricity generation is sold under long-term PPAs with creditworthy customers, and any fuel for natural-gas-fired projects, where required, is purchased under long-term contracts to assure stability of operating margins. Three wholly-owned natural-gas-fired plants are located in Ontario: the 120 MW Iroquois Falls facility, the 110 MW Kingston facility and the 265 MW Thorold facility. Through its 19% equity interest in Panda Energy Corporation, Northland has an interest in the 230 MW Panda-Brandywine combined-cycle power plant located outside Washington, D.C. Northland owns the 128 MW Jardin d'Éole wind farm near Matane, Quebec, which began commercial operations in late November 2009 and sells electricity under a long- term PPA to Hydro-Québec. Northland owns two wind farms located in Germany with 22 MW of installed capacity with all electricity generated being supplied to local power utilities under the terms of German renewable energy legislation. Northland manages on behalf of third-party owners, and has an economic interest in two natural-gas- and biomass-fired generation facilities in Kirkland Lake and Cochrane, Ontario for which Northland earns management, gas purchase and performance incentive fees. Northland also owns a small chipping facility located on Vancouver Island and an engineering services business. Northland owns the 86 MW Spy Hill project, the 260 MW North Battleford project, the 100 MW Mont Louis wind farm and 4 roof top solar installations, all of which are under advanced construction. Northland also has an extensive portfolio of approximately 2,000 MW of projects under development, including 316 MW of wind, solar and run-of-river hydro projects awarded PPAs under the Ontario Power Authority's FIT program, including the July 6, 2011 award to build and operate a 100 MW wind farm near Grand Bend, Ontario. Once Northland's Spy Hill project is operational in late 2011, Northland's cash flows will be diversified over five geographically separate regions and regulatory regimes.

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.


Other than statements of historical fact, certain statements in this release, including projections of future EBITDA, are forward-looking statements based on certain assumptions and reflect Northland'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. 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 cash flows, EBITDA, payout ratios and future dividends, the construction, completion, attainment of commercial operations, cost and output of development projects and the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of Northland and its subsidiaries. This information is 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 including the achievement of commercial operations of its projects on time and on budget, 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, regulatory risks, foreign exchange risks, changes in interest rates, counterparty risks, operational risks, the variability of revenues from generating facilities powered by intermittent renewable resources, changes in the economy generally, and the other factors described in the "Risks and Uncertainties" section of Northland's 2010 Annual Report and 2010 Annual Information Form, which are both filed electronically at and Northland's website 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 at the time it was completed on August 15, 2011. 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.

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