NPI Northland Power Inc

Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI) reported today financial results for the three months and year ended December 31, 2023. All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.

Financial Results

• Sales were $626 million in the fourth quarter of 2023 compared to $641 million in 2022. On a full-year basis, sales were $2,233 million in 2023 compared to $2,449 million in 2022.
• Gross Profit was $566 million in the fourth quarter of 2023 compared to $574 million in 2022. On a full-year basis, gross profit was $2,021 million in 2023 compared to $2,178 million in 2022.
• Net loss was $268 million in the fourth quarter of 2023 compared to net income of $324 million in 2022. On a full-year basis, net loss was $96 million in 2023 compared to net income of $955 million in 2022.
• Adjusted EBITDA (a non-IFRS measure) was $389 million in the fourth quarter of 2023 compared to $353 million in 2022. On a full-year basis, Adjusted EBITDA was $1,240 million in 2023 compared to $1,398 million in 2022.
• Adjusted Free Cash Flow per share (a non-IFRS measure) was $0.75 in the fourth quarter of 2023 compared to $0.16 in 2022. On a full-year basis, Adjusted Free Cash Flow per share was $1.97 in 2023 compared to $1.95 in 2022.
• Free Cash Flow per share (a non-IFRS measure) was $0.75 in the fourth quarter of 2023 compared to $0.06 in 2022. On a full-year basis, Free Cash Flow per share was $1.68 compared to $1.61 in 2022.

“Northland performed well in 2023. We achieved Adjusted EBITDA and exceeded guidance for Adjusted Free Cash Flow and Free Cash Flow. The financial and operating performance for 2023 is a testament to both the capability of our team and the resilience of our business. Notwithstanding the challenges experienced within the industry and the economy more broadly, Northland demonstrated our resilience achieving several significant milestones in 2023, including reaching financial close on our two major offshore wind projects, Hai Long and Baltic Power, and our energy storage project, Oneida. Construction for all three projects is now underway and progressing well. In addition, we successfully executed several partnership agreements within our offshore wind projects in Scotland and Taiwan. These accomplishments continue to reinforce our capability and expertise to develop, secure strong partnerships, and finance and execute upon complex, large-scale projects,” Mike Crawley, Northland’s President and Chief Executive Officer noted.

Fourth Quarter and Full-Year 2023 Financial Results

Northland successfully achieved original 2023 guidance for Adjusted EBITDA and exceeded guidance for Adjusted Free Cash Flow and Free Cash Flow per share. Performance in the fourth quarter was particularly strong, driven by higher-than-expected sell-down gains and higher production from its offshore wind facilities, partially offset by lower onshore renewables production due to lower wind and solar resources.

On a year-over-year basis, full year Adjusted EBITDA decreased primarily due to the non-recurrence of the unprecedented spike in market prices realized in 2022 in Europe, partially offset by higher band adjustment revenue recognized from Northland’s Spanish portfolio and sell-down gains realized on our development assets in Europe and Asia. With respect to Adjusted Free Cash Flow and Free Cash Flow per share, in addition to the same factors as above, both the Spanish portfolio debt optimization completed in the fourth quarter of 2023 and gains from foreign exchange hedge settlements resulted in higher reported results compared to 2022.

The following table presents key IFRS and non-IFRS financial measures and operational results. 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 December 31,							Year ended December 31,
	2023				2022			2023				2022
FINANCIALS
Sales	$	626,221			$	641,115		$	2,232,779			$	2,448,815
Gross profit		566,354				573,571			2,021,041				2,178,389
Operating income		219,802				269,794			741,157				1,050,784
Net income (loss)		(267,918	)			323,922			(96,132	)			955,457
Net income (loss) attributable to common shareholders		(285,595	)			278,898			(175,194	)			827,733
Adjusted EBITDA (a non-IFRS measure) (2)		388,658				353,070			1,239,871				1,398,176
Cash provided by operating activities		135,869				550,689			785,214				1,832,983
Adjusted Free Cash Flow (a non-IFRS measure) (2)		191,289				40,529			497,978				460,892
Free Cash Flow (a non-IFRS measure) (2)		191,448				15,883			423,744				380,472
Cash dividends paid		51,740				51,337			205,072				196,845
Total dividends declared (1)	$	76,368			$	74,172		$	303,469			$	284,582
Per Share
Weighted average number of shares — basic and diluted (000s)		254,368				246,378			252,710				236,157
Net income (loss) attributable to common shareholders — basic and diluted	$	(1.13	)		$	1.12		$	(0.72	)		$	3.46
Adjusted Free Cash Flow — basic (a non-IFRS measure) (2)	$	0.75			$	0.16		$	1.97			$	1.95
Free Cash Flow — basic (a non-IFRS measure)	$	0.75			$	0.06		$	1.68			$	1.61
Total dividends declared	$	0.30			$	0.30		$	1.20			$	1.20
ENERGY VOLUMES
Electricity production in gigawatt hours (GWh)		3,353				3,009			10,380				10,139

 

(1)	Represents total dividends paid to common shareholders, including dividends in cash or in shares under Northland’s dividend reinvestment plan.
(2)	See Forward-Looking Statements and Non-IFRS Financial Measures below. Further, note that non-IFRS measures during the three months and year ended December 31, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the same measures before the definition changes, please refer to Northland’s Management’s Discussion and Analysis (“MD&A”) for the three months and year ended December 31, 2023.

Fourth Quarter Results Summary

Offshore wind facilities

Electricity production for the three months ended December 31, 2023, decreased by 3% or 39GWh compared to the same quarter of 2022. This was primarily due to an expected 21-day grid outage required by the TenneT for maintenance at Deutsche Bucht, as well as higher unpaid curtailments due to negative prices and grid outages at German offshore wind facilities. These declines were partially offset by higher production from Nordsee One and Gemini.

Sales of $341 million for the three months ended December 31, 2023, increased 1% or $2 million, compared to the same quarter of 2022, primarily due to foreign exchange gains due to the strengthening of the Euro, partially offset by the non-recurrence of the unprecedented spike in market prices realized in 2022 and an expected 21-day grid outage required by the TenneT for maintenance at Deutsche Bucht.

Adjusted EBITDA of $218 million for the three months ended December 31, 2023, decreased 1% or $3 million compared to the same quarter of 2022, due to the same factors as 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 December 31,	2023 (1)	2022 (1)	Historical Average (2)	Historical High (2)	Historical Low (2)
Electricity production (GWh)
Gemini	832	794	783	832	739
Nordsee One	379	362	340	379	298
Deutsche Bucht	233	326	300	326	233
Total	1,444	1,482

 

(1)	Includes GWh produced and attributed to paid curtailments.
(2)	Represents the historical power production 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.

Onshore renewable facilities

Electricity production was 17% or 107GWh higher than the same quarter of 2022, primarily due to the contribution from the recently completed New York onshore wind projects which achieved commercial operation in October 2023 and higher wind resource across Spanish onshore wind facilities, partially offset by lower wind resource at Canadian onshore renewable facilities.

Sales of $104 million were 21% or $28 million lower than the same quarter of 2022, primarily due to the lower pool prices and lower Ri revenue from the Spanish portfolio, partially offset by the contribution from the recently completed New York onshore wind projects. Please refer to the MD&A for further breakdown of Spanish portfolio revenue by component.

Adjusted EBITDA of $69 million was 29% or $28 million lower than the same quarter of 2022, due to the same factors as above.

Adjusted EBITDA from the Spanish portfolio of $34 million for the three months ended December 31, 2023, decreased 49% or $33 million compared to the same quarter of 2022, primarily due to lower pool prices decreasing market revenue and Ri, and lower band adjustments by $12 million, $8 million and $15 million respectively. Free Cash Flow from the Spanish portfolio of $31 million for the three months ended December 31, 2023, increased by $98 million compared to the same quarter of 2022 due to higher debt repayments in the fourth quarter of 2022, as well as the impact from a debt optimization completed in the fourth quarter of 2023. Further details on the debt optimization, are included below.

Efficient natural gas facilities

Electricity production increased 7% or 66GWh compared to the same quarter of 2022, mainly due to higher market demand for dispatchable power.

Sales of $88 million decreased 20% or $22 million compared to the same quarter of 2022, primarily due to lower natural gas prices resulting in lower energy rates.

Adjusted EBITDA of $44 million for the three months ended December 31, 2023, decreased 9% or $4 million, compared to the same quarter of 2022, due to the same factors as above.

Utility

Sales of $85 million for the three months ended December 31, 2023, increased 33% or $21 million compared to the same quarter of 2022, primarily due to the higher market demand, rate escalations and foreign exchange gains as a result of the strengthening of the Colombian peso.

Adjusted EBITDA of $32 million for the three months ended December 31, 2023, increased 19% or $5 million compared to the same quarter of 2022, due to the same factors as above.

Consolidated statement of income (loss)

General and administrative (“G&A”) costs of $38 million in the fourth quarter increased $13 million compared to the same quarter of 2022, primarily due to increased costs and resources to support Northland’s projects and global platform and additional projects entering operation during the period, including La Lucha solar project and New York onshore wind projects.

Development costs of $27 million increased $3 million compared to the same quarter of 2022, primarily due to timing of spending to advance development projects.

Net finance costs of $111 million in the fourth quarter increased $24 million compared to the same quarter of 2022, primarily due to the issuance of the Green Notes, partially offset by scheduled repayments on facility-level loans and higher loan repayments related to loan restructurings that occurred in 2022.

Fair value loss on derivative contracts was $190 million compared to a $141 million gain in the same quarter of 2022, primarily due to net movement in the fair value of derivatives related to interest rate and foreign exchange contracts.

Foreign exchange gain of $4 million in the fourth quarter was primarily due to unrealized gain from fluctuations in the closing foreign exchange rates.

Other income of $183 million increased by $184 million compared to the same quarter of 2022, was primarily due to the accounting gains recorded as a result of the sell-down of Hai Long offshore wind projects to Gentari in the fourth quarter of 2023. The sell-down transaction was treated as a disposition of a business interest under IFRS. Further details are included below.

Impairment expense of $163 million represents goodwill write-off related to the Spanish portfolio. As communicated previously, the recent regulatory framework changes are not expected to impact the overall regulatory return over the life of the Spanish portfolio. However, because of the fixed return construct of the regulatory regime in Spain, the benefits of much higher-than-expected pool prices and cash flows received by Northland since its acquisition are being offset by lower regulated cash flows over the remaining contractual life of the portfolio. The goodwill write-off reflects the diminished value of lower future cash flows resulting from the fixed return regulatory framework.

Net loss of $268 million in the fourth quarter of 2023 compared to net income of $324 million in the same quarter of 2022, was primarily as a result of the factors described above.

Adjusted EBITDA

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

	Three months ended December 31,								Year ended December 31,
		2023				2022				2023				2022
Net income (loss)	$	(267,918	)		$	323,922			$	(96,132	)		$	955,457
Adjustments:
Finance costs, net		111,113				86,578				321,812				323,632
Gemini interest income		1,991				2,265				8,103				13,065
Provision for (recovery of) income taxes		(55,577	)			70,990				39,129				304,662
Depreciation of property, plant and equipment		156,619				146,645				595,600				571,090
Amortization of contracts and intangible assets		14,510				13,966				57,015				53,611
Fair value (gain) loss on derivative contracts		187,830				(147,414	)			294,544				(482,351	)
Foreign exchange (gain) loss		(3,570	)			(69,073	)			(39,732	)			(41,792	)
Impairment loss		163,169				—				163,169				—
Elimination of non-controlling interests		(71,813	)			(73,692	)			(258,202	)			(272,407	)
Finance lease (lessor)		(1,291	)			(1,511	)			(5,609	)			(6,352	)
Others (1)		153,595				394				160,174				(20,439	)
Adjusted EBITDA (2)	$	388,658			$	353,070			$	1,239,871			$	1,398,176

(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-downs, 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 months and year ended December 31, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the same measures before the definition changes, please refer to the MD&A.

Adjusted EBITDA of $389 million for the three months ended December 31, 2023, increased 10% or $36 million compared to the same quarter of 2022. The significant factors increasing Adjusted EBITDA include:

• $74 million in gains (calculated for non-IFRS financial measures) from the partial sell-down of Hai Long offshore wind project to Gentari, including the historically incurred growth expenditures’ recovery due to sell-down; and
• $7 million increase due to the contribution of New York Wind onshore wind facilities, which achieved commercial operations in the fourth quarter of 2023.

The factors partially offsetting the increase in the Adjusted EBITDA were:

• $33 million decrease in the contribution from the Spanish renewables portfolio, as described above; and
• $15 million increase in G&A costs and development expenditures, as described above.

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 December 31,								Year ended December 31,
		2023				2022				2023				2022
Cash provided by operating activities	$	135,869			$	550,689			$	785,214			$	1,832,983
Adjustments:
Net change in non-cash working capital balances related to operations		231,350				(141,244	)			466,313				(289,875	)
Non-expansionary capital expenditures		(1,947	)			(10,675	)			(3,215	)			(56,248	)
Restricted funding for major maintenance, debt and decommissioning reserves		(8,200	)			(6,531	)			(11,435	)			(17,857	)
Interest		(142,890	)			(112,927	)			(325,841	)			(336,356	)
Scheduled principal repayments on facility debt		(323,800	)			(439,185	)			(705,119	)			(839,614	)
Funds set aside (utilized) for scheduled principal repayments		158,020				170,661				—				—
Preferred share dividends		(1,573	)			(2,954	)			(6,103	)			(11,206	)
Consolidation of non-controlling interests		(22,194	)			(31,707	)			(87,380	)			(75,217	)
Investment income (1)		7,374				12,214				29,685				24,880
Proceeds under NER300 and warranty settlement at Nordsee One		—				14,530				—				70,317
Others (2)		159,439				13,012				281,625				78,665
Free Cash Flow (3)	$	191,448			$	15,883			$	423,744			$	380,472
Add back: Growth expenditures		26,635				24,646				112,786				80,420
Less: Historical growth expenditures’ recovery due to sell-down		(26,794	)			—				(38,552	)			—
Adjusted Free Cash Flow (3)	$	191,289			$	40,529			$	497,978			$	460,892

(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 and losses from sell-downs of development assets, interest on corporate-level debt raised to finance capitalized growth projects 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 months and year ended December 31, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the same measures before the definition changes, please refer to the MD&A.

Adjusted Free Cash Flow of $191 million for the three months ended December 31, 2023, was 372% or $151 million higher than the same quarter of 2022.

The significant factors increasing Adjusted Free Cash Flow were:

• $96 million decrease in scheduled debt repayments primarily due to the Spanish portfolio, as discussed above; 
• $49 million gain from foreign exchange hedge settlements as a result of unwinding over hedged Euro positions;
• $24 million decrease in current taxes primarily at offshore wind facilities and the Spanish portfolio as a result of lower operating results; and
• $36 million increase in Adjusted EBITDA primarily due to the factors described above.

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

• $20 million decrease primarily as a result of lower net upfinancing proceeds from EBSA due to settlement of realized maturity hedge losses; and
• $15 million increase in net finance cost primarily due to the higher short-term financing activity at Corporate, partially offset by scheduled repayments on facility-level loans and higher loan repayments related to loan restructurings that occurred in 2022.

Free Cash Flow, which is reduced by growth expenditures, totaled $191 million for the three months ended December 31, 2023, and was $176 million higher 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 December 31,								Year ended December 31,
		2023				2022				2023				2022
Adjusted EBITDA (2)	$	388,658			$	353,070			$	1,239,871			$	1,398,176
Adjustments:
Scheduled debt repayments		(129,002	)			(225,131	)			(579,445	)			(684,630	)
Interest expense		(52,309	)			(37,235	)			(195,328	)			(220,347	)
Current taxes		(46,558	)			(70,309	)			(137,460	)			(192,953	)
Non-expansionary capital expenditure		(1,938	)			(9,266	)			(3,016	)			(48,094	)
Utilization (funding) of maintenance and decommissioning reserves		(6,816	)			(6,092	)			(10,044	)			(16,550	)
Lease payments, including principal and interest		(2,365	)			(2,996	)			(8,677	)			(10,353	)
Preferred dividends		(1,574	)			(2,954	)			(6,103	)			(11,206	)
Foreign exchange hedge gain (loss)		5,873				(18,730	)			36,908				37,486
Proceeds under NER300 and warranty settlement at Nordsee One		—				12,349				—				59,769
EBSA Refinancing proceeds, net of growth capital expenditures		—				20,078				—				46,974
Others (1)		37,479				3,099				87,038				22,200
Free Cash Flow (2)	$	191,448			$	15,883			$	423,744			$	380,472
Add Back: Growth expenditures		26,635				24,646				112,786				80,420
Less: Historical growth expenditures’ recovery due to sell-down		(26,794	)			—				(38,552	)			—
Adjusted Free Cash Flow (2)	$	191,289			$	40,529			$	497,978			$	460,892

(1)	Others mainly include Gemini interest income, repayment of Gemini subordinated debt, interest rate hedge settlement, gains and losses from sell-downs 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 months and year ended December 31, 2023, include the effect of changes in the definition of non-IFRS measures. For a reconciliation of these non-IFRS financial measures to the same measures before the definition changes, please refer to the MD&A.

Significant Events and Updates

Balance Sheet:

• Optimization of Spanish Portfolio’s Debt Facility – On December 21, 2023, Northland amended its Spanish portfolio’s debt agreement to optimize debt repayments and address recent regulatory changes and market pool price volatility. As a result of this optimization, the debt repayment of €21 million ($33 million) scheduled in the fourth quarter of 2023 was deferred to future periods.
• Upfinancing of EBSA’s Credit Facility – On December 18, 2023, the EBSA facility was upfinanced by $190 million, to an aggregate amount of $711 million and the maturity date was extended to December 18, 2026. The all-in average annual cost increased from 6.3% to 8.6%, due to a combination of a higher estimated cost for Northland to maintain currency hedges to protect 100% of the Canadian dollar-denominated debt balance against changes in Colombian peso, increased underlying interest rates, and slightly higher loan margin. The increase in costs is expected to be more than offset by higher cash flows due to growth in and indexation of EBSA’s regulatory asset base. The Colombian peso has strengthened in 2023, leading to an increase in EBSA's upfinancing capability that was offset by a hedge settlement outflow of $144 million while a $44 million excess was distributed to Northland. There was no impact on Adjusted Free Cash Flow or Free Cash Flow as the upfinancing proceeds are offset by expansionary capital investments scheduled at EBSA.

Renewables Growth:

• Hai Long Offshore Wind Project – On December 28, 2023, Northland closed its previously announced transaction with Gentari International Renewables Pte. Ltd., a subsidiary of clean energy solutions company Gentari Sdn Bhd (“Gentari”), pursuant to which Gentari acquired 49% of Northland’s 60% ownership in the Hai Long offshore wind project. Northland now holds a 30.6% ownership interest in the overall project and will continue to take the lead role in Hai Long’s construction and operation. This transaction resulted in Gentari contributing a final equity consideration of approximately NTD23 billion (equivalent to $1.0 billion) and assuming its pro rata share of credit support for the project.The accounting gain from the sell-down of Hai Long was recorded at $192 million, which includes $118 million of fair value gain in respect of Northland’s retained interest in Hai Long in accordance with IFRS. Adjusted EBITDA and Free Cash Flow sell-down gain of $74 million excludes this fair value gain in accordance with Northland’s non-IFRS financial measures policy.

• New York Onshore Wind Projects – In October 2023, the 112MW Bluestone and 108MW Ball Hill onshore wind projects commenced commercial operations under the 20-year PPA with the New York State Energy Research and Development Authority (“NYSERDA”).On December 19, 2023, Northland successfully secured final tax equity funding of US$219 million ($298 million) with a conversion of term loan on both the Bluestone and Ball Hill projects. Upon achieving the commercial operations of these projects, Northland is deemed to have earned the investment tax credits of US$178 million ($242 million), 99% of which were allocated to the tax equity partner, reducing the tax equity loan in the same amount as at December 31, 2023. Following the conclusion of this tax equity investment, the financing structure of the projects comprises tax equity, back-levered non-recourse debt and equity to fund the capital costs.

• Construction Update on Hai Long, Baltic Power, and Oneida – The Hai Long project continues to advance its construction activities with progress being made on the fabrication of foundations, cables and onshore and offshore substations and preparatory works for further in-water construction during the spring of 2024. Completion of construction activities and full commercial operations are expected in 2026/2027. The project is progressing according to the planned schedule.At Baltic Power, early construction activities have commenced, with the fabrication of onshore substation, foundations and export cables underway. Full commercial operations are expected in the latter half of 2026. The project is progressing according to the planned schedule.At Oneida, construction activities have commenced, including fabrication of battery packs and transformers and pouring of foundation pads. Full commercial operations for the project are expected to commence in 2025. The project is progressing according to the planned schedule.

Other:

Board of Directors

On November 29, 2023, Northland announced the expansion of its Board of Directors from nine to ten members and the immediate appointment of Ellen Smith as a Director. Ms. Smith brings over 35 years of leadership experience within the power and utilities sector.

Project Delivery Committee

During the fourth quarter of 2023, the Board of Directors formed a new subcommittee: the Project Delivery Committee. The purpose of the Project Delivery Committee is to assist the Board of Directors with monitoring and overseeing projects in which the Company has an interest during construction.

Executive Changes

On January 15, 2024, Northland announced several changes to its executive team. Pauline Alimchandani, CFO will be departing the Company effective February 22, 2024, to pursue another opportunity. Until a new CFO is appointed, Adam Beaumont, Vice President Finance & Head of Capital Markets, will oversee the finance function on an interim basis. David Povall, Executive Vice President of Offshore Wind departed the company as well. Toby Edmonds will join Northland as Executive Vice President of Offshore Wind, bringing essential offshore project execution and operational experience. In addition, Yonni Fushman, who joined Northland in January 2023 as Chief Legal Officer and Executive Vice President of Sustainability, has been promoted to Chief Administrative and Legal Officer and will continue to serve as Corporate Secretary.

2024 Financial Targets

Management’s 2024 financial targets are described below:

Adjusted EBITDA

For 2024, management expects Adjusted EBITDA to be in the range of $1.20 billion to $1.30 billion, comparable to 2023 Adjusted EBITDA of $1.24 billion. The major factors expected to increase Adjusted EBITDA include (all amounts are approximate):

• Higher contribution from New York Onshore Wind Projects that commenced operations in the fourth quarter of 2023 and contribution from other onshore renewable assets as a result of normalized production ($30 million);
• Higher contribution from offshore wind assets as a result of normalized production or outages ($20 million);
• Lower development expenditures ($50 million) primarily as a result of focus on construction execution in 2024; and
• Higher cash flows from EBSA results expected due to favourable foreign exchange rate ($20 million).

These factors will be offset by the non-recurrence of sell-down gains and development expenditure recovery recognized in 2023 related to offshore wind projects ($110 million).

Adjusted Free Cash Flow and Free Cash Flow

In 2024, management expects Adjusted Free Cash Flow to be in the range of $1.30 to $1.50 per share, down from $1.97 per share in 2023. The major factors contributing to the year-over-year expected decline in Adjusted Free Cash flow include (all amounts are approximate):

• Lower gains from Hai Long sell-down and other transactional and hedging gains ($120 million);
• Lower contribution from EBSA as a result of higher upfinancing proceeds in 2023 ($15 million); and
• Lower interest income earned on temporary cash balances on hand ($15 million).

Factors expected to offset the aforementioned decreases include:

• Higher contribution from New York Onshore Wind Projects that commenced operations in the fourth quarter of 2023 and contribution from other assets as a result of normalized production ($10 million - $15 million).

Management expects Free Cash Flow, which includes growth expenditures, to be in a range of $1.10 to $1.30 per share, down from $1.68 per share in 2023. The reduction is due to the same factors noted above, partially offset by lower growth expenditures. Development expenditures are expected to be approximately $60 million in 2024. This represents a lower level of spend than in prior years as Northland focuses on the successful construction execution of its three key projects, ceases all development activities in Mexico, Colombia and Japan, and focuses development expenditures on secured projects in its pipeline including: ScotWind, the Korean offshore wind projects, the Alberta, New York and Ontario onshore renewable energy opportunities. These development expenditures will reduce near-term free cash flow until the projects achieve commercial operations but are expected to deliver accretive long-term growth in earnings and free cash flow.

Corporate G&A costs are expected to be $3 million lower than 2023, at approximately $75 million in 2024.

In addition, any gains from the future sell-down of ownership interests in development assets would be included in Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow as they relate to capturing development profits at key milestones. Currently, the 2024 guidance for Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow does not incorporate any sell-down proceeds and as such, net proceeds from any sell-down would increase reported Adjusted EBITDA, Adjusted Free Cash Flow, and Free Cash Flow in the event they occur in 2024.

Northland continues to implement a selective partnership strategy to sell interests in certain development projects on or before financial close. In certain situations, Northland may decide to exit certain markets or reduce development activities within certain jurisdictions. Northland 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.

The expected 2024 payout ratio, which may be closer to or above 100%, largely reflects the level of spending on growth initiatives and the equity capital raised for our projects currently under construction, for which corresponding cash flows will not be received until 2026 and 2027. Northland management expects that the Company will continue to pay dividends annually at the rate of $1.20 per share.

Once the projects under construction, including Hai Long, Baltic Power, and Oneida battery storage, are fully completed, they are collectively expected to deliver, on a five-year annual average basis, approximately $570 million to $615 million of Adjusted EBITDA and $185 million to $210 million of Free Cash Flow by 2027.

With over 3 gigawatts (GW) of current gross operating capacity and a development pipeline of approximately 12GW, including 2.4GW under construction and expected to be operational by 2026/2027, 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 and closely monitor macroeconomic conditions surrounding renewables development globally.

This Outlook is subject to the Forward-Looking Statements proviso herein as well as the Risk Factors in Northland’s most recent Annual Information Form for the year ended December 31, 2023, dated February 21, 2024 (“2023 AIF”).

Fourth-Quarter Earnings Conference Call

Northland will hold an earnings conference call on February 22, 2024, to discuss its fourth quarter and full-year 2023 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:

Thursday, February 22, 2024, 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/BIc547b4ada08048c08f0cc894f9ea16dc

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/djphevny

For those unable to attend the live call, an audio recording will be available on northlandpower.com on Friday, February 23, 2024.

Northland’s audited consolidated financial statements for the year ended December 31, 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 approximately 3.4GW (net 2.9GW) of operating capacity. The Company also has a significant inventory of projects in construction and in various stages of development encompassing approximately 12GW 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 respective per share amounts, dividend payments and dividend payout ratios, the timing for and attainment of the Hai Long and Baltic Power offshore wind and Oneida energy storage projects’ anticipated contributions to Adjusted EBITDA, Adjusted Free Cash Flow and Free Cash Flow, the expected generating capacity of certain projects, guidance, the completion of construction, acquisitions, dispositions, whether partial or full, investments or financings and the timing thereof, the timing for and attainment of financial close and commercial operations, for each project, the potential for future production from project pipelines, cost and output of development projects, the all-in interest cost for debt financing, the impact of currency and interest rate hedges, litigation claims, anticipated results from the optimization of the Thorold Co-Generation facility and the timing related thereto, future funding requirements, and the future operations, business, financial condition, financial results, priorities, ongoing objectives, strategies and the outlook of Northland, its subsidiaries and joint ventures. 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, satisfy any project finance lender conditions to closing sell-downs 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 that could cause results or events to differ from current expectations 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 and joint venture risks, contractual operating performance, variability of sales from generating facilities powered by intermittent renewable resources, wind and solar resource risk, unplanned maintenance risk, 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, integration and 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, commodity availability and cost risk, construction material cost 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, labour shortage risk, management transition risk, geopolitical risk in and around the regions Northland operates in, large project risk, reputational risk, insurance risk, risks relating to co-ownership, bribery and corruption risk, terrorism and security, litigation risk and 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, 2023, 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.

Certain forward-looking information in this release and the MD&A, including, but not limited to the information in Section 10: Outlook of the MD&A and our projected Adjusted EBITDA and Free Cash Flow expected to be generated from Northland’s interest in Hai Long, Baltic Power and Oneida may also constitute a “financial outlook” within the meaning of applicable securities laws. Financial outlook involves statements about Northland’s prospective financial performance, financial position or cash flows and is based on and subject to the assumptions about future economic conditions and courses of action and the risk factors described above in respect of forward-looking information generally, as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this release and the MD&A. Such assumptions are based on management’s assessment of the relevant information currently available and any financial outlook included in this release and the MD&A is provided for the purpose of helping readers understand Northland’s current expectations and plans for the future. Readers are cautioned that reliance on any financial outlook may not be appropriate for other purposes or in other circumstances and that the risk factors described above or other factors may cause actual results to differ materially from any financial outlook. The actual results of Northland’s operations will likely vary from the amounts set forth in any financial outlook and such variances may be material.

For further information, please contact:

Dario Neimarlija, Vice President, FP&A and Investor Relations

647-288-1019

investorrelations@northlandpower.com

northlandpower.com

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/39b9fc4b-0bcd-4805-b122-daa9304d05cf