Northland Power Inc.

Welcome to the Northland Power Conference call to discuss the second quarter of 2024 results. As a reminder, this conference is being recorded on Thursday, August 15th, 2024 at 10 a.m. Eastern. Conducting this call for Northland Power are John Brace, Executive Chair, and Adam Beaumont, Interim Chief Financial Officer. Before we begin, Northlands Management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward-looking statements that include assumptions and are subject to various risks. Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents when making investment decisions or recommendations. The release is available at www.northlandpower.com. I will now turn the call over to Mr. John Brace.

Thank you very much, Deedee, and thank you to all of you for joining us this morning for Northland's 2024 Second Quarter Earnings Call. Before we update you on the quarter, I want to first underscore our firm commitment to the health and safety of every Northlander and every person working on our behalf, both on our construction sites and across our operations and offices. With a dedicated team of highly skilled health and safety professionals, Northland continues to stay committed in its pursuit of maintaining our industry-leading health and safety standards. We are pleased with our strong first quarter performance continued into the second quarter of the year. This strong operating performance resulted in an increase in second quarter adjusted EBITDA to $268 million, up approximately $36 million compared to the same quarter of 2023. Adjusted free cash flow and free cash flow per share were 27 and 20 cents per share respectively in the quarter compared to 25 and 16 cents per share during the same period a year ago. As reflected in our press release yesterday, we're reaffirming our 2024 financial guidance and outlook, which is tracking to the higher end of the disclosed guidance range due to our strong operating results so far. Adam Beaumont, our interim chief financial officer, will provide more details on financial performance later in the call. Moving on to construction updates, we continue to make good progress on both Heilong and Baltic Power, our two large offshore wind projects in Taiwan and Poland respectively, and Oneida, our battery energy storage project in Canada. Construction of Heilong continues to advance well with the fabrication of foundations, cables, and onshore and offshore substations. The onshore construction work is advancing well and nearing completion. offshore construction activities are progressing this quarter, marking the completion of the installation of offshore substation foundation jackets, the first offshore substation topside, and continuing with pinpile installations at multiple turbine locations. Hai Long and Tai Long 2A and 2B pinpile installation is on track and is expected to be completed by the end of the third quarter of this year. The prefabrication for the first batch of turbine components, including towers, generators, and nacelles, is progressing well with multiple parts en route to Taiwan. We look forward to the first power being produced in the second half of 2025, with full commercial operations expected by 2027. Once operational, Heilong will be one of the largest offshore wind facilities in Asia, and provide enough clean energy to power more than 1 million Taiwanese households. Moving to Poland and Baltic Power, the project continues to make progress on the fabrication of onshore and offshore substations, foundations, export cables, multiple turbine components, and inter-array cables. Turbine component manufacturing and construction of the onshore substation and the operations and management building is well underway. Major in-water, onshore, offshore construction activity is expected to start in early 2025 and full commercial operations are expected in 2026. Lastly, an update on the Oneida battery energy storage project here in Ontario. Oneida continues to make great progress with all battery packs delivered on site and cabling now underway. The medium voltage transformers have been delivered and high voltage transformers have arrived in Canada and are expected to arrive at site by the end of the summer. Site grading and stormwater controls are fully complete and the underground conduit is fully installed. Full commercial operation remains on track for 2025. We have good momentum on our construction programs and continue to be vigilant, disciplined and focused on the safe execution of these projects. It will provide a material boost in adjusted EBITDA and cash flow upon completion as scheduled. There seems to be a view that we have caused growth on development while focusing only on our construction program. This is far from the reality. We remain active in pursuing growth in our core markets, supported by our strong and dedicated development teams. We continue to advance our 9-gigawatt development pipelines. are focused on moving forward with profitable projects in our core markets and see good opportunities ahead for our onshore renewables we remain focused on alberta ontario and new york for alberta we announced that we signed a 15-year bilateral off-take agreement for our 80 megawatt two-hour jurassic battery storage project with the alberta schools commodities purchasing consortium this is the first offtake of its kind in Alberta for a battery storage project and is a key milestone in the advancement of Northland's Alberta portfolio. We also participated in the latest NYSERDA auction last week and await the results expected this fall. For offshore wind, we are advancing our early stage development projects in Scotland and South Korea. Moving on to other significant second quarter results. In June, we successfully completed the sale of the 130 megawatt La Lucha solar facility in Mexico. As noted, on our investor day in March, we continue to focus our attention on the markets that we have identified as our core markets. We continue to assess asset sale or sell down opportunities. Clearly, the critical factor in our decision making will be line of sight to redeploy proceeds into opportunities that will provide higher value accretion to our shareholders. In June, Gemini experienced an unplanned outage at one of its two export cables. The in-water cable repair has commenced and completion is expected in September 2024. Insurance proceeds are expected to cover most of the repair costs. This event occurred during the lower production season. We were therefore able to redirect the production via the second export cable at the wind park and the timetable for the repairs means that this event is expected to have limited impact on full year results. Now moving on to the CEO search. We are making great progress. The board and I have been thrilled with the caliber of candidates that we met. I'm reticent to provide a detailed timeline until commitments are firm out of respect to the candidates whose careers are involved. With that, I will turn things over to Adam to give you a more detailed update on the financials.

Thank you, John, and good morning, everyone. Strong results in the second quarter continued Northland's successful financial performance for the first half of the year. We generated adjusted EBITDA of over $265 million this quarter, representing a 15% increase compared to last year. The significant factors for the increase include $10 million of higher operating results at the offshore wind facilities in Europe, primarily due to a higher wind resource at all three facilities. This was modestly offset by higher unpaid curtailments related to negative prices and grid outages at our German facilities. There was also a $10 million increase in operating results at Ipsa, driven primarily by inflation escalation and appreciation of the Colombian peso. A $17 million decrease in development expenditures as a result of more focused spending offset by some one-time G&A costs in 2024. and a $9 million increase from the contribution at our New York onshore wind facilities, which commenced operations in the late 2023. The key factor partially offsetting the increase of EBITDA was the $23 million of gains that we received from partial asset sell downs in 2023. With respect to adjusted free cash flow and free cash flow, Northland generated approximately $69 million and $51 million respectively, which is an increase of 9% and 24% from last year. This was due to our strong operating results and a $20 million cash gain from the La Lucha sale. Offsets to the increase were $19 million of higher taxes from higher operating results and $22 million of lower hedge settlements from gains realized last year. On a per share basis, these figures translated into adjusted free cash flow of 27 cents and free cash flow of 20 cents in the quarter, compared to 25 cents and 16 cents per share from last year. As John noted earlier, our three construction projects with an estimated total cost of 16 Canadian dollars, 16 billion Canadian dollars, continue to progress as planned. Northland, with our partners, have spent $6 billion on these projects so far. In June, we were encouraged to see Canada enact the 30% Clean Technology Investment Tax Credits, or ITCs, which will accelerate clean power development in Canada. This incentive is expected to benefit Canadian developers focusing on large-scale renewable power generation projects, including Northland. For example, Northland and our partners will receive a direct benefit on the Oneida project, which is currently in construction. We expect further benefits for this new legislation, which will support our development activities across Canada for the future as well. Looking at our investment grade balance sheet, Northland continues to be in a strong position with access to approximately $800 million of liquidity. This liquidity is comprised of cash on hand and funds available under our corporate revolving facility. As John noted, we reaffirmed our 2024 financial guidance due to strong operating results experienced in the first half of 2024. Management is currently projecting the full year financial outlook to be at the higher end of this disclosed guidance range. Beyond that, our future looks bright. We see progress on construction, advancing the growth pipeline, which will bring significant long-term contracted cash flow for our business. Overall, we are very pleased with the results and the progress for the first half of 2024, and I will now turn the call back over to John for concluding remarks.