Letter to Shareholders

Northland Power’s vision is to be a top clean and green power producer, inspiring our people to achieve a sustainable and prosperous future for all of our stakeholders.

For us, success means delivering measured growth and strong financial results. It also means a commitment to excellence and sustainability by all definitions – environmental, financial and operational.


Northland Power had another very successful year in 2016, delivering strong construction, operational and financial results. Our investments in offshore wind in Europe and other initiatives that contribute to long-term growth are now bearing fruit. We achieved an increase in free cash flow of 33% and adjusted EBITDA of 56%. With a total shareholder return of 31%, including dividends of $1.08 per share, we once again created superior value for shareholders.

We successfully completed construction of the 100 MW Grand Bend wind project, increasing our total net generating capacity to 1,394 MW. Overall, our fleet of 26 high-quality, long-term energy infrastructure assets, located across Canada and in Europe, met or exceeded management’s expectations. We made great progress on our two offshore wind construction projects, which continue to advance on time and on budget. Subsequent to year end, a long and arduous legal process related to contract revenues for three of Northland’s operating facilities in Ontario was finally resolved in our favour.

To support our continued growth and our evolution into an international company, we have established a substantial business presence in Europe, Mexico and Taiwan and are undertaking a number of initiatives to bolster our corporate infrastructure. In concert with these initiatives, as announced in July, we are undertaking a strategic review to ensure that we are best positioned to capitalize on a growing pipeline of clean and green energy opportunities.

Financial Results

Financially, 2016 was an excellent year for Northland. At $626.9 million, total adjusted EBITDA significantly exceeded 2015 by 56%. This increase was the result of additional revenue from the Grand Bend wind farm, the Ontario ground-mounted solar facilities and the Global Adjustment Decision. At $1.40 per share, our free cash flow per share also increased from 2015 by 29%. We generated $242.3 million in free cash flow and maintained a payout ratio below 100%, despite raising a significant amount of capital in prior years to fund our current construction portfolio.

In July, Standard & Poor’s reaffirmed Northland’s credit rating of BBB (Stable).


Letter to Shareholders

GEMINI All turbines are installed
and generating power.

On the whole, all of our operating assets met or exceeded our expectations in 2016 and to date in 2017.


We have always stressed the importance of ensuring that each of our operating facilities performs to its maximum potential. They provide the cash flow that allows us to pay our dividends and form the base upon which we can grow. Making sure that they run safely, efficiently and effectively throughout their operating lives is paramount.

Our portfolio is already made up of a diverse, sustainable technology mix, with approximately 60% thermal, 20% offshore wind, 10% onshore wind and 10% solar based on 2016 adjusted EBITDA. When Gemini transitions into full commercial operations this year, followed by Nordsee One, offshore wind will represent over half of Northland’s portfolio. While this is a significant shift from today, we will benefit in many ways from the further technological and regional diversification that we will achieve.

We are disappointed that we have so far been unable to extend the power sales contract for our thermal facility in Kingston from its expiry in January 2017. Given the current market and political conditions in Ontario, we acknowledge that extending the contract with the Ontario government will be challenging. Nonetheless, we believe in the importance and competitiveness of the facility and are pursuing potential options to continue operations by servicing export markets.

In November 2016, the courts approved an application under the Companies’ Creditors Arrangement Act (CCAA), submitted by the contractor of our five ground-mounted solar projects located in and around Cochrane and Burk's Falls, Ontario. Under the approved CCAA plan, Northland received a cash payment of $6 million, all claims and liens by the contractor and its subcontractors were released, and $66 million in letters of credit posted to remove the liens were returned to Northland.

We are pleased to report that in January 2017, the legal case between some of Northland’s subsidiaries and the Ontario Electricity Financial Corporation related to revenue calculations under power purchase agreements was definitively resolved by the Supreme Court of Canada. Final resolution of this case preserved over $300 million in value for Northland.


Recognizing that continued growth means expanding our footprint outside of Canada, Northland’s transformation to a global player in power generation continued in 2016. We have captured opportunities in new jurisdictions and technologies that leverage our expertise and are consistent with our risk/reward profile, establishing ourselves as an international leader in the clean and green energy space.

In Europe, as mentioned above, our two offshore wind projects are proceeding well. Installation of all 150 turbines at the 600 MW Gemini project in the Netherlands was completed in August, ahead of schedule. Currently, all of the turbines are producing full power at contracted rates and, as of December 31 2016, Gemini has generated €182 million of pre-completion revenue. The wind park is expected to achieve official completion mid-2017.

Our second offshore wind project, the 332 MW Nordsee One project in Germany, is also advancing on schedule and within budget. All 54 foundation monopiles and transition pieces, as well as the offshore substation and infield cables, were successfully installed in 2016. Production of the wind turbines is ongoing, with installation expected to commence in early 2017. We continue to expect full commercial operations by the end of 2017.

Domestically, in April we achieved commercial operation for Northland’s 100 MW Grand Bend, Ontario, wind project under budget and ahead of schedule. The project is a 50/50 partnership with two First Nations and to date is performing according to plan.

As global demand for electricity increases and the world embraces more environmentally friendly energy sources, we are seeing more – and larger – opportunities to advance our well-defined strategy of pursuing growth. As mentioned above, we have established offices and a substantial business presence in Europe, Mexico and Taiwan, where new clean and green energy generation is needed and has been identified as a strategic priority by governments and electricity system planners.


Letter to Shareholders

Current Development Markets

In Canada, there are some encouraging signals for new generation procurements, particularly in provinces that are actively pursuing decarbonization targets. European offshore wind projects will continue to be a focus for us, given our positive experience and reputation in the sector thus far. Mexico also provides opportunities; the country is experiencing load growth as a result of economic and demographic shifts and a desire for a greener supply mix. We have significant development activity under way, led by our office in Mexico City. We are working hard on our offshore development pipeline in Taiwan from our office in Taipei. We are also looking at other jurisdictions that meet Northland’s investment criteria and that may offer opportunities as a result of increased government focus on energy independence, sustainability and security.

To support our continued growth and international expansion, in 2016 we undertook a number of initiatives to bolster our corporate infrastructure. We implemented an enterprise resource planning system, which will generate streamlined financial and operational reporting for senior management and the Company, to facilitate timely information for decision-making and enable Northland to stay lean and flexible. As we grow in size, scope and location, we are further fortifying, documenting and formalizing our already robust risk management profile through an enterprise risk management program.

We recognize that by investing in effective processes and, most importantly, in our people, we will be best positioned to remain agile and efficient and to deliver the results you expect.

Through implementation of a number of employee engagement initiatives, along with a goals and feedback program, we continue to focus on actively empowering our employees to do the great things they are capable of. We would like to thank the Northland team for their discipline, focus and initiative and for generating the intelligent energy that powers our progress.

2017 and Beyond

With our 30th year in business under way, our priorities for 2017 are clear. We will focus on completing our existing projects on time and on budget. We will continue to drive measured growth by seeking out new, attractive projects that meet our stringent risk management criteria. And we will optimize our business and our team, which includes operating our existing facilities effectively and, wherever possible, extending their lifespans through the negotiation of new power purchase agreements.

GRAND BEND Northland’s Grand Bend
wind farm achieved commercial operations
in April 2016.


Letter to Shareholders

As we continue to evolve as a company, we remain committed to our core values. Our focus remains on achieving excellence in everything that we do. This often means challenging ourselves: to find new opportunities, to find new – and improved – ways of doing things, to drive enhanced efficiency and quality throughout the organization. Our promise to you is to manage our business and our growth prudently.

The strategic review announced in July is currently underway and demonstrates our ongoing commitment to ensuring Northland remains a sustainable, scalable company long into the future. Regardless of the review’s outcome, we remain well positioned to execute on future plans. As we made clear when we announced the review, we will embark on a new course only if it offers superior value for shareholders and an even stronger platform for future growth than the one we have today. Until the outcome is determined, our team remains focused on executing business plans and delivering shareholder value.

Guided by our Board of Directors, we remain steadfast in our commitment to generating intelligent energy and exceptional financial, environmental and operational results. We thank you for your continued support and look forward to keeping you informed on our progress in 2017.


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

John W. Brace
Chief Executive Officer


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