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 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 70.

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, 2016 and 2015, and the consolidated statements of income, comprehensive income, 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 as issued by the International Accounting Standards Board 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, 2016 and 2015, and their financial performance and cash flows for the years then ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.


Toronto, Canada
March 2, 2017

Chartered Professional Accountants,
Chartered Accountants
Licensed Public Accountants

Consolidated Balance Sheets

As at December 31, in thousands of Canadian dollars

Assets 2016 2015
Current assets
Cash and cash equivalents [Note 3] 307,521 151,927
Restricted cash [Note 20] 171,304 283,820
Trade and other receivables [Note 3] 158,007 118,807
Inventory [Note 5] 16,144 14,438
Prepayments 14,055 16,743
Finance lease receivable [Note 8] 3,246 2,987
Derivative asset [Note 18] 1,811 4,567
Total current assets 672,088 593,289
Finance lease receivable [Note 8] 152,250 155,498
Equity-accounted investment [Note 9] 4,257 4,445
Property, plant and equipment [Note 11] 7,157,401   5,914,842
Contracts and other intangible assets [Note 12] 234,328 257,406
Derivative asset [Note 18]   51,525   24,796  
Deferred tax asset [Note 17]   112,417   111,070  
Other assets [Note 20] 22,263 48,923
Long-term deposit [Note 10] 50,371 49,596
Goodwill [Note 13] 206,530 206,530
Total assets 8,663,430 7,366,395

continued...

Consolidated Balance Sheets (continued)

As at December 31, in thousands of Canadian dollars

Liabilities and equity 2016   2015
Current liabilities
Trade and other payables 231,186 237,030
Interest-bearing loans and borrowings [Note 14.2] 114,571 78,592
Dividends payable – non-controlling interest [Note 20] 602
Dividends payable 15,568 15,358
Derivative liability [Note 18] 120,322 84,759
Total current liabilities 481,647 416,341
Interest-bearing loans and borrowings [Note 14.2] 5,621,541 4,507,975
Corporate term loan facility [Note 14.1] 247,741 250,064
Convertible debentures [Note 15] 228,093 227,695
Other liabilities 2,901 4,306
Provisions [Note 16] 166,084 36,452
Derivative liability [Note 18] 375,276 376,308
Deferred tax liability [Note 17] 165,027 140,186
Total liabilities 7,288,310 5,959,327

continued...

Consolidated Balance Sheets (continued)

As at December 31, in thousands of Canadian dollars

Equity 2016 2015
Preferred shares [Note 19.1] 260,880 261,080
Common shares [Note 19.2] 2,266,901 2,219,259
Long-Term Incentive Plan reserve [Note 19.2] 12,246 6,539
Contributed surplus 278 241
Convertible shares [Note 19.3] 14,615 14,615
Accumulated other comprehensive income (loss) (20,475) 16,070
Deficit (1,599,967) (1,524,636)
Equity attributable to shareholders 934,478 993,168
Non-controlling interests [Notes 20] 440,642 413,900
Total equity 1,375,120 1,407,068
Total liabilities and equity 8,663,430 7,366,395

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

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

2016   2015
Sales  
Electricity and related products [Note 27.2] 1,097,623 727,220
Other 1,377 921
Total sales 1,099,000 728,141
Cost of sales 193,240 225,692
Gross profit 905,760 502,449
 
Expenses  
Plant operating costs 111,857 77,390
Management and administration costs – operations 35,918 25,496
Management and administration costs – development 31,255 16,345
Depreciation of property, plant and equipment [Note 11] 233,598 125,661
412,628 244,892
Investment income 2,306 3,100
Finance lease income [Note 8] 13,199 13,437
Operating income 508,637 274,094
Finance costs [Note 23] 236,426 140,233
Equity investment gain [Note 9] (337) (288)
Amortization of contracts and other intangible assets [Note 12] 13,517 18,624
Impairment of property, plant and equipment [Note 21] 23,055 8,100
Impairment of goodwill [Note 21] 12,708
Foreign exchange (gain) loss (2,022) 2,403
Finance income (9,458) (2,445)

continued...

Consolidated Statements of Income (continued)

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

2016 2015
Fair value loss on derivative contracts [Note 18] 27,830   80,424
Other expense (income) 310 (731)
Income before income taxes 219,316
15,066
 
Provision for (recovery of) income taxes [Note 17]  
   Current 10,749 5,424
   Deferred 18,008
(17,889)
28,757
(12,465)
Net income for the year 190,559
27,531
 
Net income attributable to:  
   Non-controlling interest [Note 20] 69,095 26,388
   Common shareholders 121,464
1,143
190,559
27,531
 
Weighted average number of Shares outstanding – basic and diluted (000s) [Note 24] 172,910 167,555
Net income (loss) per share – basic and diluted $0.64
$(0.07)

See accompanying notes.

Consolidated Statements of Comprehensive Income

Years ended December 31, in thousands of Canadian dollars

2016 2015
Net income for the year 190,559 27,531
   
Items that may be reclassified into net income (loss):  
   Exchange differences on translation of foreign operations (55,939)   77,920
   Deferred taxes (4,198)   3,018  
Other comprehensive income (loss) (60,137)   80,938
Total comprehensive income 130,422 108,469
   
Total comprehensive income attributable to:  
   Non-controlling interest [Note 20] 45,503 57,515
   Common shareholders 84,919 50,954
130,422 108,469

See accompanying notes.

Consolidated Statements of Changes in Equity

Year ended December 31, 2016
 

In thousands of Canadian dollars Common
shares
Convertible
shares
Preferred
shares
Long-Term
Incentive
Plan
reserve
Deficit Contributed
surplus
Foreign
currency
translation
reserve
Equity
attribut-
able to
share-
holders
Non-
controlling
interests
Total
equity
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
 
Net income for the year 121,464 121,464 69,095 190,559
 
Deferred income taxes (1,089) (200) (4,198) (5,487) (5,487)
Change in translation of net
   investment in foreign
   operation
(32,347) (32,347) (23,592) (55,939)
LTIP shares and deferred rights 516 5,707 37 6,260 6,260
Non-controlling interest
   contributions [Note 20]
1,386 1,386
Dividends to
   non-controlling interest
(20,147) (20,147)
Common and Class A share
   dividends
46,569 (185,606) (139,037) (139,037)
Preferred share dividends (11,189) (11,189) (11,146)
Conversion of debentures 1,646 1,646 1,646
Other
December 31, 2016 2,266,901 14,615 260,880 12,246 (1,599,967) 278 (20,475) 934,478 440,642 1,375,120

continued...

Consolidated Statements of Changes in Equity (continued)

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
attribut-
able to
share-
holders
  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 19]
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 20]
(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  

See accompanying notes.

Consolidated Statements of Cash Flows

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

2016 2015
Operating activities  
Net income for the year 190,559 27,531
Items not involving cash or operations:  
   Depreciation of property, plant and equipment [Note 11] 233,598 125,661
   Amortization of contracts and other intangibles 13,517 18,624
   Writeoff and impairment of property, plant and equipment, contracts and other intangible
        assets and goodwill [Note 21]
23,055 20,808
   Finance costs, net 220,397 133,217
   Fair value loss on derivative contracts 27,830   80,424
   Finance lease [Note 8] 2,989 2,750
   Unrealized foreign exchange loss (gain) (1,942)   2,525
   Other (10,542)
(5,270)
   Deferred income tax expense (recovery) [Note 17] 18,008
(17,889)
717,469 388,381
Net change in non-cash working capital balances related to operations 2,343   10,362
Cash provided by operating activities 719,812 398,743
   
Investing activities  
Purchase of property, plant and equipment [Note 11] (1,626,221)
(1,936,435)
Cash reserves utilization (funding) 103,657 (229,856)
Increase in intangible assets [Note 12]
(73,252)
Interest received 9,458 2,445
Nordsee acquisition, net [Note 20]
(84,231)
Net change in working capital related to investing activities (29,171)   73,512  

continued...

Consolidated Statements of Cash Flows (continued)

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

2016 2015
Net proceeds from the sale of development assets [Note 6.2] 10,782
Net proceeds received on legal settlement [Note 27.1] 6,000
Other (682)
Cash used in investing activities (1,536,277) (2,237,717)
Financing activities
Proceeds from borrowings, net of transaction costs 1,382,224 1,719,616
Proceeds from bank refinancing, net 179,589
Net proceeds common offerings and private placement [Note 19]   271,304
Repayment of borrowings (79,647)   (244,211)
Interest paid (197,467)   (131,726)
Non-controlling interest equity contribution [Note 20] 855 9,892
Dividends to non-controlling interests [Note 20] (12,519) (12,816)
Net proceeds from convertible debenture offerings [Note 15] 150,643
Preferred share dividends [Note 19.1] (11,189)
(13,195)
Common and Class A share dividends [Note 19.2] (139,890)
(137,852)
Other [Note 20] 28,701 2,183
Cash provided by financing activities 971,068 1,793,427
Effect of exchange rate differences on cash and cash equivalents 991   4,062
Net change in cash and cash equivalents during the year 155,594 (41,485)
Cash and cash equivalents, beginning of year 151,927 193,412
Cash and cash equivalents, end of year 307,521 151,927
Per share  
Dividends declared to shareholders $1.08 $1.08  

See accompanying notes.

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