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Northland Power Inc.
2/27/2025
Welcome to the Northland Power Conference Call to discuss the fourth quarter 2024 results. As a reminder, this conference is being recorded on Thursday, February 27th, 2025 at 10 a.m. Eastern. Conducting this call for Northland Power are Christine Healy, President and CEO, John Brace, Chairman, 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 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 .northlandpower.com. I will now turn the call over to Ms. Christine Healy.
Good morning. Thank you very much and thank you to everyone for joining today's call. So in our discussion today, I will provide an update on our business, the progress we've made on construction, and our focus areas for 2025. Adam Beaumont will walk through our 2024 fourth quarter and full-year results and our newly issued 2025 financial guidance, which was released yesterday. And then John Brace, Chairman, and Adam Beaumont, will join us as well to take your questions. Before we get into details though, I want to reiterate and emphasize the paramount importance of health and safety across all of Northland's business and all of our operations. We strive to ensure all individuals working across our company and for our company are kept safe because safety is a core value for Northland. So I'd like to take a moment to introduce myself as Northland Power's new President and CEO. Since I joined the company on January 20th, I have been energized by the talent of the Northland team and the incredible work we're doing around the globe. It's been a very busy first month and for those of you I have not yet had the opportunity to meet and connect with, I look forward to doing so. And I will share with you now some of the things that attracted me to join Northland. So fundamentally, we live in a world that needs energy and that energy needs to be affordable, reliable, secure, and clean. And Northland has a very strong reputation as a world-class energy player, a proven track record in project origination, development, execution, and operation. This company knows how to deliver projects around the world and these are projects for which the demand picture is exceptional. So with a global and diverse energy portfolio including offshore wind, onshore wind, solar, battery, and natural gas, Northland is growing and we are well positioned to take advantage of future profitable growth opportunities. I was personally really attracted by Northland being one of the few Canadian energy companies operating and succeeding in international markets. In fact, this global diversification is one of the reasons that Northland is unaffected by the threat of US tariffs, as I'm sure some of you will have questions about. Financially, we are in a strong position. We have a highly contracted revenue base, over $2.3 billion in revenues, available liquidity of over a billion, and we're one of the few power producers with an investment grade balance sheet. I have personally spent decades in the energy sector and I have a lot of passion for energy and I'm aligned with Northland's values and how we deliver. I bring with me a proven track record leading teams across continents, increasing shareholder value, and delivering multi-billion dollar infrastructure projects. I've been fortunate through my previous executive roles, including at global energy companies like Total Energy and Maersk and Atkins Realis, that I have led businesses growing across diverse markets. I also currently sit on the board of directors for Canadian Natural Resources, one of Canada's largest energy corporations. I look forward to leveraging my experience here at Northland as we work to build on the strong foundation that has been built over many decades in this country, in this company. So since joining, my focus has been on getting to know our people, so our shareholders, our stakeholders, our partners, our employees, and I've also been on a bit of a worldwide tour visiting our operations. Just recently I spent time in Europe and in Asia and I met with some of our world-class joint venture partners, including Mitsui, Gentari, Orlin, ESB. I visited some of our offshore construction sites. I met with our teams. I dove into what we are doing to advance these projects. I met our operational teams in Europe, our technology center in Europe. I was really impressed by what I saw. It's been a busy and enlightening month and I'm pleased by the quality, the dedication of our teams, and the commitment to safety across all of our operations. So I've started working closely with our senior management team to refine our strategic priorities. We will be holding a planning session with our board this June and I look forward to sharing outcomes with you at our upcoming investor day, anticipated for the fall of this year, and we can provide more details on our long-term strategic priorities and targets at that time. I will note, though, that I walk into an opportunity-rich environment here at Northland with a team who have proven that they can deliver time and again. So I'm excited about the opportunities ahead of us. With increasing global energy demand, this company is well positioned to lead and to seize upon opportunities across multiple technologies and geographies. Near term, though, our focus is on project execution. As you know, we have three large projects reaching advanced stages of construction and we will see significant milestones in 2025, so stay tuned for that. I was pleased to be in Poland and celebrate with the team at Baltic the installation of the first monopile. So these are real milestones happening right now in these projects and it's Northland teams delivering on that. I can also update you on our search for a permanent CFO. We've been working with an executive recruitment firm and that process is progressing well. We hope to make an announcement in the coming months. So maybe I'll take a couple of minutes to talk about some of our 2024 achievements. As we continue to deliver on our commitments, we are satisfied with the full year results. We hit the high end of our financial guidance and looking ahead, we are rolling out our 2025 financial guidance and Adam is going to discuss that in some more detail shortly. But on our three construction projects totaling 16 billion in investment and 2.4 gigawatts to Northland and its partners, these projects continue to advance. Heilong Baltic Power Offshore Wind Projects and Oneida, one of Canada's largest battery storage projects, are continuing according to plan. Oneida is expected to start operating in just a few months, which is exciting. So I'll start with Heilong, our one gigawatt offshore wind project in Taiwan, where we have made good progress. Manufacturing of all the pin piles is complete. Half of the offshore wind turbine jacket foundations have been installed. Half of the turbine generators and blades are complete and the supplier is progressing well with nacelles and towers. Of the 219 pin piles, 111 have been installed and more than half of the wind turbine jacket foundations are also in place. All offshore substation foundations are installed. One topside is in place and cold commissioning is complete. Two out of four export cables have been installed and the investigation at the onshore substation is complete with safe energization expected in the coming weeks. In-water construction is set to resume per the winter schedule. Turbine installations and first power are expected in the second half of this year. The project remains on track to achieve full commercial operations by early 2027. So then I move to Poland and our 1.1 gigawatt Baltic power offshore wind project, which has also made strong progress. Major in-water construction activity began earlier this year. We installed our first turbine monopile foundation and as I mentioned earlier, I was there to celebrate and enjoyed some cake with the team. Work on the offshore substation's main structure is underway. Looking ahead, progress continues on the fabrication of onshore and offshore substations, foundations, export cables, turbine components and inter-array cables. The project remains on track to achieve commercial operations by the end of 2026. Then I'm going to turn to Oneida, our large battery storage project in Canada, and I'm pleased to share that we're in the final stages of this project. With all major activities completed, commissioning is now underway and we're on track to meet our 2025 operational date in the coming months. Oneida is our first commercial scale battery energy project in Northland and I'm proud of our tremendous performance on this project. This accomplishment highlights our robust capabilities and our track record of delivering projects as planned. I think our success at Oneida paves the way for future opportunities and enables us to leverage our expertise in battery storage across other jurisdictions. As you know, we are also progressing with our second battery storage project in Alberta and I'll talk about that more in a moment. Collectively, once complete, our three construction projects, Heilong, Baltic and Oneida, will contribute approximately $600 million in adjusted EBITDA and $200 million in pre-cash flow to our business. As we look ahead, we're identifying new opportunities in our core markets and we're advancing our 10-gigawatt development pipeline. For 2025, we plan to invest $60 million in development. We remain committed to pursuing profitable projects and we continue to see strong opportunities across our pipeline to enhance shareholder value. In our onshore renewables business in Alberta, our 80-megawatt, two-hour Jurassic battery storage project is progressing. The EPC contractor and battery supply contracts have been signed and the project is advancing to financial close in the coming months. In Ontario, we're reviewing the new LT2 procurement guidelines and we believe that we could bid multiple technologies into that auction process. In our offshore business, our early-stage .4-gigawatt ScotWind offshore wind project continues to progress. We continue to see and seek attractive investment opportunities in our core markets such as the Baltic region and in areas where governments are increasing efforts and showing strong interest in procuring renewable energy. I do want to spend a quick moment to address some questions that have come up regarding some announcements by the new US administration, particularly around potential tariffs on Canada and changes to renewable power incentives. As many of you may know, Northline made the strategic decision not to enter the US offshore wind market and therefore we have no exposure to the executive orders relating to offshore wind development. Our current US onshore exposure is limited to 220 megawatts of operating wind power in New York State. We continue to look at additional opportunities within our New York onshore development pipeline as we see these as good potential investments for the future. In terms of potential tariffs, if they are imposed on Canada, we believe they would have minimal impact on our business due to our international diversification, our access to a global supply chain, and our development pipeline largely outside of the United States. I will also note that despite any political shifts that may happen around the world, the fundamental demand for power remains high and renewable energy will continue to dominate new installations. Renewables and natural gas are the best positioned technologies to meet this growing demand and Northland's scale, geographical reach, capabilities, and technology mix position us to deliver on that need. Drivers like data centers, reshoring, electrification, decarbonization, all of these fuel the growth and we see that in Canada with our largest grids, Ontario, Quebec, and Alberta, revising long-term demand forecasts upwards. But we see that in our markets around the world. The demand for power remains strong. A new natural gas generation alongside renewables will be essential into the future. Geopolitical factors, frankly, are something we cannot control. And when we invest in energy, we're essentially investing through the cycle. Political stability is important to everyone. But of course, changes in the political environment do happen, and we must remain adaptable. That's why we focus on developing good projects with robust execution so that these projects are profitable throughout changes in the cycle. We've seen some depressed valuations for power energy companies, including Northland, and there is some macro environment noise and sentiment. But the market fundamentals remain strong and our ability to originate, develop, construct, and operate profitable projects around the world sets us apart. Recently, we've observed some significant transactions in the renewable energy space that demonstrates a dislocation between private and public market valuations. This is a testament that power infrastructure is valuable, and we see the strong fundamentals, and I think we can see through the strong fundamentals to a strong future for the company. In response to what we believe to be an undervalued Northland share price, Adam will talk in a few minutes about our amended dividend reinvestment program, or DRIP, where we are removing the discount and we are reverting to market purchases to reduce dilution for our shareholders, and Adam will talk about this some more. We're confident in Northland that we're well placed to benefit from market trends, and we can leverage our competitive advantages to capture and deliver profitable opportunities. You can also see in our portfolio that owning power generation infrastructure continues to be valuable. As our existing contracts expire, we have the option to re-contract, and typically we have no debt obligations remaining on our assets. Because we're a good operator, we can deliver solid revenue streams from these assets for years to come. Before I turn it over to Adam, I also want to address a topic that's been on some investors' minds according to some of the discussions we've been having, and that's Northland's dividend policy. The Board of Directors reviews the dividend policy regularly as part of our overall capital allocation strategy. Northland's Board and management understand that the dividend is important to many of our shareholders, and our current plan is to maintain the dividend at current levels. Our asset base is strong, and our expected cash flow is sufficient to cover the dividend and support our planned growth. In addition, we have three large construction projects coming online over the next few years that provide additional material cash flow. Our value proposition remains based on our strong capability and our track record, and our ability to capitalize on large power growth opportunities. We have technological diversification, including the ability to develop, construct, and operate offshore wind, onshore solar, onshore wind, battery storage, and natural gas power infrastructure globally. We have an existing presence in North and South America, Europe, and Asia. I would also say one of our key parts of the value proposition is our people. We have people who know how to originate, develop, construct, deliver, and operate power infrastructure globally, and it's a key ingredient for our success. And finally, of course, the market fundamentals I've already mentioned. Power demand is here to stay, and Northland is ready to capitalize on it. So with that, I'll turn things over to Adam, who can provide a more detailed update on the financials. Adam?
Thank you, Christine, and good morning, everyone. We are pleased with our 2020-2024 operating results, which achieved the higher end of our financial guidance. These results reflect the strength and stability of our business through global and technological diversification, and are a testament to our track record of successfully and effectively operating our projects, while also delivering on our construction commitments. During the fourth quarter, we generated adjusted of $312 million. While on its face, this was a decrease compared to last year, but as you will recall, it was largely due to the one-off gain recognized on the Heilong partnership with Gentery late in 2023. I wanted to quickly note a couple of highlights for each of our business units during the quarter. For offshore wind, the wind resource was good, but lower than last year, which featured a historical high in the fourth quarter of 2023. The German wind farms experienced lower unpaid curtailments this quarter due to a lower number of negative pricing events. And in November, there was a 10-day unplanned outage from the grid operator to perform system upgrades, which impacted one of our German wind farms. Onshore renewables results were also strong, with higher wind and solar resources at our Canadian and New York assets and favorable band adjustment revenue in Spain. For natural gas facilities, this quarterly results were largely in line with those in 2023. In November, it's worth noting that we successfully completed the 23 megawatt capacity expansion at our Thorold Natural Gas Facility in Ontario. The $40 million upgrade was completed on time and on budget, funded with project-level debt. If you recall, in 2023, we signed an agreement to increase the capacity of the facility and extend our revenue contract by five years until 2035. This extension is conditional upon the successful completion of upgrade tests scheduled for later this year, which we expect to achieve. This upgrade will add more cash flow and demonstrate our technical abilities or continues to demonstrate our technical capabilities in natural gas and the post-BPA value in our high-quality assets. IBSA, our Columbia utility, saw improved results primarily due to the combination of its regulated growing regulated asset base and rate escalations, which effectively provide us with protection against inflation. On a full year basis, adjusted EBITDA was $1.3 billion, representing a 2% increase compared to last year. This was primarily due to higher wind resources over the course of the year, a full year contribution from our two New York wind assets, which came online late in 2023, and lower discipline spending on early stage development activities as we had planned and previously communicated. During the fourth quarter, we generated adjusted free cash flow of $81 million and free cash flow of $58 million. On a per share basis, this resulted in $0.31 and $0.22 respectively in the fourth quarter. On a full year basis, we generated adjusted free cash flow of $394 million and free cash flow of $328 million in 2024 or $1.53 and $1.27 per share respectively. Turning to our 2025 financial guidance that we introduced yesterday, we expect 2025 adjusted EBITDA to be in the range of $1.3 to $1.4 billion, an increase of approximately $100 million from last year. This increase is largely driven by the first cash flows from our growth projects currently under construction, including the Heilong pre-completion revenues, which are expected to start in the second half of this year, and the Oneida facility, which is expected to achieve commercial operations in the coming months. As a reminder, pre-completion revenues are used to fund construction costs for Heilong until full commercial operations is achieved. This revenue will only be included in our adjusted EBITDA, but not in our cash flow metrics. Factors expected to offset the increase are lower band revenue adjustments in Spain from lower posted regulatory prices and lower planned contributions from the North Sea One offshore wind project, following a scheduled step down in its PPA price from 194 to 154 euros per megawatt hour. We expect 2025 adjusted free cash flow to be $1.30 to $1.50 per share. When compared to 2024, actual adjusted free cash flow, 2025 will benefit from higher contributions from our natural gas facilities and EBSA, as well as lower net debt service and taxes. The Oneida project coming into service in 2025, as I already mentioned. This will be offset by a couple items already mentioned and lower cash flows resulting from the gain on the sale of the Lulucha Mexico asset and its partial year of operations in 2024. Our free cash flow guidance is expected to be $1.10 to $1.30 range, which assumes $60 million of development expenses. I do want to highlight that we continue to disclose both adjusted free cash flow and free cash flow metrics. Our free cash flow metric is different from how our peers report, including growth expenses. Going forward, we will place more emphasis on adjusted free cash flow as it represents the best metric of Northland's ability to generate cash flow from our operating business before any investment related decisions are made, such as development related activities. Development expenditures are an important aspect of our business. However, the benefit is not typically realized for several years and the level of spending may differ year over year. Turning to our three construction projects, which continue to progress well, as Christine noted earlier, the capital spend in the fourth quarter was approximately $1 billion, which leads to $8 billion to date. This marks 50% of the total $16 billion of total expected project costs for those three projects. As Christine alluded, turning to our share price, while it has been encouraging to see an increase over the past couple days, we still believe our current share price does not reflect the true long-term value of our business. In response, we have announced two changes to our DRIP program, which will take into effect with the April dividend payment. We continue to offer the DRIP to shareholders, but have eliminated the discount and will begin sourcing DRIP shares via market purchases instead of from Treasury because we believe it is prudent to minimize dilution for our existing shareholders. We are confident in the strength of our balance sheet, the status of construction, and have multiple funding tools available to deliver on our discipline growth strategy in core markets. In terms of funding our future discipline growth in core markets, I would like to comment on a couple areas. First, our investment grade balance sheet remains strong with an available liquidity of $1.1 billion. Second, as the three construction projects come online, that will provide us with an incremental approximately $200 million annually. Third, as we add new growth projects, those projects will provide further contributions as well as incremental debt capacity to pursue more opportunities. And finally, we have more funding tools, multiple funding tools available, such as project level refinancings and asset level recycling that can provide incremental capital. We continue to advance on our development pipeline overall. To summarize, we are pleased with our 2024 results and see 2025 is another exciting year for us given the number of milestones that we expect to achieve as we further de-risk construction projects and secure new growth. With a strong balance sheet and robust liquidity position, we are well positioned to fund our program of growth while executing on construction. I will now turn the call over to John for a few final remarks. Thank you,
Adam, and good morning, everyone. This is my last conference call as I have returned to the non-executive chair of the board position. It has been a pleasure serving Northland as executive chair and interim president and CEO over the past 11 months. We have continued to position the company for the future, and I look forward to Christine's leadership as president and CEO for many years to come. Christine is a highly accomplished leader with a strong strategic acumen who has a fantastic track record of managing teams and producing successful results over multiple continents and multiple years. The board and I are very excited to have Christine with us, and I can tell you, in our opinion, Christine's first month of being nothing but spectacular. I want to thank all our stakeholders who I've interacted with during my time back in management of Northland. I'm excited about the future of Northland. And as Christine said, our global and technological diversification, our focus on long-term contract profiles and financial stability, position the company well for growth for many years to come, and to withstand any short-term political or regulatory shocks that we find ourselves in. This concludes our prepared remarks. I will now turn the call over to the operator. Operator, please open the line for questions.
Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.
And
our first question comes from Mark Jarvey of CIBC. Your line is open.
Thanks. Good morning, everyone. Adam, I just want to pick up on your comments around the balance sheet and funding tools. You talked about project refinancing. I'm just curious about the view in terms of the two offshore wind projects, the Baltic Power and Heilong, in terms of expectations around potentially amending the debt down the road. Is that something that's still contemplated in your comments? Would that be to optimize free cash flow from those assets or potentially draw out some cash that can go into future growth?
Yeah, so as we've done in the past, as I think you'll remember on the three operating offshore projects, we were able to, once the projects have achieved commercial operations and been primarily de-risked, able to refinance. I mean, obviously it'll be dependent on market conditions at that point in time, but that is something that we would definitely look to be as a toggle and have actually kicked off a mini working group already to evaluate what the different options are. So that is just one of the tools that we would be looking forward to augment our liquidity in addition to other areas of the business.
Mark, I guess I'd add to that to just say thanks for the question. It's just, if the message I can pass along is just we're continually looking at ways that we can optimize. And this is another example of if there's an opportunity there to optimize, then we will. But we have to continually keep a watch on that to see when the opportunity is there so that we can improve the overall picture for the business and that we can of course then have more liquidity and more flexibility to develop our future projects. So we like the picture right now, but anytime there's an opportunity to improve it, then of course we're going to take that.
And just Adam, if the working group started already, is that something then you think that you could actually complete shortly within the post-COD period, so like sometime in 2027?
It will really depend on the market conditions at that time if that's the right opportunity, but that would be the next logical step at this point.
Okay, and maybe Christine, this question is for you. Just in terms of your perspective now on the offshore wind business, you've been out to visit these projects, you've been able to spend some time thinking through the complexity of them. Just thinking about future capital allocation, if you had two projects that meet your return hurdles, would you be willing to do two projects at the same time as you embarked on now? Or would it be sort of a preference to maybe just do one large offshore wind project at a time and spread that capital over to onshore projects and thermal projects? I'm just kind of understanding how you're thinking about risk and sort of capital allocation around large projects.
So, Mark, I think it's a good question and it's one that we're having a close look at. I will say because we have this really strong capability in offshore wind and the reality is that the world needs offshore wind, so it's just obviously a bit of a no-brainer that we should continue to do the things that we're good at and that we deliver well on. In terms of the mix, there's a few more levers, I would say, in that. It also depends on the stake that we take in those projects, right? Because we might decide to take a smaller stake in more projects or we might decide to take a bigger stake in fewer projects. So there's a few moving pieces there as we look at what the future constellation of projects is for Northland. And because we've developed, I think, a really good track record with some world-class partners, we have the flexibility and the capability to be able to do that. So it's nice from my perspective that we have that additional flexibility and another lever to look at when we're looking at the future composition and sort of risk profile.
And just building off that in terms of partnerships, your first impressions in terms of how the partnership with Orland has gone, prior comments have been that it's gone quite well and that you guys would think to do more with them if that opportunity presented. Do you share that same view now that you've been able to meet that from their side in terms of the partnership at Baltic Power?
100 percent. I have to say, really productive meetings with Orland. I like working with them. I think our teams have a really good working relationship and then that's zippered up all the way through to the top of the house. And then I would say our other partners as well. I mean, I really was, I think when my travels around, that's the thing I came away with such a positive view on, is that we have very strong relationships with these world-class companies. And I would happily do more business with any of them.
Okay, thanks for the comments. Let's go back into here.
Thank you. Our next question comes from Sean Stewart of TD Cowan. Your line is open.
Thanks. Good morning, everyone. Christine, following up on your comments with regard to optimizing the current portfolio. Any thoughts on potential non-core asset sales? And is that timing, would that at all be dependent on managing through the higher payout ratio that you're going to have the next couple of years as you work through the construction period? Would that impact the timing of any potential divestitures as you look at those optimization opportunities?
So, Sean, thanks for the question. I appreciate it. So I would say first off that it's part of my job all the time, every day to look at optimizing the portfolio. So that's if I'm not doing that, then I think you have every right to say something about it because that's I just we need to be doing that all the time. So we continue to do that. And that's so every day. That's that's part of the consideration. The timing of anything that we do is going to be guided by what makes the most sense for the business and delivers the best value for shareholders. So I think we're in a financial position right now where we're comfortable that we're going to be able to meet all of our obligations. So that means that we have the benefit that we can make strategic decisions and do them on the timelines that make the most sense for us to be value accretive for everyone.
Thanks for that. And with respect to the perspective pipeline, you gave
us lots of context around, I guess, a clear line of sight on Jurassic and some of the other opportunities you're hoping to advance. Can you speak to the cadence of how you expect to rule out future development opportunities? And you touched on it with Mark's question with respect to comfort balancing to offshore wind projects potentially simultaneously, but broader thoughts on comfort with cadence of the investment profile going forward as you you bring this perspective pipeline to to fruition.
So I think the cadence and I would say the mix of what the future development pipeline looks like in an ideal world, we would be able to pick all of the timing and I would be able to write that out on a piece of paper and we would do that exactly in sort of a planned way. The reality is that we also have to be responsive to opportunities and market conditions. And the big lever in a lot of these projects is as well the regulatory approval process and the timelines for that are different in pretty well every jurisdiction. So while I would like to say that we have perfect control over that, the reality is that we don't and that's part of the reason why we build strong partnerships and we try to build a pipeline that is able to withstand sort of changes in the timelines as we go through that process. I think the overall picture for me then ideally is a mix of onshore and offshore battery and some gas so that we stack these things up and maybe in a less pancaked way than we are right now. And so I think if I had my druthers, that's what I would like to see. I think that we have the opportunity to do that. We've got a robust portfolio. We've got a lot of opportunities in front of us. And so I'm actually excited about that for the future. I also just practically speaking, we have some really great project people that I want to make sure are motivated, engaged and delivering on future projects for us. So I want to make sure that those folks really get to continue delivering on all the things that they're so great at.
That's all I have for right now. Thanks very much.
Thank you.
And our next question comes from Rupert Marrere of National Bank. Your line is open.
Hi, good morning everyone and congratulations on the new role, Christine. Maybe if I could start, Adam, with you. You gave us your guidance projections for 2025. Can you walk us through some of the high level assumptions behind the guidance? For example, what are you modeling on production versus the LTA or curtailment of production into 2025?
Yeah, I think it's pretty standard practice from how we've done guidance in the past. I mean, ultimately we revert to LTA in terms of production, unless there's known outages that the grid is providing or elsewhere. We did increase our small assumption on the curtailment side for this guidance here, but otherwise it was pretty standard to how it's been in the past.
Okay, very good. And Christine, you mentioned the dislocation between private equity and public valuations, and we have seen some consolidation from private equity recently of some of your public market peers. Now we're seeing the pendulum swing here on valuations and we're probably back to the same place we were eight years ago when Northland did its strategic review. With the opportunities that you have, you talked about refinancing, maybe asset recycling. Are you confident that Northland can remain competitive through to the next cycle, given your financing opportunities, remain competitive across the capital? And I'm wondering if you can just give some more color, maybe not just Christine, but the whole team there, on the evolution of this dynamic and what are your forecasts for where we're headed?
Thanks, Rupert. I appreciate the question. And I'll start by saying yes, I'm very confident in our ability to deliver into the future. And one of the main reasons that I can say that and say that with even more confidence now after going around and meeting the teams is that we have a real ability to execute on projects. And fundamentally, the value from these projects comes when they're actually constructed and delivered and operated. And that is what this company has shown time and time again it can do. So lots of ideas that are written down or talked about or put on pieces of paper don't actually result in any electrons and improvement of the overall energy mix. But this company does that and does it exceptionally well. And I think the market is going to see that. And I think certainly as we go forward with our projects, we're continuing to demonstrate it again and again. So for me, I think the future is really good for us.
The public market peer group has been consolidating significantly. Do you see increased interest or activity levels coming from some private equity partners?
So I will say I can't really speak to that because my focus has been on our operations and on delivering on our projects. So, you know, to me, we keep delivering and the market is going to reward that.
Very
good. I'll leave it there. Thank you.
Thank you.
Our next question comes from Nelson Ng of RBC Capital Markets. Your line is open.
Great, thanks. And good morning, everyone. And welcome, Christine. And John, it was great having you on the calls for the past year and touching base. So first question just relates to the drip. So obviously it's the right choice to remove that dilution of your drip by purchasing shares on the open market. But what's what are your thoughts in terms of kind of expanding that a bit more and doing stock buybacks or starting an NCIB program? Obviously cash flows are a bit tight for the next two years, but you obviously have the liquidity to do some buybacks or do more buybacks.
Yeah, Nelson. You know, reflecting on the share price, like we think that the drip change is a good step to signal to create value for shareholders overall. As you know, it was providing some liquidity, which we think continuing the drip program going forward, but at a market level makes more sense. In terms of doing anything else, like an NCIB program, it's something that will continue to monitor the share price and evaluate. But at this time, we see a lot of value in focusing that capital in projects, as Christine was alluded to, which will drive material value for the company over the long term.
Thanks, Adam. And then a quick one on your 2025 guidance. So I think the guidance was for an additional 20 million of EBITDA from onshore renewables, excluding Spain. Is that mainly from just higher generation from existing assets or is there something else on that?
Yes, that's correct. Just like a couple of the assets had, so we're not hitting their LTAs for 2024, and there will be the return on that side, which makes up the most of that difference.
Okay, thanks. And then just one last question. I think, Christine, you've got
to
go on.
Nelson, sorry to jump in. Just ONITA obviously would be part of it. It's not in the 2020, the 20 million dollar number, but it would be incremental as well as we expect that to come online in the early part of the year.
Okay, thanks for that. And then in terms of the impact from tariffs, from the potential tariffs are minimal. So I just want to clarify for the Jurassic Battery Storage Project, where I guess the financial close is coming in the next few months, then construction will start at that time as well. Will any equipment be sourced from the US or will most of the materials be domestic? And I presume batteries are coming from Asia rather than the US?
So all of our contracts are in place for Jurassic Best, so we have no exposure on the tariff side related to the construction phase. In terms of the supply chain, I'm looking across at Adam. I had a recent briefing on the project, Nelson, but I'm not going to pretend that I have the right answers at my fingertips there. Do you have it, Adam?
The
suppliers, where we're getting the batteries from?
I don't believe so, but we can double check.
Yeah, we can get back to you on that, but I did confirm in the recent project briefing that we have no tariff exposure. The way that we've contracted and structured that, we're well covered.
Nelson, just to add to that, our supplier is directly from Asia, and I think we've been public in the past about the supply agreement and clues and allowance for tariffs, should tariffs be imposed by Canada. We believe it's sufficient to cover whatever tariff eventuality there is, but beyond that, in our capital budget for the project, we've made additional allowances for tariffs. So I think we're going to find ourselves pretty well covered and probably coming out better than we expected.
Great. Thanks, John.
Thank you.
And our next question comes from Robert Hope of Scotiabank. Your line is open.
Good morning, everyone. Maybe a question on the development pipeline through the lens of discontinuing the dilutive drip. When we think about kind of the next phase of growth, should we assume then the capital requirements are going to be much more in that kind of 27, 28 timeframe? Where you'll have the offshore cash flows coming in and you won't require kind of that incremental cash flow from the drip?
I mean, Rob, as you know, right now we have $1.1 billion of liquidity available, and that cash flow will actually start coming in this year in 2025. So I wouldn't say that it's all weight into the back end there. We will have some capacity over the near term as well.
Okay, appreciate that. And then maybe Christine, you know, you've spoken quite a bit about the attractiveness of offshore investment, onshore investment in batteries and natural gas. You know, you've been a little silent on the utility side of the business. So, you know, how do you think about that? And is that an area that you want to put more capital into that existing asset or maybe even future assets at a later date?
I'm happy to get a question about the utility side of the business. They're a little bit the unsung heroes. I mean, fundamentally, this is part of how we can be really good operators. You know, the fact that the utility side of the business performs very well, that it's a great training ground for people in our organization. So I think actually it's very complementary to the overall portfolio. And it's back to, you know, our strategy is that we develop these projects and then we're a long term operator of them. So having existing operations in our utility based business just aids in sort of growing our skill set in that. So I like that part of our business. I think that we do it well. What the shape of that is in the future. I think, again, you know, the conversation is that we're always looking at what's the best way to optimize the portfolio and where are we heading in the future? I think I'll be able to give you a bit more color on that when we do our investor day in the fall.
Look forward to it and congrats on the new role. Christine and John, you know, it's been a pleasure over the past year. So thank you, Saul. Thank you,
Rob.
Thank you.
And our next question comes from Benjamin Pham of BMO. Your line is open.
Hi, good morning. On your development backlog, the 10 gigawatts, there's a one gig tradition on the Natgas Canadian side. Could you clarify with that in the backlog before? How do you see that transitioning in the years ahead? And do you think that the Natgas offers the best returns in your backlog right now?
Ben, maybe I'll try to give an answer to that. It's only last year, part way through the year, that we made an explicit decision that we would pursue natural gas projects with speed and significant effort. So that was not really been in our backlog. So in prior years, to my knowledge, in a significant way. We're excited about natural gas, as you know, that was almost the genesis of Northland Power. We've built up significant experience over the years. Our natural gas fleet is actually smaller than it was not that many years ago. And we have a very motivated team of natural gas experts who are, I'll use the word again, excited in developing new opportunities for Northland. It also ties in very well with what I think Christine was alluding to, which is the realities of the energy world and the energy market, needing not only renewables, but needing natural gas in order to satisfy demand and support a stable grid. So we're looking forward to success in natural gas
on into the future. Okay, thanks for that, John.
And H switch it in the North Sea, you mentioned the step down. I'm wondering next, how should we think about the re-contracting discussions? When do they need to start and the path ahead and the potential counterparties that you could be potentially discussing with?
So, thanks for the question and the re-contracting, we're very proactive on that. So, we've in fact been in the market and we've had a process that's been ongoing. We're seeing really positive results from that. So, more to come in the future because that's ongoing. So, I can't really talk more about it right now. But certainly, that was one of the questions that I had for the teams is, have we started that process? And I was really delighted to learn that the answer is yes, they're way ahead of me. They've already started. We know and understand our markets well and we see good opportunities in the re-contracting.
Yeah. And as you know, Germany is probably one of the most liquid corporate PPA markets that's out there. So, a good number of opportunities there.
Okay. That's good. Maybe one last one to clean up on the dividend you've committed to it. And you mentioned also placing more focus on adjusted free cash flow, which is pretty much what peers are doing. Does that suggest that when the board thinks about sustainability, is that the metric to look at? In other words, your payout ratio guidance is more 85% versus 100% this year?
That's what we would suggest in comparison to our peers. Obviously, the difference is how you treat the development expenditures, which are discretionary and may fluctuate year over year. So, if you're looking to assess the underlying performance of the business, our adjusted free cash flow metric, which we would say is the best indicator of the long-term value for the organization. So, short answer, yes.
Okay. Got it. Okay. Thanks, all of
you. Thank
you.
Our next question comes from Nick Boychuk of Cormark Securities. Your line is open.
Thanks. Good morning. Christine, in your prepared remarks, you kind of touched on the political landscape globally right now. And looking at the countries you're looking to develop and further, I have to think that a lot of them are being the most pragmatic and logical about adding incremental renewables. And in the answer to Rupert, you mentioned the regulations being a key impediment. I know it's early, but are you seeing any of those markets start to maybe, you know, provide those sooner, provide more concessions, or just make it a little bit easier for you guys to operate in their markets?
So, thanks for the question, Nick. I think one of the key things that we see is that once we get to know and understand the markets, then our capability increases in that market as well. So, and then by having partners who know those markets, that sort of increases our capacity on the regulatory side even further. So, we think that we have a good understanding now in those markets as to what the regulatory process looks like. In terms of overall trends, I think that governments see overall that they want more renewable energy. And in the markets where we're active, I think that's the feedback we get all the time. So, in fact, it's good dialogue around how can that process be made smoother, more efficient, more effective in order to deliver. And as we demonstrate our track record in those countries, I think that becomes kind of a positive loop. So, I'm feeling positive about that for the future.
Got it. Thanks. And then you mentioned as well that the private and public market valuation disconnect is getting more stark. And you again kind of mentioned this in Rupert's answer, but I'm curious if you guys are proactive in seeing some things that you may want to acquire. Obviously, you mentioned the balance sheet flexibility. You could potentially refinance other things. Is the M&A pipeline active in something that you guys are ongoing in terms of looking at in the next couple years?
We are always on the hunt. So, I would say, yes, I'm always keeping a very close eye on that.
Okay, appreciate it. Thank you.
Thank you. I'm showing no further questions at this time. I'd like to turn it back to Christine Healy for closing remarks.
Excellent. Thank you very much. And thanks everyone for joining us today. Our next earnings call will be following release of Q1 results in May. And we thank you for your continued support and interest.
This concludes today's conference call. Thank you for participating and you may now disconnect.