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

Northland Power Income Fund

October 16, 2006 08:34 ET

Northland Power Income Fund to Invest $35 Million in 236 MW Thorold Cogeneration Project

TORONTO, ONTARIO--(CCNMatthews - Oct. 16, 2006) -

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Northland Power Income Fund (the "Fund") (TSX:NPI.UN)(TSX:NPI.DB) announced today that it has committed to provide funding of $35 million for the Thorold Cogeneration Project being developed by Thorold CoGen L.P., an entity owned by Northland Power Inc. Northland Power Inc. is the owner of the Manager of the Fund.

Thorold CoGen L.P. was a successful bidder into the Ontario Power Authority's ("OPA's") Combined Heat and Power Request for Proposals and has executed a 20-year contract with the OPA for an average annual Contract Capacity of approximately 236MW under which the Thorold Project will receive monthly payments which are designed to cover all fixed costs and investment returns. Variable costs, primarily the cost of natural gas, will be recovered from revenue earned when the plant operates. The contractual structure of the Project is designed to ensure predictable, stable and sustainable cash flows over a minimum 20 year period.

The Project will be located adjacent to the Abitibi-Consolidated Company of Canada recycled newsprint mill in Thorold, Ontario and will supply the mill's electricity and steam requirements under a 20-year energy supply agreement. The Project will reduce Abitibi's energy costs and improve its competitiveness, helping to secure employment in the Thorold area.

The Thorold Project is configured around one large industrial gas turbine that, when combined with the large steam demand from Abitibi, will make this one of the most efficient power plants in Canada. The Project will be built under a fixed price construction contract, and is scheduled to be in commercial operation in the first half of 2009. The Project will be operated and maintained by a subsidiary of Northland Power Inc.

The Fund will provide $35 million to the Project as a loan subordinated to the senior project debt and at an effective annual interest rate of 12.5%. The Fund has obtained a right-of-first-offer on Northland Power Inc.'s ownership interest in the Project in the event that Northland Power Inc. decides to sell its interest. The transaction is expected to close in first quarter 2007 subject to a number of conditions, including closing of the senior debt financing for the Project and completion of documentation on terms acceptable to the Fund. Drawdowns on the subordinated loan are expected to start immediately following closing. The Fund expects to finance the $35 million subordinated loan under its existing line of credit.

"The Fund's Manager considers that, once the Project is constructed and operational, the long-term Contract with the Ontario Power Authority will make the Project an attractive, low-risk investment for the Fund. Having the Fund provide subordinated debt now allows the Fund to participate in the Project from the outset while shielding it from construction and other early-stage risks," stated John Brace, CEO of the Fund's Manager. "Management and the trustees believe that this arrangement provides the Fund with an attractive return commensurate with the risk and creates the opportunity for a larger investment by the Fund after the Thorold Project is completed."

The Thorold subordinated loan has been reviewed and unanimously approved by the independent trustees of NPIF Commercial Trust. The Manager believes that the transaction conforms to the Fund's investment objective of producing stable and sustainable levels of cash available for distribution to Unitholders from energy-related projects, and meets the Fund's guidelines for permitted investments.

Northland Power Income Fund indirectly owns interests in six power generating facilities: three natural gas-fired combined-cycle cogeneration power plants and three wind farms. Two cogeneration plants are located in Ontario: the 120 megawatt ("MW") Iroquois Falls facility that has been wholly-owned by the Fund since its inception in 1997, and the 110 MW Kingston facility which has been wholly-owned by the Fund since it acquired an additional 50% interest on March 23, 2006. Through its 19% equity interest in Panda Energy Corp (PEC) and loan to a PEC subsidiary, the Fund has an interest in the 230 MW Panda-Brandywine cogeneration power plant located just outside Washington, D.C. Electricity produced from the cogeneration plants is sold under long-term power purchase agreements (PPAs) with creditworthy entities to ensure revenue stability, and long-term contracts assure the supply and price of natural gas, which is the Fund's largest cost. The 54 MW Mont Miller wind farm in the Gaspesie region of Quebec supplies electricity to Hydro-Quebec under a long-term PPA while the Fund's two wind farms in Germany, with a combined capacity of 21.5 MW, sell electricity to regional power utilities under the provisions of German renewable energy legislation.

The Fund's trust units and convertible debentures, which trade on the Toronto Stock Exchange under the symbols NPI.UN and NPI.DB respectively, 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

This news release contains certain forward-looking statements, including statements regarding expectations concerning distributable cash. Although these forward-looking statements are based upon current expectations and assumptions, they are subject to numerous risks and uncertainties, many of which are beyond the Fund's control, including those that have been disclosed in the Fund's latest annual report and annual information form. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of distributions, the Fund and unitholders will derive there from.

Contact Information

  • Northland Power Income Fund Management Inc.
    John Brace
    President & Chief Executive Officer
    (416) 962-6262 x 115
    or
    Northland Power Income Fund Management Inc.
    Boris Balan
    Director, Communications & Business Development
    (416) 962-6262 x 116
    or
    Northland Power Income Fund Management Inc.
    Barb Bokla
    Manager, Investor Relations
    (416) 962-6262 x 156
    (416) 962-6266 (FAX)
    Email: info@NPIFund.com
    Website: www.NPIFund.com