Q2 2020 Northland Power Inc Earnings Call
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As a reminder, this conference is being recorded Thursday August 13th Twentytwenty at <unk> am Eastern time.
Conducting this call for Northwind power or my colleagues, President and Chief Executive Officer.
Pauline Allentown, Donny Chief Financial Officer, and Washington, Kulu, Senior director of Investor Relations and strategy.
Before we begin Northland should management has asked me to remind listeners that all fingers figures presented are in Canadian dollars and <unk> to caution that certain information presented and responses to questions may contain forward looking statements that include assumptions and are subject to various risks.
Actual results may differ materially materially from management's expected or forecasted results results.
Please read the forward looking statements section in Yesterdays news release announcing Northland Power's results and be guided by its content and making investment decisions are recommendations.
Releases available at Www Dot Northland powered dot com.
Ill now turn the call over to my colleague. Please go ahead.
Thank you Dan good morning, everyone.
Thanks for joining us today. This morning, we will review, our second quarter 2020 financial and operating results and provide an update on the business. Following our remarks, we look forward to taking your questions and comments.
Pauline and I also have David possible executive Vice President development, joining us today on the call as well.
We continue to show resilience in our business considering the challenges we faced difficult, but 19 and its implications our teams have risen to these challenges ensuring that our operations continue unabated and that we continue to execute on our strategic objectives. We successfully completed a number of initiatives during the quarter with that enhance our financial position and advance.
Our growth pipeline.
A little more to stay on the shortly.
First turning to the quarter.
I will provide a high level overview of our second quarter results and Paline will provide a more detailed look into the financial numbers later in the call.
We achieved healthy growth in adjusted EBITDA reporting a 17% increase in the quarter compared to a year ago.
Adjusted EBITDA in the quarter was approximately $227 million compared to $194 million in the same period in 2019.
Our free cash flow for share in the second quarter was nine cents per share compared to 20 cents per share in 2019, representing a decrease 55% year over year.
Helane, we'll take a deeper dive into the quarterly numbers, but I'd like to point out that the decrease in free cash flow was primarily primarily attributable to higher gross spending relative to 29 team.
And the timing of scheduled debt repayment for Deutsche Boot following the declaration of commercial operations at the end of March.
However year to date when we include the excess pre completion revenues recorded in the first quarter with respect to Deutsche Boot, our free cash flow per share was $1.17 catch up from 98 cents in the prior year. This keeps us firmly on track to meet our full year guidance.
Strategically we executed on a number of initiatives during the quarter intended to strengthen our competitive position and enhance our growth objectives.
We strengthened our internal capabilities with the addition of Wendy Franks to our senior management team.
As executive Vice President of strategy and investment management, Wendy will be responsible for providing leadership in business strategy investment management, and making strategic investments in growth opportunities across new technologies for the business.
We also bolstered our capabilities with respect to our sustainability initiatives with the addition of a new director of sustainability.
And we added leadership to drive the origination of commercial and industrial power purchase agreements.
Subsequent to the ended the quarter, we successfully closed a $465 million permanent financing for epsa utility, allowing us to repay the balance on the 12 month bridge loan facility that was used to acquire the asset as well as credit facilities at the utility.
Also repaid a portion of the balance on our corporate kinda facility to provide us with additional liquidity and financial flexibility.
We finalized the power purchase agreement for the acquisition of EPS upon receiving final regulatory approval of the EPS is proposed tariff by local regulators. The final price was 2.5 trillion Colombian pesos or approximately 1 billion Canadian dollars, which was adjusted from the 2.4 trillion Colombian panels were 906.
80 million Canadian dollar price, we reported on January 14th 2020 upon closing of the acquisition.
I've communicated previously pursuant to the share purchase agreement. The final purchase price was subject to post closing adjustments. Following a review of the final tariff resolution in the event at a deviation from the proposed here.
And now Lucho, our construction activities continue and the project remains on track for completion in the second half of 2020.
Well Kogut 19 associated restrictions did affect the completion timing somewhat activities continue and we're still confident that the project will be completed later this year.
As a first project the underpinned by commercial and industrial.
Customer offtake agreements, we are progressing to secure these off take agreements for Lucia, we expect to secure them through our qualified supplier N P. An idea closer to project completion later this year.
At a high long offshore wind project in Taiwan. The team continues to make progress work continues on securing power purchase agreements for the remaining 744 megawatt allocation secured under an auction process.
Recent events in regards to agreements with commercial corporate off takers have certainly highlighted the very favorable mark in Taiwan for corporate P.P. Ace.
The positive signal to the market of the growing demand for renewable energy by the leading global corporations and for Taiwan to now have one of the world's largest commercial P. H side, it's great step.
How long or through our auction project has the option also has the option to pursue commercial P. H and this is of course part of our strategic options to be clear.
744 megawatt.
Auction projects have met all the requirements for the utility P.P. ace tied to those auction bids.
As the World continues to transition to Green energy, we see considerable opportunities ahead of us in the coming years for our business to grow.
Established a local presence in multiple global regions through our regional development offices and have bolstered our capabilities to compete leveraging our global presence and capabilities. We continue to source development and M&A opportunities to position ourselves to grow our portfolio and deliver returns for our shareholders.
But this isn't a perspective, our offshore wind objects as major projects. We have identified present, nearly 2.6 gigawatts of growth potential for us and could double the amount of current generation capacity for the company.
We also look to leverage our existing platforms that we've established now in Latin America to source further growth opportunities in Colombia and Mexico.
And our teams continued to look for additional opportunities and other key markets that we've identified with Northland, we'll look to establish a presence.
I will now turn the call over to Pauline for more detailed review of our financial results.
Thank you, Mike and good morning, everyone last night, North Sunpower release, operating and financial results for the second quarter of 2020.
We generated adjusted EBITDA of $227 million in a second quarter, which was an increase of $32 million or a 17% increase from year ago.
Primary drivers behind the increase in adjusted EBITDA year over year included the additional contribution for might or might you be project, which <unk> Chief commercial officer creations at the end of March and at SAP, which was consolidated from the closing of acquisition on January 14th of this year.
These two projects contributed approximately 40 $54 million, an incremental adjusted EBITDA in the quarter.
These results were slightly offset by a $12 million decrease in operating results and her Gemini and north sea when facilities in the North Sea pioneer only stabling from lower wind resources during the quarter combined with continued weakness in the wholesale market prices that Gemini and unpaid curtailments that north sea. When do you just on schedule, it's great to repair.
Yes.
Thus far in 2020, we have seen weakness in wholesale market prices and a higher level of negative pricing and unpaid curtailments year to date as disclosed in our and DNA, we have experienced approximately $46 million of losses from unpaid curtailments due to negative pricing and grid. Your parents that are German wind farms and.
Where market pricing at Gemini.
Well the majority of these experience losses are due to market related conditions and grid repairs some of which had been reflected in your annual guidance. There a multitude of factors that impact your performance and we will be able to provide additional color next quarter on an narrowed guidance range.
Also included within our second quarter results were development expenditure is approximately $13 million, primarily relating to our high long offshore wind project up from $5 million in the prior year.
With respect to free cash flow, north and generated a total of $17 million or nine cents per share in the second quarter. This represents a 55% decrease on a per share basis from the second quarter of 29 team.
The primary driver behind the year over year decrease in free cash flow was a $41 million or 18 cents per share scheduled increasing principal payments, primarily tripled to do what you do.
[noise] following the declaration of commercial operations at the end of March the projects first scheduled principal repayment occurred in June.
The payment was even Finley amortized between Q1, and Q2 and the amount of 18 cents per share for corner.
Also contributing to the lower free cash flow year over year was a higher level of project development activities, mainly attributable to high long as previously discussed.
As we outlined in February when we provided our 2020 financial guidance Northland allocated to higher level of spending on its development expenditures primarily at high long for 2020 development expenses are expected to total 45 to 50 cents of 2020 free cash flow for share, including development costs and overhead.
Which represents an increase from a total of 24 cents per share in 2019, thus far in 2020 development expenditures have amounted to 17 cents per share.
We expect to commence capitalization of high long and the second half of 2020 as the project is continuing to advance by Q3, we will provide more of an update with respect to our development expenses for 2020. However at this time they remain unchanged from guidance.
Our rolling four quarter free cash flow payout ratio calculated on a cash dividend basis for a period ended June Thirtyth 2020 was 62% up from 58% last year.
With respect to our financing activities, we successfully completed a number of transactions in the quarter that were intended to increase our corporate liquidity and enhance our financial position.
On the 11th we completed the early redemption of our series C convertible debentures, which were due June thirtyth 2020 of the hundred and $49 million a principal outstanding $147 million worth of debentures were converted into approximately 6.8 million shares with the remaining nominal amounts redeemed in cash.
Also in a quarter, we announced the signing of an agreement for the permanent financing for at SAP for an aggregate amount of approximately $465 million. The permanent financing included a Canadian dollar traunch under Colombian peso tranche for an initial two year term, which north and expects to renew annually.
The two facilities carry a blended interest rate of approximately 5.3% and providing loss playing with the ability to rightsize at says capital structure annually by increasing leverage commensurate with expected increases in eat at says adjusted EBITDA. The financing closed in early July.
On June Thirtyth, we further enhanced our corporate liquidity with the completion of the upsizing the debt on our north Battlefront facility, which resulted in gross proceeds of $52 million at an effective interest rate of 2.1%.
Net proceeds.
Regenerated Opportunistically and it will be used for general corporate purposes and to help fund growth.
As outlined in our news release yesterday, Northland announce a change to the discount rate applicable to its dividend reinvestment plan, whereby common shareholders and class a shareholders may elect to reinvest their dividends in common shares of Northland at a 3% discount from the previous discount as now.
This changes effective with the dividend currently scheduled to be paid on September 15, 2022 shareholders of record on August 31 2020.
North in remains in a very strong liquidity position and the dividend reinvestment program is intended to supplement the funding of select growth initiatives that are continuing to progress.
Turning to our 2020 outlook I want to make a couple of comments and provide some details on our adjusted EBITDA and free cash flow for share guidance.
As we've noted earlier our business strategy remains focused on enabling us to meet our commitment to our shareholders. Despite the implications of cold 19, the strength of our balance sheet and stability of our cash flows which are underpinned by long term revenue contracts combined with ample liquidity positions well both from a defensive perspective and to pursue.
<unk> growth opportunities are 2020 guidance remains unchanged at this time. We can you can you do expect adjusted EBITDA to be in the range of 1.1 billion to $1.2 billion and expect free cash flow per share to be in the range of $1.70 cents to $2.05 per share.
I want to take a moment to highlight or de do debt assumptions that are included within our guidance as I noted earlier with the achievement of commercial operations at the end of March we're working to restructure the projects 1.5 billion Euro senior debt.
Although we paid the first 46 million year old principal debt amount in June our 2020 guidance assumes we were successful in recycling or amortize. It station schedule such that that December payment of approximately 38 million euros its deferred.
We are continuing to evaluate it. This is the most optimal decision for us and will provide an update during our Q3 results. We typically set funds aside for scheduled debt principal repayments for reporting purposes, we allocate semi annual repayments evenly across two quarters for purposes of calculating free cash flow.
For 2020, north on share of Gemini and North Sea. One annual principal repayments are expected to total 82 million and emailing here else respectively.
We have included this disclosure in our Mdna for better transparency in forecasting free cash flow.
Before I turn the call back over to Mike I wanted to quickly touch base on our balance sheet and available liquidity, we have a strong balance sheet and ample excess liquidity available, which was further enhanced by the two facility level financings completed in the quarter at the ended the quarter, we had access to $561 million of cash and liquidity.
[noise] comprising $106 million of corporate cash on hand, and $455 million of liquidity available on a revolving facility to help us pursue growth initiatives. This was an increase from $423 million available at the end of the first quarter.
With that I will now turn the call back over to Mike for his concluding remarks.
Thank you Pauline.
In closing I wanted to highlight the while our primary focus during these times is a health and safety ever employees and all stakeholders. We also feel a great sense a responsibility to continue delivering electricity under our long term offtake agreements in concessions.
Our efforts continue to focus on ensuring our facilities operate at the highest levels of availability delivering the essential power that are off take counterparties rely on n. need.
We've taken measures to enhance our financial flexibility and liquidity as Paline has outlined to whether the current environment and to ensure that our business remains resilient.
Lastly by leveraging our financial flexibility extensive development expertise and knowledge, we will continue to identify and develop future opportunities to further expand our global development footprint and enhanced north plans growth.
That concludes our prepared remarks, we'd now be happy to take your questions. The F. Please open the line for any questions.
Yes, or at this time I would like to remind everyone that if he would like to ask a question. The press star one on your telephone keypad now again that star one for any questions over the phone line, we'll pause for just a moment to compiled acuity roster.
Your first question will come from Sean Steward with TD Securities. Please go ahead.
Thank you good morning.
Couple of questions to start with.
First on the anchored unpaid curtailment in Germany, I think the M. DNA reference 28 days for each facility potentially can you give us ideas, where we are in.
Relative to that the maximum for each facility and what we might expect to see and third quarter with respect to the grid repairs I suppose specifically.
Yeah, so well get to this exact numbers in just one second Sean but with respect to Deutsche Boot, which had.
A significant.
Unscheduled outage in the second quarter up most of the unscheduled days have now been used up.
So we don't anticipate any significant outage or unscheduled outage that would be on compensated for the rest of the year on North Sea one.
There are still almost a full allotment of unscheduled days.
Available for the rest of the year.
I would say one thing on both of those projects is that what we've seen.
In both respects is that early on with some of the new infrastructure from the transmitter there have been somewhat we'd kind of characterize as teething issues that have been worked out and we saw that was north sea. One earlier not long after that project was commissioned and.
We've obviously seen a a lengthy outage this quarter with Deutsche boot.
So I mean, no guarantee Sean but I think it is a in our view.
Sort of certainly a nonrecurring event and then the nature of of new new infrastructure that once it begins operating transmitter sees a what's wrong. We don't always get a ton of transparency are ordered or you know disclosure of exactly what went wrong want wrong from the transmitter, but but certainly our experience with north Sea. One is that early on there's some issues.
But then it tends to normalized.
Thanks, Mike for that you mentioned for I longed to be in three.
The.
Going down the path is.
Securing commercial.
Agreements to augment the.
The capacity awards already you can you just given its an idea of how that might look how you marry those two together a two to come up with a.
For contract structure for those projects.
Yeah. So so both of those.
Projects total 744 megawatts had to complete the permitting in order to.
Execute their P.A. with a high power the utility right.
And so that that's the process under the auction that we've been into and end the PPH would be at the price that we built into that that auction.
We have both those projects now I have met all the permitting requirements.
To sign the P.A. I think we've disclosed in an earlier call that we have held off on signing a PPA because we've been told by type power that they're bringing out a new P.A., which will have some.
Advantageous terms or some preferable terms in it.
Including we believe the ability to kind of step in and step out of that P.P.A.
And enter into commercial off take agreements, but still used to tie power P.P.A. as a floor. If you will right or is a backstop.
We haven't seen the drop dead and and they were told that it's still coming it's not the the biggest priority given the projects don't come online until 2025, so when they don't go to.
If I'd until 2022 over told that is coming so we're waiting for it we expected to come this year. So that's that that went once we have that new drops that EPA. We would then moved to execute on the type power P. Eight at the same time we've been.
In discussions with commercial off takers.
For a commercial P.P.A. for those projects, which you you'd expect would have to be at enhanced economics, otherwise we wouldn't to enter into that so that's.
What's going on right now.
David Paboase on the line he's closer to it but is there anything that I've I've left out David.
No. Thank you, Mike I know youve covered it well so basically the key wuxi that continues to be focusing the business and you referenced in yoga introduction of course with boosted the team as well to being more capacity into helped deliver that so it remains on track and hopefully more to report in the yen.
In the second half the year.
And on the commercial side with the idea would be similar to what or said did with the semiconductor company find one big partner.
Or do you syndicate that across a number of different.
Oh Offtakers.
That's one option or to find one went off taker.
The simplicity to that.
There may also be better economics, you got around syndicating out across a number of different off takers. So those are they the options that were were considering right now but.
In our view at this point both options or are you know available in are being explored.
Okay.
I will get back into queue. Thanks, very much for the detail. Thanks, Sean.
The next question will come from Nelson Ng with RBC capital. Please go ahead.
Great. Thanks, I'm, just a quick follow up to Sean's question in terms of curtailment.
How does the curtailment look in Q3, obviously, there's a less.
Grid outages, but how does it look from a negative pricing perspective.
Oh and I'm, so on a yes, one a negative.
Pricing.
The what we've seen as as the locked down in Europe.
As kind of come to an end in may.
Roughly is probably about a month month ahead of North America, certainly month ahead of Canada.
We've seen a demand start to pick up.
And it it is.
Really tough to say during the summer for the summer isn't usually when you see a negative pricing, but but certainly we're seeing kind of conditions return more back to normal which would lead us to believe that assuming there's not a subsequent locked down or anything like that in Europe. This fall.
Ah that we would expect to kind of move back to what our budget assumptions were for for uncompensated curtailment related to the negative pricing.
Okay, and then just to clarify the debut grid outage or repair that was fully in Q2 and it didn't drag onto into Q3.
Few days into Q3, mostly in Q2, okay.
Got it.
And then a quick question on the a ABS financing how large was the.
'cause it Canadian dollar tranche of that's that and then also can you give a bit more color as to that the two year term like why two years versus versus a longer term.
And the financing with about half and half ass flat at Canadian dollar and Columbian tranche and that so I I think what the term.
We are going to work with our lender group to an increase terminal facility and that you know I think we have to remember the conditions that we were in market conditions. We ran when we when we got the financing done I think it's a testament to to Northland and upside itself, a and still there.
Term with a slightly shorter than than what we would like but but hopefully going into two next year, we'd love to to lengthen term I'm not a facility.
The and we plan to renew it annually and that part of the strategy around that is because we have annual increases in EBITDA. So that allows us to to recapitalize SAP that the project on annual basis.
Okay, and then just one more question for you, but probably before I get back in the queue. You mentioned that you're looking to restructure the I'd say do debt I.
I think for the other offshore wind facilities, you also cook or reduce the credit margin or the spread like are you also looking to to do the same for Oh for this as well.
Yes, subject you to market conditions, which were which were looking at and will form part of our evaluation and and not deciding to move forward with this fab.
With this refinancing.
Okay, great Thanks for talking too.
The next question will come from David Quezada with Raymond James. Please go ahead.
Thanks morning, everyone. My first question here is on the low Luke and I guess renewables in Mexico more broadly I know the there've been some some issues that the government there and there and their stance on certain foreign investment on renewable projects is well lucero kind of outside of that because you'll be looking for.
Commercial off take agreements I'm, just wondering if you see any any challenge there and how colors your thoughts on.
Future developments in the country.
Yeah, I mean, I'd say it say lucho has not been completely unaffected by some of the decisions and positions. The government has taken a as you recall when the new government came into the New administration came in they canceled the.
Auctions for centralized auctions for renewable power, which by that point, we had decided we weren't pursuing anyway. So that that had no impact on us and in fact in our view given our business plan that that was it was probably preferable and away because it to amend there was less low cost renewables coming into those centralized auctions.
And I've done a supported our business to plan to to pursue corporate offtake for a for renewables for renewable assets now what they've done more more recently David is is a us a few things too.
During the economic locked down or for cobot related locked and they've done a couple of things to inhibit are being inc. interconnection of new renewable assets during that locked down period.
They were injunctions filed by ourselves and by others, even though we were gonna be connecting after that lock down was over but number generators, including ourselves filed and injunctions and with courts and the the the decision a sense centrally was cost or was it was stopped.
And there was another effort from the administration to frustrate a private power companies that was similarly.
Stopped by injunctions through the courts by a private power companies. So.
I mean, what's going on is there's a couple of a attempts to do things to <unk> to two.
Frustrate private power companies, but more specifically to try and advantage and protect see a fee.
And to a ALP pemex find a customer for some of their fuel oil throughput through the SIFI the that the utility.
And so far by enlarge the courts have prevented the government's from taking these actions and we'll continue to kinda work in concert with other generators. If further a attempts are made.
I would say that the real target if the government is is to.
Preserve some market share level of market share for the SIFI as much as we can tell.
And the the kind of target as well as probably some of the larger generators.
Private generous in Mexico, So given that we right now are building 130 megawatts of solar and we've got a relative to the total installed capacity of Mexico, a fairly modest.
Goals in terms of Buildout in the next few years I think in the and the situation will regulator itself.
Okay, Great. That's good color. Thank you and then maybe just one more for me the the potentially use the bigger turbines at high long to a I'm just wondering how you see that potentially affecting if at all or the return profile of the project any any ballpark on on cost savings and and I guess, how you look at the kind of risk reward of.
Making that move.
Yeah, I mean, I mean overall it it would be a an enhancement to the project economics soup with offshore wind if you have fewer turbine locations by virtue of having a larger turbines a it really does significantly reduce your your installation cost, but also your operating cost as well and a and.
Your balance of plant infrastructure, you don't need as many cables to interconnect the turbines and so on so.
It is definitely a positive step ER and a we take some comfort that the turbine is an evolution on a current platform that as Jerry or Siemens get Mesa.
Has already been using for several years and where there's a number of turbines already.
A lot of turbines already operating on that platform is just a to just scaled it up a bit.
So yes with its overall a positive or for the project.
That's great. Thank you very much I'll get back into queue.
The next question will come from Rupert Merer with National Bank. Please go ahead.
Morning, everyone.
Good morning, I referred to a.
Starting with with ABS. So you saw revision to the the regulated tariffs in the quarter can you give us more color on what that new tariff looks like are there any big changes since the or the first time, we discussed this asset.
Number one to go and maybe you could give us the or are we and leave it all forecast for this year.
I mean, yeah, I mean, they did the pair of change so it would the there's as the original submission there was a what was originally approved back in December.
The regulator and then an appeal was submitted or by the prior owner right and.
And then we finally got decision so the the decision ended up as these things often do somewhere between the two goalpost of.
Well it was submitted by the prior owner of Epsa, and what was and what a what was originally proposed by the regulator or approved by the regulator in December so at a big.
To some extent kind of split the difference.
So in terms of our economics on the project the economics and the project.
I think from original if I'd have.
Improved marginally from our standpoint, silver kinda by and large steady state or just some movements around in terms of or what was approved in what was not approved within the a the total filing.
As a follow up to that and it sounds like Youre looking at mid single digit growth in rate base overtime is that correct. So should we be modeling about 20 to 40 million and growth capex per year there.
I think.
But probably a we provided the asked sustaining capex component of fat approximately 3% to 4% if that Rob which is about 20 million per year, we provided that disclosure in the end DNA and dad D. and the growth and Rob. This is Phil if that's correct.
Okay, Great and then secondly, going back to to Taiwan.
You talked a little about the potential for.
Moving to larger turbines wondering if you can give us some more color on the overall supply chain development, what what works left to do there.
As the supply chain meeting your expectations and maybe how supported that is out of your hurdle.
Sure I'll, let David speak to that.
Great.
Hi, Thanks, Mike and I little bit of pellets to that that the main focus for the supply chain and then I would just I think we've talked on previous calls is we have no other projects the localization requirements for the.
ER for the first and plug in smaller project and that's a key focus at the team at the moment to work through that so that's really as you might she's getting is close to the supply local supply chain and that we're making good progress and I'm, we'll be able to close it out a in the second half of this year, which is positive.
To the broader supply chain, and obviously, Taiwan or eat maturing there's a number projects that have gone ahead of us.
So they've done some of that like work in terms of bringing that supply chain up and learning could on so I'm not seeing any any significant headwinds intended unlocking value and as we touched on to the Peter's question. The 40 megawatt.
Turbine if it's very bad never worked on the project were bringing in a lucky to have been hasn't resulted in proven go economics I don't see any difference here, obviously working with the a defensive it seems schemata continues to boost that said that level of confidence we have.
Hi, Craig I'll leave it there thanks.
The next question will come from Mark Jarvi with B.I.B.C. capital. Please go ahead.
Thanks, Good morning, one.
They werent turn to Europe here and at some point I think there was mentioned a couple years ago about maybe monetizing the transmission assets a gemini but.
Now there's conversations around energy islands and in the North Sea. So just maybe help us understand how you think that as a strategic asset and think about at some point in monetizing me a lot or other interests in the offshore wind facilities in northern Europe.
Well there certainly is a great deal of in <unk> interest in investing in offshore wind operating offshore wind assets in northern Europe in general and and we.
Certainly regularly get approached a on that.
For North side, obviously, we would have to have some specific use of proceeds or if we were to consider.
Any kind of monetization or any kind of sell down all of those assets are going forward, but the certainly is as you know a lot of investor interest and increasing investor interest in.
And offshore wind assets.
So obviously, you're sort of control on time, and if you wanted access that but just wondering again on the transmission, it's a gemini whether or not there is anything you're seeing increase value around that that line given what we're trying to do in terms of expanding the network.
Yeah, I mean, we're currently not looking at.
Monetizing or or or divesting the transmission line to the Gemini.
Okay, and then you can just turned to other opportunities run off shore, just maybe Japan, starting to move forward, just remind us again, whether or not.
You can participate in the initial auctions or whether or not you have to wait for the region than where you guys are located with your partner in Cuba, and then whether or not Poland is still a market that you're a sort of clean and interested in.
For sure I mean, David can Ah can speak to all of that well.
Yes.
Thank you, they're happy to happy to do that thanks, Mark Yeah, So starting off with it we did you come one so yes, the project, which we've done.
We have a partnership I thought I mean she's in.
In cheap at that one that is not designated by the government in the first two bounds. So you're writing that we won't be participating they supposed to grounds, we got project, but probably not a great surprised you did say that with the yen or with the skill sets and the experience that we have it yeah.
Oh sure when developing I'm gonna be some interest from policies for us to participate in that will give them projects, where that you have to do that at all or equal to participate in duly rounds. So nothing to reveal on this call, but obviously, we will continue those discussions and hope to knock early opportunity. If you can do that and it works has.
In terms of all participation.
So that's how I see Dupont playing out.
You mentioned, Poland, I mean, I'm glad you talked to too we we look to continue to expand all Oh offshore portfolio, Poland, Yes, you're absolutely right in the opportunities that which we which we hope to pursue a on a on you know I would I could probably a gun to find out into other markets where we.
Also competing to to look to see if we can add more offshore wind down it into the pool, you, which he.
Did you do action.
Okay. That's great instead of it and then my last question, maybe just around some of the announcements working like BP and sort of large oil majors getting more involved and clean energy and obviously you guys have a sort of a competitive and you should advantage and then some history around this how do you see their new entrants coming in does it impact what.
You see as your opportunity set in the next five years and then.
Is there an opportunity to partner with any of them to there'd been dialogue around that.
Yeah, it's interesting supposed to meet the oil and gas majors can either be fall onto the that bucket of threat or opportunity right in terms of offshore wind because a they whether it would they they come in that they can often be quite aggressive players. So.
Our overall strategy as you know has been to gain control of offshore wind projects at an earlier stage. So that we can then be in a position to bring.
Investors in including oil and gas majors.
As partners as they later as as the value of those projects increases as we move them through a permitting and a and other milestones or so.
Where we kinda Crs, where we see a situation where we'd be competing head to head like in the north east of the U.S. with oil and gas majors for lease or that is usually where we kinda tend to back away because ah we.
He then bidding and very aggressive ways for for leases are and so those types of constructs we try to avoid where we can get controller project early like I said and bring them in as a partner once more value has been created then a than that is something that we would we see as an opportunity for north fund.
Let's say to say, Mike that largely even with some of the new Stephens really nothing's really changed in terms of how you guys see yourselves working amongst all the other competition.
[noise] or not at this point I mean, we know we continue to obviously a talk to various players in the market, including oil and gas majors.
But but no I'd say, there's no fundamental change from how I described or what were doing to pursue offshore wind a investment opportunities.
Okay. Thanks answers pressure.
The next question will come from Ben pack and with B M. Oh. Please go ahead.
Okay. Thanks, good morning.
I want to ask but I'm not sure if someone asked this year you addressed you reinstated.
I wonder what are the thought process or driver.
That I'd read the self centered around.
That's what growth initiatives.
Anymore conduct yeah, yeah that would be appreciated.
Yeah, it's exactly that Bennett said give us some additional flexibility to pursue growth, which is very much at part if our core strategy with respect to offshore wind.
Okay, but it sounds but this isn't.
And he is this more Taiwan <unk> thinking here. This is more possibly signaling that there's lot of.
Lot of business development going on and there could be some more to come.
Well, we are as David mentioned earlier, we're looking at other offshore wind opportunities in markets around the world typically <unk> well as you've seen what we've done more recently as it is move into a new emerging markets not not emerging markets new emerging markets for offshore wind.
Where we can get control of a project early on and then as it moves forward and as we create more value bring partners and so yes. So I think you should expect that David is a looking at a number of those opportunities.
Around the world currently.
All right because at the pressures on [laughter], that's why invited him on the call [laughter] not an app can ask you then I would.
Like the top allocation and you bring a mill nets friends and whats what the near term Ah you remember bowl that you're anticipating merger you had that strategic a cap allocation at your Investor day, there's more to confirm that strategy or augment that enhance.
What what should we expect from the investment community.
Is a as you're just repeat the question again I think if I'm looking at it probably I'm sorry, I didn't quite get as you are Peter Please Ben.
Sure absolutely so you put up the.
Strategy of where you want came back.
Globally and technology wise at your Investor Day, Yes, and not enough you you brought in a missed ranks I guess to Oh, I'm, just going from two to revisit that.
But what is what is heard near term objectives for you is it is that basically confirming that clan or is there a possibility to even look beyond that and really what should we expect from from yeah. The next that's fair. That's fair. So I mean, we I think what you can expect is that.
A number one that we're active as I said already in some of the newer markets for for offshore wind ER and looking for.
Where we can can can establish meaningful stakes in projects probably at a at an earlier earlier stage typically so that's number one right and what we like about that as we've described is that typically into new market for offshore wind.
You can secure a long term a deep you usually with the government or some age another government.
As the off take around that P.. So that's number one number two.
It is as we did that believe it or disclose at the investors day.
Moving into Latin America, where we like the a growth characteristics of that market overall, obviously each individual market is different.
And what Weve, what we're doing there is establishing what I call platform. So mechanisms in specific countries, where we can have an advantage.
Over other competitors and where it can also secure superior returns so whether it's in Colombia, leveraging the absolute utility for generation or transmission opportunities.
Or in Mexico, a establishing at a qualified supplier or power market or so that we can match generation from her own assets to load.
In Mexico. So that's the thrust that you're seeing in in Latin America, and we hope to have you know more to come.
In that regard.
And then what Wendy's.
Remit. Most specifically is is to look for new growth areas beyond what we would have described at the at the Investor Day.
Your and a half or almost two years ago now a and so a which would include looking at renewable fuels hydrogen storage or to see a if there's a meaningful opportunity for from Northland to invest capital in those areas going forward.
Okay, that's great and and then lastly, maybe.
I wanted to this theater them on a bucket conclusion.
Yes, basically you recovered your your capex through the sale.
Our Barnes and then.
Sure and does it does it basically you basically NPV neutral on.
EBITDA you would've documented that.
Sure and trip at the end result.
I would take it down to say that I mean, I think the way the way we got to it was a combination of ER.
What you described along with.
Ah completing the construction ahead of schedule and a and some cost savings on construction of the main project. So all told the project ended up coming in a slightly under budget and ahead of schedule.
Okay, Alright, but as you described as you described the.
NPV neutral.
Okay alright. Thanks.
The next question will come from now do you put doing with industrial Alliance. Please go ahead.
Yeah, Hi, good morning, just I'm just wondering if you can give us some huggable called them or any new developments and a in Korea, how about well run company that you acquired the performing versus your expectation so for.
Yeah, I mean, they Dave it's been a you know actively working with our team there on on that project and other opportunities in Korea.
Yeah, My reaction that give you little bit.
So that each alone that <unk>, but do you see progressing well I guess first thing that too when you enter into new relationship and start working with them are you putting that case I'm guessing you're willing to say it and so the teams are working well, we boosted I'll then team as well by adding more people. He is actually in business to support not put.
<unk> and Ah, it's moving at the plant basically it's at this stage talking about a engaging further with local stakeholders and building those relationships, which of course are essential to the success of the project and also the when measurement measurement campaigns so old tracking.
Expected towards the next the key milestone comes early next year.
We will complete 12 months, if we'd measurement and we can move forward with the next day to the permitting so so hopes to progress report on it.
That's a that's good and maybe just an update on some of your maybe I'll call them, all and offshore wind development. So where were you okay. They for some more onshore wind or solar opportunities.
Go ahead, David Leiker Yep Yep Yep.
And yes, it coupon could we talk a lot and one of these questions of course are about the offshore part of the business, which is what's critical eye popping the business, but we also looking for onshore projects clearly a asked me touched up before the Latin American opportunities Mike's already to the suggested.
Let me know positioning.
In Colombia through the exit opportunity and so we are seeing this first opportunities coming down on the on the development side of onshore renewable assets and so that's one posted area and what we should we ever see more than some growth coming can you put gets coming and youre seemingly so there's enough a quote a number of.
Opportunities and let's call them more towards the east enhances the European region or whether the market soon a still attractive and still opportunities. We think it values as well we can promote onto opportunities and I guess also no no forgetting one of the markets to the close to home in.
North American market. So again, we're being very selective in making sure we were comfortable with the parts of the U.S. that works the other than we thought delivered value and so we are and we're hoping to I'd sort of assets to to those who have already acquired in North America or in the development stage to continue to to building a lot you platform that.
Yeah, I mean, if if you look at our North times cash flow right. The foundation is a long term.
Ah contract ideal ideally contractor was some government entity or age another government. So high quality long term cash flows a foundation. So as you know from from talking to a you know our peers as well that is less and less available with onshore renewables, that's why the company likes.
Offshore and why it's it's in our view advantageous that we've been able to secure a leadership position globally and offshore wind and why we're pursuing more projects as we discussed earlier and offshore wind. So that's number one number two on onshore renewables. There are still some markets, where you can get long term contracts or add.
And there are so we are pursuing some markets like New York, where they've got a very aggressive.
Program to a to procure renewables over the next to a decade. So that's a market that that certainly is is of interest to us.
Eastern Europe for the reasons, David I gave a you can fill in certain areas a secure long term contracts otherwise with onshore renewables. It did is typically more commercial off take agreements that are underpinning a investments as you know from our peers as well or so in that regard we have increased as they met.
Since the beginning of the call our capacity to originate a such agreements, but they do need to come with a a return [laughter] that Ah that compensates for the the different risk profile of of the cash flows and so so that does again have as Tom.
Getting certain markets are from for those but that's that's overall strategy so high quality long term.
Cash flow from offshore wind and onshore and it was in select markets.
And otherwise are looking at commercial off take agreements, where we can get and finding a way to where we can optimize the returns on those oh on those assets such as what we're doing and with Epsa and with the qualified supplier in Mexico as as also described earlier.
Oh, Okay. It sounds like on Ah Ah you know maybe some of your peers war, let's say, becoming more comfortable with having more merchant exposure on their portfolios or you know what wherever that is around the world sounds like that's not really your strategy, you're not you're not really looking at a more merchant assets right now Uh huh.
I think what I'd say that yeah, if any any IP. That's that's purely pursuing an onshore renewables strategy will will inevitably have either.
Shorter 10, or commercial contracts underpinning their investments or and or more merchant exposure.
Due to extent that we we are still pursuing which we are Oh, you know incremental gross what we call it kind of singles and doubles through onshore renewables.
We will see a more of that type of cash flow at north fine, but but the foundation and what we would look to see being the majority we still expect to come from a long term.
The government backed contracts, which Oh, we see offshore wind is providing a still a an opportunity for those.
Okay. That's certainly those that's right.
The next question is I follow up from Sean Steward with TD Securities. Please go ahead.
Thanks, just just one follow up Mike with reference to your your comments on New York.
There was a social media posts regarding two hires you've made.
To further projects in New York, and I think there was referenced it three onshore wind farms, one of which you have some context on.
Your website about Highbridge can you give us and ideas.
I guess, the other two projects and how you're planning to participate in upcoming RFP in New York.
What I what I can disclose is what's what's public is that there's Ah I think it's been a filing with a.
Nice that NYSERDA has made a in new York with their there I guess, a regulating body too.
[noise] pursue the conversion of the existing RAC contracts to the new I RAC contract, which is basically the prior rec contract was a for the the renewable attributes are of a project, whereas the new Iraq covers both the renewable attributes.
Also oh I get the Brown energy components, so it looks to full revenue.
Picture for a project is covered by the new Iraq, which is designed to further encourage renewable.
Power investments in in New York State.
So that is something that we're watching closely we are as you know developing projects in New York and ER and that certainly would be or something that is of interest to two wise on those projects.
Okay. That's all I had thanks.
The final question is from Louis Baker private Investor. Please go ahead.
Hi, good [laughter].
Right or whatnot.
Question regarding the impairment loss.
Nobody then you're left side real financial statement from $90 million.
In connection with to demonstrate demonstrator project.
No.
They're not proceeding to recover that money.
So I'll start off and then Paline can add some some color to that Louis and thanks for your your your your continued interest in your investment in Northland. So so through.
If you look at Deutsche Boot as a as as the overall project Deutsche booked.
Which which as you know commissioned at the end of ours and it was C or D is went in at a commercial operations at the end of March you'll get the overall project.
The two demonstration turbines were discontinued we decided not to pursue them anymore.
Through a combination of insurance.
Vending the selling the turbines back to the original or the turbine vendor.
As.
As well as improved economics on the project because it came in ahead of schedule and and under budget overall the project Deutsche Boot.
ER comes in inline with what the original economics were expected for it.
Yes, and this quarter, we disclose that we received other income of 32 million a with the proceeds from the at insurance and from the sale of the turbine.
I didn't get I didn't hear those numbers you're breaking up.
Oh.
Yes, so as disclosed in our press release in and DNA. We reported other income of 32 million as a result have the proceeds from this together. They turbines. In addition to the receipt of the insurance proceeds that Mike referred to.
Oh, what was the impairment loss any or was it all recovered.
[noise] in totality of they have the whole pro Jack.
There wasn't material impact on the NPV, but if you're looking at 98 million of this specific write off we've received 32 million that's corner.
And your more dropped 32 million.
And that's again and that.
Tariff this topic [laughter].
[noise], we can follow up with you offline if if that's helpful and in terms of reconciling about what's written off and what was recorded in income this quarter and I'd be happy to do that but I can give you recall that the office and probably never during the week every don't mind that sounds great. Okay. Thank you.
At this time I would like to turn the conference over to my Crawley for any closing comments.
Thank you very much for joining us today.
We will hold our next call following the release of our third quarter 2020 results in November in the meantime, we thank you for your continued confidence and support take care.
Ladies and gentlemen, thank you for participating in today's conference call you may now disconnect.
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