Q4 2024 Northland Power Inc Earnings Call
Speaker Change: Welcome to the Northland Power conference call to discuss the fourth quarter 2024 results. As a reminder, this conference is being recorded on Thursday, February 27, 2025 at 10 a.m. Eastern.
Speaker Change: Conducting this call for Northland Power are Christine Healy, President and CEO, John Brace, Chairman, and Adam Beaumont, Interim Chief Financial Officer.
Speaker Change: Before we begin, Northlands 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.
Speaker Change: 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 when making investment decisions or recommendations.
Speaker Change: The release is available at www.nordlandpower.com. I will now turn the call over to Ms. Christine Healy.
Christine Healy: Good morning. Thank you very much and thank you to everyone for joining today's call.
Christine Healy: So, in our discussion today, I will provide an update on our business, the progress we've made on construction, and our focus areas for 2025.
Speaker Change: Adam Beaumont will walk through our 2024 fourth quarter and full year results and our newly issued 2025 financial guidance which was released yesterday and then John Brace will join us as well to take your questions.
Speaker Change: Before we get into details though I want to reiterate and emphasize the paramount importance of health and safety across all of Northland's business and all of our operations.
Speaker Change: We strive to ensure all individuals working across our company and for our company are kept safe because safety is a core value for Northland.
Speaker Change: So I'd like to take a moment to introduce myself as Northland Power's new president and CEO.
Speaker Change: Since I joined the company on January 20th, I have been energized by the talent of the Northland team and the incredible work we're doing around the globe.
Speaker Change: It's been a very busy first month, and for those of you I have not yet had the opportunity to meet and connect with, I look forward to doing so. And I will share with you now some of the things that attracted me to join Northland.
Speaker Change: So fundamentally, we live in a world that needs energy, and that energy needs to be affordable, reliable, secure, and clean.
Speaker Change: and Northland has a very strong reputation as a world-class energy player.
Speaker Change: a proven track record in project origination, development, execution, and operation. This company knows how to deliver projects around the world, and these are projects for which the demand picture is exceptional.
Speaker Change: So with a global and diverse energy portfolio, including offshore wind, onshore wind, solar, battery, and natural gas, Northland is growing and we are well positioned to take advantage of future profitable growth opportunities.
Speaker Change: I was personally really attracted by Northline being one of the few Canadian energy companies operating and succeeding in international markets.
Speaker Change: In fact, this global diversification is one of the reasons that Northland is unaffected by the threat of U.S. tariffs, as I'm sure some of you will have questions about.
Speaker Change: Financially, we are in a strong position. We have a highly contracted revenue base, over $2.3 billion in revenues, available liquidity of over a billion, and we're one of the few power producers with an investment-grade balance sheet.
Speaker Change: I've personally spent decades in the energy sector and I have a lot of passion for energy and I'm aligned with Northland's values and how we deliver.
Speaker Change: I bring with me a proven track record of leading teams across continents, increasing shareholder value, and delivering multi-billion dollar infrastructure projects.
Speaker Change: And I've been fortunate through my previous executive roles, including at global energy companies like Total Energy and Maersk and Atkins Reales, that I have led businesses growing across diverse markets.
Speaker Change: I also currently sit on the Board of Directors for Canadian Natural Resources, one of Canada's largest energy corporations.
Speaker Change: I look forward to leveraging my experience here at Northland as we work to build on the strong foundation that has been built over many decades in this company.
Speaker Change: So since joining, my focus has been on getting to know our people, so our shareholders, our stakeholders, our partners, our employees, and I've also been on a bit of a worldwide tour visiting our operations.
Speaker Change: Just recently, I spent time in Europe and in Asia, and I met with some of our world-class joint venture partners, including Mitsui, Gentari, Orlin, ESB. I visited some of our offshore construction sites. I met with our teams.
Speaker Change: I dove into what we are doing to advance these projects.
I met our operational teams in Europe.
Speaker Change: our technology center in Europe, I was really impressed by what I saw. It's been a busy and enlightening month, and I'm pleased by the quality, the dedication of our teams, and the commitment to safety across all of our operations.
Speaker Change: So, I've started working closely with our senior management team to refine our strategic priorities. We will be holding a planning session with our board this June, and I look forward to sharing the outcomes with you at our upcoming Investor Day, anticipated for the fall of this year, and we can provide more details on our long-term strategic priorities and targets at that time.
Speaker Change: I will note, though, that I walk into an opportunity-rich environment here at Northland with a team who have proven that they can deliver time and again.
Speaker Change: Near term though, our focus is on project execution. As you know we have three large projects reaching advanced stages of construction and we will see significant milestones in 2025, so stay tuned for that.
Speaker Change: I was pleased to be in Poland and celebrate with the team at Baltic the installation of the first monofile.
Speaker Change: So these are real milestones happening right now in these projects, and it's Northline teams delivering on that.
Speaker Change: I can also update you on our search for a permanent CFO. We've been working with an executive recruitment firm and that process is progressing well. We hope to make an announcement in the coming months.
Speaker Change: So maybe I'll take a couple of minutes to talk about some of our 2024 achievements.
Speaker Change: As we continue to deliver on our commitments, we are satisfied with the full year results. We hit the high end of our financial guidance. And looking ahead, we are rolling out our 2025 financial guidance, and Adam is going to discuss that in some more detail shortly.
Speaker Change: But on our three construction projects, totaling $16 billion in investment and 2.4 gigawatts to Northland and its partners, these projects continue to advance.
Speaker Change: Highlong, Baltic Power Offshore Wind Projects, and Oneida, one of Canada's largest battery storage projects, are continuing according to plan.
Speaker Change: Oneida is expected to start operating in just a few months, which is exciting.
Speaker Change: So I'll start with Hailong, our one gigawatt offshore wind project in Taiwan, where we have made good progress.
Manufacturing of all the pin piles is complete.
Speaker Change: Half of the Offshore Wind Turbine Jacket Foundations have been installed.
Speaker Change: Half of the turbine generators and blades are complete, and the supplier is progressing well with nacelles and towers.
Speaker Change: Of the 219 pin piles, 111 have been installed, and more than half of the wind turbine jacket foundations are also in place.
Speaker Change: All offshore substation foundations are installed, one topside is in place, and cold commissioning is complete.
Two out of four export cables have been installed.
Speaker Change: And the investigation at the onshore substation is complete, with safe energization expected in the coming weeks.
In-water construction is set to resume per the winter schedule.
Speaker Change: Turbine installations and first power are expected in the second half of this year.
Speaker Change: The project remains on track to achieve full commercial operations by early 2027.
Speaker Change: So then I moved to Poland and our 1.1 gigawatt Baltic Power offshore wind project, which has also made strong project progress.
Speaker Change: Major in-water construction activity began earlier this year. We installed our first turbine monopile foundation, and as I mentioned earlier, I was there to celebrate and enjoyed some cake with the team. Work on the offshore substation's main structure is underway.
Speaker Change: Looking ahead, progress continues on the fabrication of onshore and offshore substations, foundations, export cables, turbine components, and inter-array cables.
Speaker Change: The project remains on track to achieve commercial operations by the end of 2026.
Speaker Change: Then I'm going to turn to Oneida, our large battery storage project in Canada, and I'm pleased to share that we're in the final stages of this project.
Speaker Change: With all major activities completed, commissioning is now underway, and we're on track to meet our 2025 operational date in the coming months.
Speaker Change: Oneida is our first commercial-scale battery energy project in Northland, and I'm proud of our tremendous performance on this project.
Speaker Change: This accomplishment highlights our robust capabilities and our track record of delivering projects as planned.
Speaker Change: I think our success at Oneida paves the way for future opportunities and enables us to leverage our expertise in battery storage.
across other jurisdictions.
Speaker Change: As you know, we are also progressing with our second battery storage project in Alberta, and I'll talk about that more in a moment.
Speaker Change: Collectively, once complete, our three construction projects, Heilong, Baltic and Oneida, will contribute approximately $600 million in adjusted EBITDA and $200 million in free cash flow to our business.
Speaker Change: As we look ahead, we're identifying new opportunities in our core markets, and we're advancing our 10-gigawatt development pipeline.
Speaker Change: For 2025, we plan to invest $60 million in development. We remain committed to pursuing profitable projects, and we continue to see strong opportunities across our pipeline to enhance shareholder value.
Speaker Change: In our onshore renewables business in Alberta, our 80-megawatt, 2-hour Jurassic battery storage project is progressing. The EPC contractor and battery supply contracts have been signed and the project is advancing to financial close in the coming months.
Speaker Change: In Ontario, we're reviewing the new LT2 procurement guidelines, and we believe that we could bid multiple technologies into that auction process.
Speaker Change: In our offshore business, our early-stage 2.4 gigawatt ScotWind offshore wind project continues to progress.
Speaker Change: We continue to see and seek attractive investment opportunities in our core markets such as the Baltic region and in areas where governments are increasing efforts and showing strong interest in procuring renewable energy.
Speaker Change: I do want to spend a quick moment to address some questions that have come up regarding some announcements by the new U.S. administration, particularly around potential tariffs on Canada and changes to renewable power incentives.
Speaker Change: As many of you may know, Northland made the strategic decision not to enter the U.S. offshore wind market, and therefore we have no exposure to the executive orders relating to offshore wind development.
Speaker Change: Our current U.S. onshore exposure is limited to 220 megawatts of operating wind power in New York State.
Speaker Change: We continue to look at additional opportunities within our New York onshore development pipeline as we see these as good potential investments for the future.
Speaker Change: In terms of potential tariffs, if they are imposed on Canada, we believe they would have minimal impact on our business due to our international diversification, our access to a global supply chain, and our development pipeline largely outside of the United States.
Speaker Change: I will also note that despite any political shifts that may happen around the world, the fundamental demand for power remains high, and renewable energy will continue to dominate new installations.
Speaker Change: Renewables and natural gas are the best positioned technologies to meet this growing demand and Northland's scale, geographical reach, capabilities, and technology mix position us to deliver on that need.
Speaker Change: Drivers like data centers, reshoring, electrification, decarbonization, all of these fuel the growth and we see that in Canada with our largest grids Ontario, Quebec and Alberta revising long-term demand forecasts upwards.
Speaker Change: But we see that in our markets around the world. The demand for power remains strong. A new natural gas generation alongside renewables will be essential into the future.
Speaker Change: Geopolitical factors, frankly, are something we cannot control, and when we invest in energy, we're essentially investing through the cycle.
Political stability is important to everyone.
Speaker Change: But, of course, changes in the political environment do happen, and we must remain adaptable. That's why we focus on developing good projects with robust execution so that these projects are profitable throughout changes in the cycle.
Speaker Change: But the market fundamentals remain strong, and our ability to originate, develop, construct, and operate profitable projects around the world sets us apart.
Speaker Change: Recently, we've observed some significant transactions in the renewable energy space that demonstrates a dislocation between private and public market valuations.
Speaker Change: This is a testament that power infrastructure is valuable and we see the strong fundamentals and I think we can see through the strong fundamentals to a strong future for the company.
Speaker Change: In response to what we believe to be an undervalued Northland share price,
Speaker Change: Adam will talk in a few minutes about our amended dividend reinvestment program, or DRIP, where we are removing the discount and we are reverting to market purchases to reduce dilution for our shareholders. And Adam will talk about this some more.
Speaker Change: We're confident in Northland that we're well placed to benefit from market trends and we can leverage our competitive advantages to capture and deliver profitable opportunities.
Speaker Change: You can also see in our portfolio that owning power generation infrastructure continues to be valuable. As our existing contracts expire, we have the option to recontract and typically we have no debt obligations remaining on our assets.
Speaker Change: Because we're a good operator, we can deliver solid revenue streams from these assets for years to come.
Speaker Change: Before I turn it over to Adam, I also want to address a topic that's been on some investors' minds, according to some of the discussions we've been having, and that's Northland's dividend policy.
Speaker Change: The Board of Directors reviews the dividend policy regularly as part of our overall capital allocation strategy. Northland's Board and management understand that the dividend is important to many of our shareholders, and our current plan is to maintain the dividend at current levels.
Speaker Change: Our asset base is strong and our expected cash flow is sufficient to cover the dividend and support our planned growth.
Speaker Change: In addition, we have three large construction projects coming online over the next few years that provide additional material cash flow.
Speaker Change: Our value proposition remains based on our strong capability and our track record and our ability to capitalize on large power growth opportunities.
Speaker Change: We have technological diversification, including the ability to develop, construct, and operate offshore wind, onshore solar, onshore wind, battery storage, and natural gas power infrastructure globally. We have an existing presence in North and South America, Europe, and Asia.
Speaker Change: I would also say one of our key parts of the value proposition is our people. We have people who know how to originate, develop, construct, deliver, and operate power infrastructure globally, and it's a key ingredient for our success.
Speaker Change: And finally, of course, the market fundamentals I've already mentioned. Power demand is here to stay, and Northland is ready to capitalize on it. So with that, I'll turn things over to Adam, who can provide a more detailed update on the financials. Adam?
Adam Beaumont: Thank you, Christine, and good morning, everyone. We are pleased with our 2024 operating results, which achieve the higher end of our financial guidance.
Adam Beaumont: These results reflect the strength and stability of our business through global and technological diversification, and are a testament to our track record of successfully and effectively operating our projects while also delivering on our construction commitments.
Adam Beaumont: During the fourth quarter, we generated adjusted EBITDA of $312 million.
Adam Beaumont: While on its face, this was a decrease compared to last year, but as you will recall, it was largely due to the one-off gain recognized on the Heilong partnership with Gentari late in 2023.
Adam Beaumont: I wanted to quickly note a couple of highlights for each of our business units during the quarter.
Adam Beaumont: For offshore wind, the wind resource was good, but lower than last year, which featured a historical high in the fourth quarter of 2023.
Adam Beaumont: The German wind farms experienced lower unpaid curtailments this quarter due to a lower number of negative pricing events.
Adam Beaumont: And in November, there was a 10-day unplanned outage from the grid operator to perform system upgrades, which impacted one of our German wind farms.
Adam Beaumont: Onshore renewables results were also strong, with higher wind and solar resources at our Canadian and New York assets and favourable band adjustment revenue in Spain.
Adam Beaumont: For our natural gas facilities, this quarterly results were largely in line with those in 2023.
Adam Beaumont: In November, it's worth noting that we successfully completed the 23-megawatt capacity expansion at our Thorold Natural Gas Facility in Ontario.
Adam Beaumont: The $40 million upgrade was completed on time and on budget, funded with project-level debt.
Adam Beaumont: If you recall, in 2023, we signed an agreement to increase the capacity of this facility and extend our revenue contract by five years until 2035.
Adam Beaumont: This extension is conditional upon the successful completion of upgrade tests scheduled for later this year, which we expect to achieve.
Adam Beaumont: This upgrade will add more cash flow and demonstrate our technical abilities or continues to demonstrate our technical capabilities in natural gas and the post-PBA value in our high-quality assets.
Adam Beaumont: IHPSA, our Columbia utility, saw improved results primarily due to the combination of its growing regulated asset base.
Adam Beaumont: and rate escalations which effectively provide us with protection against inflation.
Adam Brace, Adam Beaumont, John Bruce, Mike Crawley
Adam Beaumont: On a full year basis, adjusted EBITDA was $1.3 billion, representing a 2% increase compared to last year.
Adam Beaumont: This was primarily due to higher wind resources over the course of the year.
Adam Beaumont: A full year contribution from our two New York Wind assets, which came online late in 2023. And lower discipline spending on early stage development activities, as we had planned and previously communicated.
Adam Beaumont: During the fourth quarter, we generated adjusted free cash flow of $81 million and free cash flow of $58 million. On a per share basis, this resulted in $0.31 and $0.22 respectively in the fourth quarter.
Adam Beaumont: On a full year basis, we generated adjusted free cash flow of $394 million and free cash flow of $328 million in 2024, or $1.53 and $1.27 per share, respectively.
Turning to our 2025 financial guidance that we introduced yesterday.
Adam Beaumont: We expect 2025 adjusted EBITDA to be in the range of $1.3 to $1.4 billion, an increase of approximately $100 million from last year.
Adam Beaumont: This increase is largely driven by the first cash flows from our growth projects currently under construction, including the high-long pre-completion revenues,
Adam Beaumont: which are expected to start in the second half of this year, and the Oneida facility, which is expected to achieve commercial operations in the coming months.
Adam Beaumont: As a reminder, pre-completion revenues are used to fund construction costs for High Long until full commercial operations is achieved. This revenue will only be included in our adjusted EBITDA, but not in our cash flow metrics.
Factors expected to offset the increase
Adam Beaumont: and lower planned contributions from the North Sea-1 offshore wind project following a scheduled step-down in its PPA price from 194 to 154 Euros per megawatt-hour.
Adam Beaumont: We expect 2025 adjusted free cash flow to be $1.30 to $1.50 per share.
When compared to 2024, actual adjusted free cash flow
Adam Beaumont: 2025 will benefit from higher contributions from our natural gas facilities and EBSA, as well as lower net debt service and taxes.
Adam Beaumont: The Oneida Project coming into service in 2025, as I already mentioned.
Adam Beaumont: This will be offset by a couple items already mentioned and lower cash flows resulting from the gain on the sale of the La Lucha Mexico asset and its partial year of operations in 2024.
Adam Beaumont: Our free cash flow guidance is expected to be $1.10 to $1.30 range, which assumes $60 million of development expenses.
Adam Beaumont: I do want to highlight that we continue to disclose both adjusted free cash flow and free cash flow metrics.
Adam Beaumont: Our free cash flow metric is different from how our peers report, including growth expenses.
Adam Beaumont: Going forward, we will place more emphasis on adjusted free cash flow as it represents the best metric of Northland's ability to generate cash flow from our operating business before any investment-related decisions are made, such as development-related activities.
Adam Beaumont: Development expenditures are an important aspect of our business, however the benefit is not typically realized for several years, and the level of spending may differ year over year.
Christine Healy: Turning to our three construction projects, which continue to progress well, as Christine noted earlier,
Christine Healy: The capital spend in the fourth quarter was approximately $1 billion, which leads to $8 billion to date.
Christine Healy: This marks 50% of the total $16 billion of total expected project costs for those three projects.
Speaker Change: As Christine alluded, turning to our share price, while it has been encouraging to see an increase over the past couple of days,
Christine Healy: we still believe our current share price does not reflect the true long-term value of our business.
Christine Healy: In response, we have announced two changes to our DRIP program which will take into effect with the April dividend payment.
Christine Healy: We continue to offer the DRIP to shareholders, but have eliminated the discount and will begin sourcing DRIP shares via market purchases instead of from Treasury, because we believe it is prudent to minimize dilution for existing shareholders.
Christine Healy: We are confident in the strength of our balance sheet, the status of construction, and have multiple funding tools available to deliver on our discipline growth strategy in core markets.
Christine Healy: In terms of funding, our future discipline growth in corporate markets
Christine Healy: I would like to comment on a couple areas. First, our investment grade balance sheet remains strong with available liquidity of $1.1 billion.
Christine Healy: Second, as the three construction projects come online, that will provide us with an incremental approximately $200 million annually.
Third
Christine Healy: As we add new growth projects, those projects will provide further contributions as well as incremental debt capacity to pursue more opportunities.
Christine Healy: And finally, we have more funding tools, multiple funding tools available, such as project-level refinancings and asset-level recycling that can provide incremental capital.
We continue to advance on our development pipeline overall.
Christine Healy: To summarize, we are pleased with our 2024 results and see 2025 as another exciting year for us given the number of milestones that we expect to achieve as we further de-risk construction projects and secure new growth.
Christine Healy: With a strong balance sheet and robust liquidity position, we are well positioned to fund our program of growth while executing on construction.
John Brace: I will now turn the call over to John for a few final remarks.
John Brace: Thank you, Adam, and good morning everyone. This is my last conference call as I have returned to the non-executive chair of the board position.
John Brace: It has been a pleasure serving Northland as Executive Chair and Interim President and CEO over the past 11 months.
Christine Healy: We have continued to position the company for the future, and I look forward to Christine's leadership as President and CEO for many years to come.
Speaker Change: Christine is a highly accomplished leader with a strong strategic acumen who has a fantastic track record of managing teams and producing successful results over multiple continents and multiple years.
Speaker Change: The board and I are very excited to have Christine with us. And I can tell you, in our opinion, Christine's first month of being nothing but spectacular.
Christine Healy: I want to thank all our stakeholders who I've interacted with during my time back in management of Northland. I'm excited about the future of Northland.
Christine Healy: And as Christine said, our global and technological diversification, our focus on long-term contractor profiles and financial stability, position the company well for growth for many years to come, and to withstand any short-term political or regulatory shocks.
that we find ourselves in.
Christine Healy: This concludes our prepared remarks. I will now turn the call over to the operator. Operator, please open the line for questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.
Christine Healy: To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.
Speaker Change: And our first question comes from Mark Jarvie of CIBC. Your line is open.
Thanks. Good morning, everyone.
Speaker Change: Adam, I just want to pick up on your comments around the balance sheet and funding tools. You talked about project refinancing. Just updated views in terms of the two offshore wind projects, Baltic Power and Heilong, in terms of...
Speaker Change: and their expectations around potentially amending the debt down the road. Is that something that's still contemplated in your comments? Would that be to optimize free cash from those assets or potentially draw out some cash that can go into future growth?
Speaker Change: Yeah, so as we've done in the past, as I think you'll remember on the three off-bridging offshore projects, we were able to, once the projects have achieved commercial operations and been primarily de-risked.
able to refinance.
Speaker Change: I mean, obviously, it'll be dependent on market conditions at that point in time, but that is something that we would definitely look to be as a toggle and have actually kicked off a mini working group already to evaluate what the different options are.
Speaker Change: So, that is just one of the tools that we would be looking forward to augment our liquidity in addition to other areas of the business.
Speaker Change: And Mark, I guess I'd add to that to just say and thanks for the question it's just
Speaker Change: If the message I can pass along is just we're continually looking at ways that we can optimize. And this is another example of if there's an opportunity there to optimize, then we will.
Speaker Change: but and we have to continually keep a watch on that to see when the opportunity is there.
Speaker Change: so that, you know, we can improve the overall picture for the business and that we can, of course, then have more liquidity and more flexibility to develop our future projects. So, we like the picture right now, but anytime there's an opportunity to improve it, then, of course, we're going to take that.
John Brace: And just, Adam, if the working group started already, is that something then you think that you could, you know, actually complete shortly within the, you know, post-COD period, so like sometime in 2027?
John Brace: It will really depend on the market conditions at that time if that's the right opportunity, but that would be the next logical step at this point.
Speaker Change: Okay and maybe Christine this question is for you just in terms of you know your perspective now on the offshore wind business you've been out to visit these projects you've been able to spend some time thinking through the complexity of them
Speaker Change: Just thinking about future cap allocation, if you had two projects that sort of meet your return hurdles...
Speaker Change: Would you be willing to do two projects at the same time as you embarked on now or would it be sort of a preference to maybe just do one large offshore wind project at a time and spread that capital over to onshore projects and thermal projects? I'm just kind of understanding how you're thinking about risk and sort of capital allocation around large projects.
Speaker Change: So, Mark, I think it's a good question, and it's one that we're having a close look at. I will say, because we have this really strong capability in offshore wind, and the reality is that the world needs offshore wind, so it's...
Speaker Change: is just obviously a bit of a no-brainer that we should continue to do the things that we're good at and that we deliver well on.
Speaker Change: In terms of the mix, there's a few more levers, I would say, in that.
Speaker Change: It also depends on the stake that we take in those projects, right? You know, because we might decide to take a smaller stake in more projects, or we might decide to take a bigger stake in fewer projects. So, you know, there's a few moving pieces there as we look at what the future constellation of projects is for Northland.
Speaker Change: And because we've developed, I think, a really good track record with some world-class partners, we have the flexibility and the capability to be able to do that.
Speaker Change: So, it's nice from my perspective that we have that additional flexibility and another lever to look at when we're looking at the future composition and sort of risk profile.
Speaker Change: And just building off that in terms of partnerships, your first impressions in terms of how the partnership with Orland has gone, prior comments have been that it's gone quite well and that you guys would think to do more with them if that opportunity presented, do you share that same view now that you've been able to meet their side in terms of the partnership at Baltic Power?
Speaker Change: A hundred percent. I have to say really productive meetings with Orlin. I like working with them. I think our teams have a really good working relationship and then that's zippered up all the way through to the top of the house.
Speaker Change: and then I would say our other partners as well. I mean, I really was, I think when my travels around, that's the thing I came away with such a positive view on is that we have very strong relationships with these world-class companies and I would happily do more business with any of them.
Speaker Change: Okay, thanks for the comments. I'll go back in the queue here.
Thank you.
Adam Brace, Adam Beaumont, John Bruce, Mike Crawley
Speaker Change: Our next question comes from Sean Stewart of TD Cal, and your line is open.
Sean Stewart: Thanks, good morning everyone. Christine, following up on your comments with regard to optimizing the current portfolio.
Sean Stewart: Any thoughts on potential non-core asset sales, and is that timing, would that at all be dependent on managing through the higher pay rate ratio that you're going to have the next couple of years as you work through the construction period?
Sean Stewart: would that impact the timing of any potential divestitures as you look at those optimization opportunities?
Sean Stewart: So, Sean, thanks for the question. I appreciate it. So, I would say first off that it's part of my job all the time, every day, to look at optimizing the portfolio. So, if I'm not doing that, then I think you have every right to say something about it, because we need to be doing that all the time. So, we continue to do that. So, every day, that's part of the consideration.
Sean Stewart: The timing of anything that we do is going to be guided by what makes the most sense for the business and delivers the best value for shareholders.
Sean Stewart: So I think we're in a financial position right now where we're comfortable that we're going to be able to meet all of our obligations. So that means that we have the benefit that we can make strategic decisions and do them on the timelines that make the most sense for us to be value accretive for everyone.
Speaker Change: Thanks for that. And with respect to the perspective pipeline, you gave us lots of context around, I guess, clear line of sight on Jurassic and some of the other opportunities you're hoping to advance. Can you speak to the cadence of
Speaker Change: how you expect to roll out future development opportunities and you touched on it with Mark's question with respect to comfort balancing
Speaker Change: to offshore wind projects potentially simultaneously, but broader thoughts on comfort with cadence of the investment profile going forward as you bring this prospective pipeline to fruition.
Speaker Change: So I think the the cadence and I would say the mix
of what the future development pipeline looks like.
Speaker Change: In an ideal world, we would be able to pick all of the timing and I would be able to write that out on a piece of paper and we would do that exactly in sort of a planned way.
Speaker Change: The reality is that we also have to be responsive to opportunities and market conditions. And the big lever in a lot of these projects is as well the regulatory approval process and the timelines for that are different in pretty well every jurisdiction.
Speaker Change: So while I would like to say that we have perfect control over that, the reality is that we don't, and that's part of the reason why we build strong partnerships, and we try to build a pipeline that is able to withstand sort of changes in the timelines as we go through that process.
Speaker Change: I think the overall picture for me then ideally is a mix of onshore and offshore battery and some gas.
so that we stack these things up maybe in a...
Speaker Change: in a less pancaked way than we are right now. And so I think if I had my druthers, that's what I would like to see.
Speaker Change: I think that we have the opportunity to do that. We've got a robust portfolio, we've got a lot of opportunities in front of us, and so I'm actually excited about that for the future. I also, just practically speaking, we have some really great project people that I want to make sure are motivated, engaged.
Speaker Change: and you know delivering on future projects for us. So you know I want to make sure that those folks really get to continue delivering on all the things that they're so great at.
Speaker Change: Okay, that's all I have for right now. Thanks very much.
Thank you.
Speaker Change: And our next question comes from Rupert Morair of National Bank. Your line is open.
Rupert Morair: Hi, good morning everyone and congratulations on the new role, Christine.
Speaker Change: Maybe if I could start, Adam, with you. You gave us your guidance projections for 2025. Can you walk us through some of the high-level assumptions behind the guidance? For example, what are you modeling on production versus the LTA or curtailment of a production into 2025?
Speaker Change: Yeah, I think it's pretty standard practice from how we've done guidance in the past. I mean, ultimately, we revert to LTA in terms of production unless there is known outages
Speaker Change: that the grid is providing or elsewhere. We did increase a small assumption on the curtailment side for this guidance here, but otherwise it was pretty standard to how it's been in the past.
Okay, very good. And Christine, you mentioned the dislocation between
Speaker Change: private equity and public valuations. And we have seen some consolidation.
Speaker Change: from private equity recently of some of your public market peers. Now, we're seeing the pendulum swing here on valuations and we're probably back to the same place we were eight years ago when Northland did its strategic review.
Speaker Change: With the opportunities that you have, you talked about refinancing, maybe asset recycling.
Speaker Change: Are you confident that Northland can remain competitive through to the next cycle given your financing opportunities, remain competitive on a cost of capital?
Speaker Change: And I'm wondering if you can just give some more color, maybe not just to Christine, but the whole team there on...
Speaker Change: on the evolution of this dynamic, and what are your forecasts for where we're headed?
Speaker Change: Thanks, Rupert, I appreciate the question and I'll start by saying yes, I'm very confident in our ability to deliver into the future. And one of the main reasons that I can say that and say that with even more confidence now after going around and meeting the teams is that we have a real ability to execute on projects.
Speaker Change: And fundamentally, the value from these projects comes when they're actually constructed and delivered and operated.
Speaker Change: And that is what this company has shown time and time again it can do. So lots of ideas that are written down or talked about or put on pieces of paper don't actually result in any electrons and improvement of the overall energy mix.
Speaker Change: But this company does that and does it exceptionally well. And I think the market is going to see that. And I think certainly as we go forward with our projects, we're continuing to demonstrate it again and again. So for me, I think the future is really good for us.
and the public.
of Peer Group has been consolidating significantly. Do you see...
least, interest or activity levels coming from
from some private equity partners.
Very good. I'll leave it there. Thank you.
Speaker Change: Our next question comes from Nelson Ng of RBC Capital Markets. Your line is open.
Speaker Change: Great thanks and good morning everyone and welcome Christine and John it was great having you on the calls for the past year and touching base.
Nelson Ng: So first question just relates to the DRIP, so obviously it's the right choice to remove that dilution of your DRIP by purchasing shares on the open market, but what's what are your thoughts in terms of kind of expanding that a bit more and doing stock buybacks or starting an NCIB program?
Nelson Ng: Obviously cash flows are a bit tight for the next two years but you obviously have the liquidity to do some buybacks.
or do more buybacks? Yeah, no.
Nelson Ng: Reflecting on the share price, we think that the drip change is a good...
step to signal to create value for shareholders overall.
Nelson Ng: As you know, it was, you know, providing, you know, some liquidity, which we think, you know, continuing the DRIP program going forward, but at a market level makes more sense.
Speaker Change: In terms of doing anything else like an NCIB program, it's something that we'll continue to monitor the share price and evaluate, but at this time, we see a lot of value in focusing that capital in projects, as Christine was alluded to, which will drive material value for the company over the long term.
Speaker Change: Thanks Adam. And then a quick one on your 2025 guidance. So I think the guidance was for an additional 20 million of EBITDA from onshore renewables excluding Spain.
Speaker Change: Is that mainly from just higher generation from existing assets, or is there something else more than that?
Speaker Change: Yes, that's correct. A couple of the assets were not hitting their LTAs for 2024, and there will be the return on that side, which makes up the most of that difference.
Okay.
Thanks.
Nelson Ng: And then just one last question, I think, Christine, you've got to go on. Actually, Nelson, sorry to jump in, just Oneida obviously would be part of it. It's not in the 2020, the $20 million number, but it would be incremental as well as we expect that to come online in the early part of the year.
Okay, thanks for that.
Nelson Ng: And then in terms of the impact from tariffs, from the potential tariffs are minimal. So I just want to clarify for the...
Jurassic Battery Storage Project
Nelson Ng: where I guess the financial close is coming in the next few months then construction will start at that time as well. Will any equipment be sourced from the U.S. or will most of the materials be
Nelson Ng: domestic and I presume batteries are coming from Asia rather than the U.S.
Nelson Ng: So all of our contracts are in place for Jurassic Best, so we have no exposure on the tariff side related to the construction phase.
Nelson Ng: In terms of the supply chain, I'm looking across at Adam. I had a recent briefing on the project, Nelson, but I'm not going to pretend that I have the right answers at my fingertips there. Do you have it, Adam? In terms of the impact to the suppliers, where we're getting the batteries from?
Adam Beaumont: I don't believe so, but we can double check. Yeah, we can get back to you on that, but I did confirm in the recent project briefing that we have no tariff exposure. The way that we've contracted and structured that, we're well covered. Nelson, just to add to that, our supplier is directly from Asia.
Speaker Change: And I think we've been public in the past about the supply agreement includes an allowance.
for tariffs, should tariffs be imposed by Canada.
Speaker Change: that we believe is sufficient to cover whatever tariff eventuality there is. But beyond that, in our capital budget for the project, we've made additional allowances for tariffs. So, I think we're going to find ourselves pretty well covered and probably coming out better than we expected.
Great, thanks John.
Thank you.
Speaker Change: And our next question comes from Robert Hope of Scotiabank. Your line is open.
Speaker Change: Good morning, everyone. Maybe a question on the development pipeline through the lens of discontinuing the dilutive drip. When we think about kind of the next phase of growth,
Speaker Change: Should we assume then that the capital requirements are going to be much more in that kind of 27, 28 timeframe?
Speaker Change: you know where you'll have the offshore cash flows coming in and you won't require kind of that incremental cash flow from the drip.
Speaker Change: I mean, Rob, as you know, right now we have $1.1 billion of liquidity available and that cash flow will actually start coming in this year, in 2025. So I wouldn't say that it's all weight into the back end there. We will have some capacity over the near term as well.
Speaker Change: Okay, appreciate that. And then maybe Christine, you know, you've spoken quite a bit about the attractiveness of offshore investment, onshore investment in batteries and natural gas. You know, you've been a little silent on, you know, the utility side of the business. So, you know, how do you think about that? And is that an area that you want to put more capital in to that existing asset or maybe even future assets at a later date?
Speaker Change: I'm happy to get a question about the utility side of the business. They're a little bit the unsung heroes. I mean, fundamentally, this is part of how we can be really good operators. You know, the fact that the utility side of the business performs very well.
Speaker Change: It's a great training ground for people in our organization, so I think actually it's very complementary to the overall portfolio.
Speaker Change: And it's back to, you know, our strategy is that we develop these projects and then we're a long-term operator of them, so having existing operations in our utility-based business
Speaker Change: just aids in sort of growing our skill set in that.
Speaker Change: So, I like that part of our business. I think that we do it well. What the shape of that is in the future, I think, again, you know, the conversation is that we're always looking at what's the best way to optimize the portfolio and where are we heading in the future. I think I'll be able to give you a bit more color on that when we do our Investor Day in the fall.
Speaker Change: Look forward to it, and congrats on the new role, Christine and John. It's been a pleasure over the past year, so thank you all.
Speaker Change: And our next question comes from Benjamin Pham of BMO. Your line is open.
Benjamin Pham: Hi, good morning. On your development backlog, the 10 gigawatts, there's a one-gate condition on the NatGas Canadian side.
Benjamin Pham: Could you clarify, was that in the backlog before? How do you see that transitioning in the years ahead? And do you think that the net gas offers the best returns in your backlog right now?
Speaker Change: Ben, maybe I'll try to give an answer to that. It's only last year, partway through the year that we made an explicit
Benjamin Pham: decision that we would pursue natural gas projects with with speed and significant effort. So that was not really been in our backlog so in prior years to my knowledge in any significant way.
Benjamin Pham: We're excited about natural gas. As you know, that was almost the genesis of Northland Power. We've built up significant experience over the years. Our natural gas fleet is actually smaller than it was not that many years ago.
Benjamin Pham: And we have a very motivated team of natural gas experts who are...
Benjamin Pham: I'll use the word again, excited in developing new opportunities for Northland. It also ties in very well with what I think
Benjamin Pham: Christine was alluding to, which is the realities of the energy world and the energy market, needing not only renewables but needing natural gas in order to satisfy demand and support a stable grid.
Benjamin Pham: So, we're looking forward to success in natural gas on into the future.
Speaker Change: Okay, thanks for that, John. And may I just switch in in order to see, you mentioned the step down.
I'm wondering, Nex, how should we think about the recontracting?
Speaker Change: discussions, when do they need to start, and the path ahead, and the potential counterparties that you could be potentially discussing with.
Speaker Change: So thanks for the question, and the recontracting, we're very proactive on that. So.
Speaker Change: We've in fact been in the market and we've had a process that's been ongoing. We're seeing really positive results from that.
Speaker Change: So, more to come in the future, because that's ongoing, so I can't really talk more about it right now. But certainly, that was one of the questions that I had for the teams is, you know, have we started that process? And I was really delighted to learn that the answer is yes, they're way ahead of me. They've already started. We know and understand our markets well, and we see good opportunities in the recontracting.
Speaker Change: And as you know, Germany is probably one of the most liquid corporate PPA markets that's out there, so a good number of opportunities there.
Speaker Change: Okay, that's good. Maybe one last one to clean up on.
Speaker Change: You mentioned also placing more focus on adjusted free cash flow, which is pretty much what peers are doing.
Speaker Change: So does that suggest that when the board thinks about sustainability, is that the metric to look at? In other words, your pale ratio guidance is more 85% versus 100% this year?
Speaker Change: That's what we would suggest in comparison to our peers. Obviously, the difference is how you treat the development expenditures, which are discretionary and may fluctuate year over year. So if you're looking to, you know, assess the underlying performance of the business,
Speaker Change: are adjusted free cash flow metric, which we would say is the best indicator of the long-term value for the organization. So short answer, yes. Yes.
Okay, got it. Okay, thank all of you.
Thank you.
Adam Brace, Adam Beaumont, John Bruce, Mike Crawley
Speaker Change: Our next question comes from Nick Boychuk of Cormark Securities. Your line is open.
Nick Boychuk: Thanks, good morning. Christine, in your prepared remarks, you kind of touched on the political landscape globally right now, and looking at the countries you're looking to develop and further, I have to think that a lot of them are being the most pragmatic and logical about adding incremental renewables.
Speaker Change: And in the answer to Rupert, you mentioned the regulations being a key impediment. I know it's early, but are you seeing any of those markets start to maybe, you know, provide those sooner, provide more concessions, or just make it a little bit easier for you guys to operate in their markets?
Nick Boychuk: Thanks for the question, Nick. I think one of the key things that we see is that once we get to know and understand the market, then our capability increases in that market as well.
Speaker Change: So, and then by having partners who know those markets, that sort of increases our capacity on the regulatory side even further.
Speaker Change: So, we think that we have a good understanding now in those markets as to what the regulatory process looks like.
Speaker Change: In terms of overall trends, I think that governments see overall that they want more renewable energy. And in the markets where we're active, I think that's the feedback we get all the time. So, in fact, it's good dialogue around how can that process be made smoother, more efficient, more effective in order to deliver. And as we demonstrate our track record in those countries, I think that becomes kind of a positive loop.
So I'm feeling positive about that for the future.
Speaker Change: Got it, thanks. And then you mentioned as well that the private and public market valuation disconnect is getting more stark.
Speaker Change: and you again kind of mentioned this in Rupert's answer, but I'm curious if you guys are proactive in seeing some things that you might want to acquire. Obviously, you mentioned the balance sheet flexibility, you could potentially refinance other things. Is the M&A pipeline active in something that you guys are ongoing in terms of looking at in the next couple of years?
Speaker Change: We are always on the hunt, so I would say, yes, I'm always keeping a very close eye on that.
Okay. Appreciate it. Thank you.
Speaker Change: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Christine Healy for closing remarks.
Christine Healy: Excellent, thank you very much, and thanks everyone for joining us today. Our next earnings call will be following release of Q1 results in May, and we thank you for your continued support and interest.
Christine Healy: This concludes today's conference call. Thank you for participating and you may now disconnect.