Northland Power Inc.

Welcome to the Northland Power conference call to discuss the third quarter 2024 results. As a reminder, this conference is being recorded on Thursday, November 14th, 2024 at 10 a.m. Eastern. Conducting this call for Northland Power are John Brace, Interim President and CEO, and Adam Beaumont, Interim Chief Financial Officer. Before we begin, Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented in 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, Operator. Thank you for joining us this morning for Northland's third quarter 2024 earnings call. We continue successfully to execute on the strategy, set out an investor day, and we are pleased with the performance for the first nine months of the year. In addition, during the quarter, our team achieved several important milestones. Our $16 billion construction program remains on track, our full year of financial guidance stands, And we've made great strides to advance our growth pipeline to capture the strong growing demand for power we see globally. Before we get into details, I want to reiterate the paramount importance of health and safety across our entire business and all our operations. An incident this past summer at our Highlawn project, which I'll speak about shortly, starkly emphasized the critical importance of health and safety standards. We continue to strive to ensure all individuals working across our projects are kept safe. Now, moving on to our quarterly results and business updates. As reflected in our press release yesterday, our 2024 financial outlook remains within the guidance range. Adam Beaumont, our interim chief financial officer, will provide more details on financial performance later. We are pleased with the progress of our 2.4 gigawatt construction pipeline that remains on track and on budget. This includes Heilong and Baltic Power, our two large offshore wind projects in Taiwan and Poland respectively, both accomplishing large de-risking milestones this quarter. We are also making great progress as we near the final stages of construction for Oneida, one of Canada's largest battery energy storage projects. which is expected to be operating in 2025. In more detail, starting with Heilong, which I visited with several board members about a month ago, as most of you are aware, we experienced a tragic incident at the Heilong onshore substation on August 20th. A release of carbon dioxide from the fire suppression system affected 17 on-site workers employed by one of the project's subcontractors and resulted in three fatalities. Established emergency response protocols were enacted properly and activity at the onshore substation was suspended to comply with investigations to determine the root cause of the incident. While these investigations remain ongoing, work at the onshore substation has resumed safely and is progressing according to recovery plans, with energization expected in the first quarter of 2025. The incident has not created any significant impact on the project's overall schedule, and costs are still expected to be within our original budget. The project continues to make progress with in-water construction work for the 2024 season being almost completed. This quarter marked a significant de-risking milestone for the project, as we installed pin piles at 37 turbine locations and the jacket foundations and 35 or 37 turbines planned for 2024, which is about half of the project's turbines. In fact, the final two jackets are out at sea for installation over the next couple of days. As a consequence, we will be well ready to install turbines when they start arriving next year. Manufacturing also progressed on the first sets of towers, generators, and nacelles, with some already completed. Excitingly, we are estimating that we're less than 12 months away from the first power generation, a testament to the milestones achieved this past quarter. Overall, the project continues to progress on time and on budget, and we look forward to full commercial operations in early 2027. Moving now to the Baltic Power Offshore project in Poland, it continues to make good progress on the fabrication of onshore and offshore substations foundations, export cables, turbine components, and inter-array cables as planned. The first sets of monopiles, cables, and transition pieces have been completed and are en route to the project site. Turbine component manufacturing and construction of both the onshore substation and the operations and management facility are underway. Major in-water offshore construction activity is expected to start in early 2025. As with Heilong, Baltic Power continues to progress on time and on budget. Full commercial operations continue to be expected by the end of 2026. And lastly, an update on the Unida project here in Ontario. I'm pleased to say that construction is in its final months with all major pieces of equipment on site. All 278 megapaths and 70 medium voltage transformers are installed. with the high voltage transformers in the process of being installed and connected. All cabling and grid interconnection works are being finalized with the 230 kilovolt cable being pulled across the new towers towards the site for interconnection and commissioning activities. Again, we continue to track on time and on budget. The full commercial operation remains on plan for 2025. As I just outlined, we have good momentum across our construction programs and continue to be vigilant, disciplined, and focused on execution. Once completed, these three projects are expected to provide a material boost to Northland's adjusted EBITDA and cash flow. Turning to growth, we remain active in identifying new opportunities in our core markets as we also continue to advance our development pipeline. Starting with onshore, renewables business, we're focused on our development work in Alberta, Ontario, in New York. Regarding Alberta, we announced last quarter as a post-quarter news item that we signed a 15-year bilateral offtake agreement for our 80-megawatt, two-hour Jurassic battery storage project with the Alberta Schools Commodities Purchasing Consortium. This late-stage project continues to advance towards the signing of EPC contracts and battery supply contracts in the coming months. We are reviewing the newly announced LT2 guidelines in Ontario and are making progress on battery, onshore renewable, and natural gas opportunities to submit into the LT2. Lastly, we await the final results of the last NYSERDA auction in New York. With regard to our offshore wind business, we continue to be active with our early stage projects in a disciplined and systematic manner. For example, at Spratnamara in Scotland, our 900-megawatt fixed-bottom offshore wind project, we have completed the environmental scoping, we have received a generator license, and we have completed Phase 1 of public consultations on the project. We closely monitor our core markets for attractive investment opportunities, including Poland, where we recently saw the announcement of new auction targets that have increased from 5 gigawatts to 12 gigawatts for 2025 through 2020. Finally, in our thermal and utilities business unit, we continue to pursue a number of gas fire opportunities. At Northland, we maintain a strong focus on only moving forward with profitable projects in our core markets, and we continue to see good opportunities ahead that can enhance shareholder value. Moving on to other significant third quarter events, as noted on our last call in June 2024, Our offshore wind facility, Gemini, experienced an unplanned outage on one of its two export cables. The in-water cable repair was successfully completed in September. You'll see the timing impact in our third quarter results in that we incurred repair costs this quarter, but we expect the insurance proceeds to be received in the fourth quarter. As we noted earlier, this outage occurred during the lower production season and we were able to redirect most production by the second export cable at the wind park i would like to acknowledge the exceptional work from our operations team to get the facility back online quickly i also want to address some of the questions we've been asked about the u.s presidential election and what this might mean for northland firstly i think it's important to remind you that we all that we took the strategic decision not to enter the u.s offshore wind market many years ago and therefore have no exposure on this front. This is an area which many pundits see as a potential challenge and risk under the incoming government. Beyond that, I can't add much to the discussion beyond what others have said. However, to summarize, while it's unclear at this point as to what policies and regulations may change under the new administration, We and other market participants believe that it will be difficult to repeal the IRA entirely given associated benefits with that program have been provided to many states in the US, the majority of which are Republican. And I'd like to just summarize some of the facts we see in front of us. First of all, we all know there's an incredible demand for new electricity sources for electrification of commercial, industrial, residential, personal use, data centers, AI, and such. There's going to be a need for an immense amount of steel in the ground in the United States. And secondly, as I mentioned, the IRA is of large benefit to many Republican states, so it would be hard to scrap it all together. Beyond that, I would say that our operating projects in the United States, Bluestone and Ball Hill, are not at any risk. We also have several projects in our development pipeline which have a certain degree of advancement which probably protect them from any future changes. With the remaining projects in our pipeline, we will take a measured approach, watching what happens and exploring the development of those projects as the facts become clear on the ground. Lastly, I want to update you on our global search for a new president and CEO. In short, we are very pleased with the progress we are making. I am optimistic that we will be closing out the search in the very near term. In the meantime, I would like to acknowledge the excellent job that our management team has been doing and continuing to successfully execute the strategy outlined at Investor Day and progressing our business plan. 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. Our results for the first nine months were strong and we're on track to achieve our full year objectives. As you heard from John and disclosed in our second quarter results, our third quarter was in part impacted by the Gemini cable outage, where the cost of the repairs of approximately $11 million net to Northland is expected to be largely recovered by insurance proceeds in the fourth quarter. Ignoring the quarterly timing, the outage is expected to have approximately $5 million impact on Northland's free cash flow for the year. Turning to adjusted EBITDA, this quarter we generated $228 million, representing a 15% decrease compared to last year. The primary factors include a $19 million of lower operating results at our offshore wind facilities, primarily due to the cable outage at Gemini, lower overall wind production, and unpaid curtailments related to planned maintenance for grid outages at the Debu wind farm. Additionally, $19 million in gains from sell-downs of development assets in 2023, a $9 million decrease in the contribution from our Spanish portfolio due to market prices and the timing of band adjustment revenues, and lower contributions from our natural gas assets, primarily due to one charge from a historical PST tax assessment that occurred during the quarter. These were partially offset by the contributions from our New York onshore wind facilities, which reached commercial operations in October of last year, and higher operating results at our Columbia utility, EBSA, from the rate escalation and foreign currency movements. On a nine-month year-to-date basis, we generated adjusted EBITDA of $950 million, representing approximately a $100 million increase compared to last year. This increase is primarily due to the strong winds during the first part of the year, the addition of our New York wind assets, lower spending on early stage development projects, offset by higher G&A, mainly from one-time management changes. Our adjusted free cash flow and free cash flow during the quarter generated approximately $19 million and $1 million respectively, which were lower than last year. This decrease is primarily due to $49 million lower adjusted EBITDA, as I described earlier, a $7 million decrease from foreign exchange and interest rate hedges and other settlements that occurred in 2023, partially offset by $12 million of lower scheduled debt repayments, mainly at our Spain portfolio. On a per share basis, these figures translated into adjusted free cash flow of $0.08 and free cash flow of less than $0.01 in the quarter. This compared to $0.25 and 14 cents per share from last year. Similar to adjusted EBITDA, for the nine months ended, both our adjusted free cash flow and free cash flow were higher than the prior years as explained in our quarterly report. I wanted to highlight that this quarter we further strengthened our investment grade balance sheet by increasing the amount of liquidity on our corporate revolver. As a result, we have $1.1 billion of available liquidity to support our future discipline growth in core markets. A reminder, we continue to have most of our depth structure at the project level, which is primarily self-amortizing over the life of the revenue contracts. As John mentioned, our three construction progress projects continue to progress achieving a number of milestones this quarter the three projects invested another one billion dollars this quarter amounting to seven billion dollars to date of the total of 16 billion dollars in project costs we reaffirmed our 2024 financial guidance which remains within the disclosed guidance range this quarter we removed the indication of tracking to the higher end of the range as the strong wind performance in the first half of the year was offset by softer offshore wind performance in Q3 and October. We are tracking to the upper half of the range and our final results will primarily depend on the wind performance during the quarter. Overall, we are satisfied with these results and the progress that we've made in the first nine months of the year. We're excited with the milestones that are coming up, most notably the Oneida battery facility achieving commercial operations and high long first power, which is expected to be less than 12 months away. I will now turn the call back to John for concluding remarks.