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Northland Power Announces Signing of Credit Agreement for $5.0 Billion Project Financing at Hai Long Offshore Wind Project

Northland Power Inc.
Northland Power Inc.

Project Highlights

  • Hai Long is a 1.0 gigawatt (GW) offshore wind project being developed as a joint venture between Northland (60 per cent) and Mitsui & Co. (40 per cent).

  • The project is Northland’s first offshore wind project in Asia and fifth in Northland’s offshore wind portfolio.

  • Hai Long 2A (294 MW) benefits from a 20-year PPA with Taipower, and Hai Long 2B and 3 (728 MW) benefits from a 30-year Corporate Power Purchase Agreement (CPPA) with an investment grade counterparty (S&P: AA-).

  • Upon completion of Hai Long and the Baltic Power project, the company’s gross installed offshore wind capacity will nearly triple from 1.2 GW to 3.3 GW.

  • The total capital cost of the project is projected to be approximately $9 billion. Northland has secured all necessary equity funding required for the project. Financial close is expected to follow shortly, upon satisfaction of all relevant conditions precedent to the financing being achieved.

  • The project is expected to provide strong Free Cash Flow and Adjusted EBITDA (non-IFRS measures)4 upon achieving full commercial operations in 2026/2027.

  • The project has achieved significant milestones, including in-water construction and fabrication activities, all environmental approvals, major permits and construction contracts.

  • Once completed, Hai Long is expected to power the equivalent of over one million Taiwanese households and make a significant contribution to Taiwan’s renewable energy targets.

TORONTO, Sept. 21, 2023 (GLOBE NEWSWIRE) -- Northland Power Inc. (Northland) (TSX: NPI) today announced that its Hai Long offshore wind project (Hai Long or the project) in Taiwan has signed a credit agreement to secure 118 billion New Taiwan Dollars long-term over 20 year non-recourse financing (equivalent of $5 billion CAD). The weighted average all-in interest cost for the term of the financing is expected to be approximately five per cent.

The non-recourse project financing will be provided by over 15 international and local lenders with support from multiple Export Credit Agencies (ECAs) from six different countries. The project is expected to reach financial close shortly, upon satisfaction of all relevant conditions precedent to the financing being achieved. Upon the achievement of financial close, total debt and equity required for the project are expected to be fully funded, which includes future cash flows expected to be received from sell-down proceeds and pre-completion revenues.

“Today’s announcement is a major achievement for Northland, our partners, and the offshore wind industry, globally and in Taiwan,” said Mike Crawley, President and Chief Executive Officer of Northland. “We are progressing yet another world-class offshore wind project despite a challenging market environment. The project will produce high quality and stable cashflow over a 30-year period with further optimization opportunities. Offshore wind is necessary to meet global renewable energy demand in the years ahead and Northland is one of the few companies able to originate, develop, finance, construct, and operate such facilities.”

Hai Long’s total cost is projected to be approximately $9 billion, with funding from its $5 billion of non-recourse debt by the project lenders, approximately $1 billion of pre-completion revenues, and the remaining equity investment contributed by the project’s partners. Northland’s equity investment has been fully secured through funds raised under its At-the-Market equity (ATM) program in 2022 and its minority stake sale to Gentari International Renewables Pte. Ltd. (Gentari), which is anticipated to close during the fourth quarter of 2023, subject to satisfaction of all closing conditions pursuant to the terms of the purchase and sale agreement. Upon closing of the sell-down transaction, Gentari will hold a 29.4 per cent indirect equity interest in the project and Northland will own 30.6 per cent and will continue with the lead role in construction and operation.

“This financing is Northland’s first in Asia and, once closed, will be the largest non-recourse offshore wind project financing to date in the region,” said Pauline Alimchandani, Northland’s Chief Financial Officer. “We would like to thank the project team, our partners, and all the financial and capital providers for working together to achieve this significant milestone. Once operational, Hai Long is expected to provide significant, long-term contracted Adjusted EBITDA and Free Cash Flow to our business and shareholders.”

Northland’s interest in Hai Long is expected to generate a five-year average of approximately $230 to $250 million of Adjusted EBITDA (a non-IFRS measure)4 and $75 to $85 million of Free Cash Flow (a non-IFRS measure)4 per year once operational, delivering significant long-term value for Northland’s shareholders. Hai Long’s project financing is denominated primarily in New Taiwan Dollars, along with Japanese yen and European euros. Interest rate exposures are being managed with a combination of fixed rate tranches and long-term interest rate hedges in line with Northland’s risk management strategy and project finance terms. Hai Long is also entering into currency hedges to manage foreign exchange exposures associated with certain construction contracts. In addition, Northland will use currency hedges to stabilize the Canadian dollar equivalent for a large portion of its projected repatriated cash distributions, projected through 2033, and will enter into additional hedges beyond this time period, on an ongoing basis.

Hai Long is located approximately 45 – 70 kilometers off the Changhua coast in the Taiwan Strait and consists of two phases, Hai Long 2 and Hai Long 3, with an expected combined generating capacity of 1,022 MW. Hai Long 2A was awarded up to 300 MW of grid capacity under a Feed-in-Tariff, while Hai Long 2B and 3 were awarded up to 744 MW of grid capacity in Taiwan’s first competitive price-based auction in 2018. Hai Long subsequently signed a CPPA for the 744 MW auction portion in 2022. The project has obtained all environmental approvals and its major construction permit and has commenced with early construction work and fabrication for components. Completion of construction activities and full commercial operations are expected in 2026/2027. In addition, the project secured a 15-year operations and maintenance agreement with the turbine supplier, with options to extend.

Hai Long will play an important role in helping the Government of Taiwan achieve its renewable energy target of 15 GW of offshore wind to be constructed between 2026 and 2035. Once operational, Hai Long will be one the largest offshore wind facilities in Asia, and provide enough clean energy to power more than one million Taiwanese households.

Project Overview

(C$)

Total Project

Northland’s Interest1

Installed Capacity

1,022 MW

313 MW

Hai Long 2A

294 MW

n/a

Hai Long 2B & 3

728 MW

n/a

Contracted Life

 

 

Hai Long 2A

20 years

n/a

Hai Long 2B & 3

30 years

n/a

 

 

 

Total Capital Costs

$9 billion

$2.7 billion

Non-Recourse Project Financing

$5 billion

$1.5 billion

Total Equity

$3 billion

$0.9 billion

Pre-Completion Revenues used to fund Capital costs

$1 billion3

$0.3 billion3

 

 

 

5-year Average Annual Adjusted EBITDA (a non-IFRS measure)4

n/a

$230 -250 million2

5-year Average Annual Free Cash Flow (a non-IFRS measure)4

n/a

$75-85 million

 

 

 

Estimated annual net production

4,500 GWh

n/a

Non-Recourse Debt Term

Over 20 years

n/a

Weighted Average All-in Interest Cost

~5 per cent

n/a


1.

Northland’s interest reflects sell-down of a 49% interest to Gentari expected in the fourth quarter of 2023, resulting in net interest of 30.6%.

2.

Assumed NTD/CAD exchange rate at 0.046.

3.

It is projected a total of $1.1 billion Pre-Completion Revenues will be generated prior to full commercial operations. $1.0 billion of those Pre-Completion Revenues will be assumed to be part of Hai Long’s funding plan with the remainder to be distributed to sponsors at commercial operations (approximately $30 million net to Northland).

4.

See Non-IFRS Financial Measures and Forward-Looking Statements below.

 

 

Expected Financial Contribution from Oneida, Baltic Power and Hai Long

In 2023, Northland has achieved or expects to achieve financial close on three projects: Oneida, Baltic Power and Hai Long. These projects have and/or will be funded through an aggregate equity investment by Northland, net of sell-down proceeds, of $1.75 billion. The net proceeds have been fully secured primarily through: ATM proceeds in 2022, corporate hybrid issuance in 2023, and available cash and liquidity on hand. Once all three projects are fully operational, anticipated by 2027, they are expected to collectively generate an aggregate Adjusted EBITDA and Free Cash Flow (non-IFRS measures)4 of $570 to $615 million 5 6 and $185 to $210 million 5 6, respectively, resulting in significant value creation and accretion for Northland’s shareholders.

5.

Based on a 5-year annual average from the completion date.

6.

The projected Adjusted EBITDA and Free Cash Flow are presented to provide additional information relating to the projects’ contributions to the Company’s results of operations. This information may not be appropriate for other purposes.

 

 

ABOUT NORTHLAND POWER

Northland Power is a global power producer dedicated to helping the clean energy transition by producing electricity from clean renewable resources. Founded in 1987, Northland has a long history of developing, building, owning and operating clean and green power infrastructure assets and is a global leader in offshore wind. In addition, Northland owns and manages a diversified generation mix including onshore renewables, efficient natural gas energy, as well as supplying energy through a regulated utility.

Headquartered in Toronto, Canada, with global offices in eight countries, Northland owns or has an economic interest in approximately 3.2 GW (net 2.7 GW) of operating capacity. The company also has a significant inventory of projects in construction and in various stages of development encompassing approximately 16 GW of potential capacity.

Publicly traded since 1997, Northland's common shares, Series 1 and Series 2 preferred shares trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A and NPI.PR.B, respectively.

NON-IFRS FINANCIAL MEASURES

This press release includes references to the Company’s adjusted earnings before interest, income taxes, depreciation and amortization (“Adjusted EBITDA”) and Free Cash Flow, which are measures not prescribed by International Financial Reporting Standards (“IFRS”), and therefore do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. Non-IFRS financial measures are presented at Northland’s share of underlying operations. These measures should not be considered alternatives to net income (loss), cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of Northland’s results of operations from management’s perspective. Management believes that Northland’s non-IFRS financial measures are widely accepted and understood financial indicators used by investors and securities analysts to assess the performance of a company, including its ability to generate cash through operations. For a detailed description of each of the non-IFRS financial measures referred to above, including the reconciliations for such non-IFRS financial measure to their most directly comparable IFRS financial measure, see Section 1: Non-IFRS Financial Measures, Section 4.5: Adjusted EBITDA, and Section 4.6: Adjusted Free Cash Flow and Free Cash Flow in our MD&A for the three and six-month periods ended June 30, 2023, which is incorporated by reference and available under the Company’s profile on SEDAR+ at www.sedarplus.com.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking statements including certain future oriented financial information that are provided for the purpose of presenting information about management’s current expectations and plans. Northland’s actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, the events anticipated by the forward-looking statements may or may not transpire or occur. Readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects,” “anticipates,” “plans,” “predicts,” “believes,” “estimates,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These statements may include, without limitation, statements regarding Northland’s expectations for guidance, the completion of construction, the timing for and attainment of commercial operations, the project’s anticipated contributions to Adjusted EBITDA and Free Cash Flow, the expected generating capacity of the project, and the future operations, business, financial condition, financial results, priorities, ongoing objectives, strategies and outlook of Northland and its subsidiaries, all of which may differ from the expectations stated herein. These statements are based upon certain material factors or assumptions that were applied in developing the forward-looking statements, including the design specifications of development the projects, issuance of notices to proceed to contractors in accordance with contractual milestones, the provisions of contracts to which Northland or a subsidiary is a party, management’s current plans and its perception of historical trends, current conditions and expected future developments, as well as other factors, estimates, and assumptions that are believed to be appropriate in the circumstances. Although these forward-looking statements are based upon management’s current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties. Some of the factors include, but are not limited to, risks associated with sales contracts, Northland’s reliance on the performance of its offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht for approximately 50% of its Adjusted EBITDA and Free Cash Flow, counterparty risks, impacts of regional or global conflicts, contractual operating performance, variability of sales from generating facilities powered by intermittent renewable resources, offshore wind concentration, natural gas and power market risks, commodity price risks, operational risks, recovery of utility operating costs, Northland’s ability to resolve issues/delays with the relevant regulatory and/or government authorities, permitting, construction risks, procurement and supply chain risk, project development risks, disposition and joint venture risk, competition risks, acquisition risks, financing risks, interest rate and refinancing risks, liquidity risk, credit rating risk, currency fluctuation risk, variability of cash flow and potential impact on dividends, taxation, natural events, environmental risks, climate change, health and worker safety risks, market compliance risk, government regulations and policy risks, utility rate regulation risks, international activities, cybersecurity, data protection and reliance on information technology, labour relations, reputational risk, insurance risk, risks relating to co-ownership, bribery and corruption risk, legal contingencies, and the other factors described in the “Risks Factors” section of Northland’s 2022 Annual Information Form, which can be found at www.sedarplus.ca under Northland’s profile and on Northland’s website at northlandpower.com. Northland has attempted to identify important factors that could cause actual results to materially differ from current expectations, however, there may be other factors that cause actual results to differ materially from such expectations. Northland’s actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, and Northland cautions you not to place undue reliance upon any such forward-looking statements.

The forward-looking statements contained in this release are based on assumptions that were considered reasonable as of the date hereof. Other than as specifically required by law, Northland undertakes no obligation to update any forward-looking statements to reflect events or circumstances after such date or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.

For further information, please contact:

Mr. Adam Beaumont, Vice President
Mr. Dario Neimarlija, Vice President
647-288-1019
investorrelations@northlandpower.com


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