NPI Northland Power Inc

Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) reported today financial results for the three and six months ended June 30, 2023. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.

“In a challenging time for renewable power projects globally, I was pleased to see our team complete our corporate funding plan this year with the proceeds secured from the Green Subordinated Hybrid Note issuance. With respect to projects expected to achieve financial close in 2023, Baltic Power advanced to the final stages of confirmatory diligence and signed all of the supply chain contracts for the project; Hai Long continued to make progress in its final credit approval processes and secured changes in the Corporate PPA contract (“CPPA”). Once complete, these projects are expected to materially enhance all of Northland’s key financial metrics. Finally, I am pleased to re-affirm the lower end of Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow guidance range for 2023, despite the impact of the recent regulatory changes in Spain, as a result of better than expected performance on other planned activities in 2023, including sell downs,” Mike Crawley, Northland’s President and Chief Executive Officer noted.

Second Quarter Highlights

Financial results for the three months ended June 30, 2023 were lower compared to the same quarter of 2022 primarily due to lower revenue generated from the Spanish portfolio, the non-recurrence of the unprecedented spike in market prices in Europe realized in the second quarter of 2022 and slightly lower production across our offshore wind and onshore renewables facilities.

Financial Results

• Sales decreased to $472 million from $557 million in 2022.
• Gross Profit decreased to $427 million from $485 million in 2022.
• Adjusted EBITDA (a non-IFRS measure) decreased to $232 million from $335 million in 2022.
• Adjusted Free Cash Flow per share (a non-IFRS measure) decreased to $0.25 from $0.70 in 2022.
• Free Cash Flow per share (a non-IFRS measure) decreased to $0.16 from $0.63 in 2022.
• Net income decreased to $22 million from $268 million in 2022.

Sales, gross profit, operating income and net income, as reported under IFRS, include consolidated results of entities not wholly owned by Northland, whereas Northland’s non-IFRS financial measures include only Northland’s proportionate ownership interest.

Summary of Consolidated Results
(in thousands of dollars, except per share amounts)		Three months ended June 30,						Six months ended June 30,
			2023			2022			2023			2022
FINANCIALS
	Sales	$	471,547		$	556,792		$	1,093,268		$	1,251,846
	Gross profit		427,468			484,951			996,371			1,120,715
	Operating income		102,625			215,780			375,167			579,176
	Net income (loss)		21,662			267,866			128,799			555,446
	Net income (loss) attributable to common shareholders		4,341			238,032			74,235			467,174
	Adjusted EBITDA (a non-IFRS measure)(2)		232,255			335,192			583,954			755,341
	Cash provided by operating activities		204,278			312,337			501,340			758,956
	Adjusted Free Cash Flow (a non-IFRS measure)(2)		62,703			162,010			242,773			353,995
	Free Cash Flow (a non-IFRS measure)(2)		41,289			145,543			195,981			319,918
	Cash dividends paid		51,148			48,442			101,195			95,835
	Total dividends declared(1)	$	75,749		$	69,957		$	151,065		$	138,454
Per Share
	Weighted average number of shares — basic and diluted (000s)		252,356			232,321			251,579			230,019
	Net income (loss) attributable to common shareholders — basic and diluted	$	0.01		$	1.01		$	0.28		$	2.01
	Adjusted Free Cash Flow — basic (a non-IFRS measure)(2)	$	0.25		$	0.70		$	0.96		$	1.54
	Free Cash Flow — basic (a non-IFRS measure)	$	0.16		$	0.63		$	0.78		$	1.39
	Total dividends declared	$	0.30		$	0.30		$	0.60		$	0.60
ENERGY VOLUMES
	Electricity production in gigawatt hours (GWh)		2,024			2,082			4,855			5,003
(1) Represents total dividends paid to common shareholders, including dividends in cash or in shares under the DRIP.
(2) See Forward-Looking Statements and Non-IFRS Financial Measures below. Further, note that non-IFRS measures during the three and six months ended June 30, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the ones before definition change, please refer to the MD&A.

Second Quarter Results Summary

Offshore wind facilities

Electricity production for the three months ended June 30, 2023, decreased 3% or 22GWh compared to the same quarter of 2022. This was primarily due to lower wind resource across all offshore wind facilities and higher unpaid curtailments related to negative prices in Germany, partially offset by higher turbine availability at Nordsee One following the completion of the rotor shaft assembly (“RSA”) replacement campaign in 2022 and fewer uncompensated grid outages at the German facilities.

Sales of $221 million for the three months ended June 30, 2023, decreased 10% or $25 million compared to the same quarter of 2022, primarily due to the non-recurrence of the unprecedented spike in market prices realized in the first half of 2022 by $40 million and slightly lower production across all offshore wind facilities by $6 million. These declines were partially offset by higher turbine availability at Nordsee One following the completion of the RSA replacement campaign in 2022 and the effect of foreign exchange fluctuations due to the strengthening of the Euro and other items by $21 million.

Adjusted EBITDA of $121 million for the three months ended June 30, 2023, decreased 14% or $20 million compared to the same quarter of 2022, due to the same factors noted above.

An important indicator for performance of offshore wind facilities is the current and historical average power production of the facility. The following tables summarize actual electricity production and the historical average, high and low, for the applicable operating periods of each offshore facility:

Three months ended June 30,	2023(1)		2022(1)		Historical Average(2)		HistoricalHigh(2)		HistoricalLow(2)
Electricity production (GWh)
Gemini	433		444		439		493		385
Nordsee One	188		190		187		220		150
Deutsche Bucht	160		170		159		170		141
Total	781		804
(1) Includes GWh produced and attributed to paid curtailments.
(2) Represents the historical power production for the period since the commencement of commercial operation of the respective facility (2017 for Gemini and Nordsee One and 2020 for Deutsche Bucht) and excludes unpaid curtailments.

Regulatory Market Price Cap Changes Effective from December 1, 2022, to June 30, 2023

In response to the unprecedented surge in energy prices across Europe for most of 2022, in September 2022, the EU Council established a cap on market revenues on renewable energy producers effective from December 1, 2022, to June 30, 2023 (the “EU price cap”). Following the implementation of the EU price cap, any revenue above the contracted power purchase price for each facility is capped. The EU price cap has not been extended by the Netherlands or Germany. However, the respective market prices are lower than the subsidy prices, so no upside is planned for with respect to previously issued guidance on the offshore wind facilities in 2023.

Onshore renewable facilities

Electricity production was 11% or 66GWh lower than the same quarter of 2022, due to lower wind resource across the Canadian and Spanish onshore wind facilities, partially offset by higher solar resource at the Canadian solar facilities.

Sales of $98 million were 25% or $33 million lower than the same quarter of 2022, primarily due to lower merchant revenue by $46 million from Spanish portfolio, partially offset by the increase in band adjustments by $14 million.

Adjusted EBITDA of $66 million was 38% or $41 million lower than the same quarter of 2022, due to the same factors as above.

Adjusted EBITDA from the Spanish portfolio of $24 million for the three months ended June 30, 2023, decreased 63% or $41 million compared to the same quarter of 2022, primarily due to lower merchant revenue by $46 million from Spanish portfolio, partially offset by increase in band adjustments by $14 million. Free Cash Flow from Spanish portfolio of negative $17 million for the three months ended June 30, 2023, decreased by $49 million compared to the same quarter of 2022, due to the same factors discussed above.

The recent Spain regulatory framework change enacted on June 29, 2023, has resulted in a reduction to our key financial metrics in 2023 by effectively deferring the timing of revenue recognition from 2023 to 2025 and beyond. During the second quarter we reversed $11 million of “band adjustment” revenue related to the Spanish portfolio that was previously recorded in the first quarter. While the regulatory changes are expected to impact the Spanish portfolio’s full year Adjusted EBITDA for 2023 by approximately $90 million (inclusive of the $11 million reversal), the changes do not impact the returns expected to be generated from the Spanish facilities, given its fixed regulatory return construct. The Company’s original investment thesis upon entering the Spain market in 2021 remains intact despite the recent regulatory changes. Further details are discussed below and in the Outlook sections of this press release and our second quarter Management’s Discussion and Analysis (“MD&A”).

Change in Spanish Regulatory Framework

On June 29, 2023, a new Royal Decree-Law (“RDL”) was published with a number of measures, which will have an impact on our Spanish portfolio. Refer to the table below for the comparison between our expectations pre and post the regulatory framework changes for 2023:

	Prior to June 29,2023					Post June 29,2023					Change
		Euro	Dollars				Euro	Dollars			Euro			Dollars
Regulatory posted price (per MWh)
2023	€	208	$	304		€	109	$	159		€	(99	)	$	(145	)
2024		130		190			109		159			(21	)		(31	)
2025 and beyond		78		114			89		130			11			16
2023 Revenue impacts (in millions)
Return on Investment (“Ri”) revenue	€	39	$	57		€	41	$	60		€	2		$	3
Band adjustment revenue, net of other items		75		111			12		18			(63	)		(93	)
Merchant revenue (average 2023)		90		131			90		131			—			—
2023 Total Revenue	€	204	$	299		€	143	$	209		€	(61	)	$	(90	)
2023 Adjusted EBITDA (in millions)	€	170	$	250		€	110	$	160		€	(60	)	$	(90	)
(1) Table above assumes EUR/CAD exchange rate of $1.46. Refer to MD&A for definitions of Ri, band adjustments, and merchant revenues. 2023 production from the Spanish portfolio assumed at 1,030GWh with full year captured merchant price assumed at €85/MWh.

While the band adjustment revenue is lower in 2023, it is only a matter of deferring the timing of revenue recognition to 2025 and beyond, under the regulatory framework and therefore not expected to impact the overall return of Spanish portfolio. Irrespective of the regulatory change, Northland expects to achieve its designated regulatory return over the remaining regulated asset lives and there is no change in view on the portfolio or its value contribution to Northland.

The Spanish portfolio is comprised of onshore wind (435MW), solar photovoltaic (66MW), and concentrated solar (50MW) assets located throughout Spain. The Spanish portfolio operates under a regulated asset base framework that guarantees a specified pre-tax rate of return of 7.4% for 20 sites and 7.1% for 13 sites, over the full regulatory life of the facilities, regardless of settled wholesale merchant power price.

Upon acquisition of the portfolio in August 2021 (“acquisition date”), the 5-year average annual EBITDA (2021-2025) was expected to be €90 million ($135 million). With the impact of the new regulatory changes and the actual amounts earned since 2021, on a comparable basis over the same timeframe, this is expected to be slightly higher, at €105 million ($155 million).

From the acquisition date to 2030, we expect average annual Adjusted EBITDA to be approximately €95 million ($140 million).

Efficient natural gas facilities

Electricity production increased 4% or 31GWh compared to the same quarter of 2022, mainly due to higher market demand for dispatchable power and lower unplanned outages.

Sales of $76 million decreased 26% or $27 million compared to the same quarter of 2022, primarily due to lower energy rates triggered by lower natural gas prices, which is a pass-through cost.

Adjusted EBITDA of $49 million for the three months ended June 30, 2023, decreased 45% or $40 million, compared to the same quarter of 2022, primarily due to Kirkland Lake’s one-time management fee received in 2022.

Utility

Sales and gross profit of $73 million and $50 million, respectively, for the three months ended June 30, 2023, increased 4% or $3 million and 2% or $1 million, compared to the same quarter of 2022, primarily due to higher market demand and rate escalations, partially offset by the foreign exchange fluctuations due to the weakening of the Colombian Peso.

Adjusted EBITDA of $30 million for the three months ended June 30, 2023, remained in line with the same quarter of 2022.

Consolidated statement of income (loss)

General and administrative (“G&A”) costs of $31 million in the second quarter increased $11 million compared to the same quarter of 2022, primarily due to increased costs and resources to support Northland’s projects and global platform and higher administrative costs to support the sustainable operations.

Development costs of $28 million increased $13 million compared to the same quarter of 2022, primarily due to timing of spending to advance early to mid-stage development projects.

Net finance costs of $71 million in the second quarter decreased $6 million compared to the same quarter of 2022, primarily due to scheduled repayments on facility-level loans and higher loan repayments related to loan restructurings that occurred in 2022.

Fair value gain on derivative contracts was $16 million in the second quarter, primarily due to net movement in the fair value of derivatives related to commodity, interest rate and foreign exchange contracts.

Foreign exchange loss of $5 million in the second quarter was primarily due to unrealized loss from fluctuations in the closing foreign exchange rates.

Other income of $32 million increased 93% or $15 million compared to the same quarter of 2022, primarily due to the gains associated with two offshore wind assets in Europe in 2023.

Net income of $22 million in the second quarter decreased by $246 million compared to the same quarter of 2022, primarily as a result of the factors described above.

Adjusted EBITDA

The following table reconciles net income (loss) to Adjusted EBITDA:

	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Net income (loss)	$	21,662			$	267,866			$	128,799			$	555,446
Adjustments:
Finance costs, net		71,064				77,736				138,278				159,240
Gemini interest income		4,163				3,749				6,262				7,456
Provision for (recovery of) income taxes		37,169				85,708				76,024				186,262
Depreciation of property, plant and equipment		145,882				144,614				291,057				292,029
Amortization of contracts and intangible assets		14,342				15,545				28,042				25,603
Fair value (gain) loss on derivative contracts		(17,936	)			(239,730	)			63,003				(373,175	)
Foreign exchange (gain) loss		4,526				34,575				(24,648	)			66,949
Elimination of non-controlling interests		(54,042	)			(40,964	)			(133,009	)			(141,818	)
Finance lease (lessor)		(1,511	)			(1,614	)			(2,969	)			(3,278	)
Others(1)		6,936				(12,293	)			13,115				(19,373	)
Adjusted EBITDA(2)	$	232,255			$	335,192			$	583,954			$	755,341
(1) Others primarily include Northland’s share of profit (loss) from equity accounted investees, Northland’s share of Adjusted EBITDA from equity accounted investees, gains from partial asset sell-down, acquisition costs and other expenses (income).
(2) See Forward-Looking Statements and Non-IFRS Financial Measures below. Further, note that non-IFRS measures during the three and six months ended June 30, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the ones before definition change, please refer to the MD&A.

Adjusted EBITDA of $232 million for the three months ended June 30, 2023, decreased 31% or $103 million compared to the same quarter of 2022. The significant factors decreasing Adjusted EBITDA include:

• $41 million decrease in the contribution from the Spanish renewables portfolio, as discussed above. Please refer to MD&A for further breakdown of Spanish portfolio revenue by component;
• $37 million decrease in the contribution primarily from a one-time management fee from Kirkland Lake received in 2022;
• $20 million decrease in operating results at the offshore wind facilities primarily due to the non-recurrence of the unprecedented spike in market prices realized in the first half of 2022 and slightly lower production across all offshore wind facilities. These declines were partially offset by higher turbine availability at Nordsee One following the completion of the RSA replacement campaign in 2022 and the effect of foreign exchange fluctuations due to the strengthening of the Euro and other items; and
• $24 million increase in G&A costs and development expenditures, with the latter driven by timing of spend.

The factor partially offsetting the decrease in the Adjusted EBITDA were:

• $23 million in gains from partial asset sell-down.

Adjusted Free Cash Flow and Free Cash Flow

The following table reconciles cash flow from operations to Adjusted Free Cash Flow and Free Cash Flow:

	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Cash provided by operating activities	$	204,278			$	312,337			$	501,340			$	758,956
Adjustments:
Net change in non-cash working capital balances related to operations		55,170				25,883				135,025				40,992
Non-expansionary capital expenditures		(414	)			(18,480	)			(899	)			(31,310	)
Restricted funding for major maintenance, debt and decommissioning reserves		(6,811	)			(6,004	)			(2,653	)			(11,098	)
Interest		(97,345	)			(75,521	)			(139,610	)			(148,033	)
Scheduled principal repayments on facility debt		(274,157	)			(307,944	)			(325,642	)			(348,385	)
Funds set aside (utilized) for scheduled principal repayments		104,016				125,152				(8,166	)			(16,926	)
Preferred share dividends		(1,521	)			(2,741	)			(3,003	)			(5,441	)
Consolidation of non-controlling interests		(16,670	)			4,644				(61,653	)			(41,804	)
Investment income(1)		9,755				4,222				17,270				8,398
Proceeds under NER300 and warranty settlement at Nordsee One		—				21,164				—				38,876
Others(2)		64,988				62,831				83,972				75,693
Free Cash Flow(3)	$	41,289			$	145,543			$	195,981			$	319,918
Add back:Growth expenditures		28,859				16,467				54,237				34,077
Less:Historical growth expenditures’ recovery due to sell-down		(7,445	)			—				(7,445	)			—
Adjusted Free Cash Flow(3)	$	62,703			$	162,010			$	242,773			$	353,995
(1) Investment income includes Gemini interest income and repayment of Gemini subordinated debt.
(2) Others mainly include the effect of foreign exchange rates and hedges, interest rate hedge, Nordsee One interest on shareholder loans, share of joint venture project development costs, acquisition costs, lease payments, interest income, Northland’s share of Adjusted Free Cash Flow from equity accounted investees, gains from sales of development assets, interest on corporate-level debt raised to finance capitalized growth project and other non-cash expenses adjusted in working capital excluded from Free Cash Flow in the period.
(3) See Forward-Looking Statements and Non-IFRS Financial Measures below. Further, note that non-IFRS measures during the three and six months ended June 30, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the ones before definition change, please refer to the MD&A.

Adjusted Free Cash Flow of $63 million for the three months ended June 30, 2023, was 61% or $99 million lower than the same quarter of 2022.

The significant factors decreasing Adjusted Free Cash Flow were:

• $103 million decrease in contribution from the operating facilities leading to lower Adjusted EBITDA primarily due to the factors described above; and
• $30 million net proceeds from the sale of two efficient natural gas facilities in April 2022.

The factors partially offsetting the decrease in Adjusted Free Cash Flow were:

• $15 million decrease in current taxes primarily at offshore wind facilities and the Spanish portfolio as a result of lower operating results; and
• $12 million gains from sales of offshore wind development assets in Europe and foreign exchange hedge settlements.

Free Cash Flow, which is reduced by growth expenditures, totaled $41 million for the three months ended June 30, 2023, and was 72% or $104 million lower than the same quarter of 2022, due to the same factors as Adjusted Free Cash Flow.

The following table reconciles Adjusted EBITDA to Adjusted Free Cash Flow.

	Three months ended June 30,								Six months ended June 30,
		2023				2022				2023				2022
Adjusted EBITDA(2)	$	232,255			$	335,192			$	583,954			$	755,341
Adjustments:
Scheduled debt repayments		(144,207	)			(147,853	)			(283,543	)			(295,554	)
Interest expense		(54,744	)			(60,023	)			(99,160	)			(121,304	)
Current taxes		(17,694	)			(32,725	)			(64,690	)			(89,109	)
Non-expansionary capital expenditure		(413	)			(15,749	)			(720	)			(26,668	)
Utilization (funding) of maintenance and decommissioning reserves		(6,347	)			(5,574	)			(2,645	)			(10,230	)
Lease payments, including principal and interest		(1,464	)			(116	)			(4,529	)			(3,123	)
Preferred dividends		(1,521	)			(2,741	)			(3,003	)			(5,441	)
Foreign exchange hedge gain (loss)		6,830				32,929				30,288				48,091
Proceeds under NER300 and warranty settlement at Nordsee One		—				17,989				—				33,044
EBSA Refinancing proceeds, net of growth capital expenditures		—				3,953				—				16,777
Others(1)		28,594				20,261				40,029				18,094
Free Cash Flow(2)	$	41,289			$	145,543			$	195,981			$	319,918
Add Back: Growth expenditures		28,859				16,467				54,237				34,077
Less:Historical growth expenditures’ recovery due to sell-down		(7,445	)			—				(7,445	)			—
Adjusted Free Cash Flow(2)	$	62,703			$	162,010			$	242,773			$	353,995
(1) Others mainly include Gemini interest income, repayment of Gemini subordinated debt, interest rate hedge settlement, gains from sales of development assets, and interest received on third-party loans to partners.
(2) See Forward-Looking Statements and Non-IFRS Financial Measures below. Further, note that non-IFRS measures during the three and six months ended June 30, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the ones before definition change, please refer to the MD&A.

In the second quarter, in order to accommodate the transactions that occurred during the period, the Company aligned its non-IFRS measures to more accurately reflect the economic reality of its operations. Management implemented certain changes to the compositions of Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow. The revised definitions provide for the inclusion of partial sell-down gains (losses) in Adjusted EBITDA. All other changes had a minor impact to the calculation of the aforementioned non-IFRS measures and are fully described on the Section 4.7: Reconciliation to 'Non-IFRS Measures Before Definition Change' of the MD&A. With respect to Adjusted EBITDA, management believes the adjustments are appropriate as the revised definition better aligns with the ongoing performance of the business and Northland’s previously disclosed strategy.

Significant Events and Updates

Balance Sheet:

• Green Subordinated Notes – On June 21, 2023, Northland closed its inaugural offering of $500 million of Fixed-to-Fixed Rate Green Subordinated Notes, Series 2023-A, due June 30, 2083 (“Green Notes”). The Green Notes will carry a fixed coupon of 9.25% per annum until the first reset date on June 30, 2028, and have an estimated after-tax cash cost in Euros to the Company of approximately 6.2%, taking into consideration the benefit of a Canadian dollar to Euro hedge and applicable corporate tax deductions. The Green Notes are rated BB+ by both S&P Global Ratings (“S&P”) and Fitch Ratings Inc. (“Fitch”) and will benefit from 50% equity treatment by both credit agencies. Northland intends to allocate the net proceeds from the Green Notes offering toward investments in green projects that meet the eligibility criteria of Northland’s Green Financing Framework.
• At-The-Market Equity Program – During the second quarter of 2023, there was no activity under the ATM program resulting in no shares being issued by the program, except for the remaining share settlements post March 31, 2023. Subsequent to quarter end, the ATM program was terminated in accordance with its terms upon the expiry of the Company’s short form base shelf prospectus on July 16, 2023.
• Corporate Credit Rating Re-affirmed - In May 2023, Northland’s corporate credit rating was reaffirmed at BBB (stable) by Fitch, a global rating agency, in addition to S&P’s BBB (stable) rating.

Renewables Growth:

• Nordsee Cluster Offshore Wind Project – On May 25, 2023, Northland announced the sale of its 49% ownership stake in the Nordsee Cluster offshore wind portfolio (“NSC”) to its partner on the portfolio, RWE Offshore Wind GmbH (“RWE”). The sale provided RWE with 100% ownership of the projects for a cash consideration of approximately €35 million, which included a premium to Northland’s costs incurred to date. The transaction transferred all assets, liabilities and committed contractual obligations relating to NSC, to RWE in the second quarter of 2023. The sale of NSC is consistent with Northland’s strategy to prioritize projects within its development pipeline that are strategically and financially consistent with its investment approach.
• ScotWind Partnership – On May 9, 2023, Northland signed a partnership agreement with ESB, a leading Irish energy company for a 24.5% interest in both projects. The partnership with ESB demonstrates the strong interest in ScotWind and in developing offshore wind in Scotland and provides an opportunity to bring in a strong, long-term partner to share in the costs and help advance the development process.
• Oneida Energy Storage Project – On May 15, 2023, the Oneida energy storage project reached financial close, as the project successfully completed all necessary financing conditions. Construction activities have commenced, which are focused on road construction and site preparation before receiving the major equipment. Northland currently owns 74% of the project, which is being developed in partnership with NRStor Inc., Six Nations of the Grand River Development Corporation and Aecon Group Inc. Full commercial operations for the project are expected to commence in 2025.
• Hai Long Offshore Wind Project – The Hai Long project early construction works program and fabrication of key components continue to progress. During the first quarter, the project received its major construction permit as planned and signed an amendment to the CPPA that resulted in the extension of CPPA tenor by two years from 20 to 22 years. Subsequent to quarter end, the project signed another amendment to the CPPA that extended its tenor by a further eight years from 22 to 30 years and signed amendments to extend the long stop dates of certain key supplier contracts. The project financing is progressing towards financial close in 2023 and is advancing through its credit approvals, albeit at a slower pace and under more challenging conditions than initially expected due to market specific factors. The final credit approval process was launched in March 2023 to secure the necessary funding commitments from local and international lenders and Export Credit Agencies (“ECAs”) to achieve financial close and remains ongoing. On December 14, 2022, Northland signed an agreement with Gentari International Renewables Pte. Ltd. (“Gentari”) to sell 49% of its current stake in Hai Long. Upon closing, the transaction will result in Gentari holding a 29.4% indirect equity interest in Hai Long. Northland will hold a 30.6% interest in the project upon the achievement of transaction close and will continue to take the lead role in its construction and operation.

• Baltic Power Offshore Wind Project – Baltic Power continued to make progress during the quarter having signed all of the supply chain contracts for the project. The financing process continues to advance with a consortium of local and international banks as well as ECAs. The project continues to advance to financial close, expected in 2023. Northland has a 49% working interest in Baltic Power, with its partner Orlen S.A. holding the remaining 51%. The project’s 25-year Contract for Difference (“CfD”) offtake agreement, now denominated in Euros, includes an inflation indexation feature commencing with a base year of 2021, providing offsetting benefits to the higher inflationary price pressures experienced. Northland’s equity funding expectations and returns remain in line with previously disclosed expectations as a result of the inflation indexation, which has offset the impact of previously disclosed cost increases experienced.
• New York Onshore Wind Projects – Work towards achieving commercial operations on the 108MW Ball Hill project and 112MW Bluestone project continues, with commercial operations expected to occur in 2023. On February 17, 2023, Northland entered into an agreement to sell a 100% stake in the High Bridge project. The transaction is expected to close by the third quarter of 2023, subject to the satisfaction of certain customary closing conditions.
• South Korean Offshore Wind Project – Electricity Business Licenses (“EBLs”) for up to 1,270MW capacity at Dado have been secured, providing exclusivity over the development areas. In addition, Northland’s second project, the 616MW Bobae project, has also been awarded the requisite EBLs. Other development activities for the projects are continuing to advance.
• La Lucha Mexican Solar Project – Northland has completed all connection and energization activities relating to its 130MW La Lucha solar power project in Mexico, with the project having achieved full commercial operations in June 2023. The project has been generating revenues since being connected to the Mexican energy grid and is expected to contribute $6 million of Adjusted EBITDA towards the 2023 financial results.
• Suba Colombian Solar Projects – Northland holds a 50% economic interest in the 130MW Suba projects in Colombia. Its partner, EDF Renewables, holds the remaining 50%. After an in-depth evaluation, Northland and EDF Renewables have jointly elected not to proceed with the development of the Suba projects.

Outlook on 2023 Funding Plan

Having successfully achieved financial close of the Oneida energy storage project in 2023, Northland’s focus is on achieving financial close on the Baltic Power and Hai Long offshore wind projects. Both projects are progressing towards financial close in 2023, though Hai Long continues to be more challenging than expected due to market specific factors. Each project is presently in active workstreams with resources and efforts focused on securing all necessary milestones and conditions precedent to achieve financial close. Collectively the project finance processes are being supported by a diverse group of Northland’s project partners, lenders, including global financial institutions, local lenders, ECAs, government infrastructure lenders and multi-lateral agencies. At this time, Northland intends to utilize non-recourse project-level financing as the primary source of funding, with Northland’s equity requirements expected to be supported by available liquidity on hand, proceeds from sell-downs, assets sales and the net proceeds from the recently issued Green Notes. Other than closing on the respective project financings and the 29.4% sell-down to Gentari, there are no further external funding needs for Northland to achieve financial close. At this time and based on current market conditions, management believes the Company will have access to the necessary capital required to achieve financial close of the two aforementioned offshore wind projects. Taking into account the proceeds from the Green Notes issuance Northland has access to $1,012 million of available liquidity, including $73 million of cash on hand and approximately $939 million of capacity on its corporate revolving credit facilities as at June 30, 2023.

2023 and Long-term Outlook

As of August 10, 2023, management’s 2023 financial outlook remains unchanged from prior guidance, albeit now at the lower end, as a result of the aforementioned regulatory changes in Spain. Adjusted EBITDA in 2023 is expected to be in the range of $1.2 billion to $1.3 billion, Adjusted Free Cash Flow per share in 2023 is expected to be in the range of $1.70 to $1.90 and Free Cash Flow per share in 2023 is expected to be in the range of $1.30 to $1.50. As discussed previously, the regulatory change impact is expected to reduce Adjusted EBITDA by approximately $90 million and Adjusted Free Cash Flow and Free Cash Flow by $75 million in 2023 due to the recent regulatory changes. However, the noted impacts are expected to be mitigated through better than expected performance on other planned activities in 2023, including sell downs, that continue to be part of our ongoing business strategy.

Northland continues to implement a selective partnership strategy to sell interests in certain development projects on or before financial close. The Company will assess each opportunity individually and intends to remain a long-term owner of the renewable power assets it develops.

Over the longer term, Northland remains positioned to achieve substantial growth in Adjusted EBITDA by 2027, upon achieving targeted commercial operations of Oneida, Baltic Power and Hai Long, each with long-term contracted revenues of between 20 to 30 years.

With over 3 gigawatts (GW) of gross operating capacity and a robust development pipeline of approximately 16GW, the Company is well positioned for an accelerating global energy transition. Northland intends to be selective and pursue only projects within its pipeline that meet its strategic objectives and targeted returns closely monitoring macroeconomic conditions surrounding renewables development globally.

Second-Quarter Earnings Conference Call

Northland will hold an earnings conference call on August 11, 2023, to discuss its 2023 second quarter results. The call will be hosted by Northland’s Senior Management, who will discuss the Company’s financial results and developments as well as answering questions from analysts.

Conference call details are as follows:

Friday, August 11, 2023, 10:00 a.m. ET

Participants wishing to join the call and ask questions must register using the following URL below:

https://register.vevent.com/register/BI4601ceef5c7a4348b73c48e8550ac53f

For all other attendees, the call will be broadcast live on the internet, in listen-only mode and can be accessed using the following link:

Webcast URL: https://edge.media-server.com/mmc/p/snhk5ze8

For those unable to attend the live call, an audio recording will be available on northlandpower.com on August 14, 2023.

Northland’s unaudited interim condensed consolidated financial statements for the three and six months ended June 30, 2023, and related Management’s Discussion and Analysis can be found on SEDAR at www.sedarplus.ca under Northland’s profile and on northlandpower.com.

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 over 3.0GW (net 2.7GW) of operating capacity. The Company also has a significant inventory of projects in construction and in various stages of development encompassing over 15GW 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”), Adjusted Free Cash Flow, Free Cash Flow and applicable payout ratios and per share amounts, 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 and applicable payout ratio and per share amounts 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.

FORWARD-LOOKING STATEMENTS

This press release contains statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”) that are provided for the purpose of presenting information about management’s current expectations and plans. Readers are cautioned that such statements may not be appropriate for other purposes. 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. Forward-looking statements include statements that are not historical facts and 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 future Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, including the anticipated impact from the recently announced Spain’s regulatory framework, respective per share amounts, dividend payments and dividend payout ratios, guidance, the completion of construction, acquisitions, dispositions, investments or financings and the timing thereof, attainment of financial close and commercial operations, the potential for future production from project pipelines, cost and output of development projects, litigation claims, anticipated results from the optimization of the Thorold Co-Generation facility and the timing related thereto, plans for raising capital and future funding requirements, the allocation of the net proceeds from the Green Notes offering, and the future operations, business, financial condition, financial results, priorities, ongoing objectives, strategies and the outlook of Northland, its subsidiaries and joint ventures. There is a risk that delays in closing the financings, failure to obtain the anticipated level of finance commitments and failure to close one or more financings could affect construction schedules and/or Northland’s cash or credit position and capital funding needs. 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 projects, 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, the ability to obtain necessary approvals, satisfy any closing conditions, or obtain adequate financing regarding contemplated construction, acquisitions, dispositions, investments or financings, 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 further regulatory and policy changes in Spain which could impair current guidance and expected returns, risks associated with merchant pool pricing and revenues, risks associated with sales contracts, the emergence of widespread health emergencies or pandemics, Northland’s reliance on the performance of its offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht for over 50% of its Adjusted EBITDA, counterparty risks, 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, project development risks, acquisition risks, procurement and supply chain risks, financing risks, disposition and joint-venture risks, competition risks, interest rate and refinancing risks, liquidity risk, inflation risks, impacts of regional or global conflicts, 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, terrorism and security, legal contingencies, and the other factors described in the “Risks Factors” section of Northland’s Management’s Discussion and Analysis and Annual Information Form for the year ended December 31, 2022, 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, unless otherwise indicated, stated as of the date hereof and 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:

Adam Beaumont, Vice President

Dario Neimarlija, Vice President

647-288-1929

investorrelations@northlandpower.com

northlandpower.com