In January 2015, Northland announced the closing of a $157.5 million offering of 4.75% convertible unsecured subordinated debentures. In March 2015, Northland closed a $231 million offering of 14,437,500 common shares. Northland also issued, on a private placement basis, 3,125,000 common shares to a subsidiary of Northland Power Holdings Inc., a company controlled by the Chairman of Northland, James
C. Temerty. The aggregate gross proceeds from the offering and placement were $281 million ($271.3 million after costs and underwriters’ fees). Northland used the net proceeds of the offerings primarily to fund a portion of Northland’s equity investment in Nordsee One and Grand Bend, to replenish working capital and for general corporate purposes.
On March 5, 2014, Northland announced the closing of a $157.5 million offering of 9,843,750 common shares and $78.8 million 2019 Debentures. Northland also issued, on a private placement basis, 3,125,000 common shares to a subsidiary of Northland Power Holdings Inc., a company controlled by the Chairman of Northland, James C. Temerty. The aggregate gross proceeds from the offering and placement were $286.3 million ($275.7 million after costs and underwriters’ fees). Northland used the net proceeds of the offerings primarily to fund a portion of Northland’s equity investment and subordinated loan to Gemini.
Northland also has an employee Long-Term Incentive Plan (LTIP) that provides for a maximum of 3.1 million Shares to be reserved
and available for grant to employees of Northland and its subsidiaries. The majority of executives and certain management and staff receive LTIP awards based on project milestones. Certain executives receive LTIP awards annually pursuant to employment agreements. For milestone-related LTIP awards, the number of Shares awarded at each milestone is determined using the amount of expected development profits at that milestone date. As a result, the amount of LTIP costs recognized depends on the estimated number of Shares to be issued
at each milestone date, which, in turn, is based on management’s best estimate of a project’s expected development profit. Changes in estimates about the number of Shares to be issued, forfeiture rates and vesting dates and changes in fair value up to the grant date are recognized in the period of the change. During 2015 and 2014, milestones were achieved requiring management to estimate the share-based cost of LTIP awards. For the year ended December 31, 2015, Northland issued 115,298 Shares (2014 – 632,701 Shares) to employees and capitalized $4.6 million (2014 – $3.1 million) and expensed $1.2 million (2014 – $2.2 million) of costs under the LTIP.
During 2015, Northland recognized a $304.8 million increase in total equity. The increase in Shares was primarily due to the public offering and private placement in March 2015 and the issuance of additional Shares under Northland’s LTIP and DRIP programs and deferred rights. As a result of the acquisition of the controlling interests in CEEC, Gemini and Nordsee and the equity funding of McLean’s, Grand Bend, Gemini and Nordsee by their non-controlling partners, Northland’s shareholders’ equity includes non-controlling interests, which totals $413.9 million at December 31, 2015. Readers should refer to Note 21 to the consolidated financial statements for additional details related to Northland’s non-controlling interests. Shareholders’ equity also includes $14.6 million in accumulated other comprehensive income, which arises as the Canadian dollar/euro exchange rate fluctuates and Gemini and Nordsee results are translated into Canadian dollars.
As of the date of this MD&A, Northland has outstanding 170,007,882 Shares, 4,501,565 Series 1 Preferred Shares, 1,498,435 Series 2 Preferred Shares, 4,800,000 Series 3 Preferred Shares, 1,000,000 Class A Shares, $78.8 million of 2019 Debentures and $157.5 million of 2020 Debentures. If the 2019 Debentures and 2020 Debentures converted in their entirety, an additional 10.9 million Shares would result.