Gemini owner Northland in Q2 loss

Northland Power, the Canadian power producer that owns a controlling stake in the Netherlands' 600MW Gemini offshore wind project, swallowed a net loss of C$91.8m ($84m) during the second quarter.

A “significant portion” of that loss was the result of adverse effects of interest-rate swaps on Project Gemini.

Because Northland has chosen to forego hedge accounting, such adverse effects directly bite into the company’s operating results, despite having no immediate impact on the company’s cash obligations.

These fair-value adjustments, reflecting the marked-to-market value of Northland’s assets and liabilities, “will reverse over time”, Northland claims.

The loss compares to a net profit of C$80.1m during the year-ago quarter.

Northland is a significant Canadian independent power producer, with a fleet of gas-fired plants across Canada, and a fast-growing portfolio of wind and solar assets.

However, the Toronto-listed company entered the league of global renewables heavyweights last year when it acquired a controlling stake – since bumped up to 60% – in Gemini.

Gemini had been developed by Amsterdam-based Typhoon Offshore since being offloaded by failed German offshore wind polymath BARD.

The €2.8bn ($3.7bn) Gemini, which will be one of the world’s largest offshore wind farms upon completion in 2017, is a major commitment for Northland – representing its first major push outside its core markets, and its first offshore wind investment.

In order to maintain its current dividend – C$1.08 on an annualised basis, equivalent to a 6.1% yield at the present share price – Northland’s dividend payout ratio currently exceeds its free cash flow. That “may” remain the case until Gemini is completed, Northland says.

Gemini’s minority owners include Siemens Financial Services, with Siemens set to supply and install turbines; and Dutch marine contractor Van Oord, which will construct the rest of the project.

In spite of its net quarterly loss, Northland chalked up strong growth in sales and adjusted EBITDA, thanks to having more capacity online, including the recently completed McLean’s wind farm on Ontario’s Manitoulin Island.

Northland reported quarterly sales of $C169.9m, compared to C$124.4m last year.

Adjusted EBITDA came in at C$81.5m, compared to C$50.1m last year.

Northland raised its adjusted EBITDA guidance for the whole of 2014 by C$5m, to C$350m-C$360m – and says that will grow to C$380m-C$400m next year.