TORONTO, ONTARIO -- (Marketwire) -- 11/09/11 -- Northland Power Inc. ("Northland") (TSX: NPI)(TSX: NPI.PR.A)(TSX: NPI.DB.A) announces third quarter operating results.
Significant events
During the quarter, and through to the date of this release, Northland achieved several milestones in its construction and development programs.
The 100 megawatt (MW) Mont Louis wind farm and 86 MW Spy Hill gas-fired peaker project achieved commercial operations on September 17, 2011 and October 19, 2011, respectively, both ahead of schedule and under budget. The 260 MW North Battleford combined-cycle gas facility completed all major equipment deliveries and surpassed 45% completion of the main construction contract. The project remains ahead of schedule and within budget.
Permitting and other development activities are moving forward on a further $1 billion of contracted projects under Ontario's feed-in-tariff (FIT) program, including the 60 MW McLean's Mountain wind project, 130 MW of ground mounted solar projects, the 26 MW Kabinakagami hydro projects, the 100 MW Grand Bend wind project and other advanced development projects. Northland expects to receive all required permits and to begin construction in the spring of 2012 on the first six of the solar projects and the McLean's Mountain project. Construction of the Grand Bend project is expected to begin during 2013.
On October 18, 2011, Standard & Poor's revised its outlook on Northland's long-term debt to positive from stable and reaffirmed Northland's rating of BBB-. Standard & Poor's report credited Northland's consistent financial strategy and improving diversification resulting from the addition of Northland's new facilities as the basis for the upward revision in Northland's outlook. Standard & Poor's report concluded that Northland had adequate sources of liquidity to cover its near-term needs, including dividends.
On November 9, 2011, Northland announced a change to its Dividend Reinvestment Plan (DRIP) whereby common shareholders and Class A shareholders may elect to reinvest their dividends in common shares of Northland at a 5% discount. The new terms will apply to shareholders of record who are entitled to cash dividends and have elected to participate in the DRIP for dividends paid on and after December 15, 2011. While the future uptake on Northland's revised DRIP is uncertain, management expects it to improve the efficiency of raising equity for future projects and that the net result will be a material reinvestment of cash dividends into Northland, based on management's review of comparable companies with similar DRIP programs.
Summary of Financial Results
Northland's results for the three months ending September 30, 2011 were below the previous two quarters and reflected traditional third quarter seasonal lows. All of Northland's facilities operated within management's expectations during the quarter; however, unusually calm winds at the Jardin d'Eole wind farm contributed to lower than expected sales, earnings before interest, taxes, depreciation and amortization (EBITDA) and free cash flow. Free cash flow also fell below management's expectations due to a one-time $2 million contribution to Thorold LP's major maintenance reserve account. Management expects this contribution to be reversed in 2012 as warranty claims are settled.
The following table summarizes the consolidated financial and operating results.
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Three Three Nine Nine
months months months months
In thousands of dollars ended ended ended ended
except per Share and Sept. 30, Sept. 30, Sept. 30, Sept. 30,
energy unit amounts 2011 2010 2011 2010
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FINANCIALS
Sales 80,854 78,974 257,373 219,884
Gross Profit 43,124 44,583 143,999 128,121
EBITDA 30,049 34,649 105,448 104,316
Operating Income 16,237 19,886 63,626 64,449
Net Income (Loss) (71,547) (134,874) (39,866) (233,158)
Free Cash Flow 2,842 10,371 32,075 51,809
Dividends Declared to
Shareholders 20,974 19,598 62,198 58,175
Per Share
Free Cash Flow 0.037 0.144 0.419 0.723
Dividends Declared to
Shareholders 0.270 0.270 0.810 0.810
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ENERGY VOLUMES
Electricity (megawatt
hours) 709,626 663,400 2,164,544 1,798,161
Steam (thousands of pounds) 333,631 341,770 1,421,896 1,108,938
Fuel Consumption (thousands
of gigajoules) 5,345 4,898 16,111 12,869
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Northland's consolidated sales for the three months ending September 30, 2011 were higher primarily due to increased production from the Thorold facility. Gross profit was down $1.5 million as a significant increase in TransCanada PipeLines Limited ("TransCanada") natural gas transportation tolls at the Iroquois Falls and Kingston facilities and unseasonably calm winds at the Jardin d'Eole wind farm were partially offset by improved results at the Thorold facility. EBITDA and operating income were down $4.6 million and $3.6 million respectively due to: (i) the reasons described above; (ii) higher costs at Jardin d'Eole; (iii) increased corporate expenditures reflecting new hires, one-time costs and the high level of development activities; and (iv) lower investment income as Northland received a one-time special dividend in the third quarter of last year from Panda Energy Corporation. The quarterly net loss was $63.3 million lower than 2010 due to several non-cash accounting adjustments as described in more detail in Northland's third quarter report.
The complete third quarter and year to date reports for 2011, including management's discussion and analysis and unaudited condensed interim financial statements, are available at www.sedar.com and www.northlandpower.ca.
Free cash flow of $2.8 million for the quarter was short of last year primarily due to the lower operating income, a $3.3 million principal payment on Thorold LP's senior loan and a $2 million deposit to Thorold LP's major maintenance account that management expects to reverse in 2012.
Northland continues to pursue a proven business strategy that provides stability and long-term growth to its shareholders. Northland's primary focus is to maximize the results from its existing operating facilities in order to maintain predictable cash flow streams over their asset lives, while safeguarding the environment, health and safety of its employees and the communities in which it operates. Northland's proactive management of all construction disciplines and established industry relationships are expected to continue its record of on-time and on-budget project completion. For current and future development projects, Northland intends to continue its strategy of utilizing long-term sales, supply and maintenance agreements to ensure stable margins, and non-recourse project finance structures to reduce risk. Northland will continue to exercise judgement, discipline and acumen in its development activities to ensure maximum success. The discipline Northland applies to operations, construction and development underpins management's confidence in Northland's ability to continue to meet its commitments to its stakeholders.
Northland's board and management are committed to maintaining the current dividend of $1.08 per share on an annual basis, payable monthly. Northland's management and board have anticipated the impact of growth on the payout ratio and Northland has adequate funds to meet its dividend commitment from operating cash flows, cash and cash equivalents on hand and, if necessary, use of its line of credit. In addition, management expects the company's premium DRIP (announced on November 9, 2011) to provide an additional source of liquidity.
For the nine-month period ending September 30, 2011, the dividend payout ratio was 193% of free cash flow, which largely reflects the impact of Northland's successful development program and strategy of fully funding its equity requirements at the start of construction. Management expects the dividend payout ratio for the full year 2011 to be 155% to 160% notwithstanding the 738% payout ratio in the third quarter which was largely due to the impact of seasonality.
Management expects the dividend payout ratio to drop below 100% on a full year basis, in the second half of 2013 with the addition of the combined cash flows of the Mont Louis, Spy Hill, solar ground mounted and North Battleford projects, absent significant additional investments as a result of further development success. Management expects the corresponding annual EBITDA to be in the range of $360 million to $400 million, an increase of 160% to 190% from 2010. Further information on Northland Power's liquidity and management of its committed dividend payments can be found in the September 26, 2011 investor presentation and webcast on Northland's website www.northlandpower.ca.
ABOUT NORTHLAND
Northland Power Inc. (TSX: NPI) owns or has a net economic interest in 1,004 MW of operating generating capacity, and 260 MW of generating capacity in advanced construction. Northland is also actively developing 340 MW of wind, solar and run-of-river hydro projects already awarded PPAs and approximately 2,200 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, solar and biomass. Electricity generation and capacity is primarily sold under long-term contracts with creditworthy customers. Northland's operating thermal power assets are located in the provinces of Ontario and Saskatchewan Canada, and include the 120 MW Iroquois Falls cogeneration facility, the 110 MW Kingston combined-cycle power facility, the 265 MW Thorold cogeneration facility, the 86 MW Spy Hill peaking facility and an economic interest in two natural-gas- and biomass-fired generation facilities as well as a 19% equity interest in the 230 MW Panda-Brandywine combined-cycle power facility located outside Washington, D.C. Northland's operating renewable power facilities include the 128 MW Jardin d'Eole wind farm and the 100 MW Mont Louis wind farm both located in Quebec, two wind farms totalling 22 MW of installed capacity located in Germany and several rooftop solar power facilities in Ontario. Northland owns the 260 MW North Battleford project, which is currently under construction in Saskatchewan, Canada. Northland's cash flows are diversified over five geographically separate regions and regulatory jurisdictions.
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.
FORWARD-LOOKING STATEMENTS
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 cost of fuel and fuel transportation costs, 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 www.sedar.com and Northland's website www.northlandpower.ca. 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 November 9, 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.
Contacts:
Barb Bokla
Manager, Investor Relations
647-288-1438
(416) 962-6266 (FAX)
Adam Beaumont
Director of Finance
647-288-1929
(416) 962-6266 (FAX)
investorrelations@northlandpower.ca
www.northlandpower.ca
