Q3 2021 Northland Power Inc Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Northland Power Conference call to discuss the 2021 third quarter results. During the presentation, all participants will be in a listen only mode.

After which we will conduct a question and answer session at that time. If you have a question. Please press Star then one on your telephone.

If at any time during the conference you need to reach not please press star zero.

As a reminder, this conference is being recorded Thursday November 11, 2021 at 10 a M.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline Alan <unk> Chief Executive.

I Could've officer, and morphine collegial senior director of Investor Relations and strategy.

Before we begin the Watson's management management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information represented and responses to questions may contain forward looking statements that include assumptions that 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 content and making investment decisions or recommendations. The release is available at www Dot north.

Windpower Dot Com I will now turn the call over to Mike Crawley. Please go ahead.

Thank you norm and good morning, everyone. Thanks for joining us today.

Morning, We will review, our third quarter 2021 financial and operating results. Following our opening remarks, we will take questions from analysts and look forward to addressing those questions.

Kick things off as we always do I want to reiterate that the health and safety of our employees and stakeholders always comes first.

Pride ourselves in a rigorous adherence to health protocols. During this pandemic, ensuring the safety of our employees, while allowing us to maintain high levels of facility availability.

So first looking at the financial results for the third quarter, we reported adjusted EBITDA of $211 million compared to $254 million a year ago, representing a decrease year over year of 17% for.

For free cash flow, we reported $11 million in the quarter or five cents per share. This compares to $61 million or <unk> 30 per share reported in the third quarter of 2020.

This year, our financial performance has been challenged in large part due to the wind conditions in the North Sea.

This low level resource has affected the contributions from our three offshore wind farms, which have seen historically low levels of wind production so far in 2021.

I will note that we have seen that abnormally low level of wind resource not only in the north sea, but across much of western Europe with generation in that whole area trending well below what our long term averages.

However, as we start the fourth quarter, which is typically one of the stronger quarters for offshore wind. We are seeing improved conditions with October production coming in very strong in fact October has turned out to be the second strongest production months in the year so far.

At well above <unk> levels.

As we noted in our press release yesterday, and Pauline will touch on it later in the call. Despite the lower performance in our offshore wind segment, we remain on track to achieve the low end of our 2021 guidance range for both adjusted EBITDA and free cash flow.

This was possible due to the increasing diversification in our portfolio, where our results benefited from stronger performance in our onshore operating segments, including assets like <unk> and the recently acquired solar and wind assets in Spain.

Both of these sets of assets are performing well and in fact, the Spanish assets are assets are benefiting from the higher pool prices across much of Europe. This year.

On our growth initiatives, we are making good progress executing on a couple of opportunities to advance and grow our portfolio.

So starting in Colombia.

We're focused on growing our platform there following the acquisition of <unk>.

In early 2020.

You recall one of <unk> key attributes was its grandfathered rights that allow us to participate in all aspects of the Colombian electricity sector.

This has allowed us to grow our platform first with our 16 megawatt <unk> solar project, which achieved financial close in the second quarter.

We followed this up with two solar projects with a combined capacity of 130 megawatts.

Partnership with EDF renewables, we've successfully bid these projects into the most recent renewables auction.

Secure offtake for these projects Northland, we'll have a 50% ownership in both of these projects, which will benefit from a 15 year power purchase agreement with multiple high quality Colombian energy distribution and commercialization off takers that are required to secure a minimum amount of green power by 2023.

<unk>.

The projects are expected to begin commercial operations in the second half of 2023.

Moving to Germany, along with our partners RW, we exercised our step in rights for North Sea to Sky.

Expansion project on our current North Sea. One project. This allows us to retain the lease with the successful conclusion of the option in late September the winning bid was zero bid for North Sea too and we had the right to match that bid in order to retain the least for north sea too.

We will now move forward with the development of that project and we'll look forward to secure long term offtake contracts with commercial and utility customers for the project.

We also have the same step in rights for North Sea, three which comes to auction in 2023 and similar to North Sea. Two we expect to exercise those rights to retain the lease.

Should we not be successful bidding ourselves into the auction.

Together. These two projects have the potential for up to 900 megawatts of capacity and can help to meet the growing demand for renewable power in Europe, among both utilities and also corporates.

Northland has an 85% interest in each of these leases in Spain, we successfully closed the acquisition of the wind and solar portfolio on August 11th and we spoke about earlier this year, adding 551 megawatts of operating capacity to North science portfolio.

Our near term focus will be on integrating the assets into our portfolio and we also look to.

And ourselves for further growth in the region.

Adding key personnel to the team to help build out this platform in Spain.

The assets have seen a significant increase in merchant the merchant pool prices since the announcement of the transaction in April of this year. We are now seeing prices north of 100 Euro per megawatt hour, which will certainly have a positive impact on our near term cash flows from the portfolio under the regulated tariff scheme.

The portfolio aligns well with our priority priorities and helps to further diversify our asset base through adding high quality long term regulated cash flow.

Now turning to our other development and construction projects I wanted to provide a brief update on the various projects that we have underway in Japan in September the government designated for GNU C areas as promising development zones.

For offshore wind development hundreds round three process.

Offshore wind procurement these areas included Zoomy city.

In Chiba Prefecture, where Northland is progressing with the development of its Chiba offshore wind project, along with our partners.

In addition.

The cat <unk>.

That area and are key to protector for Northland is exploring up to a 400 megawatt opportunity through a consortium with Mitsui in Osaka gas was also designated on this promising development area list.

<unk> nation as promising areas is a key milestone in the development process for these two early stage development projects, which could have a total production capacity of up to 900 megawatts once completed.

Our New York State construction of our two onshore wind projects Bluestone and ball Hill.

It's progressing well and the projects remain on track for commercial operations in late 2022.

Our third 100 megawatt New York onshore wind project hybrid continues to be under active development.

At that Lucha efforts to achieve energized nation of the facilities continues with Northland working with Mexican authorities and other private power producers are experiencing similar issues to try and expedite the process with timelines still remaining somewhat uncertain.

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

And finally at North Sea, one we have accelerated our bearing replacement campaign and we're able to replace 10 rotary shafts assemblies by the end of September more than we had initially planned. This is an important outcome as it allows us to minimize the downtime of the wind turbines during the fourth quarter.

When wind resource tends to be stronger.

The project had a very high availability availability.

During October as a result.

The 10 assemblies will replace at a cost of 13 million euros or $16 million Canadian dollars at Northland Chair.

We were able to achieve some cost savings on the total expected to replacement cost for all 54 assemblies.

The cost is now expected to be slightly lower than estimated last quarter and within the range of 50 million to 60 million euros or 65% to $75 million Canadian dollars at Northland as chair.

The costs are now expected to be almost fully covered by the warranty bond settlement achieved received in 2020 relating to the outstanding warranty obligations of North Sea one's original turbine manufacturer upon us and solvency.

We will resume with the replacement campaign in the second quarter of 2022 and expect to complete the replacement of all remaining 44 assemblies in 2022 and 2023.

I'll 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 third quarter of 2021 in the quarter, we generated adjusted EBITDA of $211 million, which was a decrease of $44 million or 17% from the $254 million, we generated in the third quarter of 2020.

The main factor, resulting in the year year over year decrease in EBITDA was the lower wind resource at the offshore facilities as highlighted by Mike in his remarks.

Partially offsetting this was a $19 million contribution from the Spanish portfolio.

With respect to free cash flow Northland generated approximately $11 million in the quarter. This was a decrease of approximately $50 million or <unk> 82 per cent compared to the same quarter last year.

Similar to adjusted EBITDA, the largest driver of the year over year decrease in free cash flow with a lower offshore wind resource in the quarter.

This was partially offset by about $8 million of lower taxes at the offshore wind facilities and about a 3 million dollar contribution in the quarter from the <unk> portfolio.

For adjusted free cash flow, we can't read it $34 million in the quarter compared to $76 million in the same period a year ago. The.

The factors leading to the $42 million decrease were the same factors impacting free cash flow, except lower growth expenditures in 2021, which do not impact adjusted free cash flow.

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

We believe that adjusted free cash flow provides a relevant presentation of cash flow generated from the business before investment related decisions and is a meaningful measure of our ability to generate cash flow after ongoing obligations to reinvest in growth and to fund our dividend.

On a per share basis. These figures translated into free cash flow of five cents in the quarter compared to 30 cents last year and adjusted free cash flow of 15 cents in the quarter compared to 38 cents per share last year.

Free cash flow and adjusted free cash flow payout ratios calculated on a cash dividend basis for the rolling four quarters ended September 30th or 81% and 60% respectively.

This compares to 65% and 61% for the same period ending September 30 of last year. The increase in both net payout ratio was primarily due to lower free cash flow and adjusted free cash flow and the effect of the shares issued from the common equity issue in April of this year.

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

In the quarter, we executed on a number of initiatives that will further enhance our balance sheet and improve our corporate liquidity, while also advancing our ESG objectives.

We successfully renewed and extended our $1 billion revolving credit facility with the syndicated both Canadian and global financial institutions I two years to 2026 or 'twenty 'twenty four and executed several amendments to increase the liquidity available under the facility to fund the growth.

Concurrently we also implemented a sustainability linked loan R. S. L. L overlay the implementation of the sell out is an important outcome and aligns with our ESG initiatives and the Green financing framework. We introduced in February of this past year.

The S. One that was based on achieving defined targets around both increasing our renewable generating capacity and reducing carbon emissions intensity.

The S. L. L is expected to provide northern with cost savings when the targets are met and this is an important step in integrating our ESG performance with our financing objectives.

All margin savings are expected to be used to fund our global sustainability initiatives.

Also in the quarter, we successfully restructured and upsize the senior debt on a number of our Canadian solar facilities, resulting in a one time cash distribution to Northland totaling $40 million or approximately <unk> 18 per share.

Refinancing constitutes a green project financing in support of our ESG initiatives.

To date in 2021, Northland has received cash distributions amounting to $113 million or 50 cents per share from optimizing and upsizing project finance and other debt structures to further enhance our liquidity and to find growth.

I will note that these cash distributions are not included in free cash flow or adjusted free cash flow as they are not scheduled financing, but they very much do contribute to our ability to fund growth.

Lastly, Northland received a second investment grade corporate credit rating of Triple B stable SUNFISH. This reading will add to the current rating of Triple B stable from S&P, which was reaffirmed in March of this year.

The additional rating reaffirmed storefronts credit worthiness and financial stability and could support feature that freezes in specific market.

In terms of our liquidity as at September 30th 2021 Northland had access to $824 million of cash and liquidity comprised of $784 million of proceeds under our syndicated revolver facility and $40 million of corporate cash on hand.

We continue to look at opportunities to support our growth initiatives by raising capital from existing assets and.

And executing on cost effective financial optimizations that provides increased liquidity for the company.

As part of this initiative. We are currently working on a refinancing effort for SaaS to extend and upsize the refinancing and also just simply some optimizations to position us for success in refinancing this asset on a reoccurring basis, we expect to complete the refinancing in the fourth quarter, which is expected to generate additional cash flow to north.

Lynn.

In regards to our financial outlook for 2021, we remain on track to achieve the low end of guidance for both adjusted EBITDA and free cash flow per share for adjusted free cash flow, we expect to achieve the range that was revised in the second quarter of this year.

For adjusted EBITDA, Our current guidance range is $1 1 billion to $1 $2 billion of free cash flow.

The range of one dollar and 30 to $1.50, which is expected for 2021.

For adjusted free cash flow for sure the expected range is $1.60 to $1.70 per share.

To reiterate given the lower offshore wind performance, thus far in the year, which negatively impacted our financial performance. We believe achieving the lower end of guidance is a very good outcome there.

The performance from our Canadian portfolio, and Ed Firth speaks to the value of our diversified portfolio, providing offsetting support to the short term weakness in the offshore wind segment. This diversification will be further enhanced with the addition of the recently acquired Spanish portfolio, which is performing well.

Before I turn the call back over to Mike I wanted to speak to our aircraft false 120 megawatt efficient natural gas facility aircraft falls has contributed significantly to no offense financial performance over the course of its 25 year PPA, which is set to expire at the end of this year.

This expire will impact the contribution from aircraft false to our 2022 financial protection.

Ali aircraft false contributes approximately 75 million annually and adjusted EBITDA and this contribution is expected to reduce by approximately 90% in 2022.

Given the current forecasted, Ontario market capacity needs northern anticipates participating in the Ontario market for capacity auctions as a generation resource offering capacity for both the summer and winter commitment period. In addition management intends to seek other offtake opportunities.

In closing we are satisfied with our progress in 2021, given the challenges that we have faced due to the various shortfalls experienced in offshore wind. Despite these unusual market conditions, we continue to execute on our business objectives, and secure new opportunities for future growth and diversification and to offset low.

Of our cash flows from our expiring PPA contracts.

Our teams are working hard to ensure that our facilities deliver strong performance and we continued to enhance our financial position through the execution of key financing initiatives that will allow us to advance our growth objectives with that I will now turn the call back over to Mike for his concluding remarks.

Thank you Pauline So looking ahead, we continue to see a lot of growth opportunities within the renewable energy space as a global trend towards decarbonization continues to gain momentum.

Through our global presence Northland aims to be at the forefront of this movement and our strategy continues to be on making the investments necessary to position ourselves to capitalize on these opportunities our growth strategy centers on developing our pipeline of offshore wind projects in Europe, and Asia, which will provide significant growth in mid to late in growth in the mid to low.

Half of this decade.

While in the near term our efforts will focus on supplementing our cash flow profile through targeted onshore renewable opportunities in key markets through both development and strategic M&A.

This concludes our prepared remarks, we'd now be happy to take your questions normal. 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 registration. Please press the pound key if you're using a speaker phone. Please lift your handset before entering your request one moment. Please for our first question.

Our first question comes from David Cusano with Raymond James. Please proceed with your question.

Thanks. Good morning, everyone. My first question here, maybe just starting with the Japanese offshore wind projects I'm wondering if there's any additional color or context, you can provide on on a I guess how much this improves the likelihood of those projects going forward.

Now expected was it that these would be.

Resignees promising areas and maybe just what the next hurdles are with those products.

For sure I mean, it is the first key step in moving towards having a procurement run are on on that that area. So for us. It was a key milestone on those two two projects for those two projects. The next step will be for it to be formally established has a designated zone, which sit.

He knows that there will be an option run within that area for an off take and for the interconnection as well.

So that's the next steps between now and then.

Our team will continue to work with the local community.

To ensure their support for the project, which has already been confirmed to a certain level, which is why it was designated as a promising zone.

But that has to be further confirmed and then once that happens.

It would be a signal to run a run a procurement in that area.

Excellent thanks for that Mike and then maybe one on <unk>.

On the potential for North Sea, three coming up I'm just curious if.

If the the elevated power price environment in Europe stays in place could you see any change to the way bidding happens there like potentially a nonzero subsidy bidder or do you still expect that to be a you know a pretty competitive process.

I still expect it to be competitive whether it's a zero subsidy better not will be determined I think what's clear to us is that certainly.

In the near term and I cant forecast beyond that but in the near term power prices should remain higher than they have been historically and in Germany or in northern Europe.

But the biggest driver I would say.

For for those projects will be the increasing corp.

Corporate demand for renewables.

And then as you get further out towards the latter part of the decade.

We think the emergence of demand of green electrons for for hydrogen.

<unk> projects as well in northern Europe, So and as you know the European Union and the various state governments are being quite proactive on hydrogen so.

I think that's.

What really has us excited about the north sea two and three projects is a is that demand for for green electrons. It's if you look at all of the net zero commitments for most large corporates.

The easiest the commitment and the low hanging fruit is around the procurement of renewable power.

And for summit to start looking at opportunities to.

On a pilot basis, initially, but to introduce hydrogen and some other industrial processes. So you need green electronics for that too. So I think those because those projects are well positioned.

Excellent excellent thanks for that Mike and then maybe just one last one if I could quickly on.

On the benefit from higher prices across the space portfolio I'm, just curious if under the regulated.

System there.

Do you have to give some of that back the downward adjustment in future periods.

We do.

So I mean, there's three year periods, where you have a effectively.

Set tariff there's three components there.

In our revenue streams as the market revenue, we get there's a capacity type payment and then there's a almost like an energy type supplement payment.

You get the last two components are set every three years, so there'll be a reset at the beginning of 2023 in there.

The system is generally trying to solve too.

That low 7%.

Return level right on the assets. So yes, so it basically effectively moves cash flow.

Earlier.

<unk>.

There may be some modest time value benefit, but I don't think it's anything we would say it's going to be significant on returns for the projects. Overall, so it's more of a benefit in terms of moving up cash flow earlier, which.

Certainly good from our standpoint, given the back ended cash flow that we get from the offshore wind development projects. So we have plenty of anything else you'd add to that.

The other thing is we're working through revenue recognition, where obviously in unprecedented territory with everyone with with flair with respect to where power prices are I think all else equal you are looking at higher cash flows over the three and six year period, even if there is a downward adjustment. So within this you know this window of time, there the capsules as makes sense.

Would be higher and we're just determining now how to how to recognize that.

Excellent. Thank you very much for that I'll turn it over.

Thank you.

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

You May proceed with your question.

Thanks, Good morning, everyone.

Just following up on North Sea too we saw worse than today secure its 25 year contract.

With the ASF and as you Mike as you think about.

Securing corporate off take.

Can you give us a sense of.

How that progresses.

Do you leave any.

Merchant exposure as you move ahead here ideally how.

How much would you look to secure through corporate offtake over the gate for for that project as you move it ahead.

We would expect to look to us to secure commercial offtake or our utility offtake as well, but for the vast majority of the output there will likely be a portion of that is left is merchant just to ensure that we can meet the delivery commitments under.

Under the corporate PPA, but of course that'll come down to the the terms of that corporate PPA as well.

Okay.

With respect to the 130 megawatts in Colombia, you're moving ahead with EDF on.

Any background you can give us there as it seems relatively small scale why.

Partner at all for those opportunities can you give us some context there.

Yeah for sure. So the original developer the projected as ETF. So they were they were seeking a partner.

And the partner that had had a presence in Colombia, and and knew the market well and so that's how how it really came about.

And I think they probably they knew that we were already building a solar project in Colombia, as well, so I'm not sure whether that helped or not but they are they were seeking a partner.

And do you have by it right down the road for those developments and how does that work.

No no no. We're 50 50 partners all the way through on those projects.

Okay.

That's all I have for now thanks, Mike I'll get back in queue.

Thank you.

And our next.

Question comes from the line of Rupert <unk> from National Bank. You May proceed with your question.

Hi, good morning, everyone I'd like to follow up on North Sea two again, it sounds like the outlook for corporate Ppas as there's pretty good can you talk about sort of terms you can get there and.

But they'd be able to support <unk>.

Project finance on the asset.

We would expect to be able to layer in project financing I can turn it over to Pauline as well on it so prior to exercising our step in rights on North Sea too we did.

A robust market sounding both on corporate offtake anticipating that it could be a zero subsidy that we'd be stepping into.

And with that we also explored kind of what.

Types of turned to be able to get with our lenders.

To add some leverage to that so.

We've got a pretty clear view.

Current market.

Where that would be but of course, you know what it would be a few more years before we go out and actually secure that but.

With the financial close for North Sea to anticipated in 'twenty, three or 'twenty four.

Okay, great. So what else is required before you can move to financial close and with this project are you contemplating sell downs as you discussed in your Investor day, and I imagine the sell downs could go to corporate off taker as well, maybe if you could give some color on your thoughts there. Please.

Yeah, <unk> certainly seen that in some instances where the off taker also wants to invest in the asset.

I think in most cases that ive seen they havent, but that I've seen a few cases, where they have we would I think we've been clear that we'd be open to looking at sell downs on on all of our larger offshore wind projects doesn't mean, it will necessarily move forward on every one of them, but we certainly would be we would be open to that and and it does mean that there's a.

A lot of capital looking to invest in offshore wind projects, but there's a limited number of projects and unlimited number of developers who have the capacity to to advance and get those projects to S. I D.

Okay. Thanks, and what are the other hurdles to get through F. I D.

They did just complete a dip.

Final permitting the projects too.

To complete the procurement, which is just just now starting our processes around the project.

Obviously final design, which is related to both.

The project, but those are the main the main next steps that we don't really see any significant hurdles getting to a S. I D. Just.

Just to.

Just a lot of work.

And maybe.

Sorry, sorry go ahead sorry.

One final question on <unk>, So you've had some curtailment issues with North Sea one.

Looking out a couple of years when Nordstrom to North Sea three could be online you anticipate we could see the end of those curtailments.

But that's been our forecast.

All along is that.

As a more more coal gets retired and there's a schedule to get called all of the coal fired generation in Germany retired over the next decade roughly.

And as some additional transmission capacity is added between the north and south of Germany.

That should.

Relief and address some of the congestion issues that were.

Creating a.

The curtailment at periods of low demand and high production in the North Sea.

Great I'll leave it there thanks for the color.

Okay. Thanks.

Thank you. Our next question comes from the line of Nelson <unk> with RBC capital markets. Your line is open great.

Great. Thanks, and good morning, everyone.

First question. This relates to project cost escalation I know thats been pretty topical for in many sectors.

You've talked about in the past, but can you just remind us on kind of where you are in terms of.

What portion of costs have been locked in and where and what.

And what are the key risks remaining for your New York projects and also for your Taiwan project.

Yeah, so so for.

Nelson for all of the for both of the New York projects that are under construction.

All of the costs are.

<unk> locked in so we've reached financial close all of the.

<unk>.

Supply agreement contracts had been finalized and signed so the projects are proceeding as expected through construction. So all of that is locked down.

On high long as we've described earlier, we have preferred supply agreements on the both on the balanced plant and as well as on the turbine.

Procurement as well and so with those we get good visibility through all of the sub suppliers of those contractors.

At different iterations over over the year and so we've got pretty good visibility into what's happening on.

With pricing from their subcontractors.

We're watching it closely there's nothing.

Certainly particular concern related to it.

Inflationary pressures at this point versus what our assumptions had been going in.

We're obviously, keeping a close eye on steel prices, but.

We're not looking to ramping to be closing, our financing and therefore locking down any commitments to suppliers until.

Second or even third quarter of 2022, so there's still some time to go on that.

And then just to clarify on your third New York Project, that's still in advance development. So things are still kind of moving that right or are any of those costs locked in yet.

Yeah.

Hey.

We're in discussions on some of the some of the costs are locked in on that project.

So.

But we haven't yet reached FID. So I think we'll probably have more to say on that in a in the fourth quarter.

Okay, and then just on on high long.

So costs are kind of moving around you're watching it closely.

Is there an ability to push the financial close date, a little bit.

Later like what's the latest thing yes.

That's where.

Where you can still complete the project in 2024 and 'twenty five.

Yeah, I mean, there's issues with weather windows in construction and high long so we wouldn't want to see.

Financial close drift past Q3 likely roughly speaking.

And without some change in schedule right. So in order to adhere to the current schedule that we have with that would probably be.

Kind of where we'd be looking Q2 Q3 for financial close.

<unk>.

Uh huh.

Yeah, I'd leave it at that I think and on the on how long I mean, what I would say is that there is a we continue to see.

Lots of interest in general for renewable power in Ireland in Taiwan.

Both from the government, but also from corporates.

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

In terms of La Lucha, it's like obviously the facilities completed and I presented just sitting idle right now.

So it is mainly like the government just I.

I guess not wanting to connect like due to political reasons is that how how you see it or there are other renewable facilities getting connected and or or have they just.

Put a pause on everything.

So there's two things that have gone on one is is related to COVID-19, which is just.

The impact of the pandemic on Mexico, Mexico was you know probably harder hit than a lot of other countries and so we saw long periods of time when certain government offices that we required permits from where were actually shut down because of outbreaks.

Within that office and even when they were opened up that they were operating at reduced capacity in the end.

And doing turnarounds on requests or permits much slower than would be typical so that's the one impact the other impact is.

Probably a little bit more speculative.

It's certainly clear in public that the administration has been trying to make changes to the energy reforms that were embedded into the constitution by the previous administration.

To encourage renewable power and to.

To encourage private investment in the electricity sector.

So far they've been unsuccessful, both in trying to make regulatory changes that were.

Overturned or or or or stopped I guess effectively by by the courts.

And they also had announced.

Some legislative changes that they were going to try and bring through there.

This fall, which we understand and now hold back it didn't appear that they had support and they may be introduced.

Later next year.

But that's that's the best information that we have on that I think it certainly could you could conclude that because of all of that that's been going on it does create.

An environment of uncertainty with the government agencies that need to test.

Connect and do the final kind of approvals on any new power facility and this is what we've heard from other Canadian American and European Ipp's active in in Mexico, When we talk to them regularly on that.

Having said that it's not like everything is completely frozen so.

There is activity and progress being made on a number of different projects.

We do know of one project that was connected.

Last month after a very long delay.

And very drawn out process and so I think that's that's the best way that I can that's why it's the way that I can characterize it.

Okay. Thanks for that color, Mike I'll leave it there.

Yes.

Thank you. Our next question comes from the line of Mark Jarvi with CIBC capital markets. You May proceed with your questions.

Thanks, Good morning, everyone.

I wanted to come back in Japan, maybe you can clarify how big is your position in the second quarter.

And another question would be you can talked about moving from promised areas designated areas.

What's sort of the timeline for that and what do you think he'd be with contracting.

Yeah.

Yes, I think over the over the next 12 months you would you'd see a.

Projects get moved from being a promising promising zone two designated zone, which would signal then within a year following that there would be a procurement.

And that is.

And again, it's not a foregone conclusion that every promising zone will be.

Moved over to be a designated zone.

All of our Japanese projects.

Our position is in all of our Japanese projects is a minority position.

I don't think we've yet on all of them just disclose what our what our exact positioning but that is typical for how these offshore wind projects are moving forward in Japan.

Usually with a couple of strong domestic partners and one.

<unk> like Northland that has the expertise and in offshore wind and that's what we've been.

Obviously, we are pushing forward with them and are looking to promote.

Through our team in Tokyo.

And Mike is there a are there further opportunities to join other controls.

Over the next year or two.

There could be for sure there certainly could be so there's a.

The.

What we announced today would be for the round three process. There is around one process and around two process that is.

Obviously underway already for procurement and then.

For round for following that there's probably also the opportunity to do more.

More Greenfield development, which are which is something that we.

We certainly would be looking at.

So just to clarify Mike were you, saying that in the round one or two years you still you could come in as a partner to one of those are going to be more focused on.

Round three and four.

I'd say, we'd be so the two projects that we talked about today if.

If they move forward to being designated zones would be for around three.

We believe there's enough timeline for us actually possibly do Greenfield development of sites for around four but we have not announced or move forward with any sites, yet, but that certainly would be an opportunity for our team in Japan.

And then for round, one and round two.

There are consortium set of already informed in various designated areas.

And.

But we've got nothing nothing at this point to disclose on a on any of those consortium.

Got it Okay, and then going back to the North sea to sounds like assuming kind of a similar way that you're stepping on north of three converting two and three deep built in CRM at the same time and does that influence how you go about contracting or the country at them as two separate projects when we're looking for off take.

So they'd be built effectively in series right. So the financial close of North Sea two would be $23 24, a north sea three would be around 26 27 roughly speaking.

So are.

We would look to certainly says we went about.

Project design procurement and offtake, we'd be looking at trying to leverage the scale advantage of up to two projects combined are but they would be staggered in terms of how they would come online eventually.

And then the last question for me is just obviously one has the shortest contract that your existing projects kind of rolls off around that 27 timeframe.

Well, it's a three month they come on line like how does that come into the fold in terms of trying to think about contracts and and maximizing the afterlife of that product out to the foundational PPA rolls off.

It's a good question mark because it it does kind of align well.

With the North Sea, two and three so you've got North Sea, one which is obviously operating coming off of its contract.

Later this decade right around the time, when we would be.

Securing offtake for North Sea, two and three so there is an opportunity to look at it as one large block and and we have the same partner on North Sea, one two and three as well.

Our WB at 15%.

And how soon do you start to think about what to do with northern tier one is that stuff that you're actively engaging right now are thinking about.

Bob contracts or is that still a couple of years away.

It is probably a couple years away on the offtake side in terms of looking at how we are.

Right size and optimize operating costs for a post absolutely period that is something that the team is engaged in right now.

Okay I'll leave it there thanks, Mike.

Yes.

Thank you.

Next question comes from Ben Pham with BMO capital markets. You May proceed with your question.

Hi, Thanks, Good morning, you had a comment around.

The diversification of your assets, how its help to Jeremy.

<unk> maintained your guidance and it's clear that it's helping out the diversification.

So my question is.

That has caused the diversification.

The thought process like when you rank order projects you deploy capital has has that moved up the priority for you as you look to deploy capital in them too.

To that like are you you. Thank you.

What you want to be in terms of the business mix today in diversification and as things change and you'll you'll you'll relocate it in the future.

We've certainly got a much better position today than we would have two years ago in terms of diversification is as you pointed out right in it are.

We're starting to see the benefits of that.

The next major move in terms of diversification of course would be building out high long and hopefully other projects offshore wind projects in Asia, which are little further balance out not just our overall portfolio, but also specifically are offshore.

Portfolio and reduce our exposure on.

Two north sea wind variability right and so.

And then we're also looking to get more onshore renewable development and so as we bring online projects in New York.

We're hoping to get more growth out of Spain.

In Colombia, and we've indicated to the market. The other area of interest to us in the onshore renewables is is eastern Europe is like markets in eastern Europe. So we think that will also further help diversify our cash flow and and strengthen the business overall.

Yeah, I think it's about building a balance too in terms of cash flow profiles, because everything we're talking about now with respect to Asia and Europe are all longer dated cash flows.

And so it's really about building a good balance with onshore.

Other opportunities like the Colombia project for example, which you know will deliver cash flow in the next couple of years and so it's I wouldn't say that we are we are there today, but we're certainly making good progress in terms of building out a more diversified portfolio that gives US you know cash flows it.

Got it.

Balancing near term and long term.

And do you find your observation because you'd be looking at offshore wind for some time that they're there's geographical diversification benefits like geographies kind of moving in different ways on wind resources that is that a correct statement.

Did you see it for sure I mean diversity, so even between the Baltic and the North Sea and in Northern Europe.

You see some some differences.

Quarter to quarter in terms of wind production, but.

But certainly between.

Different parts of the globe between Asia, and the North Sea you'd see a very.

Very different.

Warner by quarter or year over year production. So you could have in Asia, and how long we could have.

P 30 year end and in the North Sea, we could have a P 70 or more like this year you know what it looks like it will probably come in at around <unk> 90, or slightly worse here. So it will definitely balance out the portfolio in the long run, but Pauline pointed is a is an important one in terms of the priority for the business right now which.

It is not just looking at geographic diversification, but looking at spreading out.

Cash flow and the new cash flow that comes on from our development activities through the decade. So it's not all back ended.

Okay.

I'd love, an update too around the spread between.

Your cost of cap, one and offloading it to lower cost of capital player or is it just still not that 300 basis points.

Brad even though you're right that the group has been under pressure. It has it has it widened.

No I think that 300 basis points, it's probably still accurate.

Some projects that might be higher on another project, so it'll be lower than that but I think right now we just got some some some work on this and I think we feel pretty comfortable on that spread holding.

Okay. That's great. Thank you.

Thank you.

Thank you.

And our next question comes from the line of Justin <unk> with Scotiabank. You May proceed with your question.

Thank you morning, everyone just quickly on the sustainability linked loan overlay you've indicated that.

You hit certain targets.

There'll be some cost savings do you think he could kind of just give a little bit more color or quantify some of those targets timelines and.

What does the kind of scale of those.

A copy of it.

Yeah sure I mean, they're not large I mean right now there.

Structured generally is to be plus or minus five basis points. So it's.

Its not today I mean, I think the E. S. L. Alice is then sort of at a great initiative for companies to be undertaking because it ties nicely in terms of bringing together our kpis.

Sorry.

Making a more formal.

I sense that in their tracks and they reported on their audited.

And then you know sort of how to account, but there's also some benefit from them, but I wouldn't say it would be a large benefit where I think we could position ourselves.

Going forward as being able to apply the S. L out to more sort of a corporate pieces of debt that we have in our portfolio.

Dan.

And potentially to do other types of linked.

Links to keep loans in the future.

Yes.

Great. Thanks, and then maybe just quickly on at North Sea, one with the the replacement.

Those are those RSA is.

What are you kind of indicate that.

Might be curtailing.

The capacity in order to protect them in the interim just looking to see what the what the kind of ease up a little bit to that.

5% or is it more than that.

Yeah, I mean the.

Couple of things on that so.

The the really positive news this year about how quickly the team in Hamburg, our teammate Hamburger was able to mobilize is that by the time the wins picked up in October right.

That we were able to get all of the turbines are back online.

So we were able to replace the rotor shaft assemblies on all of the turbines that had seen the most severe degradation and that were.

Either severely curtailed or taken offline completely so so that was from our standpoint very positive and it.

Allowed us to get as I said in the opening remarks, a very high level of availability on North Sea one during October.

There are a very limited number of turbines that are operating at a lower.

Capacity level so.

So I think it says from a down to four megawatts each turbine from.

From $6 three.

It's in the range of kind of 10, or so 10 or 11 turbines that are operating at that level and that's really just to ensure that we extend their operating capacity. So they can hopefully do not have to get shut down through the winter and then those would be the first turbines in.

In the 2022 campaign to get the rotary shafts assembly replace so.

Overall, I think our team in and hamburgers.

<unk> has done a very good job of being put forward on that and and doing it.

In a very cost effective way at the same time.

Great. Thanks, that's all for me.

Okay.

Thank you and our next question comes from Matthew down Whats I E capital. Your line is open.

Hi, good morning.

Good morning, I, just want to go back to Ben's question on live discretion, if I'm reading a bit between the lines. What you are saying and then thinking about your strategic priorities from Investor Day, There's no real urgency to acquire another utility platform and grow that part of the portfolio.

I think our interest we would put it this way I think we should be remain interest in other utility platforms certainly within Colombia.

To.

Uh huh.

Leveraged some synergies with that stuff.

<unk> said when we acquired I think it will be announced at the time was in our view one of the better run.

<unk> in Colombia I hadn't.

Excellent operating track record and so it was a good.

Utility for Northland to step into as our first investment in that.

That asset class.

But we would be certainly interested in looking at other utilities that either may get privatized by the government in Columbia or.

Private you only privately owned utilities that may come to market.

Particularly if we see some synergies with with Epson are but I'd say, it's more specific to.

Colombia, and then again continuing to leverage you know absent or episode.

<unk> expanded maybe with a if we were able to do that to build out of renewable platform in a in Colombia.

Okay got it that's very clear.

The other question I had is.

As related to the two new Columbia projects and.

Other projects in Colombia is this do you think this is another path for you going forward like trying to find corporate our corporate partnerships, but other developers to work with them and maybe that's something you can repeat it in the U S market.

We're always open to partnering.

Partnering in the.

Two of the three offshore wind projects, we have in Europe or with partners, how long we have partners on as well.

So yeah, we definitely would be.

It would be open to that I mean, our our view is that over.

Over the next decade.

The world is going to need a huge volume of additional green electrons and so we.

We want to be part of enabling a.

You know as many projects as we can.

To assist with that and some of that we can do on our own and some of that we will need to do with partners and some of that.

At some point, even if we're doing it on their own as we said earlier, we would bring in partners.

To help continue to advance those projects.

As they mature.

I guess just to take it a step further my question was really around up to one gigawatt target for for onshore renewables in the U S. Do you think that that's going to be more similar to the New York wind projects, where it's 100% ownership youre developing everything on your own or do you think I'm more of that could come from working with other developers.

Oh, both I think you'll see both.

Okay. Okay.

Thank you. Our next question comes from the line of Andrew <unk> with Credit Suisse. You May proceed with your question.

Thank you good morning, I guess the questions for Mike and it's it's really the evolution of the offshore market.

And it's sort of funny, saying that because in the Grand scheme of things Theres not a whole lot of capacity globally at this stage, but a lot in the future, but when you think about the parallels that we saw in the onshore market, where it started off with heavy government subsidies and contracts and then largely wound up being corporate ppas for many and then some merchant.

Where do you think we are in that evolution on the offshore because we're seeing an increasing number of corporate deals being announced dedicated for a longer duration on offshore.

I think I don't know if its roughly CAD decade behind maybe in that kind of order.

Magnitude in terms of the the lag on it but.

Certainly what you continue to see us in markets like Japan.

Taiwan, Poland, where long term contracts are being offered up to attract the developers tractor supply chain.

And given the the loan development periods for these projects and and a.

Significant upfront <unk> that certainly is needed to do meet necessary in a in a new market to get that market going so that's what we that's what we like and that's what we're trying to.

Obviously, you take advantage of our leverage.

But yes, youll see over time, both both because as the market matures like Youre, saying and it was like you've pointed out in Germany, you'll see.

The more corporate Ppas are fewer government.

Back Ppas.

But it's also.

Probably in the last two or three years is just the increasing demand from from corporates, where where they actually want to have access.

In a market to renewable power and in a market like I wanted to good example, where.

It's really difficult to get access to green electrons and a lot of these corporates need green electrons in order to meet their ESG commitments or to satisfy the ESG commitments of their customers above them right. So that's the other kind of push that youre seeing so you're seeing kind of you'll gradually as you pointed out and start seeing the.

As that market matures seeing government ppas, maybe pull back.

But youre going to Youre also starting to see these corporate corporates push in because they want to get.

Control of the screen electronics for their their net zero commitments as well.

Got it appreciate that color and then maybe just following up on that with corporates are a greater number of green electrons does that give you another lover lover for financial flexibility on whether it be farm downs or securitizing, the cash flow stream. How do you sort of think about that and maybe it's a question for polling also.

Yeah Paulina.

Falling short on that.

Or I mean.

Theres certainly a if I understand your question correctly so if.

I think in terms of farm down some and I may have misunderstood. Your question I think in terms of farm downs and sell downs.

There would be a we think there'll be equal interest whether you you're you have a government backed PPA or a high credit quality corporate PPA. So I don't think that really changes yeah.

Think I think it's more of a bank ability really is it is your lenders like where we're all project finance, we don't corporate finance. So we've got to ensure that the corporate contracts have strong term terms conditions guarantees all of those things that lenders would heal.

Feel comfortable with but so far I mean, you know as we can gauge lenders on the north sea projects everything is favorable to positive I would say relative to government contracts. It's just about structuring them properly and it's it's a bit of pioneering right now in terms of how youre structuring. These corporate ppas because every single entity that structuring them isn't necessarily financing the same way.

Okay very much appreciate it thank you.

Thank you.

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

Okay, well, thanks for everyone for to everyone for joining us today, we're going to hold our next call. Following the release of our fourth quarter and full year 2021 results in February in the meantime, I want to thank you for your continued confidence and support.

Ladies and gentlemen that does conclude your conference for today.

You for your participation have a pleasant day.

Okay.

[music].

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Ladies and gentlemen, thank you for standing by and welcome to the Northland Power Conference call to discuss the 2021 third quarter results. During the presentation. All participants will be in a listen only mode. After which we will conduct a question and answer session at that time. If you have a question. Please press Star then 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 Thursday November the 11th 2021 at 10 a M.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline I'm Chandni Chief.

He's executive officer, and morphine collegial senior director of Investor Relations for strategy.

Before we begin northern Spanish management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information represented and responses to questions may contain forward looking statements that include assumptions that 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 content and making investment decisions or recommendations. The release is available at www Dot north.

Windpower Dot Com I will now turn the call over to Mike Crawley. Please go ahead.

Thank you norm and good morning, everyone. Thanks for joining us today.

Morning, We will review, our third quarter 2021 financial and operating results. Following our opening remarks, we will take questions from analysts and look forward to addressing those questions.

Kick things off as we always do I want to reiterate that the health and safety of our employees and stakeholders always comes first.

Pride ourselves in the rigorous adherence to health protocols. During this pandemic, ensuring the safety of our employees, while allowing us to maintain high levels of facility availability.

So first looking at the financial results for the third quarter, we reported adjusted EBITDA of $211 million compared to $254 million a year ago, representing a decrease year over year of 17% for.

The free cash flow, we reported $11 million in the quarter or five cents per share. This compares to $61 million or <unk> 30 cents per share reported in the third quarter of 2020.

This year, our financial performance has been challenged in large part due to the wind conditions in the North Sea.

This low level resource has affected the contributions from our three offshore wind farms, which have seen historically low levels of wind production so far in 2021.

I will note that we have seen this abnormally low level of wind resource not only in the north sea, but across much of western Europe with generation in that whole area trending well below what our long term averages.

However, as we start the fourth quarter, which is typically one of the stronger quarters for offshore wind. We are seeing improved conditions with October production coming in very strong in fact October has turned out to be the second strongest production months in the year so far.

And well above <unk> levels.

As we noted in our press release yesterday, and Pauline will touch on it later in the call. Despite the lower performance in our offshore wind segment, we remain on track to achieve the low end of our 2021 guidance range for both adjusted EBITDA and free cash flow.

This was possible due to the increasing diversification in our portfolio, where our results benefited from stronger performance in our onshore operating segments, including assets like <unk> and the recently acquired solar and wind assets in Spain.

Both of these sets of assets are performing well and in fact, the Spanish assets are assets are benefiting from the higher pool prices across much of Europe. This year.

On our growth initiatives, we are making good progress executing on a couple of opportunities to advance and grow our portfolio.

So starting in Colombia.

We're focused on growing our platform, they're following the acquisition of <unk>.

In early 2020, if you recall one of <unk> key attributes was its grandfathered rights that allow us to participate in all aspects of the Colombian electricity sector.

This has allowed us to grow our platform first with our 16 megawatt <unk> solar project, which achieved financial close in the second quarter.

And we followed this up with two solar projects with a combined capacity of 130 megawatts.

In partnership with EDF renewables, we are successfully bid these projects into the most recent renewables auction.

To secure off take for these projects Northland, we'll have a 50% ownership in both of these projects, which will benefit from a 15 year power purchase agreement with multiple high quality Colombian energy distribution and commercialization off takers that are required to secure a minimum amount of green power by 2020.

Sorry.

The projects are expected to begin commercial operations in the second half of 2023.

And moving to Germany, along with our partners RW, we exercised our step in rights for North Sea too.

Spansion project on our current North Sea one project there.

It allows us to retain the lease with the successful conclusion of the auction in late September the winning bid was a zero bid for North Sea too and we had the right to match that bid in order to retain the least for North Sea Doo.

We will now move forward with the development of that project and we will look forward to secure long term offtake contracts with commercial and our utility customers for the project.

We also have the same step in rights for North Sea, three which comes to auction in 2023 and similar to North Sea. Two we expect to exercise those rights to retain the lease should.

Should we not be successful bidding ourselves into the auction.

Together. These two projects has the potential for up to 900 megawatts of capacity and can help to meet the growing demand for renewable power in Europe, among both utilities and also corporates.

Northland has an 85% interest in each of these leases in Spain, we successfully closed the acquisition of the wind and solar portfolio on August 11th that we spoke about earlier this year, adding 551 megawatts of operating capacity to Northland portfolio.

Our near term focus will be on integrating the assets into our portfolio and we also look to.

And ourselves for further growth in the region.

We're adding key personnel to the team to help build out this platform in Spain.

The assets have seen a significant increase in merchant the merchant pool prices since the announcement of the transaction in April of this year. We are now seeing prices north of 100 Euro per megawatt hour, which will certainly have a positive impact on our near term cash flows from the portfolio under the regulated tariff scheme.

The portfolio aligns well with our priority of priorities and helps to further diversify our asset base through adding high quality long term regulated cash flow.

Now turning to our other development and construction projects I wanted to provide a brief update on the various projects that we have underway in Japan in September the government designated for new C areas as promising development zones.

For offshore wind development Andreas round three process.

Offshore wind procurement. These areas included Zoomy City <unk>.

Chiba Prefecture, where Northland is progressing with the development of its Chiba offshore wind project, along with our partners.

In addition.

The cat <unk>.

Area and a key to protector for Northland is exploring up to a 400 megawatt opportunity through a consortium with Mitsui in Osaka gas was also designated on this promising development area list.

The designation as promising areas is a key milestone in the development process for these two early stage development projects, which could have a total production capacity of up to 900 megawatts once completed.

Our New York State construction of our two onshore wind projects Bluestone and ball Hill.

Is progressing well and the projects remain on track for commercial operations in late 2022.

Our third 100 megawatt New York onshore wind projects hybrid continues to be under active development.

At La Lucha efforts to achieve energized nation of the facilities continues with Northland working with Mexican authorities and other private power producers are experiencing similar issues to try and expedite the process with timelines still remaining somewhat uncertain.

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

Now finally at North Sea, one we have accelerated our bearing replacement campaign and we're able to replace 10 rotary shafts assemblies by the end of September more than we had initially planned. This is an important outcome as it allows us to minimize the downtime of the wind turbines during the fourth quarter.

When wind resource tends to be stronger.

Project had a very high available availability during October as a result.

The 10 assemblies will replace at a cost of 13 million euros or $16 million Canadian dollars at Northland as chair.

We were able to achieve some cost savings on the total expected to replacement cost for all 54 assemblies.

The cost is now expected to be slightly lower than estimated last quarter and within the range of 50 million to 60 million euros or <unk> 65 to 75 million Canadian dollars at Northland Chair.

The costs are now expected to be almost fully covered by the warranty bond settlement achieved received in 2020 relating to the outstanding warranty obligations at North Sea, one original turbine manufacturer eponymous insolvency.

We will resume with the replacement campaign in the second quarter of 2022 and expect to complete the replacement of all remaining 44 assemblies in 2022 and 2023.

I'll 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, Northern power released operating and financial results for the third quarter of 2021 in the quarter, we generated adjusted EBITDA of $211 million, which was a decrease of $44 million or 17% from the $254 million, we generated in the third quarter of 2020.

The main factor, resulting in the year year over year decrease in EBITDA was the lower wind resource at the offshore facilities as highlighted by Mike in his remarks.

Partially offsetting this was a $19 million contribution from the Spanish portfolio.

With respect to free cash flow northern generated approximately $11 million in the quarter. This was a decrease of approximately $50 million or <unk>, 82% compared to the same quarter last year.

Similar to adjusted EBITDA, the largest driver of the year over year decrease in free cash flow was the lower offshore wind resource in the quarter.

This was partially offset by about $8 million of lower taxes that the offshore wind facilities and about a 3 million dollar contribution in the quarter from the <unk> portfolio.

For adjusted free cash flow, we generated $34 million in the quarter compared to $76 million in the same period a year ago. The.

The factors leading to the $42 million decrease were the same factors impacting free cash flow, except lower growth expenditures in 2021, which do not impact adjusted free cash flow.

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

We believe that 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 our ability to generate cash flow after ongoing obligations to reinvest in growth and to fund our dividend.

On a per share basis. These figures translated into free cash flow of five cents in the quarter compared to 30 last year and adjusted free cash flow of 15 cents in the quarter compared to 38 cents per share last year.

Free cash flow and adjusted free cash flow payout ratio calculated on a cash dividend basis for the rolling four quarters ended September 30th.

The 1% and 60% respectively.

This compares to 65% and 61% for the same period ending September 30 of last year the.

The increase in both net payout ratio was primarily due to lower free cash flow and adjusted free cash flow and the effect of the shares issued from the common equity issue in April of this year.

Yeah.

Turning to our balance sheet and liquidity remains in a very strong position with ample liquidity to help fund our identified development initiatives in the quarter, we executed on a number of initiatives that will further enhance our balance sheet and improve our corporate liquidity, while also advancing our ESG objectives, we successfully renewed and extended.

Of our $1 billion revolving credit facility with the syndicated both Canadian and global financial institutions by two years to 2026 from 2024 and executed several amendments to increase the liquidity available under the facility to fund the growth.

Concurrently we also implemented a sustainability linked loan or S. L. L. Overlay the implementation of the Esso al is an important outcome and aligns with our ESG initiatives and the Green financing framework, we introduced in February of this past year.

The <unk> is based on achieving defined targets around both increasing our renewable generating capacity and reducing carbon emissions intensity.

The <unk> is expected to provide northern with cost savings when the targets are met and is an important step in integrating our ESG performance with our financing objectives. All margin savings are expected to be used to fund our global sustainability initiatives.

Also in the quarter, we successfully restructured and Upsized senior debt on a number of our Canadian solar facilities, resulting in a one time cash distribution to northern totaling $40 million or approximately <unk> 18 per share.

Refinancing constitutes a green project financing in support of our ESG initiatives.

To date in 2021, Northland has received cash distributions amounting to $113 million or <unk> 50 per share from optimizing and upsizing project finance and other debt structures to further enhance our liquidity and to fund growth.

I will note that these cash distributions are not included in free cash flow or adjusted free cash flow as they are not scheduled financing, but they very much do contribute to our ability to fund growth.

Lastly, Northland received a second investment grade corporate credit rating of Triple B stable from Fitch. This rating will add to the current rating of chair, who will be stable from S&P, which was reaffirmed in March of this year.

The additional rating reaffirmed storefronts credit worthiness and financial stability and could support feature that raises in specific market.

In terms of our liquidity at September 32021, Northland had access to $824 million of cash and liquidity comprised of $784 million of proceeds under our syndicated revolver facility and $40 million of corporate cash on hand.

We continue to look at opportunities to support our growth initiatives by raising capital from existing assets and executing on cost effective financial optimizations that provides increased liquidity for the company.

As part of this initiative. We are currently working on refinancing effort for SaaS to extend and upsize the refinancing and also just simply some optimizations to position us for success in refinancing this asset on a reoccurring basis, we expect to complete the refinancing in the fourth quarter, which is expected to generate additional cash flow to Northland.

Yeah.

In regards to our financial outlook for 2021, we remain on track to achieve the low end of guidance for both adjusted EBITDA and free cash flow per share for adjusted free cash flow, we expect to achieve the range that was revised in the second quarter of this year.

For adjusted EBITDA. The current guidance range is $1 1 billion to $1 $2 billion worth of free cash flow.

The range is one dollar and 30 to $1 50, which is expected for 2021 for.

For adjusted free cash flow for sure. He expected range is $1 60 to $1.70 per share.

To reiterate given the lower offshore wind performance, thus far in the year, which negatively impacted our financial performance. We believe achieving the lower end of guidance is a very good outcome.

The performance from our Canadian portfolio, and Ed Firth speaks to the value of our diversified portfolio, providing offsetting support to the short term weakness in the offshore wind segment. This diversification will be further enhanced with the addition of the recently acquired Spanish portfolio, which is performing well.

Before I turn the call back over to Mike I wanted to speak to our aircraft was 120 megawatts of efficient natural gas facility. Seroquel Falls has contributed significantly to <unk> financial performance over the course of its 25 year PPA, which is set to expire at the end of this year.

This expire will impact the contribution from aircraft <unk> to our 2022 financial projection currently aircraft sales contributed approximately $75 million annually and adjusted EBITDA and this contribution is expected to reduce by approximately 90% in 2022.

Given the current forecasted, Ontario market capacity need Northland anticipates participating in the Ontario market through capacity options as a generation resource offering capacity for both the summer and winter commitments period. In addition management intends to seek other offtake opportunities.

In closing we are satisfied with our progress in 2021, given the challenges that we face due to the various shortfalls experienced in offshore wind.

Despite these unusual market conditions, we continued to execute on our business objectives, and secure new opportunities for future growth and diversification and to offset lower cash flows from our expiring PPA contracts. Our teams are working hard to ensure that our facilities deliver strong performance and we continue to enhance our financial position.

Through the execution of key financing initiatives that will allow us to advance our growth objectives with that I will now turn the call back over to Mike for his concluding remarks.

Yeah.

Thank you Pauline So looking ahead, we continue to see a lot of growth opportunities within the renewable energy space as a global trend towards decarbonization continues to gain momentum.

Through our global presence Northland aims to be at the forefront of this movement and our strategy continues to be on making the investments necessary to position ourselves to capitalize on these opportunities our growth strategy centers on developing our pipeline of offshore wind projects in Europe, and Asia, which will provide significant growth in mid to late in growth in the mid to latter.

Half of this decade, while in the near term our efforts will focus on supplementing our cash flow profile through targeted onshore renewable opportunities in key markets through both development and strategic M&A.

This concludes our prepared remarks, we'd now be happy to take your questions normal. 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 registration. Please press the pound key if you're using a speaker phone. Please lift your handset before entering your request one moment. Please for our first question.

Yeah.

Our first question comes from David Cusano with Raymond James. Please proceed with your question.

Thanks, Good morning, everyone.

My first question here, maybe just starting with the Japanese offshore wind projects.

I'm wondering if there's any additional color or context, you can provide on on.

I guess, how much this improves the likelihood of those projects going forward how expected was it that these would be no. It.

Designated promising areas and maybe just what the next hurdles are with those products.

For sure I mean, it is the first key step in moving towards having a procurement run.

That area. So for US it was a key milestone on those two two projects for those two projects. The next step will be for it to be formally established has a designated zone, which signals that there will be an option run within that area.

For an offtake and for the interconnection as well.

So that's the next steps are between now and then.

Our team will continue to work with the local community.

To ensure their support for the project, which has already been confirmed to a certain level, which is why it was designated as a promising zone.

But that has to be further confirmed and then once that happens.

It would be a signal to run to run a procurement in that area.

Excellent thanks for that Mike and then maybe one on.

On the potential for North Sea, three coming up I'm just curious if.

If the the elevated power price environment in Europe stays in place could you see any change to the way bidding happens there potentially.

Non zero subsidy bidder or would you still expect that to be a pretty competitive process.

I would still expect it to be competitive whether it's.

Zero subsidy better not will be determined I think what's clear to us is that certainly in the near term and I cant forecast beyond that.

The near term power prices should remain higher than they have been historically and in Germany or in northern Europe.

But the biggest driver I would say.

For for those projects will be the increasing corp.

Corporate demand for renewables.

And then as you get further out towards the latter part of the decade.

We think the emergence of demand of green electrons for for hydrogen.

Projects as well in northern Europe, So and as you know the European Union and the various state governments are being quite proactive on hydrogen so.

I think thats.

What really has us excited about the north sea two and three projects is is that demand for for Green electrons. It's if you look at all of the net zero commitments for most large corporates.

The easiest commitment and the low hanging fruit is around procurement of renewable power.

And for summit to start looking at opportunities too.

Ah.

On a pilot basis initially between introduce hydrogen and some other industrial processes. So unique green electronics for that too. So I think those because those projects are well positioned.

Excellent excellent thanks for that Mike and then maybe just one last one if I could quickly.

On the benefit from higher prices across the <unk> portfolio I'm, just curious if under the regulated.

System there.

Do you have to give some of that back via a downward adjustment in future periods.

We do.

So there is three year periods, where you have a effectively.

Set tariff there's three components there.

And our revenue streams as the market revenue, we get there is a capacity type payment and then there's almost like an energy type supplement payment.

You get the last two components are set every three years, so there'll be a reset at the beginning of 2023 in there.

The system is generally trying to solve too.

That low 7%.

Return level right.

The assets so yes, so it basically effectively moves cash flow up earlier.

And.

There may be some modest time value benefit, but I don't think its anything we would say is going to be significant on returns for the projects. Overall, so it's more of a benefit in terms of moving out of cash flow earlier, which.

Certainly good from our standpoint, given the back ended cash flow that we get from the offshore wind development projects that we have poly and anything else you would add to that Neil.

And the other thing is we're working through revenue recognition, where obviously in unprecedented territory with everyone with with flair with respect to where power prices are I think all else equal you are looking at higher cash flows over the three and six year period, even if there is a downward adjustment. So within this this window of time, there the capsules as Mike said with wood.

Be higher and we're just determining now how to how to recognize that.

Excellent. Thank you very much for that I'll turn it over.

Thank you.

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

You May proceed with your question.

Thanks, Good morning, everyone.

Just following up on northern <unk>, we saw horse dead today secure its 25 year contract.

With the ASF and as you Mike as you think about.

Securing corporate off take.

Can you give us a sense of.

How that progresses.

Do you leave any.

Merchant exposure as you you move ahead here ideally how.

How much would you look to secure through corporate offtake out of the gate for for that project as you move it ahead.

We would expect to look to us to secure commercial offtake or our utility offtake as well, but for the vast majority of the output there will likely be a portion that is left is merchant just to ensure that we can meet the delivery commitments.

Under the corporate PPA, but of course that will come down to the the terms of that corporate PPA as well.

Okay.

With respect to the 130 megawatts in Colombia, Youre moving ahead with EDF on.

Any background you can give us there as it seems relatively small scale why.

At all for those opportunities can you give us some context there.

Yeah for sure so.

The original developer of the project. It is EDF. So they were they were seeking a partner.

And the partner that has had a presence in Colombia, and and knew the market well and so that's how how it really came about.

I think they probably they knew that we were already building a solar project in Colombia, Helios as well, so I'm not sure whether that helped or not but they are they were seeking a partner.

And do you have by it right down the road for those developments and how does that work.

No no no. We're 50 50 partners all the way through on those projects.

Okay. That's.

That's all I have for now thanks, Mike I'll get back in the queue.

Thank you.

And our next call.

Comes from the line of Rupert <unk> from National Bank. You May proceed with your question.

Hi, good morning, everyone I'd like to follow up on North Sea two again it sounds like the outlook for corporate Ppas is it's pretty good can you talk about sort of terms you can get there and.

Would they be able to support <unk>.

Project finance on the asset.

We would expect to be able to layer in project financing I can turn it over to Pauline as well on it so prior to exercising your Stefan rates on North Sea too.

Did.

A robust market sounding both on corporate offtake anticipating that it could be a zero subsidy that we'd be stepping into.

And with that we also explored kind of what.

Types of.

Terms, we would be able to get with our lenders.

To add some leverage to that so.

We've got a pretty clear view.

Current market.

Where that would be but of course, you know what it would be a few more years before we go out to actually secure that but.

With financial close for North Sea to anticipated in 'twenty, three or 'twenty four.

Okay, great. So what else is required before you can move to financial close and with this project are you contemplating sell downs as we've discussed at your Investor Day.

I imagine the sell downs could go to corporate off taker as well, maybe if you could give some color on your thoughts there. Please.

Yeah, you certainly seen that in some instances where the off taker also wants to invest in the asset.

I think in most cases that ive seen they haven't but I've seen a few cases, where they have.

We would I think we've been clear that we'd be open to looking at sell downs on on all of our larger offshore wind projects doesn't mean, it will necessarily move forward on every one of them, but we certainly would be we would be open to that and and.

There's a lot of capital looking to invest in offshore wind projects, but there is a limited number of projects and unlimited number of developers who have the capacity to to advance and get those projects too.

Okay. Thanks, and what are the other hurdles to get through F. I D.

They did just complete.

The final permitting of the project.

To complete the <unk>.

Procurement, which is just just now starting our processes are a round of the project.

Obviously final design, which is related to both.

The project, but those are the main the.

The main next steps, we don't really see any significant hurdles getting to FID.

Uh huh.

Just a lot of work.

And maybe.

Sorry, sorry go ahead sorry.

Okay.

One final question on <unk>, So you've had some curtailment.

Issues with North Sea one.

Looking out a couple of years when Nordstrom, two north sea three could be online.

We could see the end of those curtailments.

But that's been our forecast.

All along is that.

As more and more coal gets retired and there's a schedule to get called all of the coal fired generation in Germany retired over the next decade roughly.

And as some additional transmission capacity is added between the north and south of Germany.

That should.

Relief and address some of the congestion issues that were.

Creating.

The curtailment at periods of low demand and high production in the North Sea.

Great I'll leave it there thanks for the color.

Okay. Thanks.

Thank you. Our next question comes from the line of Nelson <unk> with RBC capital markets. Your line is open.

Thanks, and good morning, everyone.

First question. This relates to project cost escalation I know thats been pretty topical for in many sectors.

You've talked about in the past, but can you just remind us on kind of where you are in terms of.

What portion of costs have been locked in and where and what.

And what are the key risks remaining for your New York projects and also for your Taiwan project.

Yeah, so so for.

Nelson for all of the for both of the New York projects that are under construction all of the costs are.

Larkin, So we've reached financial close all of the.

Supply.

Supply agreement contracts had been finalized and signed so the projects are proceeding as expected through construction. So all of that is locked down.

On high long as we've described earlier, we have preferred supply agreements on the both.

Both on the balanced plant and as well as on the turbine.

Procurement as well and so with those we get good visibility through all of the sub suppliers of those contractors at.

At different iterations over over the year and so we've got pretty good visibility into what's happening on.

With pricing from their subcontractors.

We're watching it closely there is nothing.

Certainly a particular concern related to <unk>.

Inflationary pressures at this point versus what our assumptions had been going in.

We're obviously, keeping a close eye on steel prices, but.

We're not looking to ramp that would be closing.

The financing and therefore locking down any commitments to suppliers until.

Second or even third quarter of 2022, so there's still some time to go on that.

And then just to clarify on your third New York Project, that's still in advance development. So things are still kind of moving that right or are any of those costs locked in yet.

Yeah, I'd say, we're in discussions on some of the some of the costs are locked in on that project.

So, but we haven't yet reached FID. So I think we'll probably have more to say on that in.

In the fourth quarter.

Okay, and then just on on high long.

So costs are kind of moving around you're watching it closely.

Is there an ability to push the financial close date, a little bit.

Later like what's the latest thing yes.

Yes.

That's.

Where you can still complete the project in 2024 and 'twenty five.

Yes, I mean, there's issues with weather windows in construction and high long so we wouldn't want to see.

The financial close drift past Q3 likely roughly speaking.

And.

Without some change in schedule right. So in order to adhere to the current schedule that we have that would probably be kind of where we'd be looking Q2 Q3 for financial close.

<unk>.

Yeah, I'd leave it at that I think and on the on how long I mean, what I would say is that there is a we continue to see lots.

Lots of interest in general for renewable power in high launch in Taiwan.

Both from the government, but also from corporates.

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

In terms of La Lucha, it's like obviously the facilities completed and presented sitting idle right now.

So it is mainly the government just.

I guess not wanting to connect that data political reasons is that how you see it or are there are other renewable facilities getting connected and or or have they just.

Put a pause on everything.

So there's two things that have gone on one is is related to COVID-19, which is just.

The impact of the pandemic on Mexico, Mexico was.

Probably harder hit than a lot of other countries and so we saw long periods of time when certain government offices that we required permits from where were actually shutdown because of outbreaks.

Within that office and even when they were opened up they were operating at reduced capacity in.

And doing turnarounds on requests or permits much slower than would be typical so that's the one impact the other impact is.

It's probably a little bit more speculative.

It's certainly clear in public debt.

Administration has been trying to make changes to the energy reforms that were embedded into the constitution by the previous administration.

To encourage renewable power and.

To encourage private investment in the electricity sector.

So far they've been unsuccessful both in trying to.

Regulatory changes that were.

Overturned or or or stopped I guess effectively by by the courts.

And Theyre also had announced.

On the legislative changes that they were going to try and bring through this fall, which we understand and now hold back.

It didn't appear that they have to support and they may be introduced.

Later next year.

But that's that's the best information that we have on that I think it certainly could you could conclude that because of all of that that's been going on it does create a.

An environment of uncertainty with the government agencies that need to test.

Connect and do the final kind of approvals on any new power facility and this is what we've heard from.

The Canadian American and European.

Ipp's active and in Mexico, when we talk to them regularly on that.

Having said that it's not like everything is completely frozen so.

There is activity and progress being made on a number of different projects we.

We do know of one project that was connected.

Last month after a very long delay.

And very drawn out process and so I think that's that's the best way that I can that's why that's the way that I can characterize it.

Okay. Thanks for that color, Mike I'll leave it there.

Yes.

Thank you. Our next question comes from the line of Mark Jarvi with CIBC capital markets. You May proceed with your question.

Thanks, Good morning, everyone.

I wanted to come back in Japan, maybe you can clarify how big is your position in the second component.

And another question would be you talked about moving from promised areas designated areas.

What sort of a timeline for that and what do you think he'd be with contracting.

Yeah.

Yes, I think over the over the next 12 months you would you would see.

The.

Projects get moved from being a promissory promising zone two designated zone, which would signal then within a year following that that there would be a procurement.

And that is.

Again, it's not a foregone conclusion that every promising zone will be.

Moved over to be a designated zone.

All of our Japanese.

Projects are.

Our position is in all of our Japanese projects is a minority position.

I don't think we've yet on all of them disclosed what our exact position is but that is typical for how these offshore wind projects are moving forward in Japan.

Usually with a couple of strong domestic partners and.

One strategic like Northland that has the expertise in offshore wind and that's what we've been.

Obviously, pushing forward with and looking to promote.

Through our team in Tokyo.

And Mike is there a are there further opportunities to join other consoles.

The next day or two.

There could be for sure that certainly could be so there is a.

The.

What we announced today would be for the round three process. There is around one process and around two process that is.

Obviously underway already for procurement and then.

For round for.

Following that.

We also have the opportunity to do.

More Greenfield development, which are which is something that.

We certainly would be looking at.

So just to clarify Mike were you, saying that in the round one or two you still you could come in as a partner to all of those are going to be more focused on.

Three and four.

I'd say, we'd be so the two projects that we talked about today.

They move forward to being designated zones would be for around three.

We believe there's enough timeline for us to actually.

Possibly do Greenfield development of sites for around four but we have not.

Now to move forward with any sites, yet, but that certainly would be an opportunity for our team in Japan.

And then for round, one and round two.

There are consortium set have already been formed in various designated areas.

And.

But we've got nothing nothing at this point to disclose on on any of those consortiums.

Got it Okay, and then going back to the North sea to sounds like assuming.

Kind of a similar way to step in on north of three converting two and three deep built in CRM at the same time and does that influence how you go about contracting or do you contract them as two separate projects, where youre looking for off take.

So they'd be built effectively in series right. So the.

The financial close of North Sea, two would be 'twenty three 'twenty four.

North Sea three would be around 26 27 roughly speaking.

So.

We would.

Look to certainly as we went about.

Project design procurement and offtake, we'd be looking at trying to leverage the scale advantage of the two projects combined but they would be.

<unk> in terms of how they would come online eventually.

And then the last question for me is just North Sea. One has the shortest contract that your existing projects kind of rolls off around that 27 timeframe.

Let's see three might be coming on line like how does that come into the fold in terms of trying to think about contracts.

And maximizing sort of theatrical life of that product after the foundational PPA roll off.

It's a good question Mark because it.

Does kind of aligned well.

With.

North Sea, two and three so you've got North Sea, one which is obviously operating coming off of its contract.

Later this decade right around the time, when we would be.

Securing offtake for North Sea, two and three so there is an opportunity to look at it as one large block.

And and we have the same partner on North Sea, one two and three as well.

W. We at 15%.

And how soon do you start to think about what to do with another two one is that something you're actively engaging right now are thinking about.

For contracts or is that still a couple of years away.

It is probably a couple of years away on the offtake side in terms of looking at how we.

Right size and optimize operating costs for a post FC period that is something that the team is engaged in right now.

Okay I'll leave it there thanks, Mike.

<unk>.

Thank you.

Next question comes from Ben Pham with BMO capital markets. You May proceed with your question.

Alright. Thanks, Good morning, you had a comment around.

The diversification of your assets, how it helped too.

Jeremy you maintained your guidance and it's clear that it's helping out some diversification.

So my question is.

How has how is the diversification.

Thought process like when you rank order projects you deploy capital has has that moved up the priority for you as you look to deploy capital in them.

To that like are you.

Thank you.

What you want to be in terms of.

The business mix today in diversification and as things change and you'll you'll re look at it in the future.

We've certainly got a much better position today than we would have two years ago in terms of diversification is as you point out right in it.

We're starting to see the benefits of that.

The next major move in terms of diversification of course would be building out high long and hopefully other projects offshore wind projects in Asia, which.

We will further balance out not just our overall portfolio, but also specifically are offshore.

Portfolio and reduce our exposure on.

Two north sea wind variability right and so.

<unk>.

And then what.

We're also looking to get more onshore.

Onshore renewable development and so as we bring online projects in New York.

We're hoping to get more growth out of Spain and.

In Colombia, and we've indicated to the market the other area of interest to us in the onshore renewables.

As eastern Europe in select markets in Eastern Europe. So we think that will also further help diversify our.

Our cash flow and.

And strengthen the business overall.

Yeah, I think it's about building a balance too in terms of cash flow profile, because everything we're talking about now with respect to Asia and Europe are all longer dated cash flows.

And so it's really about still seeing a good balance with you know onshore.

Other opportunities like the Colombia project for example, which will deliver cash flow in the next couple of years and so it's I wouldn't say that we are we are there today, but we're certainly making good progress in terms of building out.

A more diversified portfolio that gives US you know cash flow is it.

And it sort of balancing near term and long term.

And do you find your observation that you've been looking on offshore wind for some time that they're there's geographical diversification benefits like geographies tend to move in different ways on wind resource is that is that a correct statement.

Sure.

Did you see it for sure.

So even between the Baltic and the North sea and in Northern Europe.

You see some some differences.

Quarter to quarter in terms of wind production, but.

But certainly between.

Different parts of the globe between Asia, and the North Sea you'd see a very.

Different.

At quarter by quarter or year over year production. So you could have in Asia and high long we could have.

P 30 year and in the North Sea, we could have a P 70 or more like this year you know what it looks like it will probably come in at around <unk> 90, or slightly worse here. So it will definitely balance out the portfolio in the long run, but <unk> point is an important one in terms of the priorities for the business right now which is.

Is it not just looking at geographic diversification, but looking at.

Spreading out our cash flow and the new cash flow that comes on from our development activities through the decades. So it's not all back ended.

Okay.

I'd love, an update too around the spread between <unk>.

Your cost of cap, one and offloading it to lower cost of capital players is is it still in that 300 basis points.

Brad that even though you're the group has been under pressure or is has it has it widened.

No I think at 300 basis points is probably still accurate.

Some projects that might be higher on another project, so it'll be lower than that but I think right now we just got some some some work on this and I think we feel pretty comfortable on that spread holding.

Okay. That's great. Thank you.

Thank you.

Thank you.

And our next question comes from the line of Justin <unk> with Scotiabank. You May proceed with your question.

Thank you morning, everyone just quickly on the sustainability linked loan overlay you've indicated that.

You hit certain targets.

There'll be some cost savings do you think you could kind of just give a little bit more color or quantify some of those targets timelines and.

What those the kind of scale of those.

Cost savings.

Yes, sure I mean, theyre not large I mean right now there.

Structured generally is to be plus or minus five basis points. So.

It's it's not today I mean, I think the DSL. Alice is then sort of at a great initiative for companies to be undertaking because it ties nicely in terms of bringing together our kpis.

Sorry.

The more formal in the sense that they are tracked and they reported on their audited.

And then.

You know sort of how to account, but there's also some benefit from them, but I wouldn't say it would be a large benefit where I think we could position ourselves going forward as being able to apply the fill out to more sort of a corporate pieces of debt that we have in our portfolio and Dan.

And potentially to do other types of linked.

Linked to <unk> loans in the future.

Yes.

Great. Thanks, and then maybe just quickly on at North Sea, one what the you know the.

A replacement.

Those are those RSA.

You know what.

You kind of indicate that.

Might be curtailing.

The capacity in order to.

Protect them in the interim just looking to see what the what the kind of is that a little bit to that.

5% or is it more than that.

Yes.

Full of things on that so.

The the really positive news this year about how quickly the team in Hamburg, our team of Hamburg was able to mobilize is that by the time the wins picked up in October right.

That we were able to get all of the turbines are back online.

So we were able to replace the rotorcraft assemblies on all of the turbines that had seen the most severe degradation and that were.

Either severely curtailed or taken offline completely so so that was.

From our standpoint very positive in it.

Allowed us to get as I said in the opening remarks, a very high level of availability on North Sea one during October.

There are a very limited number of turbines that are operating at a lower.

Capacity level.

So I think it says from a down to four megawatts each turbine from.

From $6 three.

And the range of 10, or so 10 or 11 turbines that are operating at that level and that's really just to ensure that we extend their operating capacity. So they can hopefully do not have to get shut down through the winter and then those would be the first turbines in the 2022 campaign to get the rotary shafts assembly to replace so.

Overall, I think our team and in Hamburg is.

<unk> has done a very good job of being put forward on that and in doing it.

In a very cost effective way at the same time.

Great. Thanks, that's all from me Okay.

Okay.

Thank you and our next question comes from Matthew <unk> with <unk> capital. Your line is open.

Hi, good morning.

Good morning, I just wanted to go back to Ben's question on those discussions if I'm reading between the lines. What you are saying and then thinking about your strategic priorities from Investor Day, There's no real urgency to acquire another utility platform and grow that part of the portfolio.

I think our interest.

We would put it this way I think we do remain interested in other utility platforms certainly within Colombia.

Order too.

Yeah.

Leveraged some synergies with <unk>.

<unk> said when we acquired I think it will be announced at the time was in our view one of the better run.

Utilities in Colombia had an.

Excellent operating track record and so it was a good.

Utility for Northland Steffan, two is our first investment in that.

That asset class.

But we would be certainly interested in looking at other.

Utilities have either may get privatized by the government in Columbia or.

Private you only privately owned utilities that may come to market.

Particularly if we see some synergies with with Epsom, but.

But I'd say, it's more specific to.

Colombia, and then again continuing to leverage <unk>.

Expanded maybe with or.

We're able to do that to build out of renewable platform and in Colombia.

Okay got it that's very clear.

The other question I had is related to the two new Columbia projects and solar projects in Colombia is this do you think this is another path for you going forward like Cano <unk> corporate our corporate partnerships, but other developers to work with them and maybe that's something you can repeat it in the U S market.

We're always open to.

Partnering in Maine.

Two of the three offshore wind projects, we have in Europe or with partners, how long we have partners on as well.

So yeah, we definitely would be it.

It would be open to that I mean, our our view is that over.

Over the next decade.

The world's going to need a huge volume of additional green electrons and so we.

We wanted to be part of enabling.

As many projects as we can.

To assist with that and some of that we can do on our own some of that we will need to do with partners and some of that.

At some point, even if we're doing it on our own as we said earlier, we would bring in partners.

To help continue to advance those projects.

As they mature.

I guess just taking a step further my question is really around up to one gigawatt target for for onshore renewables in the U S.

Think that that's going to be more similar to the New York wind projects, where it's 100% ownership youre developing everything on your own or do you think more of that could come from working with other developers.

Both.

Youll see both.

Okay. Okay.

Thank you. Our next question comes from the line of Andrew <unk> with Credit Suisse. You May proceed with your question.

Thank you good morning, I guess the question is for Mike and it's it's really the evolution of the offshore market.

<unk>, saying that because in the Grand scheme of things Theres not a whole lot of capacity globally at this stage, but a lot in the future.

And when you think about the parallels that we saw in the onshore market, where it started off with heavy government subsidies and contracts and then largely wound up being corporate ppas for many and then some merchant.

Where do you think we are in that evolution on the offshore because we're seeing an increasing number of corporate deals being announced dedicated for a longer duration on offshore.

I think I don't know if roughly can decade behind maybe in that kind of order.

Magnitude in terms of the lag on it but.

Certainly what you continue to see us in markets like Japan.

Taiwan.

Poland, where long term contracts are being offered up to attract the developer's track the supply chain.

And given the the loan.

Development period for these projects and the and.

And the significant upfront <unk> that certainly is needed to do knee nest.

Necessary in a new market to get that market going so that's what we that's what we like and that's what we're trying to.

Obviously take advantage of our leverage.

But yes, you will see over time, both both because as the market matures like Youre, saying and it was like you've pointed out in Germany, you will see.

The more corporate Ppas fewer government backed ppas.

But it's also.

New probably in the last two or three years is just the increasing demand from from corporates, where they actually want to have access.

In a market to renewable power and in a market like Taiwan is a good example, where.

It's really difficult to get access to green electrons and a lot of these corporates need green electrons in order to meet their ESG commitments or to satisfy the ESG commitments of their customers above them right. So that's the other kind of push that you are seeing so you're seeing kind of youll gradually as you point out and start seeing the.

As the market matures seeing government ppas, maybe pull back.

But youre going to Youre also starting to see these corporate corporates push in because they want to get.

Control of the screen electronics for their <unk>.

Euro commitments as well.

I appreciate that color and then maybe just following up on that with corporates are a greater number of grant electrons does that give you another lover lover for financial flexibility on whether it be farmed downs or securitizing, the cash flow stream. How do you sort of think about that and maybe it's a question for Paul Layne also.

Yeah Paulina.

Ill start on that.

Alright.

Theres certainly a if I understand your question correctly so if.

I think in terms of farm down some and I may have misunderstood. Your question I think in terms of farm downs and sell downs.

There would be.

We think there'll be equal interest, whether you're you have a government backed PPA or a high credit quality corporate PPA. So I don't think that really changes yeah. I think I think it's more of a bank ability.

It really is it is your lenders like where we're all project finance corporate finance. So we've got to ensure that the corporate contacts have.

Strong term terms conditions guarantees all of those things that lenders would.

Feel comfortable with but so far I mean.

We've engaged lenders on the North sea projects everything is favorable to positive I would say relative to government contracts. It's just about structuring them properly and it's it's a bit of pioneering right now in terms of how youre structuring. These corporate ppas because every single entity that structuring them isn't necessarily financing the same way.

Okay very much appreciate it thank you.

Thank you.

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

Okay, well, thanks for everyone for to everyone for joining us today, we're going to hold our next call. Following the release of our fourth quarter and full year 2021 results in February in the meantime, I want to thank you for your continued confidence and support.

Ladies and gentlemen that does conclude your conference for today. Thank you for your participation have a pleasant day.