Q4 2019 Earnings Call
[noise], ladies and gentlemen, thank you for standing by.
Welcome to the North Sunpower conference call to discuss the 2019 fourth quarter and full year results. During the presentation, all participants will be in listen only mode.
Afterwards, we will conduct a question and answer session.
At that time, if you have a question. Please press star one on your telephone.
If at any time during the conference you need to reach an operator, Please press star zero.
As a reminder, this conference is being recorded Wednesday February 26, 2020 at 10 am.
That in this call for Northglenn power are my Crawley, President and Chief Executive Officer.
Paul Bradley Chief Financial Officer, and Warsame Colonial senior director of Investor Relations and strategy for when we began Northland management has asked me to remind listeners that all figures presented in Canadian dollars caution that certain information presented and risk.
My first a question may contain forward looking statements that include assumptions are subject to various risks.
Actual results may differ.
Materially from management's expected or forecasted results. Please read the following the forward looking statements like section in Yesterdays news release announcing Northland powers resolved and be counted by its content in making investment decisions or recommendations [laughter]. The release is available at W.W. del.
Do you Dot Northland power Dot Com I'll now turn the call over to my Crawley. Please go ahead.
Thank you, Jamie and good morning, everyone.
We're also joined this morning by David Pobl, Our executive Vice President of development as well. Thank you for joining US today. This morning, we will review, our fourth quarter and full year 2019 financial and operating results.
Provide an update on our development and construction activities as well as provide guidance for our 2020, adjusted EBITDA and free cash flow per share.
Closed out the year on a very positive note posting another quarter of solid operating and financial results, adding to the strong performance we delivered in funny 90.
We also advanced or projects under construction and advanced expanded our global footprint through both development and acquisition execution in the year.
First looking at the financial results for the year, we reported adjusted EBITDA of approximately 985 million compared to 891 million in 2018, representing a 10% increase year over year.
Our free cash flow per share in 2019 was $1.77 per share compared to $1.90 per share in 2018. The decline was primarily <unk>, primarily due to higher scheduled debt repayments for north Sea, one and an increasing level of development activity from our global teams Paul will provide a more detailed look into the financial numbers later in the.
[laughter] operationally our teams worked tirelessly to ensure that are facilities operated safely and efficiently excellence in operations is a key focus for north that as it predictability of the performs over operating assets in Naples, as both to comfortably pay our dividend to shareholders and provide funds for a growth activities.
Strategically we delivered on our growth objectives by establishing development projects in new jurisdictions, and acquiring or first electricity distribution utility. This was accomplished regional development office that we established over the past couple of years by leveraging our talented teams and these offices, we're better positioned to compete globally secured new.
You see in key markets, but also to compete for asset acquisitions, such as securing absa our first utility.
We continue to take advantage of a global increasing demand from renewable energy projects, we will continue to leverage our competitive advantages in order to meet our ambitious growth plans.
As such we are allocating a greater amount of development Kaplan 2020 in order to expand our growth initiatives. This additional capital will be dedicated to advancing projects under development such as high long offshore wind project in Taiwan.
But will also help establish a more pronounced presence in other markets in Asia, such as Japan, and South Korea, where we see an increased demand for renewable energy driven by sustainability, an energy independence policies.
On the construction front at Deutsche booked as previously communicated the 31 model pile foundations.
Turbines were successfully installed ahead of schedule and we're generating full power by the end of September ahead of schedule. These turbines are operating as expected, resulting in Deutsche food contributing approximately $96 million a pre completion revenues in 2019.
Installation of the two model bucket Foundation demonstrate subject was pause in December following the identification of technical issues, a thorough evaluation of the root cause is ongoing and there's a possibility that the demonstrate a project may not proceed. If this determination is made Deutsche foods will be comprised of.
The operationally completes 31 turbine Don model pile foundations for total capacity of 252 megawatts, Paul will describe or accounting treatment of the demonstrate a project momentarily.
Absolutely absolutely construction activities continue as scheduled and the project remains on track with the original project cost estimates.
Northland owns 100% Allergan, our first project in Mexico, and our first project the underpinned by commercial and industrial customer Offtake project completion is expected in the second half 2020.
In January we announced a closing over its the acquisition following the receipt of the proposed tear from the local regulator.
Closing resulted in an adjustment to the purchase price.
Canadian a $960 million came from the initial 1.5 billion Canadian dollar price.
As part of the purchase price the final purchase that's part of the purchase agreement. The final purchase price is subject to further post closing adjustments. Following a review of the tariff resolution by the local regulators.
Absent will provide as a platform for additional product development of new infrastructure in part B. We're excited about the prospects to Colombia has to offer and how these prospects will help deliver strong shareholder returns while progressing our evolution as a global player in the power infrastructure sector.
Turning to our development activities work continues at a high long offshore wind project in Taiwan to secure power purchase agreements for the remaining 744 megawatt allocation secured under an auction process. We secured all key permits in December and expect to sign the P.P. Ace in 2020.
In December we announced expansion over strategy in Asia with if the formation of a joint venture partnership in Japan that will target offshore wind development in that country.
We see tremendous potential in Asia, where more jurisdictions are shifting towards renewable energy sources to meet their energy demands.
<unk> venture will result, not just stabling Chiba offshore windy partnership to develop early stage offshore wind opportunities.
Fully develop these projects could potentially add approximately 600 megawatts of gross offshore wind capacity.
Lastly, as you would have right earlier this week, we announced the acquisition of data Ocean Wind farm Oh.
Development company with multiple early stage offshore wind project sites off the coast in South Korea.
That'll Ocean is currently owned by an experience when power developer, who will continue to support the project as a local partner working together with Northland to achieve key milestones for the project. This development opportunity further aligned for their strategic objective of being an early mover in key markets.
With meaningful presence and it adds to our portfolio in Asia grew up more to say on these opportunities that a future date I will now turn the call over to Paul for more detailed review of our financial results.
Thank you, Mike and good morning, everyone.
Last night, North and power released operating and financial results for the fourth quarter and for your 2019.
These results showcased our continued strength across a number of financial metrics.
We generated adjusted EBITDA of $273 million in the fourth quarter, a 23% increase from a year ago.
Business benefited from strong operational performance and the additional contributions from or Deutsche Boot project.
That contributed approximately $79 million of pre completion revenues in the quarter.
On a full year basis, adjusted EBITDA was approximately $985 million, which was at the higher end of our guidance of $950 million to $1 billion.
Represents an increase of 10% from the same period a year ago.
The primary drivers behind the increase was pre completion revenues from <unk>.
And higher overall production from virtually all of our operating facilities.
These were slightly offset by market prices below the contractual floor Gemini and unfavorable movements in exchange rates.
With respect to free cash flow north in generated a total of $67 million in the fourth quarter.
This represents a decrease of 24% or $21 million from the $89 million generated in the fourth quarter of 2018.
The decrease in quarterly cash flow year over year is attributable to an $18 million decrease in overall earnings resulting from market prices below the contraction floor, Gemini and negative pricing and curtailments at North Sea one.
Also contributing to the decrease was higher corporate expenses related to an increasing level of development activity.
On a full year basis free cash flow in 2019 was $318 million compared to $338 million in the prior year.
Representing a decrease of 6% or $19 million year over year.
The drivers behind the year over year change in cash flow was a 35 million dollar increase unscheduled principal repayments, primarily for north Sea one debt.
A 9 million dollar increase in costs related to increased project development activities 9 million dollar increase in current taxes related to our offshore wind facilities.
These negative factors were partially offset by a 28 million dollar decrease in our net interest expense due to amortizing debt lower outstanding balance on our corporate credit facilities and redemption of convertible debentures in 2018.
These figures translated into free cash flow per share.
37 cents for the fourth quarter and $1.77 for full year 2019.
These were 24% and 7% lower respectively compared to the same periods in 2018.
This level of cash flow resulted in a rolling four quarter free cash flow payout ratio calculated on a total dividend basis ended December 31st 2019.
68% compared to this 63% payout ratio last year.
GAAP net income in the fourth quarter was $61 million were 23 cents per share and represented a decrease of 7% compared to the $65 million recorded in the fourth quarter of 2018.
As a result of the uncertainty with the deep who motto bucket demonstrator project accounting principles required north and to record a noncash impairment loss $98 million for the project costs incurred to date associated with the demonstrator project.
On a full year basis, net income of $451 million or $1.71 for sure.
Represents an increase of 11% and 14% respectively from the same period in 2018.
This increase in net income year over year was primarily due to higher gross profit and lower finance cost mentioned earlier offset by the 98 million dollar impairment recorded a Deutsche.
Hey, higher tax expense and higher expenses due to the timing of development expenditures.
With respect to or financing activities in December we announced the renewal of our normal course issuer bid, which allows the company to purchase for cancellation up to 8 million common shares.
If the company deemed inappropriate to do so over the subsequent 12 months.
I will now take a few moments to highlight our 2020 outlook and provide some details on our adjusted EBITDA and free cash flow per share guidance.
As we have noted earlier.
Our business strategy remains focused on enabling us to meet our commitment to our investors.
Our 2020 guidance reflects a higher level of development expenditures in pursuit of the company's execution of its global growth strategy.
As a reminder, we deduct development expenses from our free cash flow and EBITDA until like given development project reaches a high degree of certainty of completion.
As a result.
Management expects adjusted EBITDA in 2020 to be in the range of 1.1 billion to $1.2 billion.
This expected range takes into consideration an incremental 140 to 150 million dollar contribution from Deutsche vote for a full year of operations, excluding the demonstration project.
And 100 million 205 million dollar contribution from Epsa, which closed in January 2020.
And also a contribution from allude show, which is expected to be completed in the second half of 2020.
Management expects free cash flow for sure in 2020 to be in the range of $1.70 $2.05 per share.
Similar to our EBITDA forecast. This range takes into account a 120 to 130 million dollar contribution from a full year of Deutsche moved operations, including onetime excess recompletion revenues that were in 2019.
Net of a partial your debt principal repayment, but excludes the demonstration project.
And a 30 million to 35 million dollar contribution from Epsa and while Lucho.
In addition, our 2020 free cash flow range takes into consideration higher planned development expenditures, including a partial year of high lungs development costs and development overhead expected to total 45 to 50 cents of 2020 free cash flow per share compared to a total of 24 cents for sure.
Sure and 29 gene.
With that I'll now turn the call back to fight for some concluding remarks.
Thank you Paul in closing I wanted to know that we made significant progress on our strategic objectives in the year, we delivered strong financial and operating results in the year, we advanced our projects under construction and under development, we expanded our global development footprint through targeted investments and acquisitions that allowed us to establish a presence in Latin America through that Lucia in Mexico and ABS.
In Colombia.
We see significant opportunities arising with the next wave of global de carbonization as governments and corporations further reduce their global carbon footprint, we want to ensure that we are well positioned to be at the forefront of this next wave recognizing that our continued growth will require further expansion of our global footprint, we remain committed to our growth.
Initiatives seeking new project opportunities in our targeted jurisdictions that concludes my prepared remarks, we'd now be happy to take your questions and as mentioned we almost at the beginning of the call. We also have David possible, our head of development with as well. So operator, please open the queue for questions.
Thank you, ladies and gentlemen need people tend not to register a question. Please press star one I'm going to telecom. If your question has been answered you would want to put stronger registration. Please press the pound key if you're using a speaker phone. Please lift your handset before entering your class request one moment. Please for the first quarter.
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Your first question comes online I, just sounds Stewart with TD Securities.
Thanks, Good morning.
Few questions the incremental 2020 development expense that you referenced.
Can you tell us how much of that is high long and do you start capitalizing some of that is it pulls financial close is that the hurdle, we should think about for that transition.
I think on a free cash flow basis about 10, 10, or 11 cents or that would be a would be high long and that is assuming that we start capitalizing July 1st. So we're assuming we continue to expense up until up until the end of the second quarter right and as shown on the capitalization.
Question, I mean, generally know won't be financial close anybody criteria.
Typically in the old days, we should use of the P.P.A. signing as our kinda bright line test with the advent of things like fit contracts, where you've got more the work ahead of you then behind you and the PVA assigned it makes the internal test, where we consider it beyond a certain barriers a little bit tougher to Ah to nail down but.
We look at things like high degree of certainty of your cost estimates, we look at various odd agreements that are pending and we look at the offtake agreements. So it's a number of measures that we internally look out and so we.
Try to make sure that the project is very pinned down by the time, we start capitalizing, but not necessarily to the point of financial close rough I'd.
Okay, and I know, you're not giving 2021 guidance, but this revised development expense.
Figure for 2020 should we expect ongoing it gets higher development expenses into 2021 and beyond as well.
Hi E. Yes, I think what would it mean, what we're doing is certainly for the offshore wind portfolio that were.
Developing in Asia and.
And we're looking at other opportunities in in a in Europe still.
[music].
Those are those opportunities will likely be reaching cod in the latter half of this decade, so 25 to.
28, 29 in that time period.
So that would mean that between now and then there'd be development expenses and a as Paul said, we would make a judgment based on various factors at which point we start capitalizing a those are those project costs.
Okay. Thanks for that and last question and maybe I'll get back in the queue. After that up can you give us progress on where you are with respect to contracting Lou judge. So we can dial in the project economics, there a little bit better.
Yeah for sure. So so we are have are in discussions with a number of qualified suppliers. I think we've also indicated that we are.
Looking at creating our own platform as well, possibly in Mexico to contract directly to industrial load. So we hope to have some information on that to share soon.
Okay I'll get back in the queue, thanks, very much and shot.
Your next question comes from the line I Rupert Merer with National Bank.
Hi, Good morning, everyone I referred maybe I'll start with a question on ABS Oh can you talk about the return assumptions or tariff assumptions that are baked into the acquisition price.
And how they may compare with the the initial assumptions that Oh, you presented to the market.
Yeah, so anything on M. Abscessus, our return assumptions are generally in line with what what we would have revealed to the market. Originally there's a price adjustment, but there was also an adjustment sorry, there's the adjustment in the tariff, but there is as you can see and also an adjustment in the purchase price as a result based on the mechanics of the.
The original purchase and sale agreement.
Can you give us any color as to what changed too to bring down the the purchase price.
Hi, there there are number of changes in some in the Capex some in the Opex.
Program and there was also a some changes to the lost control program, but there's also review going on right now, which is why we refer to some potential final adjustments that could come to.
The though the final purchase price.
Okay got you have any visibility on when those adjustments may be made.
We expect it yeah soon but Ah I can't give you specific date, yeah. I think generally we can say Rupert is at the you purchase and sale agreement was written in a fashion that was largely men's catalyst keep this whole on this until it settled.
Alright, great and maybe a question for for David on on South Korea. I was wondering if you can give us more color on on what you see in the South Korean market. For example, you have any visibility on upcoming or a fees and can you talk a little about the the team that you've acquired in South Korea, what it.
Experience they have today and how you may build out that team in the future.
Yes, certainly be for Ah. Yes, you saw then early this week a exciting partnership with signed then in South Korea had an opportunity obviously to meet the the team that we've acquired in in <unk> or the company data shows that emotion and the the department that we're now working with a really strong guy similar to what you saw it.
She's in somebody who can very much money local stakeholders, which is of course, something it's a complementary to what we bring to the to the table in terms of all of the global offshore a expertise.
So I think we we talked about an opportunity that too to deliver 300 megawatts. So convened a megawatt project and we see that progressing quite well over the next over the next 12 to 18 months to secure some of the key permits that will then allows to progress the projects through the M.
Say through the and you off piece of the process. So positive on on that that opportunity in Korea.
You talked a little about that RFP process, and or would you need to do to secure.
Contracts.
Yes, it to the keeping that working for now isn't a electricity business license. That's the key put the next key stage a in the process well on the poses to them to securing that we win win measurement stage and so circa 12 18 months from now a we will that we will be well secured.
And it which then moves is to along the process.
All right I'll get back into queue. Thank you.
Your next question comes from the line I've Nelson Ng with RBC capital markets.
Great. Thanks, So just a follow up on Rupert is question in terms of I like is there a RFP process like that that's set in terms of how.
Offshore wind contracts are given out to.
Developers.
It is not I Nelson its Mike an excuse my voice in the call today, it's got a little bit of a lingering cold, but the it's it's a different process from Japan.
And as far as it's not a centralized procurement, but it is a a process that we find attractive for other reasons. So maybe David you can walk through the path to getting a P.A. in Korea.
Yeah, so what you're going to expect.
Did you any is having secured the electricity business license. We will then looked to Ah Ah two to bring in a relationship with one of the Gencos you need that as part of a closer to then securing the or the off taking the off peak right from the incumbent Genco in the.
Vicinity of you'll project. So that's the due to which you you move to then security the offtake [noise].
Overall, it's a isn't it's driven by renewable portfolio standard in in Korea, which which obliges all of the KEPCO subsidiary the generation companies to secure a so many a renewable energy attributes are Rex.
And so the way the on for projects in Korea have worked to date is that they will procure both the renewable energy attributes and also the at the Brown energy or they did the energy from a renewable power project bundle it up into a P.P.A. and then on the back at that you would finance and construct your project yet.
So just to clarify till the gencos could technically by onshore wind solar offshore wind or even do biomass like and within that mix. They would that hit their renewable targets. They they can but there's a I believe is a higher.
Wrecked value for offshore wind to to incentivize offshore wind in Korea Yeah.
Okay and then one last question on a South Korea can you just give some color on the I guess the consideration arrangement is there like a small upfront payment, but most of the payment is I guess based on success and then on the second part.
How big is the the team that you're acquiring.
I guess people.
Yeah, I give a little little bit of color I'm, not so correct I'm pleased to say that the this <unk>. The the payments. He is very much as you describe so incentivizing the the delivery of the to keep them at some milestones that I referred to earlier so yes. Its famous the way we structured the or the transaction so you're saying.
Part of the question was the team the team has only so very small team. So it's it's the company and a it's it's a couple of individuals who have those relationships with the state local stakeholders and that's me that the key value that we need from from the liquidity.
Okay, and then just on the bigger picture on on developments development activities could you just talk about.
How are the the development costs would be incurred relative to a geography or whether it's like Latin America in North America.
Europe versus Asia.
Well generally and also just very fluid I mean, that's part of what we are able to offers being experienced developers is that we're gonna be looking at moving the development teams as expenses around as opportunities kind of come and go Oh, we have sort of our plan for 2020 ahead of us, but by the time you get to July or August that could.
No I have tremendous shifts, but you know that's pretty much the job of developers to allocate no between the different technologies and between the different geography uses the opportunities to get warm or cold or.
That's how general answer I know, if they want something specific but just wanted to be clear that we Ah we try to stay as flexible as we can with Ah.
Yeah, I mean, I am I think as Mike said, he's indication the opportunities, we're seeing in Asia or significant and so we start you have a school says with that with a certain allocation to that region, but I think the long thing would be to be too hard and fast we need to be nimble and if we see better opportunities coming in other jurisdictions, we will will respond to those and I ask advantages as Mike said, having these systems.
For a geographic M. A regional development off season around the world are we seeing a really good volume if oh good trends good quality transactions. So that's that's not my my concern is not the call until the transaction.
It's it's then allocation of the funds to divide ones and living those transactions for the business. Yeah. And then just just have probably at a tiny bit more color to that we tend to allocate enough money for the development regional offices to a prospect and to look for project. We also hold a bunch back centrally unless and until the prospects come to a certain.
Point of maturity, we're willing to go to new stages in the gates. So it's sort of think of it as a central reserve and there's a certain amount that's allocated out but into your all goes well, it's all allocated out to great projects, but we don't have them that doesn't get allocated out and you've seen that in prior years, where weve.
Actually not spent that's the whole budget because we just didn't want to let that out but that's kind of how we operate.
Okay, and then I just wanted to touch on a the debut protect before I get back into queue up can you give any color on the the technical issues that the that you're seeing it on the mono buckets.
Or the foundations I think last quarter, you mentioned, there was a delay and their manufacturing of the model buckets.
So what was the 98 million the amount that was already spent to date and would that be considered the sunk costs.
And then also like when do you think there would be a final decision on whether those two turbines would eventually be installed or not yeah. So the the fabrication delay.
It was resolved in in 2019 the.
The pause on the project was related to a failed installation of the first mando bucket.
And so we're currently doing a root cause analysis to understand why the installation failed.
And as we get more information from that and as we.
We continue our discussions with the MPCI contractor, who is responsible for the installation of the of the amount of buckets and the installation of the turbines on them on a buckets.
We will come to a conclusion, whether we proceed with the project or not yeah, and then regarding the 98 million that's kind of a harsh treatment that GAAP accounting kind of pushes us too which is now once we push the pause button and and I haven't uncertainty going forward notwithstanding the fact theres upside so I can show.
Ants and settlements of contractors they require that we take the whole thing or impairment and if some time, let's say next quarter. We decide to continue one would reverse out which obviously is not great from a lumpiness standpoint, but that's our worldwide accounting profession that is decided on that standard.
There we go and Ah you know I think just stayed stay tuned on this one it's been a few more challenges and we had wished but we hope to have this result sometime in the next quarter.
And the basis for the decision or whether or not to continue with them on a bucket I did a pilot project is gonna be the same basis for which we decided to embark on it which is.
What is best for the overall projects. It was a 252 megawatt project, we saw an opportunity to add to turbines to it through this a pilot program.
We will make a determination what's best for the overall project, which is a very attractive project and on that basis, we'll decide whether or not to proceed.
And then if you choose not to proceed like everything is already being manufactured right. So.
Like I presume you could.
Get some value for at least the turbines at a minimum and some of the equipment or.
As I mentioned, there's a number of upside, including there's some insurance proceeds of the installation has failed I mean really the root causes them to flush out wasn't an installation failure was an equipment failure in both cases, we have some degrees of recourse not only to manufacturers and contractors, but also there's an insurance element to it there salvage value there's enough.
<unk> things and then you've got a divvy that pie up between contractors and and ourselves. So you know, it's probably just counting always comes from a much more conservative base. Then then typically reality unfolds, but you know that's a that's kind of why we're not really able to say exactly today, what's going on because it really depends on how.
All this stuff takes out we've got a big team in Hamburg. That's currently on this thing pretty much a full time trying to figure out what the best course of action is.
Okay. Thanks, I go back into queue.
Your next question comes from the line of Smart choppy with see IVC capital market.
Yeah. Good morning, all you made a comment about sometimes not always spending to the budget for development expense I think there's very little bit Lauren.
2019, so just maybe as you think about that incremental spend in 2020 in ECS hi long.
Maybe 20 25 million of incremental development expense, how much monocytes you guys have to that right now how fluid is that as you work through the year [noise].
I think sitting here today.
We couldn't be good line of sight on a a number of opportunities.
ER docs, both I think seeing the teams, bringing through actual transactions, obviously with no closing those transactions you'll.
Here about that as soon as we do there's reason good visibility on those we know the nature of the projects and therefore, the near the nature of the development spend that's gonna come a after that I think in other jurisdictions, it's it's probably I'm thinking, particularly lifetime, where we're looking at Tim a as Mike referred to earlier continuing the good what we've done.
In Mexico et cetera, I'm continuing to look for other opportunities again, there's a good good amount of projects and I'm seeing the team presenting we haven't landed on which won a at the moment to bring forward, but I look good left with certainty I think on on the numbers today I mean, what we we obviously look at where the opportunities are and that's where we've decided to deploy.
Our regional development offices, and where we've targeted those regional development offices in specific.
Market specific countries.
But we're always looking to balance both in terms of when these cash flows from from our development activities will become available. So you want to have a balanced approach to that so you have some that will be coming online towards the end of the decade, some coming on near term and you see as is evidenced how many activity in Latin America is is more.
<unk> near term cash flow, whereas the offshore wind activity in a Asia is more or later term cash flows are trying to balance that out trying to balance out jurisdictions to the we would not overexposed in any one jurisdiction and also keeping an eye on the quality of cash flow. So we're trying to make sure that we have a good.
Proportion of you did perpetual or a long term contracted cash flows and and augmenting that with some near term.
See an eye off take like we're getting in Mexico, where we'd be looking for a higher return.
But obviously with lower quality or cash flow. So it's always trying to balance that out as well as they're looking to where the opportunities are in making sure we have boots on the ground in those markets.
Okay.
And then on on that's a.
So you get clarity on the final tariff.
The died in place there or are you guys waiting for that or what sort of the status in terms of financing final plans for corporate and then the nonrecourse utilities.
Yeah. So I mean, the the the work on the financing has begun a we would expect that the a tariff would be resolved prior to the financing or getting <unk>, yeah, but either way the amount of financing we need kind of goes up and down depending on the tariffs. So were you know just basically trying to.
Work through it.
You know just one observation is that you know I'm sort of.
Finishing up here the 35th year my career I've never seen a financing market so favorable, particularly for this kind of assets. So we should be well spring equal and the best bought we've ever been trying to get a financing. So I'll just kind of throw it out there.
And picking up on that Paul on the common Paul.
I have discussed maybe repricing Deutsche boot.
That's commercially.
Fleet and then as their other pieces of the dead inside the company you guys can look to reprice and sue and and in your guidance you guys assume any refinancing.
Yeah, So Deutsche Booth, a repricing Ria, probably not a refinery probably repricing on that that is certainly in our cards. This year and certainly in our business plan and I think we'll see some there's there's a bit of upside that we've put into our guidance for next year already in that but just seeing where you know financing markets are you know last two days have obviously been.
A bit disruptive in the financial markets, but generally if you take the last you know sort of four to six months. We've been just in the most favorable environment I've ever seen from a term in condition in from a pricing standpoint. So I think we'll probably see you know I'm guessing that there's some upside a there potentially as well and then as far as the rest of north instead most of our Canadian.
In fleet isn't a fixed priced a sort of institutional type debts. So unfortunately, not a lot of opportunity there, but you know shoots should some of the favorable conditions continue or we might reopen particularly some of the European other European projects on or do you want and and Gemini There's some potential there, but you know it's at some point.
Yeah, I, just sort of diminishing returns on trying to chase it down again, but yeah, we'll see where the markets go but it's something that we've always got on our radar.
Okay and then maybe last question is obviously the current virus issues like prevalent here I'm not impacted at all supply chain for you guys didn't solar for lot luge or does even the ability to get to move forward on under Goldman activities in Asia. That's a good question. The it. So there there has been a a.
Slight impact on that Luciano.
On the the module or the panel supply.
But we understand that it's now Ah moving ahead and so there was probably about a two week delay.
But it was not a not on critical path for the project, but but it's a it's a good good observation. So there was slight delay there on the supply chain, but as I said it wasn't critical path.
David you'd have a better insight on Asia in terms of what you've seen there I think in Asia and I've I've just come back last week. So a very up to date and Tim's last couple of weeks out in Asia, its starting to slow the impact I'm, a little more meetings going to video conference rather than face to face, which you could argue that's the right move anyway.
Fused fictions coming on travel overseas countries or increasing the risk level and therefore it stops you traveling more broadly that's probably the vis that I see it them I'm not really happening at the moment outside the mainland China, but you're seeing levels in places like Singapore being a increase to the point that took that might stick people moving more freely so.
Little bit of frustration I think at the moment, but nothing that smitti stuffing business.
Okay. Thanks.
Your next question comes from a line of Ben Pham with.
Came out.
Thanks, Good morning.
I'm, just wondering I benchmark or are you guys.
That's why I go back to something like that topics on the development expense and we are.
We've seen this before and in Euro your life and it's just ramping up the vault <unk> I guess, what's been tracking now you have to debut project coming in a lot of free cash flow this year.
My question is how.
How much more can you parse.
<unk> expense or other words, adding about our.
Geographic Ariad.
<unk> I mean are you.
Are you can you add more do you want that.
Where it's more harvesting.
Well it into the question is is what.
What interest we're going to retain in families development projects that were pursuing so.
Let me just as you know that there's a lot of capital chasing renewable energy assets globally.
There that capital is typically coming in certainly for operating assets very competitively, but also.
For late stage development assets.
So I think we've disclosed earlier, so we've been moving over the last a couple of years into more earlier stage development Ah leveraging what we've learnt in offshore wind in what we learnt in entrepreneur blows over the last 20 years or to develop a earlier stage projects.
With a view to initially.
Ah controlling 100% of the project or with a partner controlling honored presented the project, but as we move forward and as the project <unk> reaches and passes certain value creation milestones. We would now be certainly open to bringing in partners or equity partners.
Both to defray some of our ongoing development costs, but also to monetize some of the development profit and the and essentially augment the return that we get on the project. So.
So I mean that the lever that we have as to what extent, we bring in third party capital on some of these projects, but our view is that I mean, there's no scarcity of capital, but with all of these targets for renewable energy globally, which are.
Very aggressive me that we think we'll get more aggressive there will be a scarcity of good.
Projects, certainly with scale and that's what we're seeking to develop.
Yeah, and I'd just add to that you know what it is a bit of a pay to play type of scenario, where you know, we where we see this manifest itself is in our free cash flow per share. Unfortunately, and you know it's noticeable when we want to increase in order to take advantage of the global opportunities, particularly in the big chunky projects like offshore wind then it hurts.
Just in the short run because we've got to deduct out from or free cash flow. You'll note that some of our peers, who take a different approaches and they AFFO or something like that or they're not necessarily the same way accounting for those development expenses I mean this year, it's particularly.
Noticeable I don't want to say painful it's pretty noticeable because weve deducted will be going into high long, which is very close to the criteria, where we would normally be capitalizing it but just isn't there yet and probably won't be there till sometime mid year. So that's something that you know if we had just maybe had a couple of more milestones under our belt wouldn't be showing up.
In the guidance going forward, but to keep true to our non-GAAP measures and follow the consistency yeah. We we have to take that paying upfront, but we think that's a good a good paying to take but generally I think we have two is developers or make sure that we are allocating development dollars, where we're going to get the highest reach.
Turn and have the lowest potential loss and a you know sometimes that takes several years of advanced vision to do that you don't <unk>. The only thing I'd point to is that so so far we've been able to find that balances have been able to recover you know probably the lions share of what we spend every year and development eventually recover.
That so you know there could be an argument as to how much it out as investment capital or pre capex versus Devon acts and [noise], probably goes well beyond the topic of this call, but that's something that we debate certainly every week it investment committee, but probably more often during the week right. Various other meetings that we have.
All right that's got to find something like that sometimes here is that back.
And there are pretty fastball, I guess I just wanted to clarify that Mike your and your comment around pricing and partners I mean I.
That sounds more like at smart you can monetize pieces of that Korean business or Japan versus.
Really pushing separating development and operating assets I mean, that's.
Just wanted to clarify that <unk> my comments were more focused on that we're focused on development projects. So looking at at the as we that's a projects advance and become more mature.
We we certainly anticipate that there would be interested in in a third party capital coming in and we would be open to that at that certain stages and that's a lever that we can play with a as we look at a are our free cash flow in our corporate liquidity at any given moment right and for further background. I mean, you know just do it just true.
View here there are several reasons why you might take on a partner [noise] you know an on one end of the scale is your take on a partner fairly immediately very little uplift in economics, because the projects too big for you you you're not willing to take the risk where there's another reason why that partner needs to be either in the equation. The other bookend is you wait until as late as possible because really.
What you're trying to do is to sell down and get cheaper capital and get out at a higher capital gain into your mix and it's pretty much everything in between and typically north and style has not been to go to the latter bookend, which is to really just settle down to monetize profit at the very last minute, but as capital gets cheaper and cheaper and operating assets.
Were pushed to do that simply to stay competitive in a number of arenas, but generally where we see ourselves creating the value is through the development process, but we also realized we don't have an unlimited wallet and it's a pretty big globe and it's a pretty big not to cover so we will be taking on partners in various rounds out there in order to just maximize the.
Development dollars that we put out and try to make sure that we don't concentrate or better than anyone project or anyone region. So it's a it is tricky, but you know I think that's really what our job is to do.
And then I think just wont wont come for me you have you mentioned before on the could be an opportunity I'm a big in a a genco now that's very much to increase the chance of success Soak City, we want that project to happen.
We know about being in certain partners not only just to have the benefits, which which pulled them I just outlined but it also increases the chances on speed of of getting your project to him into and construction and operations as quickly as possible. So that's maybe a good example to mikes point of bringing in a partner.
Okay and it just to close off at that point I guess I guess now when you when you when you arc and suffering and partners.
Maybe they are your hurdle rates might be a bit lower than before because someone else is willing to pay a much lower our cost of California, you recover all that the valemax fastest freed up <unk> globally.
Yeah, I mean, that's that's one way to look at it you know there's as I said, there's there's number of reasons why you might bringing the partner, but ultimately you, we'll probably see us be doing more and more of that simply because that's where the financial markets have pushed us where you've got pension funds and you've got other pools of money that are willing to own operating projects at much lower I ours, and we are and if we try to compete.
To own that long term, 100% they may not be the most competitive bid going forward. So we have to sort of capitulate to that reality and we you'll see that probably happening more in our world over the next few years.
Alright, great. Thanks, guys.
Your next question comes on the line out Ralph Wood.
The private investor.
Good morning.
Good morning down to one or.
I did a as a shareholder to see your ongoing.
Success.
But I'm interested particularly in one project, which is being on the cards or or I'm led to believe so for some time and that's the Mora pumped storage project I'm wondering if you could give me some comment on a if if and when that project.
Liable to proceed further thank you.
Hi, Thanks, Ralph and thanks for your your support near your investment in Northland. The so the Marmor project is continuing its its development and we continue have discussions with the system, operator in Ontario, and with the Ontario government in the last.
Year year, and a half I guess about a year and a half ago, we took on Ontario power generation.
As a partner on that project.
And we continue to move the project forward with the with LPG as as the partner.
Okay. Thank you that's very good information.
What can you speculate as to the prospects for that.
Project to go ahead in the a reasonably near future.
Uh Huh uncertain I mean, I think there's certainly interest.
Within Oh.
Certain parts of the government has interests in the system operator.
We continue to discuss the project with them and or with other stakeholders.
Ontario power generation, certainly is a big supporter of the project as well and that's why we're happy to have them on board as a partner.
We are to be determined or when and how that project moves forward.
Okay I understand your language. Thank you very much and a good luck for this coming year in all your project.
Thank you very much and thanks again for your investment in Northland.
Okay.
Well. Thank you everyone for joining us today, we will hold our next call. Following the release of our first quarter 2020 results in May in the meantime, we thank you for your continued confidence and support thank you.
Ladies and gentleman that does conclude the conference conference today, Thank you participating and have a pleasant day.
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