Northland Secures Right to Acquire Majority Equity Stake in Gemini OWF

Northland Power Inc. (“Northland”) announced it has entered into agreements for the rights to acquire a majority equity stake in Gemini, a 600MW offshore wind project currently in advanced development.

Gemini is located 85 kilometres off the coast of the Netherlands in the North Sea, which combines one of the strongest and most reliable wind resources in the world with favourable sea bed conditions.

Northland has entered into agreements with a highly qualified team of offshore developers and contractors. The team includes Typhoon Offshore B.V., an experienced Netherlands-based developer of offshore wind projects in the North Sea; Siemens, the world’s leading supplier of offshore wind turbines (via Siemens Financial Services); Van Oord Dredging and Marine Contractors B.V. (Van Oord), a leading Netherlands-based international marine contractor with an excellent track record in offshore wind farm construction and a leading position as EPC contractor in offshore wind projects; and HVC N.V., a joint venture of 48 Dutch municipalities and six water regulatory authorities.

In 2010, Gemini was granted two 15-year agreements with the Government of The Netherlands through a competitive tender under the government’s Sustainable Energy Production Incentive (Stimulering Duurzame Energieproductie, “SDE”) program. These agreements provide a premium price for the large majority of the wind farm’s output for 15 years and incorporate mechanisms that reduce revenue exposure to wind production volatility.

Northland intends to actively participate in Project Gemini by taking a lead role during the remainder of development as well as construction and operations. Northland’s final investment is subject to meeting conditions for closing, formal documentation and the approval of Northland’s Board of Directors. Siemens’ final investment is also subject to approval by their Board of Directors. Northland has appointed a Committee of its Board to oversee Northland’s involvement in the project consisting of James C. Temerty, Linda L. Bertoldi, Sean Durfy, Pierre R. Gloutney. Upon closing, Northland will acquire a 55% interest in Gemini.

Gemini will play an important role in helping the G overnment of Netherlands’ achieve renewable energy targets mandated by the European Union’s Renewable Energy Directive, which calls for all Member States to reach a 20% share of energy from renewable sources by 2020. There is currently 5 GW of installed capacity in 58 operating offshore wind farms in

European waters with another 5.5 GW in construction or advanced development. According to the European Wind Energy Association (EWEA), it is anticipated that there will be up to 150 GW of installed offshore wind power in the EU by 2030, meeting 14% of the EU’s electricity demand.

Once operational, Gemini will be one of the largest wind farms in the world, and will produce approximately 2.5TWh annually – enough electricity to power more than 785,000 households. According to a July 2013 report by the EWEA, offshore wind power in the North Sea alone has the potential to meet the European Union’s electricity consumption four times over and the technology enjoys significant support, given its reputation for being a clean, renewable, efficient and safe power source.

Gemini is well advanced, having received its major environmental permits, and is close to finalizing its major contracts for turbine supply and balance of plant engineering, construction and procurement. The project will be constructed under a two-contract strategy involving Siemens and Van Oord to reduce interface risks. Siemens Wind Power was selected as the preferred supplier for the wind turbines; it is intended that they will install, and then operate and maintain them, under a long-term service contract. Van Oord will be responsible for supply and installation of the wind turbine foundations and the entire electrical infrastructure, including the offshore high voltage substation and electrical cable, as well as the transmission infrastructure and installation of the turbines.

“Today’s announcement underscores Northland’s commitment to fostering sustainable growth and delivering steady returns to our shareholders,” said James Temerty, Chairman of Northland Power’s Board of Directors. “Northland’s entry into the burgeoning offshore wind sector is consistent with our strategy of developing and investing in opportunities with long-term secured revenue contracts with creditworthy counterparties that yield attractive rates of return.”

Project Gemini’s total cost is projected to be $3.8 billion, and is expected to be financed with a combination of non-recourse project debt, mezzanine financing and equity from the consortium. Northland’s total net investment will be approximately $400 million, consisting of mezzanine and equity financing, in addition to credit support in the amount of approximately $32 million to secure the project revenue SDE agreements with the Dutch government.

Construction of Gemini is expected to start in late 2014; it is expected to reach commercial operations in 2017. The project is expected to be accretive on a free cash flow per share basis upon its completion, and provide project returns commensurate with Northland’s investment criteria.

 “As offshore wind becomes a more significant contributor to meeting the world’s need for renewable energy, Northland’s involvement in Gemini will position us very well for future opportunities and continued growth, noted John Brace, President and CEO of Northland Power. “This project provides an exceptional opportunity for Northland to integrate offshore wind into its diverse portfolio of clean and green technologies, while helping the Netherlands to achieve its renewable energy targets. We are already impressed by the high degree of support received from the Dutch government and the expertise of our partners. Together, we look forward to harnessing the enormous power of offshore wind, while helping to further advance the offshore wind sector.”

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Press release, August 1, 2013; Image: typhoonoffshore