Northland Power Reports First Quarter Results and Continued Progress on Offshore Wind Construction

Press Release

TORONTO, ON–(May 11, 2016) –

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Northland Power Inc. (“Northland” or “the Company”) (TSX: NPI)(TSX: NPI.PR.A) (TSX: NPI.PR.B) (TSX: NPI.PR.C) (TSX: NPI.DB.B) (TSX: NPI.DB.C) today reported financial results for the three months ended March 31, 2016.

“Northland’s first quarter results reflect continued progress in several key areas,” said John Brace, Chief Executive Officer. “We delivered our Grand Bend project into operations, while continuing to make significant advancements on both of our offshore wind projects currently under construction. We were pleased to see the Ontario Court of Appeal uphold the original decision relating to the price escalators for power sold under our affected power purchase agreements. Our adjusted EBITDA continues to increase, and we have reaffirmed our 2016 guidance in anticipation of another successful year. We remain well-positioned to continue growing the company while delivering robust returns to our shareholders.”

First Quarter Highlights:

Financial

• Gross profit of $129.3 million for the first quarter of 2016 was in line with the first quarter of 2015 primarily due to higher PPA rates at Iroquois Falls and contributions from the newly operating ground-mounted solar facilities, offset by lower baseload gas-fired PPA rates at Kirkland Lake and the loss of revenue from Cochrane in 2016, whose operations ceased in May 2015 due to its PPA expiry;
• Sales were 12% lower than first quarter of 2015 primarily due to lower sales at Kirkland Lake, the expiration of Cochrane’s PPA, and lower natural gas pass-through costs at Thorold and North Battleford facilities partially offset by positive contributions from Iroquois Falls and the additional ground-mounted solar facilities;
• Quarterly adjusted EBITDA for the first quarter of 2016 increased by 7% over the same period in 2015 to $103.9 million primarily driven by positive contributions from thermal and renewable operating segments and the establishment of decommissioning reserves in 2015 related to the Cochrane facility;
• Quarterly free cash flow per share was $0.26 in the first quarter of 2016 versus $0.33 in the first quarter of 2015 primarily due to net proceeds received in 2015 from the sale of the Frampton wind farm and higher debt payments relating to the newly operating ground-mounted solar facilities; and
• An accounting net loss of $91.7 million for the quarter versus a net loss of $30.6 million in the first quarter of 2015, was primarily a result of marked-to-market non-cash adjustments on Northland’s financial derivative contracts.

Construction

• Gemini – 600 MW offshore wind farm, North Sea — Construction continues to progress with the project remaining on time and within budget. In February, Northland announced that the first wind turbine was installed and commenced producing power. As of today, 50 wind turbines, representing over a third of the total wind turbines, have been installed with 27 wind turbines producing power and earning pre-completion revenues. Installation of the wind turbines will continue throughout 2016, and may continue into early 2017. Full commercial operations are expected by mid 2017.
• Nordsee One – 332 MW offshore wind farm, North Sea — Nordsee One continues to progress as expected with the project remaining on time and within budget. In April 2016, the project announced that all 54 foundation monopiles and transition pieces had been successfully installed. The offshore substation jacket foundation was also successfully installed in early May 2016. Construction of the offshore substation topside continues on schedule for installation in the summer of 2016. Production of in-field cables is nearly complete and production of the wind turbines has commenced. Full commercial operations are expected by the end of 2017.
• Grand Bend – 100 MW onshore wind farm, Ontario — The project declared commercial operations on April 19, 2016 with all 40 wind turbines producing revenues and operating as planned. Commercial operations was ahead of previously disclosed timing due to the contractors and suppliers taking advantage of favourable weather conditions and providing additional staff to advance commissioning. Capital cost of the project was within budget.

Other

• On April 19, 2016, the Ontario Court of Appeal released its decision in favour of Northland and other industry participants upholding the March 12, 2015 decision by the Ontario Superior Court of Justice with respect to the price escalator for power sold under power purchase agreements with the Ontario Electricity Financial Corporation (OEFC). Northland estimates its share of past and future lost revenue over the life of the relevant agreements would have been in the range of $225 million (originally estimated to be $200 million) had the appeal overturned the original decision. The OEFC has the right to seek leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada on the basis that the matter is of national or public importance. Subject to the right to seek leave to appeal, and the outcome of the appeal if leave is granted, Northland anticipates that approximately $90 million of retroactive payments, of the $225 million, will be received in 2016. Going forward, rates under the contracts will continue to be indexed according to the interpretation confirmed by the courts, consistent with the rates that have been applied since February 2015.
• In March 2016, Kirkland Lake closed a $25 million bank credit facility consisting of a $15 million term loan and $10 million letter of credit facility. The financing will fund the costs of plant upgrades associated with the baseload PPA contract extension negotiated in the summer of 2015, the long-term gas transportation costs and the credit requirements for the new peaking facility’s PPA.
• Management continues to re-iterate 2016 adjusted EBITDA and free cash flow per share guidance. See more detail in the Outlook section of this press release.

Read More: http://www.northlandpower.com/Investor-Centre/News–Events/Recent_Press_Releases.aspx?MwID=2052517

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