Welcome to the Northland Power conference call to discuss the second quarter 2025 results. As a reminder, this conference is being recorded on Thursday, August 14, 2025, at 10:00 A.M. Eastern. Conducting this call for Northland Power are Christine Healy, President and CEO, Jeff Hart, Chief Financial Officer, and Adam Beaumont, Senior Vice President of Capital Markets. Before we begin, Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward-looking statements that include assumptions and are subject to various risks. Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents when making investment decisions or recommendations. The release is available at www.northlandpower.com.
I will now turn the call over to Ms. Christine Healy.
Thanks, Deedi. Good morning, everyone, and thank you for joining us today. I'll begin with a business update that will include some key construction milestones and development progress. I'm going to turn it over to Jeff to walk us through then our financial results. Following our remarks, we'll open the line for questions. I'll start with a moment on health and safety, which, as you know, is of the highest importance at Northland . I've been doing site visits at our locations around the world where I continue to observe firsthand our team's strong safety commitment, and that's across all of our project sites and our operating facilities. I did want to take a moment to tell you about something a little bit special that happened recently when our utility, EBSA, hosted the 16th annual Colombian Electrical Rodeo.
The Electrical Rodeo is an initiative that was started by EBSA in Colombia, where multiple companies come together and line worker teams compete at the national level. This initiative showcases and rewards safe work practices in the field and elevates those safe practices to make sure that we're sharing the information across the industry. I'm pleased to advise that not only did we host this year's event, but we also took first place. EBSA showcased the company's technical excellence and strong safety culture. We're very proud of the work that the team has done there. To start the quarter, a quick update on construction. I know it's top of mind for many of you, but the first of our three major construction projects was completed ahead of schedule and under budget.
The 250 MW Oneida battery storage project in Ontario became Canada's largest operating storage facility and one of the largest in the world. I'm pleased to say Oneida has performed well in its first month. It's delivered capacity and captured market revenue upside as a first mover in the grid. The grid operator has praised Oneida's rapid response during recent high demand periods. For any of you who are living in the Toronto area, you know we've had some quite hot weather and heat waves, and Oneida was pressed into service and responded very well. During those high demand periods, Oneida reinforced grid reliability, and I think was certainly a benefit in the system. Learnings from Oneida now are being applied on our 80 MW Jurassic battery storage project in Alberta.
That project secured financing and began construction with the installation of the foundations for the battery packs, and we are preparing for key electrical equipment deliveries in the coming months. That project, Oneida, is expected to be completed by the second half of 2026. I will turn then to our other two major construction projects, Hai Long and Baltic Power. It is worth reminding you that together these projects will add 2.1 GW of gross capacity, and they will expand our offshore wind portfolio to five projects. More importantly, we will diversify our exposure beyond the North Sea for wind conditions. Let's start with Hai Long. In the quarter, Hai Long, which is our one GW offshore wind project in Taiwan, achieved first power. This is a major milestone because it confirms successful grid connection and turbine commissioning. We also completed installation of all of the pin piles.
This is a very important step in terms of de-risking our interface with the seabed and de-risking the rest of the construction process. The completed installation of those pin piles is an important milestone for the project as well. In addition, the team has worked hard to install 72 out of 73 jacket foundations as of today, and the last jacket foundation should be installed in the coming days. Overall, Hai Long remains on track for full commercial operation by 2027. We turn then to Baltic Power, our 1.1 GW project in Poland. In the quarter, Baltic Power installed its first turbine, and that's an important milestone in the construction progress. You will recall that first power on that project will follow grid interconnection, which is expected in 2026, and that's in line with our construction schedule.
Offshore construction progress has included installation of both offshore substation main foundations, mechanical completion of the topside structure with electrical outfitting underway, and installation of 38 monopile foundations and two substation monopiles in the water. Overall, Baltic Power remains on track for full commercial operations in the second half of 2026. In addition to our construction program, we are advancing our development pipeline. We continue to identify and pursue new opportunities in our core markets of Canada and Europe, aligning with our investment criteria and projects that offer strong value creation for shareholders. I'll say a few notes on that because we're focusing more time and attention on our home market of Canada lately, where we do see some near-term opportunities to leverage our existing platform and our strong domestic brand. We see those opportunities in storage, onshore renewables, and gas power generation.
During the quarter, we've advanced several development projects in Canada. As an example, we are actively evaluating opportunities for Ontario's LT2 process, and these are opportunities within our gas power generation and onshore renewables groups. We see our ability to deploy multi-technology brings a strong capability to the process because we can adapt to what the system operator is looking for. As part of our continuous process and focus on projects with best risk-adjusted returns, we've been looking at those Ontario opportunities, and we've decided to high -grade those opportunities and focus on the projects we see having the highest probability of success. We'll continue to monitor the procurement details to make sure that we're targeting the right risk-reward balance. Some of the projects that are being deprioritized for LT2 will still remain in the pipeline because they can be contenders in future years.
We're also sharpening our focus in Europe, where we see positive momentum around grid build-outs and industrial resilience, and that creates opportunities for Northland. As an example, we're looking at several onshore power and battery storage opportunities in Europe, and we see that there's space here for Northland to deploy our strong project execution and operational expertise and drive value for shareholders. We've also been working on our international project pipeline and assessing where and when we want to allocate capital. In offshore wind, a permit came due in one of our South Korean projects, and having looked very carefully at that opportunity, we chose not to renew the permit. Given the evolving regulatory framework and the uncertainty around development terms in that jurisdiction, we decided this was the right step for Northland.
This decision, I think, is a positive example of our efforts to focus our development work on our markets that we know and understand where we have lower early-stage risk. We do see that there are ample opportunities, and we're evaluating opportunities in high-potential regions of Europe, particularly Central Europe, where we see positive policy support for offshore wind and financial structures that support the way Northland Power does business. That's just an example of the type of strategic decision we're taking to ensure we're focused on the right opportunities, the ones that will deliver long-term value to shareholders. I look forward to sharing more with you about that later this year at our Investor Day. Before I turn it over to Jeff to walk through the financials, I did want to provide a brief overview of our second quarter performance.
As you've seen, low offshore wind resources in the North Sea persisted into the second quarter and have continued the trend from Q1. We view this as natural variability, especially when you compare it to the record high output we had in some of our assets in 2024. Unfortunately, our offshore assets in the North Sea have had the lowest wind half year since we started production 10 years ago. Our global operations, however, remain strong. As I talked to you last quarter, the thing for me that I always ask the teams to focus on is the things within our control. We had solid performance in terms of reliability, and we had excellent performance in our onshore and natural gas business. You can see overall fleet availability exceeded 95% in the quarter.
Our wind park availability improved in Q2, and that's a testament to the effectiveness of our asset management teams and our proactive asset management strategy. Our teams are continuing to implement predictive maintenance approaches, and we apply learnings from past events to reduce our downtime. Maintaining our assets in optimal conditions positions us well to capitalize when favorable wind conditions occur. As a final note, I'll say our global offshore wind diversification strategy is advancing. One of the things we talked about last quarter, and I'll repeat again, is that when Baltic Power and Hai Long come online soon, this will change the profile of the wind resource for the company. Expanding into the Baltic Sea and the Taiwan Strait balances our production profile across geographies. The year 2025 continues to be a year of key milestones for Northland Power, and our long-term value proposition is strong.
Our dedicated teams are bringing deep expertise across the full project lifecycle from origination through development, construction, and operation. Strong market fundamentals throughout highlight that the global demand for sustainable, affordable, secure power continues to rise, and Northland is well positioned to capture this momentum. With that, I'm going to turn it over to Jeff for a detailed update on the financial results.
Thanks, Christine, and good morning, everyone. This quarter, we achieved a number of key construction milestones, continued to maintain strong operations with commercial availability of 95%, and completed planned maintenance outages. Looking at our second quarter results, Northland generated adjusted EBITDA of CAD 245 million, a 9% decrease compared to the same quarter of 2024. This was predominantly due to the low offshore wind resource and higher unpaid curtailments related to negative prices at our German offshore wind facilities. The low offshore wind resource was partly offset by the contribution from the Oneida battery facility, which achieved commercial operations this quarter, and good wind conditions across our North American onshore wind fleet. During the second quarter, we generated free cash flow of CAD 58 million, which was approximately 15% lower than the same quarter last year.
On a per-share basis, free cash flow in the second quarter of this year was CAD 0.22 compared to CAD 0.27 in the second quarter of 2024. The decrease to free cash flow was primarily related to the lower adjusted EBITDA that I mentioned earlier. That was offset by a decrease in income taxes due to that lower EBITDA and a one-time tax benefit following the German Federal Fiscal Court's recently released ruling for offshore wind farms. The net loss for the quarter was CAD 53 million compared to a net income of CAD 246 million in 2024. This is primarily due to the lower operating income and non-cash mark-to-market losses on foreign currency hedges.
Turning to our investment program at Hai Long and Baltic Power, as of the end of the second quarter of 2025, we spent CAD 9 billion to date, with remaining gross capital expenditures for the two projects expected to be CAD 6 billion. At Hai Long, we have started to see the first pre-completion revenues, and at Baltic Power, we continue to advance to first power in 2026 when grid connection is planned. Now, I'll turn to our updated guidance, which is primarily a result of lower offshore wind resource year to date and DeBu having a scheduled grid outage in the third quarter. We have adjusted our full-year forecast for adjusted EBITDA to be in the range of CAD 1.2- CAD 1.3 billion compared to the previous guidance of CAD 1.3- CAD 1.4 billion.
We also revised free cash flow, which is now projected to be between CAD 1.15 and CAD1.35 per share, and that compares to CAD 1.30- CAD 1.50 per share in previous guidance. I'll hand it back to Christine to conclude the call.
Thanks, Jeff. I'm excited about Northland Power's future. The progress on the project is very strong. The operational performance is very strong. We have a good set of assets, and we're delivering within those assets. I will zoom out for a moment and say we're at a unique moment in time where we see many governments around the world poised to make investments with respect to focus areas of grid security, reliability, and interconnection. We see financial institutions committed to this process. With that strong drive from industry and government, we just see that there's a great set of conditions to invest in and deliver clean, reliable, affordable, secure energy. Before we turn to the Q&A, I can announce that our 2025 Investor Day event will be on Thursday, November 20, here in Toronto, Ontario. More details will follow. I hope you join us there.
Our team looks forward to connecting with you at the event and sharing more about our future plans. This concludes our prepared remarks. I'll turn it over to the operator. Operator, if you can open the line for questions, that would be great. Thank you.
Thank you. To ask a question, please press * 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press * 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from Sean Steuart of TD Cowen. Your line is open.
Thank you. Good morning, everyone. Christine, you referenced some of the turnover in the prospective growth pipeline, and you gave details on Korea. On the onshore renewables and storage piece of it, that drops by a GW versus what was shown at the end of Q1. I guess some of that is Ontario projects. Can you give a little bit more detail on what was dropped off that growth pipeline list?
Sure. Thanks for the question, Sean. For onshore, there's sort of a mixed bag of things. Yes, there's a couple of opportunities we had been looking at in Ontario, but now that we understand the terms for the procurement by the IESO, we're not so convinced that those are the right sites that are going to bring you to that. If we were to bid them, I don't think they'd be bringing value to the process. We've just decided to high grade on those and not spend more money chasing those right now. It's not to say those ideas go away, but they weren't the right idea for this time. We've taken them out of the pipeline because we're not actively pursuing them at this point.
We similarly had a couple of opportunities, well, one opportunity in Alberta that we decided that now with the new information we have on the REM in Alberta, that opportunity is not going to be as good as we had hoped. It's just getting the teams to refocus on the things that we think are going to drive the most value. We also had one opportunity in New York State that just given some of the changing conditions in New York right now, we've decided that that's not something that we're interested in continuing to pursue.
Okay. Thanks for that detail. Question for Jeff. The Q2 free cash flow included about CAD 16 million in a maintenance reserve positive this quarter. Should we think of that as a one-off? How does that variability for that line item trend through the second half of the year?
Yeah, I think that's a fair way to look at it, it's more of a one-off and not something structural. For us, it's just optimizing and utilizing our resources or our financial resources efficiently. There's nothing to read through there, and I wouldn't forward be continually forecasting that.
Okay. All right. That's all I have for now. I'll get back in the queue. Thank you.
Thanks.
Thank you. Our next question comes from Nelson Ng of RBC Capital Markets. Your line is open.
Great. Thanks, Anne. Good morning, everyone. My first question just relates to the curtailment in Germany. Can you just talk a bit about what you expect over the next few years in terms of curtailments? Does it get worse before it gets better? I know, I think this particular quarter, there was a lot of solar on the grid, and there was a lot of negative pricing, but can you just provide a bit of color on what you're expecting?
Hi, Nelson. Thanks very much for the question. I would say right now, we're actually doing a bit of a deep dive on exactly that question ourselves to understand where we think it's going. We've been having a number of meetings in Germany, both with other companies who are in our sector and feeding into the grid, but also with some officials as well to understand what's happening there. Overall, we do see that there's sort of variability, and we expect that there's going to be variability in that. When we budget, we budget for a certain amount of curtailment that's going to happen within the system. I think right now, everything is sort of fitting within that band from our perspective. There's nothing unexpected. I guess, do we see that that's changing as we have new entrants coming onto the grid? Right now, I would say no, I don't see a big shift, but we're keeping a watch on it because it's important to understand our markets that we're feeding into.
Okay, thanks. Just to follow up on that more specifically, when I look at Nordsee One, I think about 19% of the production was curtailed in the first half of this year compared to, I think, 9% for Deutsche Bucht. I think those two facilities are pretty close together. Can you just provide a bit of color as to why one's being impacted more than the other?
Nelson, I'm going to have to admit that I don't have a reason for why they're dramatically different from each other, but I will certainly ask the team. How about that?
That sounds great. Just sticking with Germany.
Nelson, we'll come back to you on that one as well.
Sure thing. Yeah, just sticking to Germany, the German trade tax refund of about CAD 31 million, can you just provide a bit more color there? Is that like a one-time item, whether you expect to see any more going forward?
Yeah, certainly. It is absolutely, and thanks for the question. It is one time. The way to broadly think about it is the reality of just kind of differences in provincial rates and the allocation. Ultimately, there was a ruling on how our income or how income in offshore wind would be attributed. That ruling actually resulted in income from the offshore wind being attributed to a lower effective tax rate. This is really to reflect that benefit. Historically, we were paying a higher tax rate, and with that ruling, we reassessed and actually pushed the effective rate down. It is a one-time kind of cleanup for the history there, viewed as differences between provincial rates, for lack of a better term.
It's like a one-time true-up for past tax pays.
100%. 100%.
Okay, got it.
100%.
Just one last question, Christine. You provide good color on progress at Hai Long and Baltic Power. Can you just give an update on how many turbines have been installed for each project to date?
Again, at Hai Long, we've got 20 turbines installed. I think I mentioned in my comments 72 out of 73 jackets, with hopefully the last one in the coming days. At Baltic, you'll recall we have a monopile foundation. We've got 40 monopiles out of 76 installed and five turbines.
Okay, five turbines. Great, thank you very much. I'll leave it there.
Thank you.
Thank you. Our next question comes from Mark Jarvi of CIBC. Your line is open.
Thanks. Good morning, everyone. Christine, you mentioned exploring some opportunities in Europe, batteries, onshore renewables, and that showed up in the development, prospective development pipeline. Can you share any more details in terms of where you're looking? Is that solely a Northland effort? Is it a partnership? How far off are these opportunities?
Mark, I'm not going to offer more color on that right now, but hopefully by Investor Day, I'll be able to shape that out a bit more just because we're in active conversation about some of these opportunities. We do see in the markets where we already are in Europe, we see some opportunities around storage and around generation. Which of these are going to make it to the front of the queue and on which timeline is a bit of an internal debate right now because we want to make sure that we're putting the highest value projects first. In parallel with that, you'll recall I talked, not sure actually if we talked about it in the last call.
We'll talk about it more at Investor Day, but we're also looking at what I call brownfield opportunities, which are opportunities within our own fleet where we can deploy storage in our existing fleet, and we see that there's an uplift in value from that. We have to look at these opportunities next to each other and prioritize the highest value ones first.
Can you share whether or not these potential projects in Europe have been things that have been percolating and now you just feel like they're getting to a stage where you can start to talk about them, or are they things that have kind of popped up or you've identified more in the last couple of quarters?
I would say that certainly since I arrived, we've been focusing on some of our key geographies, and this is the work that I've been doing with the team to really take our development focus and zoom in on the markets that we know well. The markets that we're already active in, the markets that we've done a lot of work to understand, and instead of, you know, having a broad lens and looking at every possible jurisdiction, we're really focusing in on the places where we think we can drive better value.
Understood. You made the comment about opportunities in offshore wind, and you said that we're, I think, used Central Europe. Is that Poland, or does that go beyond Poland? Maybe just update a view in terms of how you think PKN Orlen is going to progress with their development. Are they going to bid and then select a partner, or are you having some discussions with them as they bid potentially their next sites into the RFP?
Certainly with Central Europe, Poland is one of the Central European countries, and we're already in Poland. We certainly, obviously, like Poland, or we wouldn't be there making the investment that we are. It's Poland, but also I would say areas adjacent. I think the entire region has many of the same goals in terms of energy. For us, we look at the region, I would say, and being able to deploy within the region.
The process that's happening in Poland, we have a very strong partnership with Orlen, and we're working with them. They are a publicly owned, they're a state-owned entity, so they will go through a process as they select their future partners. We certainly hope that they will consider us in a favorable way when they're looking at future partners. The processes in Poland will go through the normal process. We evaluate what's the best way for us to enter, whether it's as a bidder or whether it's as an acquirer in a post-bid process. Either way, we're sort of neutral. We look at the way that's going to get us into the projects that we like the best.
Okay. Any update on Nordsee in terms of post-PPA? Are you active in the market looking to do a corporate PPA, or is it going to be more of a longer-term hedge with a trading partner?
Yeah, it's a really good question. Thanks for asking it. We've been exploring the potential for long-term PPAs, and it's very interesting discussions, and we're looking at that. We do have a decision to make, I would say, in the coming couple of months. I wouldn't be surprised if we actually split it a little bit, and we might do a PPA on part, and we might do a bit more, keep an open position on part.
I'm looking at that in terms of the overall portfolio and what kind of volatility exposure we're okay with. We don't have to make the decision right away because we don't have a lot free on that until 2027. I'm glad we started early because it means we can have a good look at what the market is offering. Right now, it's a little bit dealer's choice and we're the dealer, so I like that. We certainly see some interesting long-term contracting opportunities. The question is, is that how we want to structure that asset or not for the future? That's still to be determined.
Is it likely you'll make a decision by year-end?
Certainly. If yes, we will be making a decision by year-end.
Got it. Okay, thanks for the time today.
Thank you. Our next question comes from Robert Hope of Scotiabank. Your line is open.
Morning, everyone. On the Q1 call, you spoke about M&A a couple of times. Can you maybe walk us through how your thinking has been evolving on that front, whether or not you think you can pick up some, we'll call it, some gas assets in Canada or other, we'll call it, modalities and geographies?
Thank you for the question. We are very active in terms of screening M&A opportunities, and we've actually taken a deeper dive into, I would say, a strong handful of opportunities. One of the things that I'm really impressed with, actually, is that our operational teams, when they dive into these, are really able to see through and see the value. There have been a couple of things that I was excited about, but we've decided to not proceed with. I think sometimes the deals you don't do are better than the deals that you do, do. I'm okay with that outcome. We do see that there's quite a lot of interesting things coming on the market or available in the market.
I'm very positive about M&A for the future, but I'm very impressed with the team's ability to look through and understand the value of what we're seeking to acquire. For me, I'm happy to see the muscle in the team, and I expect that we will be transacting, but we will be transacting when we find the right match, not transacting on any match.
Great. Maybe turning the attention to Eastern Canada, the federal government is speaking quite favorably about offshore wind there. Are you able to interface with the federal government to help shape that process to make a made -in -Canada solution?
Yeah. Offshore wind, I think, is a we obviously like offshore wind a lot, and we think it's an important part of the energy mix for the future in many geographies around the world. The federal government in Canada certainly seems to be more interested in offshore wind than we've seen in recent years. We have had meetings with government officials in order to talk about the types of things we need to see as an investor. I think we're a very credible investor in offshore wind, that we're delivering on some important projects globally. I'm hoping that they hear what we have to say. The reality is that it's the same story everywhere. We need to have certainty on terms, and we need to have efficient permitting processes.
When permitting takes a long time or has an uncertain process or it costs a lot of money in order to get to an investment decision, that's less attractive than jurisdictions where you can do that faster, more efficiently, and cheaper. I don't think that I'm saying anything deeply insightful there, but when we have long and uncertain permitting times, it's a disincentive for investment. I hope that's being understood. The goal is to compete, and you know, it's international capital. Even for Northland, you know, we're deploying our capital internationally for offshore wind because we see that those are the best opportunities for us. If Canada wants to be competitive in that space, I think that would be a great thing.
Thank you.
Thank you. Our next question comes from Baltej Sidhu of National Bank of Canada. Your line is open.
Good morning. Christine, have you seen any incremental supply chain pressures during Q2 to now? Any technologies or regions that could be more problematic in that view?
Thank you for that question. I think it's actually been a bit of a mixed bag because you see that there have been some projects that seem to be delayed or paused. You see other parts of the world where they're trying to accelerate. I would say supply chain, I don't know that it's actually just one answer. I would say overall, we don't see a big change from last quarter. We see that for the projects that we're pursuing, there's no impact on timelines as we frame them right now. We are keeping a careful eye on that, and we're frequently meeting with some of our key suppliers to make sure we understand that and that, you know, what are the things that we don't see that could be happening that would impact our proposed project timelines. We do keep a watchful eye on it, but I would say no major change from last quarter.
Great. Just on Oneida, we got the first quarter or partial contribution of its performance. On a revenue basis, it looked like it exceeded expectations. Could you provide any details of that project in terms of how much that was merchant revenues versus capacity? I think the split that we had seen was 60/0 for capacity.
Yeah, it's Jeff here. You're right. What it laid out is 60/40. Obviously, being an early mover, and Christine alluded to it in her prepared remarks, we do see up front some potential upside with the market being really the first in place there. What I'll say is the economic case when we laid out was around CAD 40 million EBITDA. I think we're within that range annually. I think we do see some upside on the merchant side here being an early mover, but it's something that is early stage. We're going to be prudent on how we're outlooking and just see how it performs and how the grid operator utilizes it as well. We will continue to see some benefits there, but no change to that CAD 40 million EBITDA, and we'll see what upside we can capture here over the next few months.
Maybe I'll just add on to that and say, yes, it's a bit too soon to say anything other than we see some positive green shoots. Understanding how that works together, we're in a new system in Ontario. It's new for us, and it's new for the system operator. We're cautiously optimistic.
Sounds great. Just one last one for me. For Hai Long, how many more turbines would you expect to place before winter break? Just as an extension, do you have any further insight if you look to release any of the excess vessel capacity and what this could present in terms of upside for Northland?
Sorry, can I get you to repeat that? I heard the first part of the question, but not the back part of the question. Can I just get you to repeat that?
You bet. The first part was just how many more turbines would you expect to have in place by winter break, and if you have any further insight, if you'll be looking to release any of the excess vessel capacity and what that could mean in terms of upside for Northland.
Okay. I couldn't hear any of that, but now I got it. I would say in terms of installation at Hai Long, a big focus right now is on array cables and installation of array cables. That's something that we really need concise in order to do that. Every day that we can get that done is a day closer to completion. For me, right now, it's less about the turbines and more about the array cables.
Of course, we're moving in parallel on that, but the array cables, the weather window is important. You may be aware, Baltej, that we had a typhoon much earlier this year than we've seen in previous years. Normally, typhoon season would be much later. Right now, every day that we get in the good weather window, we're taking full advantage of. The team is active. I think it would be a bit too soon for us to say what we're doing with vessel capacity. We want to maintain our project schedule, and we want to make sure that everybody stays safe.
Great. That's all for me. Thank you.
Thank you. That concludes our question -and -answer session. I'd like to turn it back to Christine Healy for closing remarks.
Thank you, everyone, for joining us today. We'll hold our next earnings call after the release of third quarter results in November. I want to thank you all for your excellent questions and for your continued support. Thanks very much.
This concludes today's conference call. Thank you for participating, and you may now disconnect.