Northland Power Income Fund

Northland Power Income Fund

August 16, 2007 14:23 ET

Northland Power Income Fund Provides $30 Million Funding Commitment to Thorold Cogeneration Project

TORONTO, ONTARIO--(Marketwire - Aug. 16, 2007) -


Northland Power Income Fund (the "Fund") (TSX:NPI.UN)(TSX:NPI.DB) and Northland Power Inc. announced today that financing for the 265 megawatt $520 million Thorold Combined Heat and Power Project has been arranged. The Fund has committed to provide $30 million to Thorold CoGen L.P., the developer and owner of the Project. Thorold CoGen L.P. is owned by Northland Power Inc., the owner of the Manager of the Fund.

The Fund has committed to provide a $30 million loan, with recourse limited to the assets of Thorold CoGen L.P. and subordinated to the senior secured project debt, in association with and on the same terms as the two other sub debt lenders, the Manufacturers Life Insurance Company and Sun Life Assurance Company of Canada. Senior secured debt financing of $415 million is being provided by Bank of Montreal, Manulife and Sun Life. Northland Power Inc. is the project sponsor and has provided the required equity.

The Fund's $30 million subordinated loan commitment includes interest and fees that will accrue as the loan is advanced over the 32 month project construction period, and will have an effective interest rate of 12.5%. Quarterly payments of interest and principal will commence after completion of plant construction in spring 2010. The subordinated loan is to be repaid within five years of plant commercial operation. Initially, the Fund will finance the subordinated loan under its existing line of credit.

The Fund has obtained a right-of-first-offer on Northland Power Inc.'s ownership interest in Thorold CoGen L.P. should Northland Power Inc. decide to reduce its interest in the future.

Thorold CoGen L.P. signed a 20-year contract with the Ontario Power Authority in October 2006 for an average annual Contract Capacity of approximately 236 megawatts. Under the contract the Project will receive monthly payments which are designed to cover all fixed costs and investment returns. The Project is protected from increases in the market price of natural gas and other variable costs. Thorold CoGen L.P. will purchase natural gas at market prices when the plant operates, and "pass-through" the fuel cost to the wholesale electricity market through electricity sales at prices that exceed fuel and other variable costs. The contractual structure of the Project is designed to ensure predictable, stable and sustainable cash flows over a minimum 20-year period.

The Project is located on leased land 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 enhance its competitiveness, helping to secure employment in the Thorold area.

The Thorold Cogeneration Project is configured around a General Electric industrial gas turbine that, when combined with the large steam demand from Abitibi, will make the plant one of the most efficient power generators in Canada. The plant will be constructed by V.K. Mason Construction Co., a subsidiary of Kiewit Construction Co. of Omaha, Nebraska, under a construction contract that fixes the price and completion date, and guarantees the plant's output and efficiency. Site clearing commenced in July 2007. The Project will be operated and maintained on behalf of Thorold CoGen L.P. by a subsidiary of Northland Power Inc.

"The long-term contract with the Ontario Power Authority, together with the other contractual arrangements for the construction and operation of the plant, make the subordinated loan an attractive, low-risk investment for the Fund", stated John Brace, CEO of the Fund's Manager. "Management and the trustees believe that the project represents an attractive further investment opportunity for the Fund for which the Fund is well positioned under the right of first offer should Northland Power Inc. decide to reduce its equity interest in the Project."

The terms of the Thorold subordinated loan were reviewed and unanimously approved by the independent trustees of NPIF Commercial Trust who received independent legal and technical advice concerning the transaction. 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.

Symbol: TSX:NPI.UN and NPI.DB

August 16, 2007


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
    Northland Power Income Fund Management Inc.
    Boris Balan
    Director, Communications & Business Development
    (416) 962-6262 x 116
    Northland Power Income Fund Management Inc.
    Barb Bokla
    Manager, Investor Relations
    (416) 962-6262 x156
    (416) 962-6266 (FAX)