Q4 2021 Northland Power Inc Earnings Call

February 25, 2022

Ladies and gentlemen, thank you for standing by and welcome to this Northland Power conference call to discuss the fourth quarter and full year 2021 result.

During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time. If you have a question. Please press star one on your telephone.

Any time during the conference you need to reach an operator, Please press star zero.

As a reminder, this conference is being recorded Friday.

February 2000.

2022 at 10 a M.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline Arlington, Donnie Chief Financial Officer.

<unk> senior director of Investor Relations and strategy.

Before we begin Northland <unk> management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward looking statements that include assumptions and are subject to various risks actual.

Our 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 contents in making investment decisions or recommendations. The release is available at www Dot Northland power Dot Com I will now turn the call over.

Mike Crawley. Please go ahead.

Thank you operator and good morning, everyone. We're also joined this morning by David Powell, Our executive Vice President of development as well.

Off the top just with respect to the conflict in you.

Crane.

I'd like to just say that we are thinking of all of those impacted.

And also thinking of colleagues former colleagues and peers who have family.

And friends in the Ukraine.

Kick things off as we always do I want to reiterate that the health and safety of our employees and stakeholders always comes first the rigorous adherence to health protocols. During the pandemic help to ensure the safety of our employees, while ensuring allowing us to maintain high levels of availability at our facilities.

Reflecting back on 2021, I'm happy to say that we delivered a strong year financially operationally and strategically despite a number of challenges, including a historically low wind resource in the North Sea.

We've made strong progress in advancing key development projects sourcing new growth and optimizing our operating facilities.

As a global energy transition accelerates a substantial build out of renewable energy will be needed over the next decade with government de carbonization policies and corporate net zero plans.

Taking hold.

With a significant global presence Northland is well positioned to be a big part of this transformation our leadership and entrepreneurial DNA has helped us grow into a global company and a significantly significant exposure to offshore wind means that we can play a significant role in this energy transformation.

We have an operating portfolio of over three gigawatts of which nearly 95% is under long term revenue contracts and a 14 gigawatt development pipeline to fuel our growth.

Our primary focus remains on offshore wind, where we have three significant projects that will reach financial close within the next two to three years. These include high long, which will reach financial close later this year Baltic power in 2023, and North Sea, two and 2024.

Together these projects will provide us with almost three gigawatts of gross incremental capacity to complement the one two gigawatts of offshore wind. We currently have in operation.

In addition, we are establishing.

<unk> strong presence in select onshore renewable power markets to complement our growth in offshore wind and provide near term growth and cash flow.

Looking at our accomplishments over the last year first starting with our financial results. We finished the year on a very positive note posting solid results for the fourth quarter.

For this quarter, we reported adjusted EBITDA of $364 million compared to $269 million in 2020, representing a 35% increase.

For free cash flow, we reported $156 million or <unk> 69 on a per share basis.

This compares to the $56 million or 28 cents from the same period a year prior.

The strong performance in the quarter helped us achieve full year adjusted EBITDA of 114 billion and free cash flow per share of $1 40.

Both of these results came in at the midpoint of our guidance and exceeded our more recent expectations for the year.

<unk> will provide a more detailed look into the financial numbers later in the call.

Work is progressing on moving the project towards financial close in 2023 with commercial operations expected in 2026.

We expanded our presence in the German offshore wind market with the formation of the one three gigawatt North sea cluster with RW <unk>.

And we exercised our step in rights on the first of three projects within that cluster North sea two to retain the lease.

The formation of the cluster is expected to allow the realization of synergies and development construction as well as operating costs, leading to enhanced returns for all of the projects.

We also have the same step in rights for.

For North Sea, three and North Sea Delta, which are expected to come to auction in 2023 and all three together.

The North sea cluster with RW Uar partner.

Turning to our activities in Asia, we made significant advancements on our offshore wind projects under development there.

The most notable is our 144 megawatt high long project in Taiwan, where we are preparing to move the project financial close later this year.

In the past year, we completed key milestones for high long, including obtaining the localization plan after working closely with the local supply chain and government tenders.

Tendering of the main components has resulted in preferred supplier agreements being signed and securing the supply chain for the project.

In South Korea, we secured our first two electricity business licenses as part of our progression of a large portfolio of projects through early development in that country.

In Japan, two of our projects were designated under the government's auction process as promising areas with bidding expected to commence later this year.

Now looking at our near term growth and cash flow, we acquired a 551 megawatt portfolio of wind and solar operating assets in Spain. As you know one of the most promising growth markets for renewables. This portfolio. So far has been outperforming our underwritten assumptions.

The acquisition provided immediate cash flow to Northland has helped us to position has helped position us as a top 10 renewable power operator within Spain.

As we build on this momentum we expect to grow this platform through both Greenfield development and additional opportunistic acquisitions.

We also solidified our entry into the United States renewable energy market by beginning construction on two of our New York State onshore wind projects, which are progressing on schedule and on budget. The two projects Bald Hill of Bluestone have a combined operating capacity of 220 megawatts and benefit from a 20 year index.

<unk> energy certificates.

With nice sirna.

In Colombia, we began to deliver on our renewable growth strategy, leveraging our position and our absolute utility there. We advanced the 16 megawatt <unk> solar project and the 130 megawatt Super Solar projects Helios has already achieved financial close and construction activities commence in 2021 with commercial.

<unk> expected.

By the end of 2022 for both projects within the <unk> cluster, we hold a 50% interest in the Super projects with commercial operations expected in the second half of 2023, both projects will benefit from long term off take agreements with <unk>, securing a 12 year PPA and Suba <unk>.

Your PPA.

And finally, we bolstered our talent by adding key people and roles across the globe. These experts are vital as we build out our capacity and grow our global footprint. These key roles include areas such as corporate offtake strategy.

Market analysis project management global procurement, as well as adding storage and hydrogen talent to strengthen our ability to succeed in these new growth sectors.

In a world with Sigma significant need for new renewable power capacity and lots of capital looking to invest in these assets.

You want to be a developer with projects of scale.

This ensures that we will have proprietary investment opportunities ourselves, but also that we can pursue sell downs of interest in these projects going forward to other investors.

With that I will now turn the call over to Pauline for a more detailed review of our financial results.

Thank you, Mike and good morning, everyone.

Last night Northland Power released operating and financial results for the fourth quarter and full year 2021.

And then really proud of the accomplishments we've achieved together as a team over the past year.

Gearing ourselves up to continue to deliver on our stated objectives in 2022.

Our fourth quarter and full year financial results showcase the continued strength and resilience of our performance. Despite the challenges we encountered during the first nine months of the year with respect to low wind resource in the North Sea.

As discussed in our MD&A, our financial performance from our offshore wind facilities were impacted this past year due to a weaker wind resource in the north sea, which impacted all three of our offshore facilities.

Over and above this the turbines and replacement campaign at North Sea, one also impacted our results.

We are happy to report that the wind conditions experienced in the fourth quarter were closer to RFP 50, our normalized expectations and we continue to see strong wind conditions to start 2022.

Looking at our financial results in the fourth quarter, we generated adjusted EBITDA of approximately $364 million, which was an increase of 35% or $95 million compared to the $269 million as we generated a year ago.

There are a few factors that contributed to the higher EBITDA and resulted in a year over year increase these included higher contributions from Spain portfolio.

The acquisition and due to higher wholesale market prices in the quarter ahead of our expectations.

Higher operating contributions from Gemini, resulting from higher market prices realized on production above the subsidy cap and higher contributions from asset and our natural gas facilities due to optimizations and annual rate Escalations.

To understand our Spanish portfolio, better I encourage investors and analysts to refer to our 2021 annual report and our latest Aif release last night for more information.

On a full year basis, we generated adjusted EBITDA of approximately 1.14 billion.

It was near the midpoint of our guidance of $1 1 billion to $1 $2 billion.

Year over year, adjusted EBITDA decreased slightly by 3% from the same period, a year ago due to a $94 million decrease in contributions from our offshore wind facilities, resulting from lower wind resource in the year, coupled with the EPS hedging losses realized at Gemini and lost revenues at North Sea, one due to the bearing.

Replacement campaign.

These decreases were offset by a $74 million positive contribution from the <unk> portfolio as well as fewer periods of negative pricing and compensated outages at our German offshore wind facilities compared to last year.

With respect to free cash flow Northland generated approximately $156 million in the fourth quarter, representing an increase of $100 million versus 2020.

Overall, the higher free cash flow in the quarter compared to 2020 was due to a number of items, including $51 million increase in earnings across all of our facilities as I described in explaining adjusted EBITDA. We also realized $27 million contribution from the same portfolio as well as a $10 million decrease in interest costs.

Repayments of facility level loans.

On a full year basis free cash flow in 2021 was $307 million, which is a decrease of $36 million or 11% compared to the $344 million realized in the prior year.

The main driver behind the year over year change in free cash flow was an $88 million decrease in contributions primarily at our offshore wind facilities.

These decreases were partially offset by $30 million contribution from the <unk> portfolio and $18 million of interest cost savings, resulting from the scheduled principal repayment facility level loans.

On a per share basis. These figures translated into free cash flow of 69 cents in the fourth quarter and $1 40 for the full year 2021, which came in at the midpoint of our financial guidance for the year and above our expected guidance of approximately $1 30.

Northland has guided to in the third quarter of 2021.

These results compared to the 2008 and $1.73 respectively realized in the same periods of 2020.

Our rolling four quarter free cash flow payout ratio calculated on a cash dividend basis for the year ended December 31, 76% compared to 63% in 2020.

For adjusted free cash flow, which as a reminder, excludes growth related expenditures from free cash flow we generated.

$182 million in the quarter and $386 million on a full year basis.

On a per share basis. This translates into <unk> 80 in the fourth quarter and $1 70.

On a full year basis.

This adjusted free cash flow resulted in a rolling four quarter payout ratio of 45% compared to 53% in 2020.

Expanding a little on our growth expenditures you will note our presentation of gross expenditures in our annual report distinguishes between business development and project development expenses. We believe this presentation will more clearly outline the nature of these expenditures.

This development expenditures are encouraged to identify and secure prospective business and development opportunities.

Ultimately expected to result in identified development projects intended to be pursued to completion and include costs incurred for transactions that are not ultimately pursue tic acquisition.

On the other hand project development expenditures expenditures are attributable to certain early to mid stage development projects under active development and we have identified to the market in our current or previous disclosures. These projects are described and identified in our 2021 annual report.

With respect to our balance sheet Northland remains in a very strong position with ample liquidity to help fund our growth initiatives.

As at December 31, 2021, we had access we had access to approximately $776 million of cash and liquidity comprising $748 million of liquidity available under our revolving facility and $28 million of cash on hand.

In addition to free cash flow generated north end users additional sources of liquidity to fund growth and capital investments for the year ended December 31, we source additional liquidity through net proceeds from a number of strategic debt refinancings and debt optimization.

This included our Deutsche Bank debt facility, and a number of Canadian solar facilities, and our absolute debt facility in aggregate more thin realized nearly $200 million of additional proceeds from these refinancings.

When added to the nearly $250 million of additional liquidity generated in 2020, we have generated approximately $450 million of additional liquidity over the past few years through our refinancing and debt optimization activities to further support our growth.

Expanding on that a little bit more in December we restructured an upsize apps as long term nonrecourse debt financing, resulting in $84 million of incremental cash proceeds to Northland net of closing costs. The aggregate amount of the financing was upsize to $533 million.

Primarily by expected growth in EBITDA.

The facility is structured as a $521 million term loan and a $12 million.

Debt service reserve credit facility. The restructured facility is denominated in Canadian dollars and the principal amount is currently 100% hedged against the Colombian peso.

The interest rate on the debt facility for foreign exchange hedging cost is three 7%.

In addition, the exit facility will also benefit from a long term as we extended the loan to three years compared to two years previously.

Under the terms of the exit facility Northland intends to execute reoccurring upsizing that <unk> supported by continued growth in EBITDA.

Looking ahead, as we announced at our Investor Day held on February eight to complement our existing sources of funding Northland, we'll be considering partial sell down of ownership interest in certain development assets on or before financial close green financing instruments, such as green hybrid bonds and other fine.

Dancing tools.

These additional sources are intended to improve Northland financial flexibility, while supporting the capital and credit requirements for our development projects.

Turning to our 2022 financial guidance as noted in our press release issued on February eight for adjusted EBITDA, We expect to generate between $1 5 billion and $1. Two 5 billion. This year. This level is expected to be slightly higher relative to our 2021 guidance levels.

Guidance for 2022 free cash flow per share of $1 20 to $1 40 is expected is expected to be slightly lower than 2021 free cash flow per share of $1 40.

This is primarily due to increased project development costs and higher corporate costs and proceeds of the company's continued execution of its global growth strategy.

As a growth company with a significant pipeline of development projects Northland has committed to unlocking value by deploying early stage investment capital or <unk> to advance our projects.

As such in 2022, we expect our development expenditures to amount to $100 million or around <unk> 45 per share to fund expenditures to advance in North Bay cluster, Scotland.

Japan and Korea in addition to other strategies.

Accounting for these growth expenditure as noted above our adjusted free cash flow for 2022 is expected to be in the range of $1 65 to $1 85 per share. This compares with adjusted free cash flow of $1 70 for 2021.

I would like to point out that our 2022 guidance ranges for free cash flow and adjusted free cash flow do not incorporate any fell down proceeds and as such net proceeds from south that would increase our reported free cash flow in the event they do occur.

In conclusion, 2021 was a strong year for Northland and demonstrated the resilience of the portfolio and cash flow through diversification. Our teams achieved numerous successes in the year that allowed us to exceed our expected guidance ranges for both adjusted EBITDA and free cash flow compared to the third quarter. Despite the.

Truly anomalous wind resource year for the company.

We also took meaningful steps to increase our liquidity and enhance our balance sheet through targeted debt refinancings and optimizations to fund new investments.

All in all it was a productive year for the company 2022 will be another busy year for the company and we look forward to providing you with updates on our progress on our upcoming quarterly conference call with that I will now turn the box I will now turn back the call to Mike for his concluding remarks.

Thank you Pauline so looking forward, we have a big opportunity ahead of us to further accelerate the growth that we have delivered over our 35 year history.

We believe Northland is well positioned to ethanol originator and developer projects to capitalize on the expected growth in renewable power globally.

Currently we have 366 megawatts of additional capacity in construction with the expectation of completion in 2022. We also have nearly three gigawatts of gross capacity of projects, which are scheduled for financial close and commencement of construction within the next two years.

Once these projects are complete nor clients total gross capacity will nearly double to more than six.

Six five gigawatts by 2027.

So this concludes our prepared remarks, we're now happy to take your questions.

Operator, please open the line for any 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 and if you are using a speaker phone. Please lift your handset before entering your request.

One moment please for the first question.

Our first question comes from the line of David Rosato of Raymond James. Please proceed with your question.

Hey, Thanks, good morning, everyone.

My first question here on the offshore wind segment sounds like curtailments were lower in the quarter, but the wind resource is actually pretty close to in line I'm curious if that situation has improved weather due to investments in transmission or was that just a temporary factors that reduce those curtailments.

Hi, David Good question, So you're correct that there was less curtailment than than we had forecast and certainly less curtailment than we had seen in prior years.

We are expecting that to continue to improve and I think as you may recall.

But a year ago, we forecast that we expected by 2022, and certainly 2023 to see.

Some of the impact of curtailment due to extended periods of negative pricing decline because of transmission enhancements.

Both in northern Germany, but also north to south in Germany. So.

The other sorry, David the other impact too is just the.

The gradual retirement of coal fired generation in Germany, as well as taking some thermal capacity offline as well, which reduces the absence of negative pricing too. So overall.

We think it's a picture that is improving and we will continue to improve going forward.

Excellent thanks for that Mike and maybe just one more for me.

Just a question on your onshore renewable business, maybe specifically.

In Europe I'm, just curious if the if the high power price environment there today could.

Pardon me to accelerate any opportunities that you could see there just with maybe increased demand from corporate off takers.

Do you see any opportunities arising there that maybe weren't there six months ago.

Yes, I think it's both.

The higher energy prices, but also the volatility.

<unk> prices and the uncertainty around.

Power prices and gas prices, which are which are often on the gas off and on the margin in most markets in Europe as well so for power prices. So those two.

Pieces of uncertainty, we think will create a more favorable market for long term contracting of renewable energy to corporates going forward.

And we think that's a positive for north line as we look ahead to contracting the north sea cluster over the next two years or three years.

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

Thanks.

Thank you.

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

Thank you and good morning, everyone.

Two questions following up on.

European onshore platform.

Paul Thanks for the additional disclosures in the MD&A on.

The dynamics for for those contracts in Spain can you just help us understand a little better the pool price return on investment dynamic there and it sounds like there is some revenue recognition deferrals.

I'm wondering practically with what you've seen for the pool price through the latter part of <unk>.

2021 early 2022, how that will affect.

The.

EBITDA and free cash flow from those assets.

Yes so.

I think with respect to Spain.

Given the splits are.

First acquisition it was very much for us sort of learning and understanding not only the onboarding and integration of the assets, but also the accounting and very specific accounting that follows the regulated.

Treatment of these assets, Phil maybe maybe in a simplified way what I will say is there is a concept of band adjustments.

That.

Within the portfolio and the intent of those are effectively.

Two.

Smoothed out over the three to six year period essentially that the.

The peaks and valleys of of what ultimately happens with the pool prices.

So over time it is intended to be sort of a stable return.

Given the unprecedented levels of the pool prices in this year.

It's sort of a framework that resulted in.

In a benefit to us in 2021.

We are expecting though.

That we will receive most of the benefit of the full prices now it depends on what ultimately happens in 2022, you will see most of the benefit of the pool prices all else equal on the next regulatory cycle, which will be in 2023.

So I know that was probably a lot but.

All I can say is we are following exactly I forest revenue recognition treatment with respect to Spain, and we are not deferring or making any subjective decisions here on how we account for the revenues.

Got it okay that helps.

A question on prospective development.

Specific to the U S.

Any context, you can give us on thoughts beyond New York, what the company might be looking at there or is your plate pulling up with offshore wind elsewhere.

That'll be though.

The focus for the company.

Yes, I'll turn it to David for a couple of comments, but I mean, our focus in the U S.

Has been primarily in the northeast and obviously principally in New York State.

We like the.

And then New York ISO and also to some extent some parts of PJM, we like those markets, New England, we like that market, we've looked at opportunities there before.

And particularly in New York, we like the long term contracts that are available.

But maybe some additional color in terms of.

What youre seeing in the U S. David Yes, no. Thanks, Mike Thanks, Sean Good question.

I think as we communicated in Investor day, it's very much targeted approach, obviously, but you guys did a huge market and we need to be very focused activities.

Single.

Recognition of the center, the New York market.

We continue to see that proceeding and so youll see more assets I think coming through in New York as Mike said, the wider PGM, we think about some.

Similar benefits that we're tracking is one of the earlier questions about where we see the strongest activity and liquidity in the corporate Ppas and I think some of that comes in that PJM market as well. So as we look to the contracting basis of these assets being on the corporate side, we want to make sure we've got strong liquidity strong.

Potential for the offtake, So I think you've seen those two those two key areas.

Okay. Thanks, David that's all I have for now thanks, everyone.

Thank you.

The next question comes from Rupert <unk> with National Bank. Please proceed with your question.

Hey, good morning, everyone.

If I could.

Let's start with the thermal division some talk of price escalation that you saw in the quarter that.

Contributed to higher EBITDA.

Can you give us a little more color on what you saw in price escalation and we're in.

Was there anything else that contributed to the strong results.

On the price escalation.

I'll flip it over to Pauline but has principally been annual CPI adjustment that drove that escalation.

Yes.

So is that right.

A higher number this year would you assume something let's say north of four 5%.

Beg your pardon.

Bert.

What was the CPI adjustment what was the level of the adjustment you would've seen is around 2% to 3%.

We're also some lower opex costs as well, which also contributed to the rest of the results this year too.

Okay is that a.

Sustainable drop in Opex.

I would describe those more as one time and it just kind of relative to budget. What we had budgeted so I wouldn't necessarily assume that those are recurring the only facility, where we will see a continued reduction in operating costs would be <unk> as a result of the enhanced dispatch contract that we entered into with the <unk>.

ISO the system, operator in Ontario, which basically means that the facility is going to operate at a much more reduced level, which both.

It does three things one.

Reduces our operating costs in the long run to it.

Reduces emissions from the facility materially and three <unk>.

Our standpoint overall, it reduces the risk and exposure to that facility. It's an older facility. So the less it operates so less risk there or is there something going wrong.

Alright, great. Thank you and I'd like to take another crack at that Spain, If I may pull in and I apologize I haven't read it yet.

Got it.

The circumstance that.

Power prices remain as high as they are now if you do get a regulatory reset.

In 2023 is there any opportunity to to over earn your targeted return meaning.

Yes.

But you don't actually have to repay any excess revenue or does the contract effectively assume that you would have to repay.

I can start on that and then I'll turn it to Pauline.

Yes.

The.

The main opportunity for us to outperform in Spain is around the.

The availability and our operating costs in the facilities. So I don't know if I mentioned in a prior call, but our head of onshore renewables relocated to Madrid.

And it is going to be there for the next year.

Make sure that we both integrate the portfolio well into north plant, but also to really drill down and understand that those assets to ensure that we can operate them.

As efficiently as possible both from an availability standpoint, but also from a cost standpoint.

Those are the two.

Two ways that we can actually do better through the regulated tariff because theres an assumed.

Cost of operating an assumed availability level.

In the regulated tariffs that solves two.

Rafe target rate of return so that's where our main focus is on the higher pool prices.

Pauline explained it.

It.

The mechanism and the accounting treatment, which is guided also by the regulator is to smooth out the impact of any.

Hi, or LOE pool prices during a.

During our regulated the three year regulated period, and then the reset happens, but that is to make it.

The cash flow.

Less volatile to the owners of those assets.

So we wouldn't anticipate.

Pool prices in the long run would allow us to outperform our return on those assets and certainly does improve our re contracting opportunity on those assets as they fall off of the regulated tariff over the next 10 years, we would expect if oil prices remain high and certainly assess when we talked about earlier in the call.

If energy prices remain somewhat volatile, we think that will create a more fertile market for re contracting.

Yes, the only other thing I was going to say to that is.

Is that under the regulated return.

Like your return is intended to be.

Yes.

The $7 one of the seven 4% however, the cash that we receive.

Under the way that the agreements are written we don't have to.

Cash is not caught back so it's available for us to use at a corporate level, which sort of enhances returns on the corporate level perspective, but when it comes to the actual just considering Spain entity in Spain itself that the returns are intended to be stable for the life of the asset.

The contract.

Okay very good I'll leave it there thank you.

Okay. Thanks Robert.

Thank you. Our next question comes from now to be down with a capital market. Please proceed with your question.

Hi, good morning.

You mentioned that you've invested a lot in talent. This year I'm just wondering today when you think about your organization do you think of all the right people in the right places or do you think there are any.

Capabilities or tools that you are still missing that you might want to be pursuing this year.

I think we've done a lot in the last year to add talent, what we're looking at in 2022 is too.

Take a bit of a fresh look at.

How our business processes operate and a bit around kind of how we structure ourselves globally.

To do some enhancements just both from an asset management and also.

Growth standpoint to make sure that we're structured in the most.

<unk>.

Way and also in a way to properly manage this risk for a company of our scale. So that's more what the focus is going forward in 2022 versus last year, where it was.

More about pulling in the talent that we need it and.

Alright, thats taken all the talent and making sure it's properly organized.

Over the next year is where our focus is we've grown a lot you've grown a lot over the last.

Several years.

And so we do need to make sure that the.

The company for the scale. It is now and the scale that it will be in the coming years is structured properly.

Okay got it.

And just wanted to ask if you could provide a bit more context on the projects in Scotland.

What's your outlook for the two.

I guess the options that you have now in the book and maybe talk a little bit about floating wind if you kind of as well.

Yes for sure it I'll turn it to David.

Liza two three Gigawatts that we were awarded and David can give you some more color on those opportunities.

Yes, good question so.

Right.

Floating at least one site is definitely consulting technology. The other one is for fixed.

The early stage projects, obviously, the right at the start of that development periods that we are.

We are looking at the backend of the decade really by the time, you're going to get to.

On suppliers and CND 30 of those assets depending on work so underway.

The focus of course from a timing perspective, the fixed wanted to move that one forward with speed.

Obviously for the reasons of the technology and the ability to do that given its location.

It is nielsen's first floating project.

And so it's.

Project that we're going to learn as we as we do that there's a lot of similarity. So the learning is really on the optimization of the design of the floating in the choice of the floating technology Foundation technology I'm not something that we.

Hi.

The earlier question. We ask you have capacity that we brought in already in the business to specific floating technology.

So thats going to be something that we'll be able to leverage all of the other parts of the world as well as we look for the floating side. Some further expansion in the portfolio.

Thank you.

That's all for me.

Okay.

Well seeing no further questions I want to thank everyone for joining us today, we will hold our next call. Following the release of our first quarter 2022 results in May in the meantime, we want to thank you for your continued confidence and support.

Yes.

We got one.

Oh, sorry, Mark Jarvi sorry.

Item.

One moment.

Are you there mark.

Can you hear me.

Just made it in under the wire just how your pop up sorry about that enough.

Sorry about that I, just wanted to kind of circle back on partnerships for offshore wind.

We've done a number of them in different ways.

How much right now are you getting inbound versus chasing partnerships and trying to find a local partner I'm just wondering.

Frame the sort of types of partnerships you're entertaining at this point.

Yes.

Turn it to David again.

We're seeing a number of new markets start to open up or at least government put out frameworks or initial.

Consultations around offshore wind frameworks and some new markets. So we do get contacted by <unk>.

Some of the.

Early stage developers in those markets looking for an experience.

Experienced partner, but I don't know if anything you'd add to that David I missed the subtlety Mark's question.

How much of it in terms of our partnerships in offshore wind that we entered into and how much are we finding now is.

Reaching out.

Versus inbounds coming in asking for us to reaching out to us yet developers, yeah, sorry, sorry market was at that line couldn't quite get it.

<unk>.

What else are you finding once you're of course once we've got a foothold in the market the inbound calls come.

Much more frequently and we're finding that in a number of the locations were in now as we've got that presence. We've got that reputation of course, we're bringing value.

Part of it is coming is coming towards us to look to act.

Access that value that we're bringing to form a partnership so.

I think we are seeing increasing numbers of that now we're not target markets, which is great. Because we we intend to grow with not a single project single country, you want to grow our portfolio in each location. So I think he is positive from that perspective.

And in terms of the inbound and how often would something maybe not fit for exactly what you want to deploy permanent equity, but something you can help with like is there an opportunity for <unk> enhanced scale and operational development to sort of be it service provider, maybe not a long term owner on some of these partnerships can be installed.

Yes.

We're a couple of things one is were looking to moving forward position ourselves not just as it did.

Developer and of late particularly of late stage development or who can manage the procurement and construction.

Setup and not just as a constructor, but also as an asset manager and operator of the facility. So that ideally it won't be always the case, but ideally in the event, where we enter into partnerships with another developer.

Then we would be able to position ourselves as the asset management or going forward, which both allows us to better protect and manage our own investment in that facility, but also hopefully to be able to.

<unk> received some incremental cash flow.

From that as the asset manager beyond just whatever distributions, we get as an investor in those facilities.

Understood and then just.

Turning back to Nordson cluster and then.

Let me talk about the 491 comes off contract in around the same time.

The opportunity of Repower more tier one or is that just not feasible at this point, it's just too early.

Sort of lifecycle.

Yes, it's a good question I think the in terms of kind of.

It was a nine year not almost 10 year off take agreement or subsidy contract on that facility. So when that comes off that facility has still got a lot of life and so I think it would be unlikely that.

That we would repower and I think the better opportunity would be too.

To re contract that possibly as part of the re contracting of the overall north sea cluster since it will be right around the same timeline.

North Sea cluster comes online so I think thats, probably the better opportunity than.

Then a repowering on that facility certainly not at that time.

Okay, Thanks, Mike and maybe one last one for Paul.

<unk> cost in terms of the debate repairs just any update in terms of how that's tracking versus sort of prior disclosures or expectations.

Oh.

It's tracking along.

Along inline with expectations and the replacement.

Replacement campaign that we have planned for this year and the lost revenues that we have.

Expecting is obviously just an estimate is reflected in the guidance that we released previously.

Okay. Thanks for fitting me in here I appreciate it.

Thanks, Mark Mark Okay, well, thanks, everybody for joining and we look forward to talking to you again after the Q1 results come out.

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

[music].

Okay.

[music].

Ladies and gentlemen, thank you for standing by.

Welcome to this Northland power conference call to discuss the fourth quarter and full year 2021 result.

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

Afterwards, we will conduct a question and answer session.

At times, if you have a question. Please press star one on your telephone if at any time during the conference you need to reach an operator. Please press star Zero as a reminder, this conference is being recorded Friday February 25th 2022 at 10 a M.

Conducting this call for Northland power are Mike Crawley, President and Chief Executive Officer, Pauline All in China, Donnie Chief Financial Officer, and why Phoenix, Lisle Senior director of Investor Relations and strategy.

Before we begin Northland management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward looking statements that include assumptions and are subject to various risks actual.

Results may differ materially from management's expected or forecasted results.

Please read the forward looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents and making investment decisions or recommendations. The release is available at www Dot Northland power Dot Com I will now turn the call over.

Mike Crawley. Please go ahead.

Thank you operator and good morning, everyone. We're also joined this morning by David Powell, Our executive Vice President of development as well.

Off the top just with respect to the conflict.

Crane.

I'd like to just say that we are thinking of all of those impacted.

And also thinking of our colleagues former colleagues and peers who have family.

And friends in the Ukraine.

This morning, we will review, our fourth quarter and full year 2021 financial and operating results. Following our prepared remarks, we will take questions from analysts and look forward to addressing all of those questions to kick things off as we always do I want to reiterate that the health and safety of our employees and our stakeholders always comes first.

The rigorous adherence to health protocols during the pandemic help to ensure the safety of our employees, while ensuring allowing us to maintain high levels of availability at our facilities.

We have made strong progress in advancing key development projects sourcing new growth and optimizing our operating facilities.

As a global energy transition accelerates a substantial build out of renewable energy will be needed over the next decade with government de carbonization policies and corporate net zero plans.

Taking hold.

With a significant global presence Northland is well positioned to be a big part of this transformation our leadership and entrepreneurial DNA has helped us grow into a global company and our significant significant exposure to offshore wind means that we can play a significant role in this energy transformation.

We have an operating portfolio of over three gigawatts of which nearly 95% is under long term revenue contracts and a 14 gigawatt development pipeline to fuel our growth.

Together these projects will provide us with almost three gigawatts of gross incremental capacity to complement the one two gigawatt of offshore wind. We currently have in operation.

In addition, we are establishing a strong presence in select onshore renewable power markets to complement our growth in offshore wind and provide near term growth and cash flow.

Looking at our accomplishments over the last year first starting with our financial results. We finished the year on a very positive note posting solid results for the fourth quarter.

For this quarter, we reported adjusted EBITDA of $364 million compared to $269 million in 2020, representing a 35% increase.

For free cash flow, we reported $156 million or <unk> 69 on a per share basis.

It compares to the $56 million or 2008 from the same period a year prior.

The strong performance in the quarter helped us achieve full year adjusted EBITDA of 114 billion and free cash flow per share of $1 40.

Both of these results came in at the midpoint of our guidance and exceeded our more recent expectations for the year.

Colleen will provide a more detailed look into the financial numbers later in the call.

Looking back at the year and with respect to our growth pipeline, we closed our entry in the one two gigawatt Baltic power offshore wind project for which we also secured a 25 year index Cfd or power purchase agreement work is progressing on moving the project towards financial close in 2023 with commercial operations expected in 2002.

Six.

We expanded our presence in the German offshore wind market with the formation of the one three gigawatt North sea cluster with RW <unk>.

And we exercised our step in rights on the first of three projects within that cluster North sea two to retain the lease.

The formation of the cluster is expected to allow the realization of synergies and development construction as well as operating costs, leading to enhanced returns for all of the projects.

We also have the same step in rights in four North Sea, three and North Sea Delta, which are expected to come to auction in 2023 and all three together.

The North sea cluster with RW Uar partner.

Turning to our activities in Asia, we made significant advancements on our offshore wind projects under development. There. The most notable is our 1044 megawatt high long project in Taiwan, where we are preparing to move the project financial close later this year.

In the past year, we completed key milestones for high long, including attaining the localization plan after working closely with the local supply chain and government tender.

Tendering of the main components has resulted in preferred supplier agreements being signed and securing the supply chain for the project.

In South Korea, we secured our first two electricity business licenses as part of our progression of a large portfolio of projects through early development in that country.

In Japan, two of our projects were designated under the government's auction process as promising areas with bidding expected to commence later this year.

The acquisition provided immediate cash flow to north and have helped us to position has helped position us as a top 10 renewable power operator within Spain.

As we build on this momentum we expect to grow this platform through both Greenfield development and additional opportunistic acquisitions.

We also solidified our entry into the United States renewable energy market by beginning construction on two of our New York State onshore wind projects, which are progressing on schedule and on budget. The two projects ball Halo bluestone have a combined operating capacity of 220 megawatts and benefit from a 20 year index.

Noble energy certificate.

Friedman with nice area.

In Colombia, we began to deliver on our renewable growth strategy, leveraging our position and our FCA utility there we advanced the 16 megawatt <unk> solar project and the 130 megawatt Super solar projects.

<unk> has already achieved financial close and construction activities commenced in 2021 with commercial operations expected.

By the end of 2022 for both projects within the <unk> cluster, we hold a 50% interest in the Super projects with commercial operations expected in the second half of 2023.

Projects will benefit from long term off take agreements with <unk>, securing a 12 year PPA and Suba, a 15 year PPA.

Finally, we bolstered our talent by adding key people and roles across the globe. These experts are vital as we build out our capacity and grow our global footprint. These key roles include areas such as corporate offtake strategy.

Market analysis project management global procurement, as well as adding storage and hydrogen talent to strengthen our ability to succeed in these new growth sectors.

In a world with Cigna significant need for new renewable power capacity and lots of capital looking to invest in these assets you want to be a developer with projects of scale.

This ensures that we will have proprietary investment opportunities ourselves, but also that we can pursue sell downs of interest in these projects going forward to other investors.

With that I will now turn the call over to Pauline for a more detailed review of our financial results.

Thank you, Mike and good morning, everyone.

Lastly, Northland power released operating and financial results for the fourth quarter and full year 2021.

We are immensely proud of the accomplishments we've achieved together as a team over the past year.

Gearing ourselves up to continue to deliver on our stated objectives in 2022.

As discussed in our MD&A, our financial performance from our offshore wind facilities were impacted this past year due to weaker wind resource in the North sea, which impacted all three of our offshore facilities.

Over and above this that you're buying and replacement campaign at North Sea. One also impacted our results. However, we are happy to report that the wind conditions experienced in the fourth quarter were closer to RFP 50, our normalized expectations and we continue to see strong lead conditions to start 2022.

There were a few factors that contributed to the higher EBITDA and resulted in a year over year increase. These included higher contributions from Spain portfolio due to the acquisition and due to higher wholesale market prices in the quarter ahead of our expectations.

Higher operating contributions from Gemini, resulting from higher market prices realized on production above the subsidy cap and higher contributions from <unk> and our natural gas facilities due to optimizations and annual rate Escalations.

Do you understand our Spanish portfolio, better I encourage investors and analysts to refer to our 2021 annual report and our latest Aif released last night for more information.

On a full year basis, we generated adjusted EBITDA of approximately 1.14 billion, which was near the midpoint of our guidance of $1 1 billion to $1 $2 billion.

Year over year, adjusted EBITDA decreased slightly by 3% from the same period, a year ago due to a 94 million dollar decrease in contributions from our offshore facilities, resulting from lower wind resource in the year, coupled with the Aps hedging losses realized at Gemini and the loss revenues at North Sea, one due to the <unk>.

Replacement campaign.

With respect to free cash flow Northland generated approximately $156 million in the fourth quarter, representing an increase of $100 million versus 2020.

Overall, the higher free cash flow in the quarter compared to 2020 was due to a number of items, including $51 million increase in earnings across all our facilities as I described in explaining adjusted EBITDA.

Also realize that $27 million contribution from the same portfolio as well as a $10 million decrease in interest costs from repayment of facility level loans.

On a full year basis free cash flow in 2021 was $307 million, which is a decrease of $36 million or 11% compared to the $344 million realized in the prior year.

One driver behind the year over year change in free cash flow was an $88 million decrease in contributions primarily at our offshore wind facilities.

On a per share basis. These figures translated into free cash flow of 69 cents in the fourth quarter and $1 40 for the full year 2021, which came in at the mid point of our financial guidance for the year and above our expected guidance of approximately $1 30.

Northland has guided to in the third quarter of 2021.

These results compared to the 2008 and $1.73 respectively realized in the same periods of 2020.

Our rolling four quarter free cash flow payout ratio calculated on a cash dividend basis for the year ended December 31 was 56% compared to 63% in 2020.

For adjusted free cash flow, which as a reminder, excludes growth related expenditures from free cash flow we generated one.

$182 million in the quarter and $386 million on a full year basis.

On a per share basis. This translates into <unk> 80 in the fourth quarter and $1 70.

On a full year basis.

This adjusted free cash flow resulted in a rolling four quarter payout ratio of 45% compared to 53% in 2020.

This development expenditures are encourage to identify and secure perspective business and development opportunities.

Ultimately expected to result in identified development projects intended to be pursued to completion and include costs incurred for transactions that are not ultimately pursue tic acquisition.

On the other hand project development expenditures expenditures are attributable to certain early to mid stage development projects under active development and we have identified to the market in our current your previous disclosures. These projects are described and identified in our 2021 annual report.

With respect to our balance sheet Northland remains in a very strong position with ample liquidity to help fund our growth initiatives.

As at December 31, 2021, we had access we had access to approximately $776 million of cash and liquidity comprising $740 million of liquidity available under our revolving facility and $28 million of cash on hand.

This included our Deutsche Bank debt facility, and a number of Canadian solar facilities, and our <unk> debt facility and aggregate Northland realized nearly $200 million of additional proceeds from these refinancings.

Expanding on ebbs, a little bit more in December we restructured an upsized apps as long term non recourse debt financing, resulting in $84 million of incremental cash proceeds to Northland net of closing costs. The.

The aggregate amount of the financing was upsize to $533 million driven primarily by expected growth in <unk> EBITDA.

This facility is structured as a $521 million term loan and a $12 million.

Debt service reserve credit facility. The restructured facility is denominated in Canadian dollars and the principal amount is currently 100% hedged against the Colombian peso.

The interest rate on the debt facility before foreign exchange hedging cost is three 7%.

In addition, the <unk> facility will also benefit from a long term as we extended the loan to three years compared to two years previously.

Under the terms of the exit facility Northland intends to execute reoccurring upsizing of <unk> supported by continued growth in EBITDA.

Looking ahead, as we announced at our Investor Day held on February 8th to complement our existing sources of funding Northland, we'll be considering partial sell down of ownership interest in certain development assets on or before financial close green financing instruments, such as green hybrid bonds and other final.

Answering tools. These additional sources are intended kimco with Northland financial flexibility, while supporting the capital and credit requirements for our development projects.

Turning to our 2022 financial guidance as noted in our press release issued on February eight for adjusted EBITDA, We expect to generate between $1. One 5 billion and $1. Two 5 billion. This year. This level is expected to be slightly higher relative to our 2021 guidance levels.

Guidance for 2022 free cash flow per share of $1 20 to $1 40 as expense is expected to be slightly lower than 2021 free cash flow per share of $1 40.

This is primarily due to increased project development costs and higher corporate costs in pursuit of the company's continued execution of its global growth strategy.

As a growth company with a significant pipeline of development projects Northland has committed to unlocking value by deploying early stage investment capital or Capex to advance our projects.

As such in 2022, we expect our development expenditures to amount to $100 million or around 45 per share to fund expenditures to advance the nordson cluster Scotland.

Japan and Korea in addition to other strategies.

I would like to point out that our 2022 guidance ranges for free cash flow and adjusted free cash flow do not incorporate any sell down proceeds NSX net proceeds from sale that would increase our reported free cash flow in the event. Thank you occur.

A truly anomalous wind resource year for the company.

We also took meaningful steps to increase our liquidity and enhance our balance sheet through targeted debt refinancings and optimizations to fund new investments.

Thank you Pauline so looking forward, we have a big opportunity ahead of us to further accelerate the growth that we have delivered over our 35 year history. We believe Northland is well positioned to ethanol originator and developer projects to capitalize on the expected growth in renewable power globally. Currently we have 366 megawatt.

Lots of additional capacity in construction with the expectation of completion in 2022. We also have nearly three gigawatts of gross capacity and projects, which are scheduled for financial close and commencement of construction within the next two years.

Once these projects are complete Northland total gross capacity will nearly double to more than six.

Six five gigawatts by 2027.

So this concludes our prepared remarks, we're now happy to take your questions.

Operator, please open the line for any 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 and if you're using a speaker phone. Please lift your handset before annual year request one moment. Please for the first question.

Our first question comes from the line of David Quezada of Raymond James. Please proceed with your question.

Okay.

Hey, Thanks, good morning, everyone.

My first question here on the offshore wind segment.

Sounds like curtailments were lower in the quarter, but the wind resource is actually pretty close to in line I'm curious if that situation has improved weather due to investments in transmission or was that just a temporary factors that reduce those curtailments.

Hi, David Good question, So you're correct that there was less curtailment than than we had forecast and certainly less curtailment than we had seen in prior years.

We're expecting that to continue to improve and I think as you may recall.

But a year ago, we forecast that we expected by 2022, and certainly 2023 to see.

Some of the impact of curtailment due to extended periods of negative pricing decline because of transmission enhancements.

Both in northern Germany, but also north to south in Germany. So.

I'm sorry, David the other impact too is just the.

The gradual retirement of coal fired generation in Germany, as well as taking some thermal capacity offline as well, which reduces the absence of negative pricing too. So overall.

We think it's a picture that is improving and we will continue to improve going forward.

Excellent thanks for that Mike and maybe just one more for me.

Just a question on your onshore renewable business, maybe specifically.

In Europe I'm, just curious if the if the high power price environment there today could.

Pardon me to accelerate any opportunities that you could see there just with maybe increased demand from corporate off takers.

Do you see any opportunities arising there that maybe weren't there six months ago.

Yes, I think it's both the the higher energy prices, but also the volatility.

<unk> prices and the uncertainty around.

Power prices and gas prices, which are which are often on the gas off and on the margin in most markets in Europe as well so for power prices. So those two.

Pieces of uncertainty, we think will create a more favorable market for long term contracting of renewable energy to corporates going forward.

And as we speak.

I think that's a positive for Northland as we look ahead to contracting the north sea cluster over the next two years or three years.

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

Thanks.

Thank you.

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

Thank you and good morning, everyone.

Two questions following up on.

European onshore platform.

Paul Thanks for the additional disclosures in the MD&A.

On the dynamics for some of those contracts in Spain can you just help us understand a little better the pool price return on investment dynamic there and it sounds like there is some revenue recognition deferrals and I'm wondering practically with what you've seen for the pool price through the latter part of <unk>.

2021 early 2022, how that will affect.

The.

EBITDA and free cash flow from those assets.

Yes so.

I think with respect to Spain.

Given the splits are.

Treatment of these assets, Phil maybe maybe in a simplified way what I will say is there is a concept of band adjustments.

That.

Within the portfolio and the intent of those are effectively.

Two.

Smooth out over the three to six year period, essentially the b.

The peaks and valleys of of what ultimately happens with the pool prices.

So over time it is intended to be sort of a stable return.

However, given the unprecedented levels of the pool prices in this year.

It's sort of a framework that resulted in.

And its benefit to us in 2021.

We are expecting though.

So I know that was probably a lot but.

Got it okay that helps.

Question on prospective development.

Specific to the U S. Mike.

Any context, you can give us on thoughts beyond New York, what the company might be looking at there or is your plate pulling up with offshore wind elsewhere.

That will be though.

The focus for the company.

Yeah, I'll turn it to David for a couple of comments, but I mean, our focus in the U S.

Has been primarily in the northeast and obviously principally in New York State.

We like the.

And then New York ISO and also to some extent some parts of PJM, we'd like those markets, New England, and we like that market, we've looked at opportunities there before.

And particularly in New York, we like the long term contracts that are available.

But maybe some additional color in terms of.

What youre seeing in the U S. David Yes, no. Thanks, Michael Thanks, Sean Good question.

I think as we communicated in Investor day, it's very much targeted approach, obviously that you guys did a huge market and we need to be very focused activities.

The recognition of the center, the New York market.

We continue to see that shifted that proceeding and so youll see more assets I think coming through in New York as Mike said the wide PJM, we think about some.

I assume the benefits that we're tracking is one of the earlier questions about where we can we see the strongest activity and liquidity in the corporate Ppas and I think some of that comes in that PJM market as well. So as we look to the contracting basis of these assets being on the corporate side, we want to make sure we've got strong liquidity strong.

Potential for the offtake, So I think you've seen those two those two key areas.

Okay. Thanks, David that's all I have for now thanks, everyone.

Thank you.

The next question comes from Rupert <unk> with National Bank. Please proceed with your question.

Hey, good morning, everyone.

If I could start with the thermal division some talk of price escalation that you saw in the quarter that.

Contributed to higher EBITDA.

Can you give us a little more color on what you saw in price escalation and we're in.

Was there anything else that contributed to that strong result.

On the price escalation.

Sure.

I'll flip it over to Pauline that has principally been annual CPI adjustment that drove that escalation.

Yes.

So is that right.

At a higher number this year with Youre seeing something let's say north of four 5%.

Beg your pardon.

Bert.

What was the CPI adjustment what was the level of the adjustment you would've seen is around 2% to 3%.

There were also some lower opex costs as well, which also contributed to the rest of the results this year too.

Okay is that a.

Our sustainable drop in Opex.

I would describe those more as one time and it just kind of relative to budget, what we had budgeted so I wouldn't miss.

Necessarily assume that those are recurring the only study where we will see a continued.

<unk> operating costs would be <unk> as a result of the enhanced dispatch contract that we entered into with the.

ISO the system, operator in Ontario, which basically means that the facility is going to operate at a much more reduced level, which both.

As does three things one.

It reduces our operating costs in the long run to it.

Reduces emissions from the facility materially and three.

From our standpoint overall, it reduces the risk and exposure to that facility. It's an older facility. So the lesson of outbreaks of less risk there or is there something going wrong.

Alright, great. Thank you and I'd like to take another crack at that Spain, if I may pull in and I apologize because I haven't read the Aif yet.

The circumstance.

Power prices remain as high as they are now if you do get a regulatory reset.

In 2023 is there any opportunity to to over earn your targeted return meaning.

But you don't actually have to repay any excess revenue or does the contract effectively assume that you would have to repay.

I can start on that and then I'll turn it to Pauline.

The.

The main opportunity for us to outperform in Spain is around.

The availability at our operating costs in that facility. So I don't know if I mentioned in a prior call but are ahead of onshore renewables relocated to Madrid.

And it is going to be there for the next year.

To make sure that we both integrate the portfolio well into Northland, but also to really drill down and understand that those assets to ensure that we can operate them.

As efficiently as possible both from an availability standpoint, but also from a cost standpoint and that those are the two.

Two ways that we can actually do better through the regulated tariff because theres an assumed.

Cost of operating an assumed availability level.

In the regulated tariffs that solves two.

Rafe target rate of return so that's where our main focus is on the higher pool prices.

As <unk> explained it.

Yes.

The mechanism and the accounting treatment, which is guided also by the regulator is to smooth out the impact of any.

High or low pool prices during a.

During our regulated the three year regulated period, and then the reset happens, but that is to make it.

The cash flow.

Less volatile to the owners of those assets.

So we wouldn't anticipate.

Fuel prices in the long run would allow us to outperform our return on those assets is certainly does improve our re contracting opportunity on those assets as a falloff of the regulated tariff over the next 10 years, we would expect if oil prices remain high and certainly assessing we talked about earlier in the call.

If energy prices remain somewhat volatile, we think that will create a more fertile market for re contracting.

Yes, the only other thing I was going to say to that is.

Is that under the regulated return thank.

Like your return is intended to be.

Between the $7 one of the seven 4% however, the cash that you that we receive.

Under the way that the agreement.

The agreements are written we don't have to cash has not caught back. So it's available for us to use at a corporate level, which sort of enhances returns on the corporate level perspective, but when it comes to the actual just considering Spain entity and Spain itself. The returns are intended to be stable for the life of the asset with the.

The contract.

Okay very good I'll leave it there thank you.

Okay. Thanks Peter.

Thank you. Our next question comes from Matthew Beydoun with IAA capital market. Please proceed with your question.

Hi, good morning.

Though these are tools that you are still missing that you might want to be pursuing this year.

I think we've done a lot in the last year to add talent, what we're looking at in 2022 is too.

Take a bit of a fresh look at the <unk>.

How our business processes operate and a bit around kind of how we structure ourselves globally.

To do some enhancements just both from an asset management and also.

ROE standpoint to make sure that restructured in the most.

<unk>.

Way and also in a way to properly manage this risk for a company of our scale. So that's more what the focus is going forward in 2022 versus last year, where it was.

More about pulling in the talent that we need it and.

Alright, thats taken all the talented and making sure it's properly organized.

Over the next year is where our focus is we've grown a lot we've grown a lot over the last.

Several years.

And so we do need to make sure that the.

The company for the scale. It is now and the scale that it will be in the coming years is structured properly.

Okay got it.

And just wanted to ask if you could provide a bit more context on the projects in Scotland.

What's your outlook for the two.

I guess the options that you have now in the book and maybe talk a little bit about floating wind if you kind of as well.

Yes for sure I will turn it to David.

Liza two three Gigawatts, we are rewarded and David can give you some more color on those opportunities.

Yes, good question so.

Right.

Noting lease.

<unk> is definitely for floating technology. The other one is for fixed.

They are early stage projects, obviously, the right at the start of their development periods that we are.

We are looking at the backend of the decade really by the time, you're going to get to.

<unk> of those assets dependent works are underway.

The focus of course from a timing perspective, the fixed wanted to move that one forward with speed obviously for the reasons, if the technology and the ability to do that given its location.

It is nielsen's first floating project.

So it's.

A project that we're going to learn as we as we do that there's a lot of similarity. So the learning is really on the optimization of the design of the floating in the choice of the floating Technology Foundation technology.

And that's something that we have.

To your earlier question.

So you have capacity that we brought in already in the business to specific floating technology.

So thats going to be something that we'll be able to leverage all the other parts of the world as well as we look for the floating side. Some further expansion in the portfolio.

Thank you for the time appreciate it that's all for me.

Okay.

We're seeing no further questions I want to thank everyone for joining us today, we will hold our next call. Following the release of our first quarter 2022 results in May in the meantime, we want to thank you for your continued confidence and support.

Oh My God, we got one.

Sorry, Mark Jarvi, sorry, sorry.

Sorry, Joe.

One moment.

Barry there Mark.

Can you hear me.

Just made it in under the wire just how your pop ups, sorry about that sorry about that I just wanted to kind of circle back on partnerships for offshore wind.

There are a number of them in different ways.

How much right now are you getting inbound versus chasing partnerships I'm trying to find a local partner I'm just wondering.

Frame sort of types of partnerships you're entertaining at this point.

Yes.

Turning to the David again.

We're seeing a number of new markets start to open up or at least governance put out frameworks are initial.

Consultations around offshore wind frameworks and some new markets. So we do get contacted by <unk>.

Some of the.

Early stage developers in those markets looking for an experience.

Experienced partner, but I don't know if anything you'd add to that David I missed was the subtlety Mark's question is around.

How much of it in terms of our partnerships in offshore wind that we enter into and how much are we finding now is.

I was reaching out.

Versus inbounds coming in asking for us to reaching out to US yes, no developers, yes, sorry, sorry market was at that line.

Great.

<unk>.

What else are you finding once you're of course once we've got the foothold in the market the inbound calls come.

Much more frequently and we're finding that in a number of the locations. We're in now as we've got that presence. We've got that reputation of course, we're bringing value then a part of it is coming is coming towards us to look to act.

Access that value that we're bringing to form a partnership so.

I think were seeing increasing numbers of that now we're not target markets. We strike because we intend to grow we're not a single project single country, you want to grow our portfolio in each location. So I think he is positive from that perspective.

And in terms of those inbound how often something maybe not fit for.

And you're exactly where you want them to play permanent equity, but something you can help with like is there an opportunity from this either enhanced scale and operational development.

Service provider, maybe not a long term owner on some of these partnerships can be neutral.

Yes.

We're a couple of things one is were looking to moving forward to position ourselves not just.

As <unk>.

Developer and of late particularly of late stage development, we can manage procurement and construction.

Then we would be able to position ourselves as the asset management going forward, which both allows us to better protect and manage our own investment in that facility, but also hopefully to be able to.

<unk> received some incremental cash flow.

From that as the asset manager beyond just whatever distributions, we get as an investor in those facilities.

Okay.

And then just turning back to Nordson cluster and then.

Let me talk about the 491 comes off contract in around the same time.

The opportunity to Repower, one or is that just not feasible at this point, it's just too early.

Sort of lifecycle.

Yes, it's a good question I think the in terms of kind of.

It was a nine year not almost 10 year off take agreement or subsidy contract on that facility. So when that comes off that <unk> still got a lot of life and so I think it would be unlikely that.

That we would repower and I think the better opportunity would be too.

To re contract that possibly as part of the re contracting of the overall north sea cluster since it will be right around the same timeline.

North Sea cluster comes online so I think that's probably the better opportunity than.

Then a repowering on that facility certainly not at that time.

Okay, Thanks, Mike and maybe one last one for Paul.

Cost in terms of the debate and repairs just any update in terms of how that's tracking versus sort of prior disclosures or expectations.

Oh.

It's tracking along.

Along in line with expectations and the.

The replacement campaign that we have planned for this year and the lost revenues that we have.

So at expecting is obviously just an estimate is reflected in the guidance that we released previously.

Okay. Thanks for fitting me in here I appreciate it.

Great. Thanks, Mark Mark Okay, well, thanks, everybody for joining and we look forward to talking to you again after the Q1 results come out.

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

Q4 2021 Northland Power Inc Earnings Call

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