Q2 2021 Northland Power Inc Earnings Call

August 12, 2021

[music].

Ladies and gentlemen, thank you for standing by welcome. So this Northland power conference call to discuss the 'twenty 'twenty, one second quarter results.

During the presentation, all participants will be in a 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 Firstly August 12, 'twenty 'twenty one.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline Eileen Jang Dani Chief Financial Officer, and watching Kallio Senior director of Investor Relations and strategy.

Before we begin Northland management has asked me, it's sort of remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward looking statements.

Does that include assumptions and are subject to various risks.

Actual results may differ materially from management's expected or forecasted results. Please read the forward looking statements section in yesterday's news release announcing Northland Power's results and be guided by its concerns and making investment decisions or to commendation.

The release is available at Www Dot Northland power Dot com.

I will now turn the call over to Mike Colby. Please go ahead.

Thank you operator, and good morning, everyone. Thanks for joining US today. This morning, we will review, our second quarter 2021 financial and operating results.

Following our prepared remarks, we will look forward to taking questions from analysts.

Kick things off we want to reiterate that the health and safety of our employees and our stakeholders comes first through diligent planning and rigorous adherence to health protocols. We have maintained high levels of facility availability delivering essential supply of energy to consumers and businesses Europe, Canada and Colombia.

First looking at our financial results for the second quarter, we reported adjusted EBITDA of $203 million compared to $227 million in 2020, representing a 10% decrease.

Our free cash flow of $6 million was 68% lower compared to $17 million in 2020.

On a per share basis free cash flow was three cents this quarter compared to nine cents in 2020.

Financial results in the quarter rent package by the weakness in the wind resources at our offshore wind facilities.

Year to date, we have seen consistently low wind resource with generation trending well below long term averages. In fact this has been one of the weakest periods on record for offshore wind in the North Sea.

In addition to a lesser extent performance in the quarter was impacted by lower production and cash flow at our North Sea one facility due to the bearing issue. We had previously identified. This issue is also expected to impact our full year 2021 financial performance.

A component design issue has been identified on a number of winter buys leading to premature failure of the rotor shaft bearings, that's requiring replacement.

As a result, we have reduced the output on a small number of turbines at North Sea one while our teams mobilized to replace the rotor shaft assembly on those turbines requiring the most immediate attention.

Northland, we'll undertake a broader replacement campaign starting in 2022.

Sending into 2023 to replace the rotors have to assembly on all 54 turbines.

Pauline who will provide a bit more detail on the financial numbers later in the call.

Despite these issues impacting our near term financial results.

They do not deter from our long term objectives as reported in our press release yesterday, we continue to execute on the key priorities to further enhance our development portfolio and position ourselves to achieve our long term growth and diversification objectives.

North plant has a growing global footprint positioning in.

In key renewable markets around the world.

Execution on our growth objectives in each of these key markets will ensure we remain in a strong competitive position, enabling us to be a major player in the accelerating global build out of renewables.

As announced yesterday, we are pleased to have closed the acquisition of the Spanish onshore renewables portfolio, which adds 551 megawatts of operating capacity to Northland portfolio, bringing it to over three two gigawatts gross.

This portfolio aligns well with our priorities and helps to diversify our asset base by adding high quality regulated cash flow to our business.

Furthermore, the acquisition expands our presence in Europe, and establishes Northland as a top 10 renewables operator in Spain.

In Poland, we progressed with our partner on the Baltic offshore Wind project, which was awarded a 25 year contract for difference Offtake agreement with the Polish government at a rate of three 9.39 to $319 six.

Laski per megawatt hour or about 70 euro per megawatt hour.

Baltic power provides northland with a 49% interest in a mid stage offshore wind project with the potential for up to 1200 megawatts of capacity, which will be built in the Polish Baltic Sea and the middle part of this decade.

We expect to reach financial close for Baltic power in 2023 with commercial operations in 2026, which fits nicely with our other offshore wind projects in Asia.

Turning to our other development and construction projects I wanted to provide a brief update on the various projects we have underway.

First touching on our New York wind onshore projects in the second quarter two of the projects Ball Hill at Bluestone successfully achieved financial close both projects have secured green financing in the form of a non non recourse project loans tax equity bridge and letters of credit with a consortium of lenders.

Totally U S 308, $81 million or about $476 million Canadian.

We expect to secure permanent tax equity investments for the two projects in 2022.

Construction is underway with commercial operations for the two projects expected by late 2022.

Our third 100 megawatt New York onshore wind project, which has embedded battery storage highbridge is under active development.

Subsequent to the court quarter Northland 16 megawatt <unk> Solar project in Colombia also achieved financial close the project secured a nonrecourse green loan and with construction underway commercial operations are expected in the first quarter of 2022.

<unk> represents north of its first development project in Colombia, which capitalizes on EFS is grandfathered rights, allowing <unk> to expand into energy generation in Colombia, <unk> will serve the power needs of nonregulated municipal commercial and industrial customers.

In July the high long offshore wind project received an amendment to the project's environmental impact assessment from Taiwan's Environmental protection agency to accommodate a larger 14 megawatt turbine with longer blade links.

<unk> allows how long to complete further field work to improve Linda and generation yields through a more efficient and productive lay out over and above the benefit of this larger turbine.

The amendment is a further step forward.

Following the confirmation of the industrial revenue.

Irrelevance plan or the IRR that the project received in April which sets out Northland commitments to local supply chain and procurement, making the achievement of a significant making the achievement of a significant milestone for the project. These milestones further advanced the project closer to financial close, which we expect to occur in the second half of 2022.

The high long team continues to make progress towards securing corporate offtake power purchase agreements for the remaining 744 megawatt allocation secured under the auction process.

At La Lucha, the physical construction of the solar facilities is complete however activities relating to the Energizer <unk> of the project continues to be late.

In order to achieve commercial operations that facility requires <unk>, followed by testing, but due to administrative backlogs, resulting primarily from Covid 19, the amortization and testing have been delayed.

Efforts to achieve <unk> continue with Northland working with Mexican authorities in other private power producers, who are experiencing similar issues.

While timelines remain uncertain Northland expects commercial operations at La Lucha to commence in early 2022.

Efforts to secure commercial offtake project financing are expected to be finalized after commercial operations.

So all in all a very busy quarter, particularly from a growth perspective. These activities further enhance our competitive positioning moving forward I will now turn the call over to Pauline for a more detailed review of our financial results.

Thank you, Mike and good morning, everyone last night Northland Power released operating and financial results for the second quarter of 2021.

In the quarter, we generated adjusted EBITDA of approximately $203 million, which was a decrease of $24 million or 10% from the $227 million, we generated in the second quarter of 2020.

Main factors, leading in a year over year decrease was the lower wind resource at the offshore facilities and lower contribution from our efficient natural gas facilities due to a planned maintenance outage at north Battleford.

With respect to free cash flow northern generated approximately $6 million in the quarter. This was a decrease of approximately $12 million or <unk> 68 per cent compared to the prior year.

Similar to adjusted EBITDA, the larger drivers of the year over year decrease in free cash flow was the lower offshore wind resource in the quarter and the planned maintenance as previously discussed which together resulted in decline of approximately $14 million.

While the second quarter is typically a weaker quarter for offshore wind resource the results for this quarter across all three facilities was below the prior year and well below the long term average, resulting in lower financial performance across all of our reported metrics.

These items were offset by approximately $10 million of contribution resulting from lower net financing costs due to lower interest costs on our loan facilities.

For adjusted free cash flow, we generated $22 million in the quarter compared to $38 million in the same period a year ago.

The factors, leading to a $16 million decrease by the same factors impacting free cash flow with the difference being lower growth expense growth expenditures in 2021 of approximately $4 million.

Just to remind everyone Northland adjusted free cash flow excludes growth related expenditures from free cash flow.

Management believes adjusted free cash flow provides the relevant presentation of cash flow generated from the business before investment related decisions.

And is a meaningful measure of Northland <unk> ability to generate cash flow after ongoing obligations to reinvesting growth and fund our dividend.

On a per share basis. These figures translated into free cash flow of three cents in the quarter compared to nine cents last year and adjusted free cash flow of 10 cents in the quarter compared to 19 cents last year.

Our rolling four quarter free cash flow and adjusted free cash flow payout ratios Cas calculated on a cash dividend basis.

We're 70% and 56% respectively.

This compares to ratios at 62% and 54% for the respective prior year periods.

The increase in both net payout ratio was primarily due to lower free cash flow and adjusted free cash flow and the effects of new common shares issued in the quarter, partially offset by proceeds from the dividend reinvestment program, which was reinstated in September of last year.

I wanted to take a moment to discuss a couple of items that affected our financial results in the quarter and will also impact results for the second half of 2021, namely the bearing issues at North Sea, one and our decision to unwind the ATX hedges that Gemini.

First in North San Juan as Mike outlined in his comments Northland is proceeding with a campaign to replace the rotor shaft bearings on all turbines, which has already started and expect it to continue in phases through 2023.

As a result of this replacement campaign, there may be instances, where to your guidance may need to be curtailed potentially leading to lost revenues during those periods.

Current estimates and projections the potential loss in revenue in 2021 is currently expected to be approximately $11 million.

We continue to assess the potential impacts from this issue in 2022, and 2023 and we will provide updates as we issue guidance for next year.

The total estimated capital cost of replacing all of the turbines is 65 million euros. The majority of this cost will be covered by the remaining $54 million Euro warranty bond received in 2020 as part of the settlement relating to the outstanding warranty obligations of North sea ones turbine manufacturer the.

The impact you know often will be at its 85% proportionate interest.

Turning to Gemini and our ACX hedges as communicated last quarter, we elected to unwind. The hedges we had in place for Gemini that were originally put in place during the second quarter of 2020.

These hedges were intended to protect against the continued decline in the ATX price below the 44 euro per megawatt contracted price that was experienced.

Covid 19 demand factors.

Given the strengthening in the PX price earlier this year as economic activity rebounded and to limit loss FTE subsidy revenue due to the higher Aps price in the second quarter of this year, we entered into offsetting derivative contracts essentially crystallizing the losses as a result, Northland incurred costs amounting to 25 million.

For the second half of $2021.19 million for $2022.9 million for 2023, there will be no further losses beyond these amounts related to the hedges.

In order to minimize further fluctuations in market revenue in Gemini subsequent to year end, we purchased Aps contracts against the majority.

Of our exposure for the remaining of 2021 and 2022 to protect our cash flows should the PX price fall below the S E four place.

These put options were entered into with the strike price of approximately equal to the FTE floor and only became commercially viable in 2021 at the apex increased substantially above the S E. Four.

The total cost of the puts was approximately 2 million euros. These puts where at a relatively low cost given the widespread between the current ATX price of approximately 100 euro and the FTE for Fyfe.

We intend to enter into further contracts as appropriate for future years in accordance with our risk management policy.

Turning to our balance sheet and liquidity North mine remains in a very strong position with ample liquidity to help fund our identified development initiatives.

At the end of the quarter, we had access to $1.4 billion of cash and liquidity comprised of $838 million of proceeds under our syndicated revolving facility and $607 million of corporate cash on hand, following the completion of the share offering executed in mid April.

On August 11th $522 million of cash was used to fund the purchase price consideration for the Spanish portfolio.

We continue to look at opportunities to support our growth initiatives by raising capital from existing assets and have executed on a number of financial optimizations that have provide increased liquidity for the company at an attractive cost.

Subsequent to June 30th, we restructured and Upsized, our senior debt so of our Canadian solar facilities that resulted in a one time distribution of $29 million and a reduction of the weighted average all in rate from five 4% to four 4% year to date, we have raised over $100 million of liquidity, you're financing optimizations of existing.

Assets to fund growth.

We are currently working on refinancing efforts for <unk> to extend and upsize the refinancing in order to reach and also to restructure the financing to help manage our foreign exchange exposure, we expect to complete the financing this year.

In February we announced our green financing framework to allow the company and our subsidiaries to issue Green bonds.

Corporate and project level loans and other financing instruments for eligible green projects.

The focus of the green financing initiatives, it's a support climate change mitigation efforts by developing and investing in renewable energy infrastructure assets that increased green energy production.

This quarter, we successfully executed our two first screen financings with onshore wind projects in New York City, and the Elio Solar project in Colombia, the latter being one of the first renewable project financings in the country.

Both projects secured green construction financings.

Which have been designated as such by their respective lenders.

In regards to our financial outlook for 2021, we expect to achieve the low end of our guidance issued in February for both adjusted EBITDA and free cash flow per share.

For adjusted free cash flow be expected range has been revised.

This is primarily as a result of the historically low wind resource experience at the offshore wind facilities. During the first half of the year and the estimate of lost revenue at North Sea. One this year. If you do the rotor shaft Assembly replacement.

This updated expectation assumes an offshore wind resource in the second half of 'twenty. One that is closer to long term averages and also reflects a higher level of development costs being capitalized on projects that have met our capitalization criteria.

Consequently, the capitalization of these development costs has resulted in lower expense growth expenditures this year compare to your original expectations.

The expectation for adjusted free cash flow for <unk> per share for 2021.

Now in the range of $1.60 to $1.70 per share. This is a change from the original guidance range of $1.80 to $2 per share issued in February as a result of the same factors impacting free cash flow with the exception of changes in expense growth expenditures as previously discussed.

Year to date, we have spent a total of $137 million two advanced development projects, including $30 million expense through the P&L and $107 million of Dev ex capitalized through the balance sheet, the latter of which relates to the Baltic power High long, New York Wind and Elliot.

These projects position us well for strong future growth and long term cash flow sustainability and diversification.

With that I will now turn the call back over to Mike for his concluding remarks.

Thank you Pauline 2021, thus far has presented some challenges but it also has presented a large number of opportunities to grow our portfolio enhance our development pipeline and our competitive positioning.

We continue to work tirelessly to ensure we position ourselves as a strong competitor securing positions in key markets to support our future growth within offshore wind, but also establishing and growing our presence in onshore renewables with their Spain acquisition and U S onshore wind projects achieving financial close this past quarter.

This concludes our prepared remarks, we'd now be prepared to happy to take questions from our analysts. Please open the line for questions.

Thank you ladies and gentlemen, if you would like to register a question. Please press star one on your telephone. If your question has been answered and you would like to withdraw your guidance station.

The bounty if you are using a speaker phone. Please lift your handset before answering your request.

One moment please for the first question.

Our first question comes from the line of that.

Taylor.

Sundar became called.

Please proceed with your question.

Hey, Thanks for taking my questions here.

Wanted to start off on the offshore Mike you mentioned in North Sea conditions are at historic lows.

Can you provide some color on what gives you confidence. These conditions are more short term versus structural given I mean, we're starting to see extreme weather patterns right, such as warmer weather, which could reduce capacity factors going forward.

Yes, I mean, if we are.

If we dial the clock back this time last year, we were coming off.

A really strong first half of the year and a particularly strong first quarter last year, which I think was one of the strongest that we've ever had in terms of north sea.

Production from our North sea facilities.

So I think it's just the normal fluctuations.

Wind we.

Give guidance and budget on a P 50 basis, but theres, obviously P 90 years and Theres a P 10 years as well and P 19 quarters in P 10 quarter. So.

I think we've seen a certainly a weak first half, particularly weak first quarter.

We.

Don't see anything as you say that's it.

As you are asking that is structural in terms of the energy or the wind resource in the North Sea.

Great. Thanks, Mike and then maybe a question for you Paul on the bearings issue.

Looking at the numbers from your impact for the first eight bearings at $11 million or so is it fair to use that as a rough estimate for the remaining 46 or are there some significant differences in the bearing the types of turbines distance or other things that we should be thinking about how that revenue impact could be different yeah. The biggest unknown variable is weather.

And that's what makes it hard to provide an estimate today I think we'll have better ranges as we move forward with the current replacements.

To have a better replacement a better estimate of of you know.

Future, but even then it will be subject to two conditions.

I'd say the only thing I'd add to that is it I mean, what our team and in Hamburg has done.

My view a very good job of it is is getting on this very quickly.

So both in terms of de rating.

Our volumes that that showed the the initial impact of the of this issue with the main bearings.

And so that allowed us to.

I think extend their production and their performance longer and make sure that they were able to operate through.

Through the winter.

The highest productive productive quarter.

And they've also moved quickly.

To replace the most effected turbines the main bearing assemblies on the most effective turbines this year, which are in.

In terms of kind of procurement activities and securing vessels.

From an offshore wind standpoint, and it is very rapid so they've been able to I think mitigate the negative impacts of this.

Well and there are already well ahead of the game in terms of procurement activities and planning.

For the 2022 campaign.

Great. Thanks, Thanks for that color and then last one if I may with Mike being closed.

View on timing changed at all in finding new onshore growth.

Where youre seeing unexpected headwinds here in your offshore business over the next two years and obviously there is a long term delay from EBITDA on your development backlog I'm just wondering if your timing on finding bolt ons in Spain or doing other acquisitions on the onshore front.

No I mean, we're moving along.

Both.

Kind of our target markets in the northeast of the U S and Spain. We've previously disclosed that we've got an interest in onshore renewables in select eastern European markets as well. So we are actively pursuing opportunities both development and potentially M&A opportunities in each of those.

Each of those three areas right now as well as in Colombia to and we referenced.

The first project that we've.

Brought to construction in Colombia <unk> project.

Great. Thanks for taking my questions.

Thank you.

Yeah.

Our next question comes from the line of real appointment with National Bank. Please proceed with your question.

Good morning, everyone.

Good morning, Rupert, it's getting back to the bearing repairs that north sea can you explain the the warranty situation there and how the cost of the repairs will flow through the balance sheet.

North London following your warranty settlement.

Yes, let me start and then I'll hand, it off to Paul in so.

When sending.

Went insolvent I guess about a year and a half ago.

They we are we had already bought.

Let me dial back even further when we.

Entered into the turbine supply agreement and the service contract with ambient originally for the North Sea one project.

Team that negotiated that made sure that there was a.

Bond put in place to backstop.

<unk> warranty incentive.

Service commitments.

Under the service contract that went with the turbine sales. So that's I think was looking backwards that was a prudent move.

When <unk> went insolvent.

We were able to secure the funds from that that bond.

And they were repatriated to ourselves and repatriated to our 15% partner on the project <unk> small portion was left within the project as well.

So the majority of the cost to replace the main bearing assemblies over the next call it year and a half.

We will be covered by the proceeds of this bond that we've that we've received those funds are with Northland now.

Maybe we'll turn to Pauline describe how it works its way through our financials state yeah. So we will we will capitalize the new parts.

At their estimated long term use.

Useful life, and we will accelerate amortization the old parts between which have a useful life now of approximately zero to two years. So that's how they will be treated on balance sheet on P&L and then within free cash flow as Mike discussed, which which mirrors the actual and cash.

Is that the 65 million euro.

Replacement costs will be offset mostly by the 54 million warranty bonds, but there will be an $11 million at euro shortfall to our free cash flow from now until 2023 and.

With that as I said, the proceeds are not sufficient to cover the full replacement amount over and above that.

There will be at lost revenues in the period as they are replacing.

And Rupert.

That's been the key to how we've responded to this situation is.

To make sure that we got ahead of it as much as possible.

Order to minimize the loss revenue because thats, obviously whats not going to be covered by the bond proceeds so bye.

Moving forward in and replacing eight of the most effective turbines. This year to ensure that they can then go back to normal operations.

Before the end of this year and indeed before the end of September.

It is important so that we can capture all of the.

The higher wind resource through through the last quarter of this year and then secondly, as I said.

Said earlier to mat moving forward with the procurement for 2022.

As quickly as we could and also securing vessels so that we can optimize that.

The weather Windows in 2022 to get any replacement is done as quickly as possible and the final piece was.

Being very proactive.

In in de rating.

Our bonds that are showing any significant impact so that we can extend their life until we have the weather window to actually do the replacement.

Okay, that's great color. Thank you.

Secondly, looking at high long. So you are going to move to larger turbines. There can you give us some color on the impact that could have on the yield and the economics of the project.

Well it certainly enhances the.

The project overall U.

Need obviously fewer locations.

It doesn't necessarily increase the overall capacity.

I think it made.

By a small amount reduced the capacity just in terms of how you work out the design.

But in the long run I think.

It reduces the risk.

On construction so you have.

A much smaller number of locations, where we have to construct so that helps with the again on construction with weather windows.

Just reduces your risk and construction having fewer.

Jackets to install and fewer turbines to install.

And the same holds true for operations moving forward on the facility.

It significantly reduces your risk of downtime.

Sent that you only have to go out too.

Roughly 60% of the turbines that you would've had to go out too.

Otherwise so those are the two key benefits.

The economics in the project.

I mean, we obviously had been planning to move forward with this larger turbine for some time, but we've been working with.

Through the EIA process, the environmental assessment process in Taiwan to get the formal confirmation on that.

In terms of how we've been modeling a project we've been we've been modeling the project with this larger turbine for some time.

Okay and on the turbine can you give us an update on.

What you might be seeing.

Inflation in construction costs.

I have to have an update.

So we I mean.

If you're speaking to commodity price steel costs, Yeah of course, yeah hearing some turbine manufacturers.

Manufacturers talking about cost pressure or are you starting to see that now.

So I mean, we we get regular updates we are a preferred supplier agreement with.

Siemens Gamesa on the projects. So we've got an iterative process almost like an open book process, where we are.

At certain milestones will receive new new updates on pricing and then.

We continue to work with them to optimize the.

The.

The procurement through their supply chain in Taiwan.

We have certainly seen some impact in terms of increase in steel prices, but we are not locking in steel prices until financial close which as we said in the.

The introductions.

Sectary remarks is not till the second half of 2022.

What we are seeing as is forecast indicating that.

The expectation is that steel prices for most SEC.

Hector observers will decline and that you've seen kind of a.

Somewhat.

Short term increase in steel prices as demand recovers quickly in a number of markets post Covid lockdowns.

But the capacity.

<unk> was not able to keep up with that sudden increase in demand, but now youre seeing more capacity come online. So we would expect to see prices.

Returned to more more typical levels over the next six to 12 months and as I say, we're not looking to close financing for another year.

Thank you I'll leave it there.

Our next question comes from the line of David <unk> with Raymond James. Please proceed with your question.

Thanks. Good morning, everyone. My My first question just on the North sea to them I'm curious.

If there's just any update there I realize that the the auction hasn't happened yet, but I believe you hired consultants to optimize.

The layout I think I read that somewhere just curious if you if there've been any changes to that project as you approach the RFP.

I mean, what we're saying what we're indicating in the in this quarter is that we intend to exercise our stepping rights to exercise our stepping rights, we need to bid into the procurement.

That's that's why you're reading, obviously that we're taking all necessary steps to put together a solid.

Fitness solid the submission into the procurement.

So either our submission will be.

Vessel and that procurement or we will exercise our step in rights.

Which will allow us to step into what other bid may have been may have been successful in that procurement.

Okay. Great. That's helpful. Thank you and then maybe just one other one for me.

On the outlook in Colombia for generation I believe there's a there's an RFP upcoming there in October.

I'm just curious if you if you.

If you have any thoughts on whether or not you may participate in that.

We're certainly tracking what's going on in Colombia, I mean, it's it's an exciting market for renewables not just over the next two or three months, but over the next.

Five or 10 years, its the one market in Latin America, where there really hasn't been a significant build out of wind and solar but that as you point out.

And Theres procurements being put in place and there is also demand.

For renewables from.

Our corporate.

And customers and municipal.

Customers as well so.

We're looking at a number of opportunities, but we don't have anything to add.

Indicate about that particular procurement at this point.

Yeah.

Okay. Thanks for that Mike I'll get back in queue.

Okay.

Our next question comes from the line of Nelson Me from RBC Capital markets. Please proceed with your question.

Great. Thanks, and good morning, everyone.

First question just relates to the wind resource and so obviously it was a weak first half, but when I was looking at the.

Q2 production it seems like Gemini and North Sea. One we're below average but debut was about 8% above the long term average, but was there something specific going on a debut or like all three facilities are roughly in the same area right.

Yeah.

Theyre all in close proximity to each other and have the same.

The same wind regime.

With respect to.

They do I'll, just turn it over to we're seeing loses wired he's got the details on that.

Yeah. So if you recall Q2 last year, there were some unscheduled grid outages at Deutsche Boot, which we are not seeing this year, so hence you're seeing a higher level.

Year over year.

Dutch group because of that grid outage, but otherwise everything else is it's the same across all three facilities.

Okay got it.

And then just a quick one on the bearings replacement at North Sea. One so I guess big picture, how long did bearings typically less like was this something about would've been replaced.

Major maintenance, maybe like 10 years down the road, but they have to be replaced now or could you just give a bit more color in terms of.

That was expected versus what was actual yes. They certainly would have been expected to last.

At least for 10 years. So it is a.

Certainly.

A fabrication or a design error.

The.

There is a.

We are pursuing a detailed root cause analysis.

But as I said earlier, we've mobilized.

Fire to getting all of the detail and all the.

Information from that root cause analysis, because it's abundantly clear to us already.

That the that there is a defect across all of them and the key Keith are responding to this Nelson is is to make sure that we minimize.

The lost revenue in terms of the the capital cost of the replacement is Pauline said the majority of that.

Will be covered by the bond proceeds the key is to minimize the loss revenue and that's why we moved so quickly.

To replace them, but certainly.

They should not have failed this early in the process.

Okay got it and then did that one point to that.

Without going into a lot of detail on it we do have high high degree of confidence on the replacement design.

Based on what we've that we've seen this design used on other.

Turbines other sand and turbines that had been in production much much longer without any sign of degradation.

Okay. So just to clarify this is more than just the bearings, but it's the whole bigger.

Bigger part of the structure or when you say, replacing bearings.

Well you have to take out the whole assembly and replace the whole assembly that houses the bearings, but the.

Defect is in the coating on the bearing and which is where the degradation is occurring.

Okay got it.

And then just moving on to my next question in Mexico U.

Talked about the <unk> and.

Administrative delay in the completion of the project might get pushed into next year. So given that the facility is like physically completed could you actually produce power and sell it behind the fence or is there anything you can do while.

While the facility is completed but not see how did.

You certainly could give me in theory, you could you could produce power.

Behind the meter or in other words non grid connected energy.

Which is if we felt that there was a much longer delay.

It's probably something that we would look at but.

Given our view that we should be able to get the facility connected.

By early 2022 at this point and delivering energy into the grid.

That is the.

The best course of action in terms of getting revenue.

From the facility and having the facility.

Getting an attractive return on investment.

Okay, and so I'm not that close to the politics in Mexico, but is this simply an administrative delay or is it politics involved in like I know there's.

Okay.

There's a view that the government is not that favorable towards renewables. So there is this like a delay tactic or is this just purely admin delay.

Most of it is related to Covid 19, and so far as.

Everything has been moving very slowly.

Through both.

On land transmitted without going to the detail on just the number of permits.

Permits required to get the project into service.

Everything has moved slowly because a number of government offices would shut down for extended periods of time.

And so you wouldn't you we were.

Laid for a significant amount of time.

Getting getting some of those permits through.

I think we're close on on one of the final permits that we need but.

It will still take a bit longer to get that got through the whole process. So most of it is related to just the machinery.

Government slowing down due to Covid shutdowns.

I think what you're you're.

Certainly I mean picking up some of the pronouncements from the governments about renewables or from particularly from the administration or the president about renewables I would say what that does is it slows down the machinery of government a bit more in terms of the.

The bureaucrats in terms of making sure that all Ts are crossed I'll dive sort of audit on any permit.

But it is nothing in our view more than that is about 30. Other projects that are in the same sort of situation as we are and we know a lot of these developers their Canadian U S developers that we know and.

And funds that were familiar with theyre going through the same sort of same sort of process. So a number of them have come out the other end of it too.

So just a just a matter of if it takes longer than.

Then it should.

That's the way it is.

Okay, and then just one last question before I get back in the queue.

In terms of the New York wind projects like after so you have some attractive bridge debt in place.

Will there be any longer term project level debt. After the project is completed or will it just be tax equity.

No. We are looking at once the surplus to we've got that plus a two year tail on that construction financing so you'd be looking to do right. Now the plan is to do a 20 year bond takeout and on those projects, it's a matching tenor to term financing.

Got it thanks, a lot I'll leave it there.

Thanks.

Yeah.

Our next question comes from the line of Sean Stewart with TD Securities.

Proceed with your question.

Thanks, Good morning.

Paul in a question on refinancing opportunities you touched on the progress for the solar facilities and plans for <unk>.

Do you have any other plans or opportunities across.

Other parts of your portfolio and look at some of the legacy <unk>.

Canadian wind assets it looked like they have higher cost debt or are there more opportunities across the portfolio for refinancing.

Yes, there there are other opportunities for refinancing I think it's still a bit early but we weren't that we would help them.

By end of this year early next year to have a good better position on them.

Where there would be potential to optimize generally I would say you know market conditions have improved quite significantly for offshore wind some of it the Ts and CS that we would've negotiated a few years ago have now materially improved.

So I think there are opportunities for us, but probably a bit too early to say at today.

Okay. Thanks for that.

And.

The broader one gigawatt target for U S capacity.

Mike can you give us some context does that all come from additional prospective projects in New York do you have broader growth aspirations beyond that states does M&A factor into that target at all any detail you can give us on that that longer term objective.

He has brought in New York I mean listen we like New York, a lot because there's going to be a lot of growth. The next few years I think is a good they're going be procuring somewhere in the order of three gigawatts a year for the next several years.

And they've got nice good long term 20 year contracts, which is playing just mentioned would support a bond financing nicely to a 20 year bond financing so from from our standpoint. It's a those are those are those are good good projects good investments for Northland.

But beyond that the other markets that we'd be looking at would be.

New England certain areas of PJM.

We have looked at California before.

So generally markets, where we believe we can secure.

Long term contracts are either government backed or with utilities, some cases, C&I, but generally you're looking for.

Markets, where we can secure.

Long term contracts to underpin our investments, but those would be the main markets that we're looking at we'd be looking at.

Principally development, but some some M&A is certainly possible.

Understood. Okay. That's all I have now thank you.

Thank you.

Our next question comes from the line of Ben Pham with BMO. Please proceed with your question.

Alright, thanks, good morning.

On your pocket.

You referenced the Romania.

And here.

Your earnings release, and I'm not sure you mentioned this earlier in my remarks, but can you.

Remind us.

What your positioning is in that region.

Yeah, I mean, what we've disclosed before in.

Some of these calls is that we are intra.

Interested in eastern Europe for renewables overall, so we moved forward with offshore the offshore wind project in Poland as you know Baltic power, which we talked about today and that we also have interest in certain and in onshore renewables and in certain markets in eastern Europe, and its not all of that.

Sure.

Mrs.

It's simply that the those are the markets in Europe that are slowest or the latest to decarbonize and so we think there will be some good opportunities, particularly in EU countries.

For renewable investment going forward and renewable development going forward.

That's really all we've talked about.

Okay. So you say you actually have some development there.

Or is.

Is the smart thing or would you want to get into.

Yeah, I mean any it certainly was.

Aside from Baltic power of course, any onshore development would be at a relatively early stage that we'd be looking at.

Participating in.

And in those markets.

Referred to.

Certainly in our disclosure too.

Looking at Romanian opportunities, but I'd say those would be at an early stage.

Yeah Okay.

The the volatility in OXXO when in the quarter.

Certainly.

You've been a renewable business for a long time that when you look through all of this investment through it.

Do you think about.

Your exposure there at 60%.

This makes you rethink about sources of cash flow your diversification strategy here or is this more.

This is part of the business that's normalized all of this and nothing's changed from that perspective.

If you could I got to apologize if you could repeat the.

If you haven't got very good sound this whole call on my my ear. So could you repeat the question again.

Yeah no problem.

Curious on your thoughts on.

The sources of your cash flows and your willingness to maybe a salary diversification in the context of.

Of your exposure to offshore wind in the North Sea and the volatility we saw this quarter Oh.

Oh, Yeah for sure I mean, so so what we what you've seen and we've talked about this.

On previous calls is.

We've been making the deliberate steps to.

Diversify ourselves. If this is your question I think it diversifies our ourselves.

Away from the concentration that we have in offshore wind in the North sea. So the urge to investment in Colombia was was that was one of the.

Uh huh.

The benefits of that of that transaction that helped to diversify ourselves away or lessen our concentration.

And then of course come 2025.

We would be seeing a high long begin to.

Deliver.

Deliver cash flow and so that will further significantly diversifies it herself.

Away or at least lessen the concentration and the same thing why we are developing and are.

In New York State as well, both wind and also doing some early stage solar development. So so no.

The the overall are in terms of our development focus it is too.

Diversify ourself.

Globally, and and minimize any concentration risk, which right now our concentration or exposure.

Concentrations, obviously in the North sea, so we we'd be moving to lessen that.

Maybe maybe a detailed question on North Sea and India.

Accounting.

The.

When you got the warranty.

Yeah, I think that's starting to amortize some of the.

The benefit from that.

The Opex our.

Our opex costs. So my question now is.

Are you changing the accounting policy on either your salary.

That benefit and is.

I just want to revisit of your your off back on maintenance for North Sea since Youre doing it yourself now.

So I'll answer the first question. So it's it's not it's not a change in policy, it's more a change in estimate.

It's a prospective you out you know we would've thought we would've amortize that bonds are the proceeds over nine years and now we're amortizing it over a shorter period and on the Opex on the Opex I mean this is a I mean.

It was not a strategy as you know to self perform.

The turbine maintenance on North Sea one.

We were thankfully moved quickly to hire all of the <unk> impacts and we're able to take over the turbine maintenance very quickly with the insolvency of ups ambien and we've actually had a higher availability than I think we had with nbn prior to that until this issue with the main bearing assembly surfaced, but we would.

I don't think we would have been able to actually respond as quickly as we have to the issue and had such visibility if we werent.

Self performing on the turbine maintenance not to say, if we could we'd be looking to do that as a strategy going forward, but I'm just saying it.

It's one of the benefits of a circumstance that we didn't think we'd find ourselves in it too, but I think it's served us well in terms of being able to respond quickly and it will minimize significantly any revenue impact from.

From this this failure.

Okay, Great and Paul ASIC to clarify the celebration.

Benefit to create parcel of that is that in your in your guidance.

Yes, okay.

Okay got it okay.

Thank you.

Our next question comes from the line of Mark Jarvi with.

Yeah.

Please proceed with your question.

Thanks.

I want to come back to the long term average number you guys disclosed for offshore wind I think it's more of a of the trailing performance.

So maybe not quite LTA and when we think about it how have those assets like Gemini and North Sea. One would have been operating the longest compared in terms of average production versus maybe the PK from forecasting ahead.

At the time of Sidoti.

So what we do on all of our facilities as a renewable facilities certainly is at year three.

We take all of the.

Operating data that we have.

And including.

Any wind resource data that we have that we would have from the animal monitors that are attached to the turbines themselves.

And.

Combine that with an update of the long term data that you have from a reference that we would have from the reference.

Met mast out in the North Sea.

Pull it altogether with not getting independent energy and I E. Our independent engineer to pull it all together and then we recast the energy yield estimate for the facilities moving forward. So we've done that adjustment on Gemini.

We've done it on North Sea, one and we will do that at year three on Deutsche Boot.

What we've seen is on both Gemini and North Sea one is it.

Disclose before a modest reduction in the long term energy yield estimate for each of the facilities.

Uh huh.

But the one thing to note is that from from Gemini and North Sea one.

Whatever that modest reduction was it was even less on north sea, one and we expect it will be.

Even less and we'll see if it has any if there's any adjustment on Deutsche booked which points to the fact that then you would have picked up some of this from from oral stat and others disclosures at the just the science and the <unk>.

Methodology behind energy yield assessments on offshore wind facilities has continued to improve as more facilities have been deployed.

Principally.

In the North sea and around U K, obviously, that's where the first deployment of offshore wind has been over the last 15 years, but the but the methodologies improve significantly because exactly the same thing that happened with onshore wind.

About 10 years earlier, just given when when most onshore facilities started getting coming online so.

So that's that's the short story is that the.

Our view on the our ability to accurately predict the.

And forecast the production from the facilities improve significantly after that three year adjustment.

He has made and on the kind of.

The investment in each one of those facilities.

While that on those two facilities that adjustment with it was a modest downward adjustment on the energy yield there have been other enhancements on the facilities, including refinancings and others enhancements that we've been able to do.

With facilities in <unk>.

Services revenue renegotiation.

Renegotiation of service contracts for example that have enhanced the value of those investments. So there's been puts and takes.

And then just coming back to the nordson to anything you will bid.

See where other better show up if there wasn't like a zero subsidy.

I really feel now of where the corporate PPA market his or her broadly just longer term hedges.

If anyone to contract out.

With the step down is there a subsidy there just maybe update us in terms of alternatives either win or if you don't what other alternatives are now for I think two.

Yeah Yeah.

Certainly we are actively looking at all possible outcomes given the fact that we we certainly know what their economics will be on our bid but were looking given that we've indicated that we intend to step in.

We only have come to that decision after analyzing all possible outcomes, including as you say is zero subsidy bid, where we would be marketing the energy.

Ourselves along with our partner on those projects RW <unk>.

So yeah, we've assessed all options and there is a.

A robust market.

Corporate offtake market for renewable energy and in Europe, which has only improved over the last over the last year.

Okay and then my last question is just if you.

We did secure in order to kind of about the Tanzania for Baltic power when you got to buy ethical in Taiwan at the end of next year would you be able to put through a commitment.

However on all of those projects to try to get improved pricing or would that not quite lineup.

Maybe one other comment on turbines.

Say that again put through a commitment I missed what you said.

If you had multiple site you might get better pricing from something like an ASR.

Yes.

You're in a position at that point, they need to be able to procure turbines for Taiwan, northern tier and bought the power.

I would put.

But I'd put it this way I mean, we obviously have different partners on each project and they are different.

[noise] timelines.

So I'd put it this way.

Our our position and in negotiations with turbine vendors and our ability to get attention from turbine vendors is significantly enhanced by the volume of our offshore wind pipeline and the.

Certainty of our that our pipeline will be converted into <unk>.

Actual operating projects. So every.

Large project that gets added on.

Enhances.

Our competitive position.

With the three main offshore wind turbine vendors.

Got it that's all the questions I had thanks, Mike Thanks.

Thanks Mark.

Our next question comes from the line of Matt You bet on wood.

With <unk> capital please.

Especially if that's your question.

Hi, good morning.

Just wanted to follow up on a question about nordson to but let's say it doesn't end up being a zero subsidy bid, what's an acceptable level of motion merchant exposure if any for you for that answer.

Yes, I mean, our intention would be to in some form to contract.

The energy from that from that facility. So zero subsidy bid and there is not any revenue coming from the German state or the German regulator.

Regulator, then we would look to secure.

Secure an off take agreement of some form within an industrial or a.

Corporate off taker.

So in some form we would look to contract the energy in order to underpin that investment.

Okay.

And just on Poland.

But maybe the next steps for that project.

So the approvals of the contracts on that.

More broadly thinking about the.

Plenty of twenty-five auctions like how early do you need to start thinking about that I'm, assuming you do want to participate in that auction.

Well, so on Baltic power itself.

The one point you were up to one two gigawatt project itself.

Our project is actively working through.

Permits procurement.

Moving towards financial close in 2023.

Which is really not all that all that far away. So call. It 18 to 24 months away.

So there's a kind of approach to that scale. There's a lot of activities you can imagine going on right now with the.

The team that we've assembled to deliver that project.

On the.

Future procurements like the 2025 year 2025 auctions that have been announced for further offshore wind capacity in Poland.

Haven't.

Made any decisions or any disclosures on what we'll do around that yet.

Okay.

And just last question on Poland I guess.

So it seems to think about more offshore wind is it also too soon to think about more onshore renewables.

I think yeah, I mean, I think I'd go back to what I said earlier is that that in general.

We would see a significant build out of renewables in eastern Europe.

It's eastern Europe overall has generally lagged.

Western Europe.

And in deploying renewables, particularly northwestern Europe. So we think there's going to be a significant deployment of new renewables, both offshore wind and in.

In onshore renewables. So it's a it's an area of interest for Northland.

Okay got it thank you.

Yeah.

Mr. Crawley there are no further questions at this time I will now turn the call back to you.

Okay, well, thanks to everybody for joining us today, we're going to hold our next call. Following the release of our third quarter 2021 results in November and.

In the meantime, we thank you for your continued confidence and support.

Ladies and gentlemen that does conclude the conference call for today. Thank you for participating and have a pleasant thing.

[music].

Ladies and gentlemen, thank you for standing by welcome so they've lost landfill where conference calls to discuss the 'twenty 'twenty one second quarter result.

During the presentation, all participants will be in a listen only mode.

Star Wars, we will conduct a question and answer session. At this time. If you have a question. Please press star one on your telephone.

At any time during the conference you need to reach an operator before as far as you know I saw reminder, this conference is being recorded firstly, Oh, that's swell 'twenty 'twenty one up suddenly.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline Eileen Jang Dani Chief Financial Officer, and Y seem Kallio senior director of Investor Relations and strategy.

Before we begin Northland management has asked me, it's sort of mindless nice, but all figures presented are in Canadian dollars.

As a caution that certain information presented and responses to questions may contain forward looking statements.

Does that include assumptions and are subject to various risks actual results may differ materially from management's expected or forecasted results. Please read the forward looking statements section in yesterday's news release announcing Northland Power's first of all.

And be guided by its concerns and making investment decisions or recommendations that release is available at www. That's Northland forward that's cool.

I will now turn the call over to Mike Colby. Please go ahead.

Thank you operator, and good morning, everyone. Thanks for joining US today. This morning, we will review, our second quarter 2021 financial and operating results.

Following our prepared remarks, we will look forward to taking questions from analysts.

To kick things off we want to reiterate that the health and safety of our employees and our stakeholders comes first so diligent planning and rigorous adherence to health protocols. We have maintained high levels of facility availability delivering essential supplier of energy to consumers and businesses in Europe, Canada and Colombia.

First looking at our financial results for the second quarter, we reported adjusted EBITDA of $203 million compared to $227 million in 2020, representing a 10% decrease.

Our free cash flow of $6 million was 68% lower compared to $17 million in 2020 on.

On a per share basis free cash flow was three cents this quarter compared to <unk> 2020.

Financial results in the quarter rent package by the weakness in the wind resources at our offshore wind facilities year to date, we have seen consistently low wind resource with generation trending well below long term averages.

Fact, this has been one of the weakest periods on record for offshore wind in the North Sea.

Component design issue has been identified on a number of wind turbines, leading to premature failure of the rotor shaft bearings, thus requiring replacement.

Northland, we'll undertake a broader replacement campaign starting in 2022.

Sending into 2023 to replace the rotor shaft Assembly on all 54 turbines.

Pauline who will provide a bit more detail on the financial numbers later in the call.

Despite these issues impacting our near term financial results.

Northland has a growing global footprint positioning.

In key renewable markets around the world.

This portfolio aligns well with our priorities and helps diversify our asset base by adding high quality regulated cash flow to our business.

Furthermore, the acquisition expands our presence in Europe, and establishes Northland as a top 10 renewables operator in Spain.

In Poland, we progressed with our partner on the Baltic offshore Wind project, which was awarded a 25 year contract for difference off take agreement with the Polish government at a rate of three 9.39 to $319 six.

Laski per megawatt hour or about 70 euro per megawatt hour.

Yes.

We expect to reach financial close for Baltic power in 2023 with commercial operations in 2026, which fits nicely with our other offshore wind projects in Asia.

Turning to our other development and construction projects I wanted to provide a brief update on the various projects we have underway.

First touching on our New York wind onshore projects in the second quarter two of the projects ball Hail and bluestone successfully achieved financial close both projects have secured green financing in the form of a non non recourse project loans tax equity bridge and letters of credit with a consortium of lenders.

Totaling U S 308, $81 million or about $476 million Canadian we.

We expect to secure permanent tax equity investments for the two projects in 2022.

Construction is underway with commercial operations for the two projects expected by late 2022.

Our third 100 megawatt New York onshore wind project, which has embedded battery storage highbridge is under active development.

Hello else represents north of its first development project in Colombia, which capitalizes on apps is grandfathered rights, allowing <unk> to expand into energy generation in Colombia, Helios will serve the power needs of nonregulated municipal commercial and industrial customers.

<unk> allows high long to complete further field work to improve Linda and generation yields for a more efficient and productive lay out over and above the benefit of this larger turbine.

The amendment is a further step forward following the confirmation of the industrial revenue.

Relevance plan or the IRR that the project received in April which sets out Northland commitments to local supply chain and procurement, making the achievement of a significant making the achievement of a significant milestone for the project. These milestones further advanced the project closer to financial close, which we expect to occur in the second half of 2022.

Sure.

The high long team continues to make progress towards securing corporate offtake power purchase agreements for the remaining 744 megawatt allocation secured under the auction process.

Alicia the physical construction of the solar facilities is complete however activities relating to the Energizer <unk> of the project continues to be delayed.

In order to achieve commercial operations that facility requires energizer <unk>, followed by testing, but due to administrative backlogs, resulting primarily from Covid 19, the amortization and testing have been delayed.

Efforts to achieve <unk> continue with Northland working with Mexican authorities in other private power producers, who are experiencing similar issues.

While timelines remain uncertain Northland expects commercial operations at La Lucha to commence in early 2022.

To secure commercial offtake project financing are expected to be finalized after commercial operations.

Thank you, Mike and good morning, everyone last night Northland Power released operating and financial results for the second quarter of 2021.

In the quarter, we generated adjusted EBITDA of approximately $203 million, which is a decrease of $24 million or 10% from the $227 million, we generated in the second quarter of 2020.

The main factors leading in the year over year decrease was the lower wind resource at the offshore facilities and lower contribution from our efficient natural gas facilities due to a planned maintenance outage at north Battleford.

With respect to free cash flow northern generated approximately $6 million in the quarter. This was a decrease of approximately $12 million or 68% compared to the prior year.

These items were offset by approximately $10 million of contribution resulting from lower net financing costs due to lower interest costs on our loan facilities.

For adjusted free cash flow, we generated $22 million in the quarter compared to $30 million in the same periods a year ago.

The factors, leading to a $16 million decrease by the same factors impacting free cash flow with the difference being lower growth expense growth expenditures in 2021 of approximately $4 million.

Just to remind everyone Northland adjusted free cash flow excludes growth related expenditures from free cash flow.

Management believes adjusted free cash flow provides the relevant presentation of cash flow generated from the business before investment related decisions.

And there's a meaningful measure of north <unk> ability to generate cash flow after ongoing obligations to reinvesting growth and fund our dividend.

On a per share basis. These figures translated into free cash flow to <unk> in the quarter compared to nine since last year and adjusted free cash flow of 10 cents in the quarter compared to 19 last year.

Our rolling four quarter free cash flow and adjusted free cash flow payout ratios Cas calculated on the cash dividend basis.

We're 70% and 56% respectively. This compares to a ratio of 62% and 54% for the respective prior year periods.

First in North San Juan as Mike outlined in his comments Northland is proceeding with a campaign to replace the rotor shack bearings on all turbines, which has already started and expect it to continue in phases through to 2023.

As a result of this replacement campaign, there may be instances, where to your guidance they need to be curtailed potentially leading to lost revenues during those periods.

Current estimates and projections the potential loss in revenue in 2021 is currently expected to be approximately $11 million.

We continue to assess the potential impacts from this issue in 2022, and 2023 and we will provide updates as we issue guidance for next year.

The impact your northern will be at its 85% proportionate interest.

Turning to Gemini and our ACX hedges as communicated last quarter, we elected to unwind. The hedges we have in place for Gemini that were originally put in place during the second quarter of 2020.

These hedges were intended to protect against the continued decline in the PX price below the 44 euro per megawatt contracted price that was experienced.

Covid 19 demand factors.

Given the strengthening in the apex price earlier this year as economic activity rebounded and to limit loss FTE subsidy revenue due to the higher Aps price in the second quarter of this year, we entered into offsetting derivative contracts essentially crystallize into my losses as a result, Northland incurred costs amounting to 25 million.

For the second half of $2021.19 million for $2022.9 million for 2023, there will be no further losses beyond these amounts related to the hedges.

In order to minimize further fluctuations in market revenue in Gemini subsequent to year end, we purchased Aps contracts against the majority.

Of our exposure for the remaining of 2021 and 2022 to protect our cash flows should the Aps Frank fall below the FTE for place.

These put options were entered into with the strike price of approximately equal to the SPE floor and only became commercially viable in 2021 as the Aps increased substantially above the S E. Four.

The total cost of the <unk> was approximately 2 million euros. These puts where at a relatively low cost given the widespread between the current ACX price of approximately 100 euro and the FTE for Fyfe.

We intend to enter into further contracts as appropriate for future years in accordance with our risk management policy.

Turning to our balance sheet and liquidity northern remains in a very strong position with ample liquidity to help fund our identified development initiatives.

At the end of the quarter, we had access to $1.4 billion of cash and liquidity comprised of $830 million of proceeds under our syndicated revolving facility and $607 million of corporate cash on hand, following the completion of the share offering executed in mid April.

On August 11th $522 million of cash was used to fund the purchase price consideration for the Spanish portfolio.

Subsequent to June 30, we restructured and upsize the senior debt. However, Canadian solar facilities that resulted in a one time distribution of $29 million and a reduction of the weighted average all in rate from five 4% to four 4% year to date, we have raised over $100 million of liquidity, you're financing optimizations of existing.

Assets to fund growth.

We are currently working on refinancing efforts for <unk> to extend and upsize the refinancing and all due to risks and also to restructure the financing to help manage our foreign exchange exposure, we expect to complete the financing this year.

In February we announced our green financing framework to allow the company and our subsidiaries to issue Green bonds.

Corporate and project level loans and other financing instruments for eligible green projects.

This quarter, we successfully executed our two first screen financings with onshore wind projects in New York City, and the <unk> Solar project in Colombia, the latter being one of the first renewable project financings in the country.

Both projects secured green construction financings.

Which have been designated as such by their respective lenders.

In regards to our financial outlook for 2021, we expect to achieve the low end of our guidance issued in February for both adjusted EBITDA and free cash flow per share.

For adjusted free cash flow the expected range has been revised.

This updated expectation assumes an officer Wynn resorts in the second half of 'twenty. One that is closer to long term averages and also reflects a higher level of development costs being capitalized on projects that have met our capitalization criteria.

Consequently, the capitalization of these development costs has resulted in lower expense growth expenditures this year compare to your original expectations.

The expectation for adjusted free cash flow per share for 2021.

Year to date, we have spent a total of $137 million to advance development projects, including $30 million of expense through the P&L and $107 million of Dev ex capitalized through the balance sheet, the latter of which relates to the Baltic power High long New York Wind and early of these.

And these projects position us well for strong future growth and long term cash flow sustainability and diversification.

With that I will now turn the call back over to Mike for his concluding remarks.

Thank you Paul in 2021, thus far has presented some challenges but has also has presented a large number of opportunities to grow our portfolio enhance our development pipeline and our competitive positioning.

Continue to work tirelessly to ensure we position ourselves as a strong competitor securing positions in key markets to support our future growth within offshore wind, but also establishing and growing our presence in onshore renewables with our Spain acquisition and U S onshore wind projects achieving financial close this past quarter.

This concludes our prepared remarks, we'd now be prepared to happy to take questions from our analysts.

Please open the line for questions.

If you are using a speaker phone please lift your handset before answering your request.

One moment please for the first question.

Our first question comes from the line of Matt Taylor of Tudor Pickering Holt.

Please proceed with your question.

Hey, Thanks for taking my questions here I just wanted to throw it all in one offshore Mike you mentioned in North Sea conditions are at historic lows.

He can provide some color on what gives you confidence. These conditions are more short term versus structural given I mean, we're starting to see extreme weather patterns right, such as warmer weather, which could reduce capacity factors going forward.

Yes, I mean, if we are.

We dial the clock back this time last year, we were coming off a.

Really strong first half of the year and a particularly strong first quarter last year, which I think was one of the strongest that we've ever had in terms of north sea.

Production from our North sea facilities.

So I think it's just the normal fluctuations.

Wind we.

Give guidance and budget on a P 50 basis, but theres, obviously P 90 years and there is a P 10 years as well on P 90 quarters in P 10 quarters. So.

I think we've seen a certainly a weak first half, particularly weak first quarter.

But we.

Don't see anything as you say.

As youre asking that is structural in terms of the energy or the wind resource in the North Sea.

Great. Thanks, Mike and then maybe a question for you Paul on the bearing this year.

The number of its premier impacts for the first eight bearings at $11 million or so is it fair to use that as a rough estimate for the remaining 46 or are there some significant differences in the bearing the types of turbines distance or other things that we should be thinking about how that revenue impact could be different yes. The biggest unknown variable is weather.

And that's what makes it hard to provide an estimate today.

Today, I think we'll have better ranges as we move forward with the current replacements.

To have a better replacement better estimate of.

Future, but even then it will be subject to two conditions.

I'd say the only thing I'd add to that is I mean, what our team and Hamburg has done.

My view a very good job of is getting on this very quickly.

So both in terms of de rating.

Our volumes that that showed the the initial impact of the of this issue with the main bearings.

And so that allowed us to.

I think extend their production and their performance longer and make sure that they were able to operate through.

Through the winter.

The highest productive productive quarter.

And they have also moved quickly.

To replace the most effected turbines the main bearing assemblies on the most effective turbines this year, which.

In terms of kind of procurement activities and securing vessels.

From an offshore wind standpoint is very rapid so they've been able to I think mitigate the negative impacts of this very well and there are already well ahead of the game in terms of procurement activities and planning.

For the 2022 campaign.

Great. Thanks, Thanks for that color and then last one if I may with Mike now it's been closed.

Are you on timing changed at all in finding new onshore growth.

No I mean, we're moving along.

Both.

End of our target markets in the northeast of the U S and Spain. We've previously disclosed that we've got an interest in onshore renewables in select eastern European markets as well. So we're actively pursuing opportunities both development and potentially M&A opportunities in each of those.

Each of those three areas right now as well as in Colombia to and we referenced.

The first project that we've.

Brought to construction in Colombia <unk> project.

Great. Thanks for taking my question.

Thank you.

Yeah.

Our next question comes from the line of Rupert <unk> with National Bank. Please proceed with your question.

Good morning, everyone.

Good morning, Robert getting back to the bearing repairs that north sea can can you explain the the warranty situation there and how the cost of the repairs will flow through the balance sheet at Northland Following your warranty settlement.

Yes, let me start and then I'll hand, it off to Pauline so.

<unk>.

Went insolvent I guess about a year and a half ago or.

We we.

We had already let me dial back even further when we.

Entered into the turbine supply agreement and the service contract with <unk> originally for the North Sea one project.

The team that negotiated that made sure that there is a.

Bond put in place to backstop.

ANV warranty incentive.

Service commitments.

Under the service contract that went with the turbine sales so thats.

I think was looking back whether that was a prudent move.

When <unk> went insolvent.

We were able to secure the funds from that that bond.

They were repatriated to ourselves and repatriated to our 15% partner on the project <unk> small portion was left within the project as well.

So the majority of the cost to replace the main bearing assemblies over the next.

Call it year and a half.

We will be covered by the proceeds of this bond that we've that we've received those funds are with Northland now.

Many alternative Pauline describe how it works its way through our financial state. Yes. So we will we will capitalize the new parts.

At their estimated long term.

Useful life, and we will accelerate amortization the all parts between whichever.

Which have a useful life now of approximately zero to two years. So that's how they will be treated on balance sheet on P&L and then within free cash flow as Mike discussed, which which mirrors the actual.

Cash.

Is that the $65 million euro replacement.

Replacement costs will be offset mostly by the $54 million warranty bond, but there will be an 11 million dollar euro shortfall to our free cash flow.

From now until 2023.

With.

The proceeds are not sufficient to cover the full replacement amount over and above that.

There will be at lost revenues.

The periods as they are replaced.

And Rupert.

Thats been the key to how we've responded to this situation is.

To make sure that we got ahead of it as much as possible.

Order to minimize the loss revenue because that's obviously, what's not going to be covered by the bond proceeds.

Moving forward in replacing eight of the most effective care volumes. This year to ensure that they can then go back to normal operations.

Before the end of this year and indeed before the end of September.

It is important so that we can capture all of the.

The higher wind resource true through the last quarter of this year and then secondly, as I said.

Said earlier to mat moving forward with the procurement for 2022.

As quickly as we could and also securing vessels so that we can optimize that.

The weather Windows in 2022 to get any replacement is done as quickly as possible and the final piece was.

Being very proactive.

In.

The rating.

Several lines that are showing any significant impact so that we can extend their life until we have the weather window to actually do the replacement.

Okay, that's great color. Thank you.

Secondly, looking up at a high long so youre going to move to larger turbines. There can you give us some color on the impact that could have on the yield and the economics of the project.

Well it certainly enhances the.

The project overall U.

Need obviously fewer locations.

It doesn't necessarily increase the overall capacity.

I think it may.

By a small amount reduced the capacity just in terms of how you work out the design.

But in the long run I think reduces the risk on construction. So you have.

A much smaller number of locations, where we have to construct so that helps with again on construction with weather windows.

It reduces your risk and construction having fewer.

Jackets to install and fewer turbines to install and.

And the same holds true for operations moving forward on the facility.

It significantly reduces your risk of downtime to the extent that you only have to go out too.

Roughly 60% of the turbines that you would have had to go out too.

Otherwise so those are the those are two key benefits in terms of the economics in the project.

I mean, we obviously you have been planning to move forward with this larger turbine for some time, but we've been working with.

With the EIA process, the environmental assessment process in Taiwan to get the formal confirmation on that.

Terms of how we've been modeling a project we've been we've been modeling the project with this larger turbines for some time.

Okay and on the turbine can you give us an update on.

What you might be seeing.

Inflation in construction costs since we last had an update.

So we I mean.

Are you speaking to commodity price steel costs, Yeah of course, yeah hearing some turbine manufacturers talking about wood cost pressure.

Starting to see that now.

So I mean, we we get regular updates we are a preferred supplier agreement with <unk>.

Siemens Gamesa on the projects. So we've got an iterative process almost like an open book process, where we are.

At certain milestones will receive new new updates on pricing and then.

To work with them to optimize the.

The.

The procurement through their supply chain in Taiwan.

We have certainly seen some impact in terms of increase in steel prices, but we are not locking in steel prices until financial close which as we said in the.

The introduction.

Sectary remarks is not until the second half of 2022.

What we are seeing is forecast indicating that.

The expectation is that steel prices for most.

Sector observers will decline and that you've seen kind of a.

Somewhat short term increase in steel prices.

As demand recovered quickly and a number of markets post Covid lockdowns.

But the capacity.

Was not able to keep up with that sudden increase in demand, but now you're seeing more capacity come online. So we would expect to see prices.

Return to more more typical levels over the next six to 12 months and as I say, we're not looking to close financing for another year.

Thank you I'll leave it there.

Our next question comes from the line of David <unk> with Raymond James. Please proceed with your question.

Yeah.

Thanks, Good morning, everyone.

My My first question is just on North Sea two I'm curious.

If there's just any update there I realize that the.

The auction hasn't happened, yet, but I believe you hired consultants to optimize.

Lay out I think I read that somewhere just curious if you if there haven't been any changes to that project as you approach the RFP.

I mean, what we're saying what we're indicating in in this quarter is that we intend to exercise our stepping rights to exercise our stepping rights, we need to bid into the procurement.

So that's why you're reading, obviously that we're taking all necessary steps to put together a solid.

Our solid the submission into the procurement.

So either our submission will be.

Vessel and that procurement or we will exercise our step in rights.

Which will allow us to step into what other bid may have been may have been successful in that procurement.

Okay. Great. That's helpful. Thank you and then maybe just one other one for me.

On the outlook in Colombia for generation I believe there's a there's an RFP upcoming there in October.

I'm just curious if you if you.

If you have any thoughts on whether or not you may participate in that.

We're certainly tracking what's going on in Colombia, I mean, it's an exciting market for renewables not just over the next two or three months, but over the next.

Five or 10 years, its the one market in Latin America, where there really hasn't been a significant build out of wind and solar but that as you point out.

And Theres procurements being put in place and there is also demand.

For renewables from.

Corporate.

And customers and municipal.

Customers as well so.

We're looking at a number of opportunities, but we don't have anything to add.

Indicated about that particular procurement at this point.

Yeah.

Okay. Thanks for that Michael will get back in the queue.

Our next question comes from the line of Nelson <unk> from RBC capital markets. Please proceed with your question.

Great. Thanks, and good morning, everyone.

First question just relates to the wind resource. So obviously it was a weak first half, but when I was looking at the.

Q2 production it seems like Gemini and North Sea. One we're below average but debut was about 8% above the long term average so was there something specific going on a W or like all three facilities are roughly in the same area right.

Yeah.

Theyre all in close proximity to each other it's the same.

Same wind regime.

With respect to <unk>.

I'll just turn it over to we're seeing loses wired he's got the details on that Hey, Nelson.

Nelson, Yes. So if you recall Q2 last year, there were some unscheduled grid outages at Deutsche food, which we are not seeing this year, so hence you're seeing a higher level.

Year over year.

<unk> because of that grid outage, but otherwise everything else is the same across all three facilities.

Okay got it.

Just a quick one on the bearings replacement at North Sea, one so I guess big picture, how long to Barings typically last like what was this something that would have been replaced.

Major maintenance, maybe like 10 years down the road, but they have to be replaced dollar could you just give a bit more color in terms of what was expected versus what was actual.

They certainly would have been expected to last at.

At least for 10 years. So it is.

Certainly.

Our fabrication or design error.

The.

There is a.

We are pursuing a detailed root cause analysis.

But as I said earlier, we've mobilized.

Prior to getting all of the detail on all the information from that root cause analysis, because it's abundantly clear to us already.

That the that there is a defect across all of them and the key key to responding to this Nelson is is to make sure that we minimize.

The lost revenue in terms of the.

Capital cost of the replacement is Pauline said the majority of that.

We will be covered by the bond proceeds the key is to minimize the loss revenue and that's why we moved so quickly.

To replace them, but certainly.

They should not have failed this early in the process.

Okay got it and then did that one point to that.

Without going into a lot of detail on it we do have high high degree of confidence on the replacement design.

On what.

We've seen this design used on other turbines other sand and turbines that had been in production much much longer without any sign of degradation.

Okay. So just to clarify this is more than just the barings right. It's the whole it's a bigger part of the structure or when you say replacing bearings.

Well you have to take out the whole assembly and replace the whole assembly that that houses the bearings, but the.

The defect is in the call.

Loading on the bearing and which is where the degradation is occurring.

Okay got it.

And then just moving on to my next question.

In Mexico U.

Talked about the.

Administrative delay in the.

Completion of the project might get pushed into next year. So like given that the facility is like physically completed could you actually produce power and sell it behind the fence or is there anything you can do well while the facility is completed but not <unk>.

You certainly could in theory, you could produce power.

Behind the meter or in other words non grid connected energy.

Which if we felt that there was a much longer delay.

It's probably something that we would look at but.

Given our view that we should be able to get the facility connected.

By early 2022 at this point and delivering energy into the grid.

That is the.

Best course of action in terms of getting revenue.

From the facility and having the facility.

Getting an attractive return on investment.

Okay, and so I'm not that close to the politics in Mexico, but is this simply a administrative delay or is it is politics involved in like I know there is.

Hi.

I think there's a view that the government is not that favorable towards renewables. So there is this like a delay tactic or is this just purely admin delay.

Most of it is related to Covid 19, and so far as.

Everything has been moving very slowly.

Through both.

On land trends I mean without going into the detail on just the number of permits.

Permits required to get the project into service.

Everything has moved slowly because a number of government offices would shut down for extended periods of time.

And so you wouldn't you we were.

Laid for a significant amount of time.

Getting getting some of those permits through.

I think we're close on on one of the final permits that we need but.

It will still take a bit longer to get that passed through the whole process. So most of it is related to just the machinery.

Government slowing down due to Covid shutdowns.

I think what you are certainly picking up some of the pronouncements from the governments about renewables or from particularly from the administration or the president about renewables I would say what that does is it slows down the machinery of government a bit more in terms of the.

The bureaucrats in terms of making sure that all Ts are crossed all of the sort of audit on any permit.

But it's nothing in our view more than that is about 30. Other projects that are in the same sort of situation as we are and we know a lot of these developers their Canadian U S developers that we know and.

And funds that were familiar with theyre going through the same sort of same sort of process. So a number of them have come out the other end of it too.

So just a just a matter of if it takes longer than.

Then it should.

That's the way it is.

Okay, and then just one last question before I get back in the queue.

In terms of the New York wind projects like after.

Some attractive bridge debt in place.

Will there be any longer term project level debt. After the project is completed or will it just be tax equity.

No we are looking at Wednesday's.

Once the <unk>.

Plus too we've got staff plus a two year tail on that construction financing so you'd be looking to do right now the plan is to do it.

On a year on takeout and on those projects for matching tender to term financing.

Okay got it thanks, a lot I'll leave it there.

Thanks.

Our next question comes from the line of Sean Stewart with TD Securities. Please proceed with your question.

Thanks, Good morning.

Pauline a question on refinancing opportunities you touched on the progress for the solar facilities and plans for <unk>.

Do you have any other plans or opportunities across.

Other parts of your portfolio and look at some of the legacy <unk>.

Canadian wind assets it looked like they have higher cost debt or are there more opportunities across the portfolio for refinancing.

Yes, there are other opportunities for refinancing I think it's still a bit early but we would we would help them.

By end of this year early next year to have a good better position on.

Where there would be potential to optimize generally I would say you know market conditions have improved quite significantly for offshore wind.

Of the Ts and CS that we would've negotiated a few years ago have now materially improved.

So I think there are opportunities for us, but probably a bit too early to say at today.

Okay. Thanks for that.

And.

The broader one gigawatt target for U S capacity.

Mike can you give us some context does that all come from additional prospective projects in New York you have broader growth aspirations beyond that states does M&A factor into that target at all any detail you can give us on that that longer term objective.

It's broader than New York, I mean listen we like New York, a lot because there's going to be a lot of growth next few years I think is a good they're going be procuring somewhere in the order of three gigawatts a year for the next several years.

And they've got a nice good long term 20 year contracts, which is playing just mentioned would support a bond financing nicely to a 20 year bond financing so from from our standpoint. It's a those are those are those are good good projects good investments for Northland.

But beyond that the other markets that we'd be looking at would be.

New England certain areas of PJM.

We have looked at California before.

So generally markets, where we believe we can secure.

Long term contracts are either government backed or with utilities, some cases, C&I, but generally you're looking for.

Markets, where we can secure.

Long term contracts to underpin our investments, but those will be the main markets that we're looking at we'd be looking at.

Principally development, but some some M&A is certainly possible.

Understood. Okay. That's all I have now thank you.

Thank you.

Our next question comes from the line of Ben Pham with BMO. Please proceed with your question.

Hi, Thanks, good morning.

On your pocket.

You referenced the Romania.

Yeah.

Your earnings release, and I'm not sure if you meant.

Earlier in my remarks, but can you.

Remind us.

What your positioning is.

Richard.

Yes, I mean, what we've disclosed before in.

Some of these calls is that we are into.

Interested in eastern Europe for renewables overall, so we moved forward with offshore the offshore wind project in Poland as you know Baltic power, which we talked about today and that we also have interest in certain onshore renewables and in certain markets in eastern Europe, and its not all of that.

Sure.

I mean.

It's simply that the those are the markets in Europe that are.

Slowest or the latest to Decarbonize and so we think there will be some good opportunities, particularly in EU countries.

For renewable.

<unk> going forward and renewable development going forward, but that's really all we've talked about.

Okay. So you say you actually have.

All right.

There is.

Is this more thing or do you want to get into.

Yes, I mean any any certainly.

Aside from Baltic power of course, any onshore development would be at a relatively early stage that we'd be looking at.

Participating in.

And in those markets.

Referred to.

Certainly in our disclosure too.

Looking at Romanian opportunities, but I'd say those would be at an early stage.

Yeah Okay.

The the.

Volatility in OXXO when in the quarter.

Certainly.

You've been a renewable business for a long time, if you look through all of this investment through it.

When you think about Europe.

Your exposure there at 60%.

This makes you rethink about sources of cash flow your diversification strategy here or is this more.

This is part of the business, but that's normalized all of this and nothing's changed from that perspective.

If you could I got to apologize if you could repeat the.

If you haven't got very good sound this whole call on my my ear. So could you repeat the question again.

Yes, no problem.

Curious on your thoughts on.

The sources of your cash flows and your willingness to maybe a salary diversification in the context of.

Of your exposure to offshore wind in the North sea and the volatility we saw this quarter.

Oh, yes for sure I mean, so so so I mean, what we what you've seen and we've talked about this.

On previous calls is.

We've been making the deliberate steps to.

Diversify ourselves. If this is your question I think it diversifies our ourselves.

Away from the concentration that we have in offshore wind in the North sea. So the apps.

Investment in Colombia was was that was one of the.

Uh huh.

The benefits of that of that transaction that helped to diversify ourselves away or lessen our concentration.

And then of course come 2025.

Would be seeing a high long begin to.

Deliver.

Deliver cash flow and so that will further significantly diversifies it herself.

Or at least lessen the concentration and the same thing why we are developing an and.

In New York State as well, both wind and also doing some early stage solar development. So so no.

The the overall in terms of our development focus it is too.

Diversify ourself.

Globally, and minimize any concentration risk, which right now our concentration or exposure.

Concentrations, obviously in the North sea, so we we'd be moving to lessen that.

Exactly maybe maybe a detailed question on North America.

Counting.

The.

When you got the warranty that you had I think thats starting to amortize some of the.

The benefits of that.

Our.

So my question now is.

Are you changing the accounting policy on out of your salary.

That benefit and is does this warrant that revisit of your youre off back on maintenance for North Sea since Youre doing it yourself now.

So I'll answer the first question. So it's not it's not a change in policy, it's more a change in estimate so I'd say its a prospective you.

We would have thought we would have to amortize that bonds. The proceeds over nine years and now we're amortizing it over a shorter period.

And on the Opex.

On the Opex I mean this is a I.

I mean.

Listen it was not a strategy as you know to self perform the chair.

<unk> maintenance on North Sea one.

We were thankfully moved quickly to hire all of the <unk> impacts and we're able to take over the turbine maintenance very quickly with the insolvency of Zambian and we've actually had higher availability than I think we had with nbn prior to that until this issue with the main bearing assembly surfaced, but.

I don't think we would have been able to actually respond as quickly as we have to the issue and had such visibility if we werent.

Self performing on the turbine maintenance not to say, if we could we'd be looking to do that as a strategy going forward, but I'm just saying it.

From this this failure.

Okay, Great and Paul I think to clarify the celebration.

Half of that is that in your revenue guidance.

Yes, okay.

Okay got it okay.

Thank you.

Our next question comes from the line of Mark Jarvi with.

Yes.

Proceed with your question.

Thanks.

I want to come back to the long term average number you guys disclose for offshore wind I think it's more of a of the trailing performance.

So maybe not quite okay, and when we think about it how have those outside like Gemini and North Sea, Wellington and operating longest compared in terms of average production versus maybe the PPA from forecasting ahead.

At the time of Sidoti.

So what we do on all of our facilities as a renewable facilities certainly is at year three.

We take all of the <unk>.

Operating data that we have and including.

Any wind resource data that we have that we would have from the animal monitors that are attached to the turbines themselves.

And.

Combine that with an update of the long term data that you have from a reference that we would have from the reference.

<unk> mast out in the North Sea.

Pull it altogether with not getting an independent entity.

E independent engineer to pull it all together and then we recast the energy yield estimate for facilities moving forward. So we've done that adjustment on Gemini.

We've done it on North Sea, one and we will do that at year three on Deutsche Boot.

What we've seen.

Is.

On both Gemini and North Sea one is it.

Disclose before a modest reduction in the long term energy yield estimate for each of the facilities.

Uh huh.

<unk>.

But the one thing to note is that from from Gemini and North Sea one.

Whatever that modest reduction was it was even less on north sea, one and we expect it will be.

Even less and we will see if it has any if there's any adjustment on Deutsche booked which points to the fact that you would have picked up some of this from from or certain others disclosures that the just the science and the.

The methodology behind energy yield assessments on offshore wind facilities has continued to improve as more facilities have been deployed.

Principally.

In the North sea and around U K, obviously, that's where the first deployment of offshore wind has been over the last 15 years, but.

<unk> improved significantly with exactly the same thing that happened was onshore wind.

About 10 years earlier, just given when when most onshore facilities started getting coming online so.

So that's that's the short story is that.

Our view on our ability to accurately predict.

And forecast.

Reduction from the facilities improved.

After that three year adjustment.

Is made and on the kind of.

The investment in each one of those facilities.

While that.

Two facilities that adjustment with it was a modest downward adjustment on the energy yield there have been other enhancements.

On the facilities, including refinancings, and others enhancements that we've been able to do.

With facilities.

Services revenue.

Renegotiation of service contracts for example that have enhanced the value of those investments. So there's been puts and takes.

Got it and then just coming back to the Nordson too and you said you will bid.

There were other bidders show up if there wasn't like a zero subsequent there definitely feel now of where the corporate PPA market his or her broadly just longer term hedges.

If he wants a contract there.

With the step down on a zero subsidy there maybe opportunities in terms of alternatives either when or if we don't what other alternatives are now for <unk>.

Yes.

Certainly we are actively looking at all possible outcomes given the fact that we certainly know their economics will be on our bid but were looking given that we've indicated that we intend to step in.

We only have come to that decision after analyzing all possible outcomes, including as you say is zero subsidy bid, where we would be marketing the energy.

Ourselves along with our partner on those projects <unk>.

So yes, we've assessed all options and there is a.

A robust market.

Corporate offtake market for renewable energy and in Europe, which has only improved over the last over the last year.

Okay and then my last question is just if you.

We did secure in order to kind of go to Tiffany for Baltic power. When you got to financial close in Taiwan at the end of next year would you be able to put through a commitment to Siemens gamesa.

However on all of those projects they tried to get improved pricing or would that not quite lineup.

In terms of maybe early to commit on turbines.

Say that again put through a commitment I missed what you said that yes, I mean, I imagine that if you had multiple site you might get better pricing.

Oh, yes, yes, yes.

Yes.

Maybe in a position at that point, they need to be able to procure turbines for Taiwan, Nordson and bought the power.

<unk>.

I'd put it this way I mean, we obviously have different partners on each project and they are different.

Timelines.

So I put it this way.

Our our position and negotiations with turbine vendors and our ability to get attention from turbine vendors is significantly enhanced by the volume of our offshore wind pipeline and the.

Certainty of our that our pipeline will be converted into.

And the actual operating projects. So every.

Large project that gets added on.

Enhances.

Our competitive position.

With the three main offshore wind turbine vendors.

Got it that's all the questions I had thanks, Mike Okay. Thanks Mark.

Our next question comes from the line of Matt <unk>.

With IAA capital. Please proceed with your question.

Hi, good morning.

Just wanted to follow up on a question about nordson to let's.

Let's say it doesn't about being zero subsidy bid, what's an acceptable level of motion merchant exposure if any for you for that answer.

Yes, I mean, our intention would be to.

And in some form to contract.

The energy.

From that from that facility, so zero subsidy bidding.

There is not any revenue coming from the German state are determined.

Regulator, then we would look to.

Secure an off take agreement of some form within an industrial or <unk>.

Corporate off taker.

So in some form we would look to contract the.

The energy in order to underpin that investment.

Okay.

I'm, just calling on Poland.

Can you talk about maybe the next steps for that project.

So the approvals of the contracts on that.

More broadly thinking about the.

125 auctions like how early do you need to start thinking about that I'm, assuming you do want to participate in that auction.

Well, so on Baltic power itself.

The one point you were up to one two gigawatt project itself that.

The project is actively working through.

Permits procurement.

Moving towards financial close in 2023.

Which is really not all that all that far away. So call. It 18 to 24 months away.

There's an approach to that scale.

There's a lot of activity as you can imagine going on right now with.

The team that we've assembled to deliver that project.

On the.

Future procurements like the 2025 year 2025 auctions that have been announced for further offshore wind capacity in Poland.

Haven't.

Made any decisions or any disclosures on what we'll do around that yet.

Okay.

And just last question on Poland I guess.

So it seems to think about more offshore wind is it also the sense of thinking about more onshore renewables.

I think yeah, I mean have you had to go back to what I said earlier is that in general.

We would see a significant build out of renewables in eastern Europe.

Eastern Europe overall has generally lagged.

Western Europe and in deploying renewables, particularly northwestern Europe. So we think there's going to be a significant deployment of new renewables, both offshore wind in and.

In onshore renewables. So it's a it's an area of interest for Northland.

Okay got it thank you.

Yeah.

Mr. Crawley there are no further questions at this time I will now turn the call back to you.

Okay, well, thanks to everybody for joining us today, we're going to hold our next call. Following the release of our third quarter 2021 results in November.

In the meantime, we thank you for your continued confidence and support.

Ladies and gentlemen that does conclude the conference call for today. Thank you for participating and have a pleasant day.

Q2 2021 Northland Power Inc Earnings Call

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