Northland Power Inc. (“Northland“) (TSX: NPI) (TSX: NPI.PR.A) (TSX: NPI.PR.B) (TSX: NPI.PR.C) (TSX: NPI.DB.B) (TSX: NPI.DB.C) and Highland Group Holdings Ltd. (“Highland”), through a wholly owned subsidiary, have signed a definitive agreement whereby Northland will acquire 100% of Deutsche Bucht, a 252 MW offshore wind project currently in advanced development.
Deutsche Bucht, or “DeBu,” is Northland’s third offshore wind project. It is located 95 km northwest of the island of Borkum in the German Exclusive Economic Zone, 77 km from Northland’s other German offshore wind project, Nordsee One. The total estimated project cost is approximately EUR 1.2 billion (approximately CAD $1.8 billion), and once operational, it is expected to generate over 1,000 gigawatt hours of electricity per year.
Northland expects to invest approximately $400 million of corporate funds with the balance of the project cost provided by project financing and pre-completion revenues. Financial closing is expected mid-2017. Northland expects this investment will be sourced from cash on hand, corporate liquidity, and preferred shares. As a result of the additional financing, management is revising its 2017 free cash flow per share guidance to be in the range of $1.03 to $1.18 per share from $1.10 to $1.25 per share. The project is expected to be accretive on a free cash flow per share basis upon its completion, and provide project returns commensurate with Northland’s investment criteria.
DeBu is entitled to receive a fixed feed-in tariff subsidy for approximately 13 years under the German Renewable Energy Act (“EEG”), equating to approximately EUR 184/MWh for 8 years and EUR 149/MWh for the remainder. The majority of the project returns are expected to be earned during the 13 year feed-in-tariff period, with the remainder of the expected returns earned in the later years from the German wholesale electricity market.
DeBu is currently in an advanced stage of development — it is expected to begin construction shortly after financial close, with project completion expected by the end of 2019. Like Gemini, DeBu will use a two-contract construction strategy. MHI Vestas Offshore Wind (“MVOW”) has been selected as the preferred supplier to supply and install the turbines. An affiliate of Van Oord nv, the balance of plant contractor for Gemini and the other preferred supplier, will provide the turbine installation vessel and supply and install the wind turbine foundations and the offshore electrical infrastructure. MVOW will also maintain the turbines under a long-term service contract. DeBu will be connected to the 800 MW BorWin Beta off-shore converter station which has already been constructed.
John Brace, Chief Executive Officer of Northland Power, noted, “We are pleased to add a third solid and robust offshore wind project to Northland’s portfolio. Continued growth in the thriving offshore wind sector is an important component of Northland’s strategic development approach. DeBu will support our commitment to deliver long term value to shareholders, while aiding the global transition to clean and green energy sources.”
Closing of the acquisition is subject to clearing certain conditions precedent, which the parties will work to complete over the next several months.
Northland Power’s objective in Europe is to build a leading offshore wind ownership and operations platform with a full range of operating, development and investment activities, supporting further growth on a continental basis. The acquisition of the DeBu project contributes to the further achievement of this objective.
Europe is a key focus for Northland, given its sizable share of the world economy and strong support for renewable energy policy.
DeBu will leverage Northland’s Gemini and Nordsee One experience and will bring Northland’s offshore operating capacity to over 900MW (net to Northland) over the next three years.
Northland is an independent power producer founded in 1987, and publicly traded since 1997. Northland develops, builds, owns and operates facilities that produce ‘clean’ (natural gas) and ‘green’ (wind, solar, and hydro) energy, providing sustainable long-term value to shareholders, stakeholders, and host communities.
The Company owns or has a net economic interest in 1,394 MW of operating generating capacity and 932 MW (642 MW net to Northland) of generating capacity under construction, including a 60% equity stake in Gemini, a 600 MW offshore wind project, and an 85% equity stake in Nordsee One, a 332 MW offshore wind project, both located in the North Sea.
Northland’s cash flows are diversified over four geographically separate regions and regulatory jurisdictions in Canada and Europe.
Northland’s common shares, Series 1, Series 2 and Series 3 preferred shares and Series B and Series C convertible debentures trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A, NPI.PR.B, NPI.PR.C, NPI.DB.B, and NPI.DB.C, respectively.
Highland Group Holdings Ltd. is an investment vehicle owned by Lord Laidlaw of Rothiemay. Highland invests in renewable energy assets and is managed by Laidlaw Capital Management under the responsibility of Albert Jochems as Investment Director. Highland also owns a majority stake in the under construction Veja Mate offshore wind farm.
