Northland Power Announces Signing of Credit Agreement for $5.2
Billion Project Financing at Baltic Power Offshore Wind Project
Northland Power Inc. (“Northland” or the “Company”) (TSX: NPI)
along with its partner, Orlen S.A. (“Orlen”), today announced
that its Baltic Power offshore wind project (“Baltic Power” or the
“project”) in Poland has signed a credit agreement to secure an
equivalent of $5.2 billion of non-recourse green financing that
adheres to Northland’s green financing framework covering
construction and a 20-year term.
The non-recourse project financing will be
provided by 25 international and local commercial banks, and
multiple Export Credit Agencies and multi-lateral agencies. The
project is expected to reach financial close in the coming days,
upon satisfaction of all relevant conditions precedent to the
financing being achieved.
“Today’s announcement is a major achievement for
Northland, our partners and the Baltic Power project,” said Mike
Crawley, President and Chief Executive Officer of Northland. “This
milestone demonstrates the support from the global financial
community and reflects their confidence in Northland and our
ability to develop, procure, construct and finance large and
complex offshore wind projects. Despite the recent challenges
for the offshore wind sector in some markets, Northland continues
to find a way to advance large-scale offshore wind projects with
attractive economics.”
“This financing is Northland’s first offshore
wind project in Poland,” said Pauline Alimchandani, Northland’s
Chief Financial Officer. “We would like to thank all stakeholders
for working together to achieve this significant milestone. Once
operational, Baltic Power will be Northland’s fourth offshore wind
project in Europe and will provide significant high quality,
inflation-protected, long-term contracted Adjusted EBITDA and Free
Cash Flow to our business and shareholders.”
Northland has been co-developing Baltic Power
with Orlen, since acquiring a 49 per cent equity stake in the
project in 2021. The project financing amount of $5.2 billion
represents 80 per cent of Baltic Power’s $6.5 billion projected
total capital cost (inclusive of contingencies). The remaining
capital will be contributed by the project partners at financial
close and has already been secured. Northland’s share of equity for
the project was fully secured through the green hybrid bond
issuance in June 2023 and existing corporate liquidity. Northland’s
interest in Baltic Power is expected to generate a five-year
average Adjusted EBITDA (a non-IFRS measure)1 of approximately $300
to $320 million and $95 to $105 million of Free Cash Flow (a
non-IFRS measure)1 per year once operational, delivering
significant long-term cash flow for the Company’s shareholders.
¹See Non-IFRS Financial Measures and
Forward-Looking Statements below.
The project’s 25-year CfD offtake agreement is
Euro-pegged and includes an inflation indexation feature commencing
with a base year of 2021, providing offsetting benefits to the
higher inflationary price pressures recently experienced. Further
optimization opportunities will be pursued during and after the
construction period, which include: future optimizations the long
tenor CfD offers, operating cost improvements and construction
execution efficiencies. The project has secured a 15-year
operations and maintenance agreement with the turbine supplier,
with options to extend.
The project is located in the Baltic Sea,
approximately 22 kilometres off the Polish coast near Plaża Wydmy
Lubiatowskie and has obtained all environmental approvals and major
construction permits. Construction activities have commenced, with
fabrication of certain key components underway. Full commercial
operations are expected in the latter half of 2026. Once
operational, Baltic Power will be amongst the largest offshore wind
projects globally. It is expected to provide clean energy to over
1.5 million Polish households and will play an important role in
helping Poland achieve its renewable energy targets where installed
capacity of offshore wind energy is expected to reach up to 11 GW
by 2040.
Baltic Power has entered into interest rate
hedges that cover the full loan amortization period and provide an
effective all-in interest rate of approximately 5 per cent. In
addition, Northland has entered into currency hedges to stabilize
the Canadian dollar equivalent for the majority of its projected
distributions through 2038 and will enter into additional hedges on
an ongoing basis, in line with the Company’s risk management
strategy. Baltic Power’s major supply and construction contracts
are denominated in Euros to match the currency of financing, with
95% under fixed price contractual structures.
(C$) |
Total Project |
Northland’s Interest* |
Capacity |
1,140 MW |
559 MW |
CfD Tenor |
25 Years |
n/a |
|
|
|
Total Capital costs |
$6.5 billion |
$3.2 billion |
Non-Recourse Project Financing |
$5.2 billion |
$2.5 billion |
Total Equity (excluding pre-completion revenues) |
$1.3 billion |
$0.75 billion |
|
|
|
5-year Average Annual Adjusted EBITDA (a non-IFRS measure)2 |
n/a |
$300 - $320 million |
5-year Average Annual Free Cash Flow (a non-IFRS measure)2 |
n/a |
$95 - $105 million |
|
|
|
Estimated annual net production |
4,400 GWh |
n/a |
Non-Recourse Debt Term |
20 years |
n/a |
Non-Recourse Cost of Financing |
5.0% |
n/a |
* Northland’s interest
reflective of 49 per cent ownership. Assumed average EUR/CAD
exchange rate at 1.53 in the first five years of operations. The
2021 CfD tariff of PLN 319.6/MWh (equivalent to EUR 71.8/MWh) with
CfD price pegged to EUR at 4.45 PLN/EUR. In 2022, CfD changed from
Polish Zloty to Euro denominated currency. Indexation base year
moved up one year to 2022 using 2021 CPI. Northland’s equity
includes amounts paid to acquire the original 49% stake in Baltic
Power, and amount to approximately $0.1 billion.
²See Non-IFRS Financial Measures and Forward-Looking Statements
below.
ABOUT NORTHLAND POWER
Northland Power is a global power producer
dedicated to helping the clean energy transition by producing
electricity from clean renewable resources. Founded in 1987,
Northland has a long history of developing, building, owning and
operating clean and green power infrastructure assets and is a
global leader in offshore wind. In addition, Northland owns and
manages a diversified generation mix including onshore renewables,
efficient natural gas energy, as well as supplying energy through a
regulated utility.
Headquartered in Toronto, Canada, with global
offices in eight countries, Northland owns or has an economic
interest in approximately 3.2 GW (net 2.7 GW) of operating
capacity. The Company also has a significant inventory of projects
in construction and in various stages of development encompassing
approximately 16 GW of potential capacity.
Publicly traded since 1997, Northland's common shares, Series 1
and Series 2 preferred shares trade on the Toronto Stock Exchange
under the symbols NPI, NPI.PR.A and NPI.PR.B, respectively.
NON-IFRS FINANCIAL MEASURES
This press release includes references to the
Company’s adjusted earnings before interest, income taxes,
depreciation and amortization (“Adjusted EBITDA”), Free Cash Flow,
which are measures not prescribed by International Financial
Reporting Standards (“IFRS”), and therefore do not have any
standardized meaning under IFRS and may not be comparable to
similar measures presented by other companies. Non-IFRS financial
measures are presented at Northland’s share of underlying
operations. These measures should not be considered alternatives to
net income (loss), cash flow from operating activities or other
measures of financial performance calculated in accordance with
IFRS. Rather, these measures are provided to complement IFRS
measures in the analysis of Northland’s results of operations from
management’s perspective. Management believes that Northland’s
non-IFRS financial measures are widely accepted and understood
financial indicators used by investors and securities analysts to
assess the performance of a company, including its ability to
generate cash through operations. For a detailed description of
each of the non-IFRS financial measures referred to above,
including the reconciliations for such non-IFRS financial measure
to their most directly comparable IFRS financial measure, see
Section 1: Non-IFRS Financial Measures, Section 4.5: Adjusted
EBITDA, and Section 4.6: Adjusted Free Cash Flow and Free Cash Flow
in our MD&A for the three and six-month periods ended June 30,
2023, which is incorporated by reference and available under the
Company’s profile on SEDAR+ at www.sedarplus.ca.
FORWARD-LOOKING STATEMENTS
This press release contains certain
forward-looking statements including certain future oriented
financial information that are provided for the purpose of
presenting information about management’s current expectations and
plans. Northland’s actual results could differ materially from
those expressed in, or implied by, these forward-looking statements
and, accordingly, the events anticipated by the forward-looking
statements may or may not transpire or occur. Readers are cautioned
that such statements may not be appropriate for other purposes.
Forward-looking statements include statements that are predictive
in nature, depend upon or refer to future events or conditions, or
include words such as “expects,” “anticipates,” “plans,”
“predicts,” “believes,” “estimates,” “intends,” “targets,”
“projects,” “forecasts” or negative versions thereof and other
similar expressions or future or conditional verbs such as “may,”
“will,” “should,” “would” and “could.” These statements may
include, without limitation, statements regarding Northland’s
expectations for guidance, the completion of construction, the
timing for and attainment of commercial operations, the project’s
anticipated contributions to Adjusted EBITDA and Free Cash Flow,
the expected generating capacity of the project, and the future
operations, business, financial condition, financial results,
priorities, ongoing objectives, strategies and outlook of Northland
and its subsidiaries, all of which may differ from the expectations
stated herein. These statements are based upon certain material
factors or assumptions that were applied in developing the
forward-looking statements, including the design specifications of
development the projects, the provisions of contracts to which
Northland or a subsidiary is a party, management’s current plans
and its perception of historical trends, current conditions and
expected future developments, as well as other factors, estimates,
and assumptions that are believed to be appropriate in the
circumstances. Although these forward-looking statements are based
upon management’s current reasonable expectations and assumptions,
they are subject to numerous risks and uncertainties. Some of the
factors include, but are not limited to, risks associated with
sales contracts, Northland’s reliance on the performance of its
offshore wind facilities at Gemini, Nordsee One and Deutsche Bucht
for approximately 50% of its Adjusted EBITDA and Free Cash Flow,
counterparty risks, impacts of regional or global conflicts,
contractual operating performance, variability of sales from
generating facilities powered by intermittent renewable resources,
offshore wind concentration, natural gas and power market risks,
commodity price risks, operational risks, recovery of utility
operating costs, Northland’s ability to resolve issues/delays with
the relevant regulatory and/or government authorities, permitting,
construction risks, procurement and supply chain risk, project
development risks, disposition and joint venture risk, competition
risks, acquisition risks, financing risks, interest rate and
refinancing risks, liquidity risk, credit rating risk, currency
fluctuation risk, variability of cash flow and potential impact on
dividends, taxation, natural events, environmental risks, climate
change, health and worker safety risks, market compliance risk,
government regulations and policy risks, utility rate regulation
risks, international activities, cybersecurity, data protection and
reliance on information technology, labour relations, reputational
risk, insurance risk, risks relating to co-ownership, bribery and
corruption risk, legal contingencies, and the other factors
described in the “Risks Factors” section of Northland’s 2022 Annual
Information Form, which can be found at www.sedarplus.ca under
Northland’s profile and on Northland’s website at
northlandpower.com. Northland has attempted to identify important
factors that could cause actual results to materially differ from
current expectations, however, there may be other factors that
cause actual results to differ materially from such expectations.
Northland’s actual results could differ materially from those
expressed in, or implied by, these forward-looking statements and,
accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur, and Northland cautions you not to place undue reliance upon
any such forward-looking statements.
The forward-looking statements contained in this
release are based on assumptions that were considered reasonable as
of the date hereof. Other than as specifically required by law,
Northland undertakes no obligation to update any forward-looking
statements to reflect events or circumstances after such date or to
reflect the occurrence of unanticipated events, whether as a result
of new information, future events or results, or otherwise.
² See Non-IFRS Financial Measures and Forward-Looking Statements
below.
For further information, please
contact:
Mr. Adam Beaumont, Vice PresidentMr. Dario Neimarlija, Vice
President647-288-1019investorrelations@northlandpower.com
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