HIGHLIGHTS
- High-quality, operating portfolio of onshore renewable assets provides scale and immediately positions Northland as a top 10 operator in the growing Spanish renewables market
- Acquired portfolio offers a highly predictable cash flow profile through the Spanish regulated framework and is immediately accretive to Northland's Free Cash Flow per share and Adjusted Free Cash Flow per share
- A platform will be established around the acquired portfolio for further growth in Spain along with the creation of a European onshore renewables asset management platform
- Northland has achieved a number of recent key project milestones further advancing the 4 to 5 GW of identified development projects highlighted at the Investor Day held in February 2021
- Concurrent $900 million bought deal equity financing will fund the Spanish acquisition and equity capital requirements including acquisition costs for Baltic Power and expected near-term capital requirements for Northland's portfolio of 4 to 5 GW of identified development projects, the latter of which is all supported by high quality 20-25 year offtake contracts
- Prudent financing strategy in-line with Northland's investment principles and strong credit rating providing ample flexibility, with approximately $800 million of available liquidity to fund future growth initiatives
Northland Power Inc. ("Northland" or the "Company") (TSX: NPI) is pleased to announce that it has entered into a definitive agreement for the acquisition of an operating portfolio of onshore renewable projects in Spain and to provide a business update on various strategic initiatives. The Company is also announcing a concurrent $900 million bought deal equity financing to fund the acquisition as well as projects within the Company's identified 4 to 5 gigawatt (GW) renewable development pipeline, outlined at the Company's recent Investor Day in February 2021.
Spanish Renewables Acquisition
Northland has entered into an agreement with Helia Renovables, F.C.R., a fund sponsored by Plenium Partners Asset Management, S.G.E.I.C., S.A., and Bankinter S.A., being fully distributed among the latter clients, to acquire a portfolio of operating onshore renewable assets in Spain (the "Portfolio") with a total combined net capacity of 540 megawatts (MW). The Portfolio includes 33 operating assets comprised of onshore wind (424 MW), solar PV (66 MW), and concentrated solar (50 MW) located throughout Spain. Total cash consideration to be paid for the Portfolio upon closing will be 345 million (C$520 million) together with the assumption of debt in the amount of 716 million (C$1,075 million). Closing of the acquisition is expected to occur in the third quarter of 2021 subject to regulatory approvals and customary closing conditions.
The acquisition of the Portfolio immediately places Northland as a top 10 renewable power operator in Spain and creates a platform for growth in an attractive market for renewables. In 2020, Spain made a commitment to achieve 70% electricity generation from renewable energy sources by 2030 as part of the Law on Climate Change and Energy Transition. The 2030 target translates into a requirement for an estimated 35 to 40 GW of additional renewables capacity. In support of its 2030 goal, the Spanish government is expected to auction a further 16.5 GW of solar and onshore wind capacity over the next five years. In addition, the Spanish market has developed into one of the most active corporate offtake markets in Europe, which together with the expected procurements noted above and an attractive merchant power market, offer several routes to market for new renewables. Spain has also announced a 2030 target of 4 GW of hydrogen and 20 GW of storage, which align with Northland's energy transition growth objectives. Northland intends to leverage the acquisition of the Portfolio to build a platform with asset management, development, and operations and maintenance capabilities that can competitively pursue onshore renewables acquisition and development opportunities across Europe over the next decade.
As outlined at the Company's Investor Day in February 2021, part of Northland's strategy is to secure attractive renewable operating portfolios to ensure incremental near-term cash flow. The addition of the Portfolio's near-term cash flow helps fund the development of Northland's large offshore wind projects as new markets continue to emerge for offshore wind globally. Northland is an experienced onshore renewables power developer and operator and is a leading global player in the fast-growing offshore wind sector.
The Portfolio aligns well with Northland's priority to diversify and add high-quality, contracted or regulated cash flows to the business. All the acquired assets are governed under the Spanish regulatory framework, which was implemented in 2013. The framework replaced the feed-in tariff regime and provides a regulated return based on a standard set of operating parameters. Once each asset reaches the end of its regulatory life, it is expected that the project will either sell its generation output in the merchant power market in Spain or secure a commercial or utility power purchase agreement. The framework provides the assets with a regulated revenue stream for the remaining regulatory life, which averages 13 years across the Portfolio, increasing Northland's average contracted life of its entire power generation fleet.
"Today's (April 14) announcement further demonstrates Northland's continued growth and leadership in renewable energy and establishes Northland as a top player in one of Europe's most attractive markets over the next decade for renewables, storage and hydrogen. Through this acquisition we will also establish a European asset management platform that can support entry into other attractive European onshore renewables markets," said Mike Crawley, President and Chief Executive Officer of Northland. "This transaction is consistent with our strategy and positions Northland for further growth and diversification, while providing us with near-term cash flow."
