Northland Power Announces 2023 Financial Guidance, Expands Canadian Development Portfolio and Establishes Its 2040 Net Zero Target

Press Release

TORONTO, Feb. 03, 2023 — Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) is pleased to announce its 2023 financial outlook ahead of the previously announced annual Investor Day, which will be held at 10:00 am EST today. Members of the executive team will provide an update on recent growth activities, Northland’s long-term plans and objectives.

Through its entrepreneurial drive and disciplined execution, Northland has established a track record of growth over its 35-year history. Its diversified portfolio of operating facilities continues to deliver strong performance. With 3 gigawatts (GW) of gross operating capacity and a robust development pipeline, the Company is well positioned for an accelerating global energy transition. Northland intends to be selective and pursue only the projects within its pipeline that meet its strategic objectives and targeted returns. With growth in offshore wind set to outpace all other renewables, Northland’s leading position in offshore wind positions the Company to be a significant player in this segment through the decade. As the Company was with offshore wind, Northland intends to continue to be at the forefront of emerging renewable energy asset classes.

2022 Growth Activities

In 2022, the Company was successful in increasing its offshore wind development portfolio. In Scotland, Northland secured 2.3 GW of offshore wind leases and in Germany formed the 1.6 GW Nordsee Cluster. Progress was also made on advancing current projects towards financial close, including Hai Long and Baltic Power.

In onshore renewables, efforts focused on the Company’s targeted markets in North America, and Europe as well as Colombia. At the end of 2022, through the acquisition of a 1.6 GW solar development portfolio, the Company established a presence in Alberta, currently the most prolific market within Canada for renewable development. Through this acquisition, Northland becomes the third largest renewable energy developer in the province, with the first project in the portfolio targeted to achieve commercial operations as early as 2025. In the United States, the Ball Hill and Bluestone onshore wind projects are under construction and are expected to achieve commercial operations in 2023. As part of its growth strategy in the United States, Northland has created a pipeline of nearly 700 megawatts (MW) of solar projects which will provide the Company the opportunity to bid the projects into future auctions at its discretion.

Executing on its strategy of establishing a presence in energy storage, in December 2022, Northland entered into an agreement to acquire a majority interest in a late-stage, grid-connected battery energy storage project in southern Ontario, Canada. The Oneida Energy Storage Project is a 250 MW/1,000-megawatt hour (MWh) battery energy storage facility being developed in partnership with NRStor Inc. and the Six Nations of the Grand River Development Corporation.

Northland is also exploring the feasibility of green hydrogen to ammonia export projects along Canada’s coasts.

In 2022, inflation, supply chain constraints and rising interest rates affected the global renewables sector. For Northland, the impact was felt on its most advanced projects where equipment and material costs increased from original expectations, as the Company moved to select suppliers and lock down contracts. From a global risk management perspective, on all projects, Northland has increased estimates for contingency amounts and schedule buffers in accordance with recent changes experienced. On the 1.2 GW Baltic Power project, amendments to the 25-year CfD offtake contract, principally the new option to denominate in Euros and the advancement of the indexation base year to 2022 (from 2023 previously), have restored original project economics. Corporate offtake sourcing for the 1.6 GW Nordsee Cluster has commenced in 2023 and Northland expects to contract at a higher price than had been assumed prior to the European energy crisis; this benefit, however, may be partially offset by increased capital costs. On the 1.0 GW Hai Long project, the 744 MW 20-year corporate PPA rate helped to partially offset some of the capital costs increases. The financing of the project is progressing, albeit slower and more challenging than expected due to market specific factors. The Company continues to look for opportunities to optimize returns and manage risk and despite these higher costs, believes the actions taken in combination with other offsets, including sell-downs, will keep overall average returns for its offshore wind portfolio in the targeted ranges.

“The accelerating energy transition and energy security concerns are creating attractive development and investment opportunities for Northland Power and an improved market environment for our operating facilities”, said Mike Crawley, Northland’s President and Chief Executive Officer. “At the same time, macro-economic and geo-political headwinds of the last year require even more focus on disciplined and prudent project execution. A robust development pipeline not only positions Northland well in several key renewable energy markets but, as importantly, it allows the company to be selective in where it deploys its capital.”

BUSINESS ALIGNMENT

Northland has implemented a new organizational structure that allows the Company to scale, create clearer accountability and bring even better focus to project execution and operational excellence. Effective January 2023, Northland formally commenced operating under a business unit (BU) structure focused by technology. The BU’s encompass Offshore Wind, Onshore Renewables, Efficient Natural Gas and Utilities and Hydrogen/Renewable Fuels. The offshore BU accounts for 1.2 GW of operating assets and 12 GW of development assets in Europe and Asia. The onshore BU accounts for 1.1 GW of operating assets and nearly 8 GW of development assets in North America, Colombia and Europe, while the natural gas and utility BU accounts for 0.7 GW of operating assets.

This new operating structure will result in a more streamlined business that is better oriented towards the expected growth by technology. Each BU is led by an experienced executive, with a dedicated chief financial officer (CFO), operations head, project execution head, legal and human resource leads. The Hydrogen BU is earlier stage in its formation but with experienced hydrogen talent already in place.

Net Zero Target – Scope 1, 2 and 3
As part of the Company’s purpose to help build a carbon free world, it is establishing a net zero initiative that aims to achieve zero emissions across its operations by 2040. Efforts will focus on reducing GHG emissions intensity from Scope 1 & 2 by 65% by 2030 (from a 2019 baseline) while targeting a science-aligned net zero over all emissions scopes by 2040.

EXECUTING ON OUR DEVELOPMENTS IN 2022

Hai Long Partnership
At Hai Long, the project secured a 20-year corporate offtake agreement for the 744 MW Hai Long 2B and 3A projects, executed all material contracts with suppliers. The project has commenced with early construction works including starting the fabrication of key components. The project also announced a strategic partnership with Gentari International Renewables Pte. Ltd, who will acquire 49% of Northland’s interest in the project. Upon closing, the transaction will result in Gentari holding a 29.4% indirect equity interest in the Project, with Northland holding a 30.6% interest. Northland will continue to take the lead role in the construction and operation of the project. In addition, the two companies signed an exclusivity agreement for further potential partnerships in Taiwan.

Baltic Power Update
At Baltic Power, preferred supplier agreements for key elements of the project, including wind turbines, export cables and the offshore and onshore substations have been signed as well as agreements for the transport and installation of the turbines and for the foundations of all substation elements and offshore substations. The project continues to advance towards financial close, expected in 2023.

South Korea Update
In South Korea, the Dado Ocean offshore wind project has been awarded Electricity Business Licenses (EBLs) for approximately 900 MW of the 1,000 MW capacity, providing exclusivity on the leases for the project. The project is expected to advance to mid-stage development and will begin progressing engineering surveys and securing grid capacity. Northland has also been developing a second project, the 600 MW Bobae project. The project has been awarded EBL’s for approximately 400 MW and work continues to secure EBLs for the remaining capacity. Northland is pursuing additional early-stage development opportunities located in Wando County for multiple projects with the potential for up to 1.8 GW of operating capacity.

Suba Update
Development progress at the 130MW Suba solar projects in Colombia continues. As previously communicated, commercial operations are now expected to occur in 2024 as certain environmental permits are needed to move the projects towards financial close.

La Lucha Update
Northland continues to work to achieve commercial operations at its 130 MW La Lucha solar project in Mexico. In January 2023, the Company, along with other Canadian private power producers met with the Mexican government in a bid to find a resolution to certain activities that have caused a delay in the energization and subsequent commercial operations. Following that meeting, the relevant Mexican permitting authority approved extension of the generation permit for La Lucha. The company is now coordinating with the appropriate regulatory authorities to initiate testing of the project in order to achieve commercial operations, with the exact target date to be defined in a few weeks. While timelines remain uncertain, Northland is optimistically targeting commercial operations at La Lucha in 2023.

STRATEGIC GROWTH IN CANADA

Oneida Storage Project
Delivering on its strategic objective of establishing a presence in energy storage, Northland entered into an agreement to acquire a majority interest in a late-stage grid-connected battery energy storage project in southern Ontario, Canada. The Oneida Energy Storage Project is a 250 MW/1,000 MWh battery energy storage facility and is being developed in parentship with NRStor Inc. and the Six Nations of the Grand River Development Corporation. Upon closing of the transaction, Northland will be the majority owner of the Project and will take the lead role in its construction, financing and operation. Financial close for the Project is expected in 2023 with full commercial operations targeted to commence in 2025.

Alberta Portfolio
The Company continued its growth and leadership in renewable energy in Canada through the acquisition of a leading renewable power development platform from Greengate Power Corporation, which provides a robust development pipeline of solar projects in Alberta. Alberta is an attractive market for renewable development, being Canada’s only deregulated electricity market, offering clear pricing to generators and strong consumer and industrial demand for offtake. The acquisition adds a solar and storage pipeline encompassing over 1.6 GW and 1.2 GWh, respectively, of which the 220 MW Jurassic Project could reach commercial operations as early as 2025. The projects are expected to be accretive to Free Cash Flow per share as they reach commercial operation. All projects will be funded with non-recourse debt, in accordance with Northland’s typical investment-grade financing approach. As part of the transaction, key members of the development team originating the portfolio will be joining Northland to help execute development of the current portfolio and also accelerate growth in Alberta and across Canada.

2023 FINANCIAL TARGETS

Adjusted EBITDA

For 2023, management expects Adjusted EBITDA to be in the range of $1.2 billion to $1.3 billion compared to the revised 2022 guidance range of $1.25 to $1.35 billion, with the major factors contributing to the year over year change in Adjusted EBITDA including (all amounts approximate):

• Higher contribution from the Spanish onshore portfolio primarily due to a higher regulated posted price for the solar and some of the wind assets ($80 million); and
• Higher overall contribution from onshore renewables including the New York Wind projects, which are expected to achieve commercial operations in 2023 ($20 million).

Factors offsetting the increase in 2023 Adjusted EBITDA include:

• Lower contribution from offshore wind facilities primarily due to lower forecasted wholesale power prices compared to 2022 and completion of the NER300 subsidy at Nordsee One in the fourth quarter of 2022 ($45 million)
• Non-recurre

IBF4

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