Northland Power Reports First Quarter 2019 Results
Press Release
TORONTO, May 08, 2019 — Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) today reported financial results for the three months ended March 31, 2019.
“Our first quarter results are in line with our expectations, setting the stage for a solid 2019 as we continue to execute our strategy,” said Mike Crawley, President and Chief Executive Officer of Northland. “In the quarter, we announced the signing of our first PPA for the Hai Long offshore wind project in Taiwan, based on the 300 MW Feed-in-Tariff allocation and are working on securing PPAs for the remaining allocations for Hai Long. Construction of our Deutsche Bucht project remains on track, with completion expected by the end of the year and the project contributing to our financial results in 2020. Lastly, we announced the final investment decision for construction of our 130 MW La Lucha solar project in Mexico, continuing Northland’s tradition of growing through creative, diligent investments that generate sustainable growth and steady returns for our shareholders”.
First Quarter Highlights:
Financial Results
- Sales increased 3% from $486 million in the first quarter of 2018 to $499 million and gross profit increased 1% to $459 million.
- Adjusted EBITDA (a non-IFRS measure) increased 1% from $290 million in the first quarter of 2018 to $294 million.
- Free cash flow per share (a non-IFRS measure) decreased 6% from $0.84 in the first quarter of 2018 to $0.79.
- Net income increased 15% to $204 million from $178 million in the first quarter of 2018.
Sales, gross profit and net income, as reported under IFRS, include consolidated results of entities not wholly-owned by Northland, whereas the above non-IFRS measures, adjusted EBITDA and free cash flow, only include Northland’s proportionate interest.
Construction and Development Update
- La Lucha – 130 MW solar project, Durango, Mexico – On May 7, 2019, Northland announced the final investment decision approval for the construction of its La Lucha solar project (“La Lucha”) in the State of Durango, Mexico. Northland owns 100% of the 130 MW solar project which will have a total capital cost of approximately $190 million. Northland originated the La Lucha project and has obtained all major permits required for construction. Project completion is expected in the second half of 2020.
- Hai Long – 1,044 MW offshore wind project, Taiwan Strait – On February 26, 2019, Northland and its 40% partner, Yushan Energy, executed a 20-year PPA with Taiwan Power Company (“Taipower”) for the Hai Long 2A offshore wind project, based on the 300 MW Feed-in-Tariff (“FIT”) allocation.
- Deutsche Bucht – 269 MW offshore wind project, North Sea, Germany – The Deutsche Bucht offshore wind project is progressing according to schedule and is on budget. The total estimated project cost remains at approximately €1.4 billion (CAD $2.0 billion) with project completion expected by the end of 2019.
| Summary of Consolidated Results | ||||||||
| (in thousands of dollars, except per share amounts) | Three months ended March 31, | |||||||
| 2019 | 2018 | |||||||
| FINANCIALS | ||||||||
| Sales | $ | 498,540 | $ | 486,372 | ||||
| Gross profit | 458,923 | 454,557 | ||||||
| Operating income | 287,588 | 281,154 | ||||||
| Net income (loss) | 204,230 | 177,955 | ||||||
| Adjusted EBITDA (1) | 293,675 | 290,421 | ||||||
| Cash provided by operating activities | 307,794 | 306,130 | ||||||
| Free cash flow (1) | 141,839 | 148,047 | ||||||
| Cash dividends paid to common and class A shareholders | 54,062 | 39,131 | ||||||
| Total dividends declared (2) | 54,062 | 52,755 | ||||||
| Per share information | ||||||||
| Net income (loss) – basic | $ | 0.78 | $ | 0.61 | ||||
| Free cash flow – basic (1) | $ | 0.79 | $ | 0.84 | ||||
| Total dividends declared (2) | $ | 0.30 | $ | 0.30 | ||||
| ENERGY VOLUMES | ||||||||
| Electricity production in gigawatt hours (GWh) | 2,539 | 2,327 | ||||||
| (1) Refer to the Non-IFRS Financial Measures section of this press release for additional information. | ||||||||
| (2) Represents total dividends declared to common and class A shareholders including dividends in cash or in shares under the dividend re-investment plan (DRIP). For 2019, cash dividends equal total dividends since shares under the DRIP are sourced from the secondary market. | ||||||||
First Quarter Results Summary
Offshore wind facilities
Electricity production was largely in line compared to the same quarter of 2018. Sales of $310 million decreased 2% or $6 million primarily as a result of foreign exchange fluctuations partially offset by higher sales at Nordsee One. Adjusted EBITDA $187 million was in line with the same quarter of 2018 primarily because lower sales were offset by lower plant operating costs.
Thermal facilities
Electricity production increased 17% or 161 GWh compared to the same quarter of 2018 primarily due to favourable market conditions leading to Thorold’s increased dispatching in the Ontario electricity market and favourable operating conditions, particularly colder temperatures, at North Battleford.
Sales of $124 million increased 7% or $8 million compared to the same quarter of 2018 primarily due to gas optimization activities and higher production at Thorold and North Battleford, as described above, as well as payments for higher incremental capacity. The positive variance was partially offset by the effect of higher reported sales for Iroquois Falls in the first quarter of 2018 prior to a retrospective rate reduction by the system operator in the second quarter of 2018. Operating income of $68 million increased 6% or $4 million due to higher gross profit. Adjusted EBITDA of $77 million decreased 1% or $1 million primarily due to a one-time management fee earned in the first quarter of 2018 from assets sold and the factors described above.
On-shore renewable facilities
Electricity production increased 9% or 35 GWh compared to the same quarter of 2018 primarily as a result of higher overall solar and wind resource across the facilities. Sales of $58 million increased 8% or $5 million compared to the same quarter of 2018 primarily due to higher production. Operating income and adjusted EBITDA of $27 million and $38 million, respectively, increased 14% or $3 million and 9% or $3 million due to the same factors that increased sales.
General and administrative (G&A) costs
G&A costs of $18 million were largely in line with the same quarter of 2018 primarily due to the timing of expenditures related to project development activities, offset by lower personnel costs at the offshore wind facilities.
Finance costs
Finance costs, net, decreased 7% or $6 million compared to the same quarter of 2018 primarily due to declining interest costs as a result of scheduled principal repayments on facility-level loans, a lower outstanding balance on corporate credit facilities and the redemption of convertible debentures in the fourth quarter of 2018.
Net income
Net income of $204 million in the first quarter of 2019 was 15% or $26 million higher compared to net income of $178 million for the same quarter of 2018. The increase in net income year over year was primarily due to an increase in gross profit as well as non-cash fair value gain on derivative contracts.
Adjusted EBITDA
Adjusted EBITDA of $294 million for the first quarter of 2019 was 1% or $3 million higher than the first quarter of 2018 primarily due to a $3 million increase in production and earnings from the on-shore renewable facilities from higher overall solar and wind resource.
Free Cash Flow
Free cash flow of $142 million for the first quarter of 2019 was 4% or $6 million lower than the first quarter of 2018. The significant factor decreasing free cash flow was a $16 million increase in scheduled principal repayments, primarily for Nordsee One debt. Factors partially offsetting the decrease in free cash flow include:
- $5 million decrease in net interest expense due to declining interest costs as a result of scheduled principal repayments on facility-level loans, lower outstanding balance on corporate credit facilities and redemption of convertible debentures in the fourth quarter of 2018; and
- $2 million increase in overall production and earnings from Northland’s other operating facilities.
As at March 31, 2019, the rolling four quarter free cash flow net payout ratio was 54%, calculated on the basis of cash dividends paid and 64% calculated on the basis of total dividends, compared to 39% and 53%, respectively, in 2018. The increase in the free cash flow payout ratios from 2018 was primarily due to the higher scheduled Nordsee One principal repayments in 2019 combined with an increase in the number of shares due to the redemption of the convertible debentures in December 2018. The free cash flow net payout ratio of 54% calculated on the basis of cash dividends additionally increased due to a drop in the DRIP participation since the discount was reduced to nil.
Outlook
Northland aims to increase shareholder value by creating high-quality projects underpinned by revenue contracts that deliver predictable cash flows. Management actively seeks to invest in technologies and jurisdictions where Northland can benefit from an early-mover advantage and establish a meaningful presence while striving for excellence in managing Northland’s operating facilities by enhancing their performance and value.
As of May 8, 2019, management continues to expect adjusted EBITDA in 2019 to be in the range of $920 to $1,010 million and free cash flow per share in 2019 to be in the range of $1.65 to $1.95. Refer to Northland’s 2018 Annual Report for additional information on Northland’s outlook for 2019.
Earnings Conference Call
Northland will hold an earnings conference call on May 9, 2019, to discuss its 2019 first quarter results. Mike Crawley, Northland’s President and Chief Executive Officer, and Paul Bradley, Northland’s Chief Financial Officer, will discuss the financial results and company developments before opening the call to questions from analysts and shareholders.
Conference call details are as follows:
Thursday, May 9, 2019 10:00 a.m. ET
Toll free (North America): (844) 284-3434
Toll free (International): (949) 877-3040
The call will also be broadcast live on the internet, in listen-only mode and may be accessed on northlandpower.com. For those unable to attend the live call, an audio recording will be available on northlandpower.com on May 10, 2019.
Annual Meeting of Shareholders
Northland will hold its Annual Meeting of Shareholders on Wednesday, May 22, 2019 at 11 a.m. ET. Shareholders are invited to attend the meeting at the TSX Conference Centre, Exchange Tower, 130 King Street West, Toronto, Ontario.
Northland’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2019 and related Management’s Discussion and Analysis can be found on SEDAR at www.sedar.com under Northland’s profile and on northlandpower.com.
For further information, please contact:
Mr. Wassem Khalil, Senior Director, Investor Relations, 647-288-1019
investorrelations@northlandpower.com
northlandpower.com
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