Northland Power released it's second quarter results recently and it experienced another solid quarter.Northland is a little different than many traditional power generators.It has quite a few Canadian operations including solar and wind based generators but it also has a new wind farm in the North Sea.It is a massive operation and took massive financing.It has completed it's financing now and has started construction.The completion date is expected to be 2017.
The second quarter
Sales were up, from $124 million in Q2 2013 to $170 million in 2014.Free cash flow was up 43 % over last year while it was up by 87% in Q1 2014 over the same quarter in 2013.However Northland had significant non-cash charges and showed a net loss of $61 million compared to net income of $75 million in Q2 2013.Because of heavy capital write-offs and interest charges a better measure of performance for most utilities(including Northland) is adjusted EBITDA.For example, Northland(NPI) had a net loss for the first half of 2014 of $46 million in comparison to a net income of $100 million for the first half of 2013.But EBITDA which allows for financing and foreign exchange gains and losses has been raised by NPI from $305 million to $350 TO $360 million for 2014.This presumably does cover preliminary financing charges for their huge wind farm called Gemini.In addition,NPI raised guidance for 2015 up to $380 to $400 million.
The impact of Gemini
The total capital cost of Gemini will be around EUR$2.8 billion.It took awhile to arrange financing but it is now completed.Financing charges will affect it's earnings and earnings per share but these are non-cash charges and most will not affect cash flow.However for large capital projects like Gemini many investors will use EBITDA as a guide.The only problem is that it can put a strain on the payout ratio which will remain high until Gemini is finished.NPI says that their dividend is safe and this blog believes that it is.After all they just raised their guidance for both 2014 and 2015.
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