The caption above shows men at work on a rig;there is considerable risk in drilling for oil these days.Northland Power took a larger risk in constructing two large offshore wind farms in the world's strongest winds in the North Sea.But now they are both built (600 MW and 332MW) and fully commissioned revenues are coming in.Their recently released first quarter report shows that they have been very successful here and they are awaiting future results from one more wind farm with a constructed 252 MW of power capacity.However the stock price has not yet kept pace with the new construction and the new revenues.It too must climb up the ladder.
First Quarter Highlights
Sales increased 34% or $122 million to $486 millionand adjusted EBITDA increased 47% or $92 million to $290 million.This was even partially offset by the expiry of the Kingston power ourchase agreement (PPA).There will be no large increases in power output until 2019 when their other wind farm has been fully constructed.But NPI will get pre-completion revenues from their new project in 2018.They have also executed a 20year power contract with Taiwan for 60% ownership in 300 MW starting in 2024.So Northland continues to line up large foreign power contracts.Lastly the blog 4-C Offshore says that in 2014 when they acquired Nordsee 1 they also acquired the rights (along with the German firm RGE) for Nordsee 2 and 3which will be beside Nordsee1.The combined power capacity here will be 760 MW.However no final word has come on these two wind farms.
Climbing the Ladder
Northland has built 1092MW of capacity in the last 2 and a half years.About 750MW of which they now own.Annual revenues have grown from$760 million in 2014 to $1376 million in 2017 while over the same period adjusted EBITDA has grown from$349 million to $980 million.It's guidance for 2018 is for adjusted EBITDA of $900 to $950 million and free cash flow per share of $1.70 to $2.00 per share.But the stock price has not kept pace;in short, it has not climbed the ladder.It has not done what the men in the caption above have done;they moved across the river in stages.Based on the revenues and earnings ladder Northland Power should have climbed up to the $28 per share level.
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