In January 2015, Northland announced the closing of a $157.5 million offering of 4.75% convertible unsecured subordinated debentures that mature on June 30, 2020. 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. (NPHI), 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 the Nordsee One project and the Grand Bend wind project in Ontario, 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 of 5% convertible unsecured debentures that mature on June 30, 2019. Northland also issued, on a private placement basis, 3,125,000 common shares to a subsidiary of NPHI. 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 or for cash payments. 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 2016 and 2015, milestones were achieved requiring management to estimate the share-based cost of LTIP awards. For the year ended December 31, 2016, Northland issued 21,142 Shares (2015 – 115,298 Shares) to employees and capitalized $5.6 million (2015 – $4.6 million) and expensed $0.1 million (2015 – $1.2 million) of costs under the LTIP. A total of 1,853,979 Shares have been issued to date under the LTIP as at December 31, 2016.
During 2016, Northland recognized a $31.9 million decrease in total shareholders’ equity, which included a $47.6 million increase in Shares,
partially offset by accumulated other comprehensive income. The increase in Shares was primarily due to the issuance of additional Shares under Northland’s LTIP and DRIP programs, and debentures converted during the year. As a result of the acquisition of the controlling interests in CEEC, Gemini and Nordsee One, Nordsee Two and Nordsee Three (“Nordsee entities”) and the equity funding of McLean’s, Grand Bend, Gemini and Nordsee by their non-controlling partners, Northland’s total equity includes non-controlling interests, which totals $440.6 million at December 31, 2016. Readers should refer to Note 20 to the consolidated financial statements for additional details related to Northland’s non-controlling interests. Shareholders’ equity also includes $20.5 million in accumulated other comprehensive losses, which arises as the Canadian dollar/Euro exchange rate fluctuates and Gemini and Nordsee One results are translated into Canadian dollars.
As of the date of this MD&A, Northland has outstanding 172,352,927 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, $78.5 million of 2019 Debentures and $156.1 million of 2020 Debentures. If the 2019 Debentures and 2020 Debentures converted in their entirety, an additional 10.9 million Shares would be issued.