Northland Power gradually becoming a "dynamo"

    Northland Power released another annual report and it was not significant because of the  financial information but because of the progress report on their two big projects called Gemini and Nordsee One.There was only a small increase in cash flow and EBITDA  but Northland Power announced that it was generating electricity from two turbines at Gemini which is an offshore wind operation and that 18 of 54 turbines were installed at Nordsee One .Northland announced $402 million of EBITDA for 2015 but it expects $500 to $530 million for 2016.This is substantial but it is important to note that Northland will bring in pre -completion revenues in 2016 and  2017.
     Northland (NPI) has now 1345 MW of power generating facilities but will have another 1032 MW of power constructed by mid-2017. This includes 60% of 600 MW for Gemini and 85% of 332 MW for Nordsee One plus 100 MW at Grand Bend.,Ontario.NPI announced that it has $6 billion in it's construction portfolio.This will vault it to within 600MW of power generation of Fortis at 3000 MW of power and Fortis has a market capitalization of $11 billion.It is true that by mid-2017 NPI will make a big leapfrog in power generation.It will be well ahead of other junior utilities like Algonquin Power which is also growing rapidly but now only at about 1500 MW of power.
                 Many said -too Much, too Fast 
   Many investors (including me) thought that these two large projects would put tremenduous pressure on NPI finances and their dividend.But NPI announced that their payout ratio is only at 98%.Pre-complation revenues  will augment free cash flows and reduce the payout ratio.This blog expects (although Northland doesn't say so) pre-completion revenues from Nordsee One also.While at their Grand Bend operation they have 28 of 40 turbines installed and are also earning pre-completion revenues. Surprisingly all three projects are on or ahead of schedule.So there will be pre-completion revenues in 2016 and 2017.This will help both 2016 and 2017 EBITD;this blog expects an additional EURO 125 to 150 million in 2017 But investors can expect a large bump in EBITDA in 2018.Here us where NPI expects adjusted EBITDA of  EURO 170 to 190 million for Gemini and  EURO 160 to 180 million from Nordsee One.
                             Conclusion 
  Northland Power has taken a different approach than other mid-cap utilities like Algonquin Power which acquires distressed utilities in the United States.Northland Power builds it's own projects with the help of contractors.In this case the utilities are wind farms that are offshore the German mainland.Northland is building both Gemini and Nordsee One sequentially rather than consecutively.This way it has pre-completion revenues before the entire project has been built. There will be a significant amount of pre-completion EBITDA in 2017.This will add to free cash flows in 2016 and 2017.Theses funds can be used for new projects like Nordsee Two and Three. NPI had quite a challenging year in 2015 and early 2016 but it looks to be able  have a substantial increase in revenues and EBITDA in 2016.It is hard for this blog not to see NPI at $25 a share in late 2016.This would seem to be an excellent opportunity for investor to buy NPI shares before it moves closer to the $25 level.
                                                               see Workathon for analysis of Cdn. utilities; use Workathon for analysis of utilities