Financials

Management’s Responsibility

 

Management is responsible for the preparation of Northland’s consolidated financial statements and annual report. Management has prepared the accompanying consolidated financial statements in accordance with International Financial Reporting Standards, and the financial information included in the annual report is consistent with the consolidated financial statements. Where appropriate, these consolidated financial statements reflect estimates based on the judgments of management. When alternative methods exist, management has chosen those it deems most appropriate in the circumstances in order to ensure that the consolidated financial statements are presented fairly, in all material respects.

Management is responsible for the development and maintenance of systems of internal accounting and administrative cost controls of high quality, consistent with a suitable cost. Such systems are designed to provide reasonable assurance that the financial information is accurate, relevant and reliable and that Northland and its subsidiaries’ assets are appropriately accounted for and adequately safeguarded.

The Board of Directors and Audit Committee (consisting of independent directors) are responsible for reviewing the consolidated financial statements of Northland and the accompanying management’s discussion and analysis and ensuring that management fulfills its contractual responsibilities for financial reporting.

Ernst & Young LLP, the independent auditors, have examined the consolidated financial statements of Northland. The independent auditors’ responsibility is to express a professional opinion on the fairness of the consolidated financial statements. The auditors’ report outlines the scope of their examination and sets forth their opinion on the consolidated financial statements. Their report as auditors is set out on page 75.

The Audit Committee of Northland meets periodically with management and the independent auditors to discuss internal controls, auditing matters and financial reporting issues and to satisfy itself that each party is properly discharging its responsibilities. The Audit Committee also reviews the consolidated financial statements, management’s discussion and analysis and the external auditors’ report; examines the fees and expenses for audit services; and considers the engagement or reappointment of the external auditors. The Audit Committee reports its findings to the Board of Directors for consideration prior to the issuance of the Northland consolidated financial statements to the shareholders. Ernst & Young LLP have full access to the Audit Committee and meet with the committee both in the presence of management and separately.





John W. Brace
Chief Executive Officer
Northland Power Inc.

Paul J. Bradley
Chief Financial Officer
Northland Power Inc.

Independent Auditors’ Report

 

To the Shareholders of Northland Power Inc.

We have audited the accompanying consolidated financial statements of Northland Power Inc. and its subsidiaries, which comprise the consolidated balance sheets as at December 31, 2015 and 2014, and the consolidated statements of income (loss), comprehensive income (loss), changes in equity and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Northland Power Inc. and its subsidiaries as at December 31, 2015 and 2014, and their financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards.


Toronto, Canada
February 29, 2016

Chartered Professional Accountants
Licensed Public Accountants

Consolidated Balance Sheets

As at, in thousands of Canadian dollars

Assets December 31, 2015 December 31, 2014
Current assets
Cash and cash equivalents [Note 4] 151,927 193,412
Restricted cash [Note 21] 283,820 45,245
Trade and other receivables [Note 4] 118,807 84,371
Inventory [Note 6] 14,438 15,731
Prepayments 16,743 12,002
Finance lease receivable [Note 10] 2,987 2,750
Derivative Asset [Note 19] 4,567 890
Total current assets 593,289 354,401
Finance lease receivable [Note 10] 155,498 158,485
Equity-accounted investment [Note 11] 4,445 4,666
Property, plant and equipment [Note 12] 5,964,438   3,788,571
Contracts and other intangible assets [Note 13] 257,406 348,161
Derivative asset [Note 19]   24,796   32,572  
Deferred tax asset [Note 18]   111,070   88,980  
Other assets [Note 21] 48,923 4,020
Goodwill [Note 14] 206,530 219,238
Total assets 7,366,395 4,999,094

continued...

Consolidated Balance Sheets (continued)

As at, in thousands of Canadian dollars

Liabilities and equity December 31, 2015   December 31, 2014
Current liabilities
Trade and other payables 237,030 229,523
Interest-bearing loans and borrowings [Note 15.2] 78,592 240,597
Dividends payable – non-controlling interest [Note 21] 602 941
Dividends payable 15,358 13,537
Derivative liability [Note 19] 84,759 37,545
Total current liabilities 416,341 522,145
Interest-bearing loans and borrowings [Note 15.2] 4,507,975 2,553,964
Corporate term loan facility [Note 15.1] 250,064 246,048
Convertible debentures [Note 16] 227,695 75,307
Other liabilities 4,306 2,836
Provisions [Note 17] 36,452 30,473
Derivative liability [Note 19] 376,308 330,823
Deferred tax liability [Note 18] 140,186 135,278
Total liabilities 5,959,327 3,896,874

continued...

Consolidated Balance Sheets (continued)

As at, in thousands of Canadian dollars

Equity December 31, 2015 December 31, 2014
Preferred shares [Note 20.1] 261,080 261,279
Common shares [Note 20.2] 2,219,259 1,904,906
Long-Term Incentive Plan reserve [Note 20.2] 6,539 2,137
Contributed surplus 241 1,328
Convertible shares [Note 20.3] 14,615 14,615
Accumulated other comprehensive income (loss) 16,070 (33,741 )
Deficit (1,524,636 ) (1,319,713 )
Equity attributable to shareholders 993,168   830,811
Non-controlling interests [Notes 21] 413,900 271,409
Total equity 1,407,068 1,102,220
Total liabilities and equity 7,366,395 4,999,094

See accompanying notes.




James C. Temerty, C.M.
Director and Chairman
of the Board




Russell Goodman
Director and Chairman
of the Audit Committee

Consolidated Statements of Income (Loss)

Years ended December 31, in thousands of Canadian dollars except per-share and share information

2015   2014
Sales  
Electricity [Note 28.2] 714,298 719,140
Steam and natural gas 12,922 40,326
Other 921 605
Total sales 728,141 760,071
Cost of sales 225,692 290,692
Gross profit 502,449 469,379
 
Expenses  
Plant operating costs 77,390 78,662
Management and administration costs – operations 25,496 20,275
Management and administration costs – development 16,345 21,024
Depreciation of property, plant and equipment [Note 12] 125,661 120,191
244,892 240,152
Investment income 3,100 5,898
Finance lease income [Note 10] 13,437 13,656
Operating income 274,094 248,781
Finance costs [Note 24] 140,233 124,980
Equity investment (gain) [Note 11] (288 ) (250 )
Amortization of contracts and other intangible assets [Note 13] 18,624 19,815
Impairment of property, plant and equipment [Note 22] 7,638 11,001
Impairment of contracts and other intangible assets [Note 22] 462 30,257
Impairment of goodwill [Note 22] 12,708 929
Foreign exchange (gain) loss 2,403   (622 )

continued...

Consolidated Statements of Income (Loss) (continued)

Years ended December 31, in thousands of Canadian dollars except per-share and share information

2015 2014
Finance income (2,445 ) (2,831 )
Fair value loss on derivative contracts [Note 19] 80,424   296,586
Writedown of equity investments -   3,100
Other income (731 ) (1,222 )
Income (loss) before income taxes 15,066
(232,962 )
 
Provision for (recovery of) income taxes [Note 18]  
   Current 5,424 7,928
   Deferred (17,889 ) (63,435 )
(12,465 ) (55,507 )
Net income (loss) for the year 27,531
(177,455 )
 
Net income (loss) attributable to:  
   Non-controlling interests [Note 21] 26,388 (70,884 )
   Common shareholders 1,143
(106,571 )
27,531
(177,455 )
 
Weighted average number of Shares outstanding – basic and diluted (000s) [Note 25] 167,555 146,765
Net income (loss) per Share – basic and diluted $(0.07 )
($0.82 )

See accompanying notes.

Consolidated Statements of Comprehensive Income (Loss)

Years ended December 31, in thousands of Canadian dollars

2015 2014
Net income (loss) for the year 27,531 (177,455 )
   
Items that may be reclassified into net income (loss):  
   Exchange differences on translation of foreign operations 77,920   (56,804 )
   Deferred taxes 3,018   -  
Other comprehensive income (loss) 80,938   (56,804 )
Total comprehensive income (loss) 108,469 (234,259 )
   
Total comprehensive income (loss) attributable to:  
   Non-controlling interests [Note 21] 57,515 (93,743 )
   Common shareholders 50,954 (140,516 )
108,469 (234,259 )

See accompanying notes.

Consolidated Statements of Changes in Equity

Year ended December 31, 2015
 

In thousands of Canadian dollars Common shares   Convertible shares   Preferred shares   Long-Term Incentive Plan reserve   Deficit   Contributed surplus   Foreign currency translation reserve   Equity attributable to shareholders   Non-controlling interests   Total equity  
December 31, 2014 1,904,906 14,615 261,279 2,137 (1,319,713 ) 1,328 (33,741 ) 830,811 271,409 1,102,220
 
Net income for the year - - - - 1,143   - - 1,143   26,388   27,531  
 
Public offering and private
   placement [Note 20]
271,304 - -   - - - - 271,304 - 271,304
Deferred income taxes 1,497 - (199 ) - 239 - 3,018 4,555 - 4,555
Change in translation of net
   investment in foreign
   operation
- - - - - - 46,793   46,793   31,127   77,920  
LTIP shares and deferred
   rights
1,638 - - 4,402   646 (1,087 ) - 5,599 - 5,599
Non-controlling interest
   contributions [Note 21]
- - - - (13,158 ) - - (13,158 ) 97,453   84,295  
Dividends to
   non-controlling interest
- - - - - - - - (12,477 ) (12,477 )
Common and Class A share
   dividends
39,914 - - - (179,916 ) - - (140,002 ) - (140,002 )
Preferred share dividends - - - - (13,195 ) - - (13,195 ) - (13,195 )
Other - - - - (682 ) - -   (682 ) - (682 )
December 31, 2015 2,219,259 14,615 261,080 6,539 (1,524,636 ) 241 16,070   993,168 413,900 1,407,068  

continued...

Consolidated Statements of Changes in Equity (continued)

Year ended December 31, 2014
 

In thousands of Canadian dollars Common shares   Convertible shares   Preferred shares   Long-Term
Incentive Plan reserve
  Deficit   Contributed surplus   Foreign currency
translation reserve
  Equity
attributable to shareholders
  Non-controlling interests   Total equity  
December 31, 2013 1,637,480 14,615 261,737 7,319 (1,041,872 ) - 204 879,483 73,255 952,738
 
Net loss for the year - - - - (106,571 ) - - (106,571 ) (70,884 ) (177,455 )
 
Conversion of debentures 16,048 - - - - - - 16,048 - 16,048
Public offering and private
   placement
200,421 - -   - - - - 200,421 - 200,421
Deferred income taxes 1,327 - (458 ) - - - - 869 - 869
Change in translation of net
   investment in foreign
   operation
- - - - - - (33,945 ) (33,945 ) (22,859 ) (56,804 )
Offshore wind acquisitions
   and equity contribution
- - - - - - - - 300,958 300,958
LTIP shares and deferred
   rights
9,125 - - (5,182 ) - 1,328 - 5,271 - 5,271
Dividends to non-controlling
   interest
- - - - - - - - (9,061 ) (9,061 )
Common and Class A share
   dividends
40,505 - - - (157,394 ) - - (116,889 ) - (116,889 )
Preferred share dividends - - - - (13,876 ) - - (13,876 ) - (13,876 )
December 31, 2014 1,904,906 14,615 261,279 2,137 (1,319,713 ) 1,328 (33,741 ) 830,811 271,409 1,102,220  

See accompanying notes.

Consolidated Statements of Cash Flows

Years ended December 31, in thousands of Canadian dollars except per-share amounts

2015 2014
Operating activities  
Net income (loss) for the year 27,531 (177,455 )
Items not involving cash or operations:  
   Depreciation of property, plant and equipment [Note 12] 125,661 120,191
   Amortization of contracts and other intangibles 18,624 19,815
   Writeoff and impairment of property, plant and equipment, contracts and other intangible
        assets and goodwill [Note 22]
20,808 42,187
   Writedown of Panda-Brandywine equity investment - 3,100
   Finance costs, net 133,217 117,161
   Fair value loss on derivative contracts 80,424   296,586
   Finance lease [Note 10] 2,750 2,530
   Unrealized foreign exchange loss (gain) 2,525   (686 )
   Other (5,270 ) 988
   Deferred income tax recovery [Note 18] (17,889 ) (63,435 )
388,381 360,982
Net change in non-cash working capital balances related to operations 10,362   5,607
Cash provided by operating activities 398,743 366,589
   
Investing activities  
Purchase of property, plant and equipment [Note 12] (1,936,435 ) (1,814,609 )
Cash reserves utilization (funding) (229,856 ) 27,390
Increase in intangible assets [Note 13] (73,252 ) (46,039 )
Interest received 2,445 2,831
Nordsee acquisition, net [Note 7.2] (84,231 ) (6,952 )
Gemini acquisition, net [Note 7.1] - (30,811 )
Net change in working capital related to investing activities 73,512   58,579  

continued...

Consolidated Statements of Cash Flows (continued)

Years ended December 31, in thousands of Canadian dollars except per-share amounts

2015 2014
Net proceeds from the sale of development assets [Note 8.2] 10,782 -
Other (682 ) 750
Cash used in investing activities (2,237,717 ) (1,808,861 )
Financing activities
Proceeds from borrowings, net of transaction costs 1,719,616 1,034,811
Proceeds from bank refinancing, net 179,589  -
Net proceeds from common offerings and private placement [Note 9]
271,304   275,729  
Corporate term facility proceeds, net [Note 15.1] - 247,402
Net proceeds from bond offerings [Note 15.2] - 228,895
Repayment of borrowings (244,211 ) (273,596 )
Settlement of interest rate swaps -   (2,118 )
Interest paid (131,726 ) (114,217 )
Non-controlling interest equity contribution [Note 21] 9,892 263,770
Dividends to non-controlling interests [Note 21] (12,816 ) (11,581 )
Net proceeds from convertible debenture offerings [Note 16] 150,643  -
Preferred share dividends [Note 20.1] (13,195 ) (13,876 )
Common and Class A share dividends [Note 23] (137,852 ) (115,322 )
Other 2,183 4,126
Cash provided by financing activities 1,793,427 1,524,023
Effect of exchange rate differences on cash and cash equivalents 4,062   (26,799 )
Net change in cash and cash equivalents during the year (41,485 ) 54,952
Cash and cash equivalents, beginning of year 193,412 138,460
Cash and cash equivalents, end of year 151,927 193,412
Per share  
Dividends declared to shareholders   $1.08   $1.08  

See accompanying notes.

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