Canada-based Northland Power said in an Aug. 10 quarterly earnings report that on April 19, the 100-MW Grand Bend wind farm declared commercial operations under its 20-year Ontario Feed-In-Tariff (FIT) contract, with all 40 wind turbines producing revenue and operating as planned.
Capital cost of the project was under budget by approximately C$19 million and commercial operations occurred ahead of schedule due to the contractors and suppliers taking advantage of favorable weather conditions. The project also successfully achieved term conversion under its senior project debt facility on July 29.
In other recent developments for the company, on July 7, Northland entered into agreements with H.B. White Canada Corp. and certain of White’s affiliates to settle all disputes and claims between White and Northland and certain Northland affiliates, concerning five ground-mounted solar projects located in and around Cochrane and Burks Falls in Ontario. In conjunction with the settlement, White also announced that it filed a court application for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) in Ontario. The settlement agreements between White and Northland are conditional upon the plan of compromise or arrangement proposed by White in its CCAA proceeding being approved by the court and its applicable stakeholders and the plan providing for the payment of C$6 million to Northland, as well as other relief. Northland also expects that, upon successful conclusion of the CCAA process, all of White’s liens and filed claims relating to Northland’s projects will be released.
In late December 2014, Northland terminated its engineering, procurement and construction (EPC) contract with White for default of White’s obligations to construct the Cochrane Solar projects. Under the terms of the EPC contract, the Cochrane Solar subsidiaries commenced a claim in arbitration for approximately C$159 million against White and White Construction Inc. (called “White US”), guarantor under the White EPC contract, for costs, losses and damages for breaches of the EPC contract. White and White US had counterclaimed in this arbitration proceeding for approximately C$74 million. White registered a lien and filed a claim for approximately C$32 million against the Cochrane Solar entities relating to the termination of the EPC contract. As a result of duplication in the White lien claim, Northland removed the lien from title by posting a letter of credit for approximately C$16.6 million.
In addition to the claim by White, a number of White’s subcontractors involved in the construction of the Cochrane Solar projects registered liens and filed claims against White and Northland’s Cochrane Solar subsidiaries. Northland had arranged for the subcontractors’ liens to be removed from title by posting letters of credit for approximately C$26.8 million. Northland had retained a holdback of C$7.4 million in accordance with the Ontario Construction Lien Act. Northland contends that its liability to the subcontractors is limited to this holdback amount.
Northland’s offshore wind facilities consist of the 600-MW Gemini wind farm, located off the coast of the Netherlands, and the 332-MW Nordsee One wind farm, located off the coast of Germany. Both Gemini and Nordsee One are currently under construction.
- In May 2014, Northland acquired a 60% interest in Gemini, which is located 85 kilometers off the coast of the Netherlands in the North Sea. The project has a 15-year electricity subsidy agreement with the government of the Netherlands. Under a two-contract project structure, Siemens will supply and erect the turbines, and Van Oord will construct the balance of the wind farm. Construction has been progressing well with the final in-field cables were installed on all 150 sections in April 2016. As of this point, 138 wind turbines, representing over 90% of the total wind turbines, have been installed with 105 wind turbines producing power and earning pre-completion revenues. Installation of the wind turbines will continue throughout 2016. Full commercial operations are expected by mid 2017. Gemini’s total capital cost is approximately €2.8 billion (C$4 billion as of June 30, 2016). The project remains on time and within budget.
- In September 2014, Northland acquired an 85% equity stake from RWE Innogy GmbH in Nordsee One, a 332 MW, €1.2 billion offshore wind development located in the North Sea, 40 kilometers north of Juist Island in German territorial waters. RWE, retains a 15% equity interest in the wind farms. Nordsee One is entitled to a FIT subsidy for approximately ten years under the German Renewable Energy Act, which is added to the market power price effectively generating a fixed unit price for energy sold. Nordsee One continues to progress as expected. Installation of all 54 foundation monopiles and transition pieces was achieved in April 2016. In July 2016, installation of the offshore substation was successfully completed. Installation of the in-field cables continues to progress well. Wind turbine production is ongoing, with installation expected to commence in early 2017. Full commercial operations are expected by the end of 2017. Nordsee One’s total capital cost is approximately €1.2 billion (C$1.7 billion as at June 30). The project remains on time and within budget.
As of June 30, Northland owns or has a net economic interest in completed power producing facilities with a total operating capacity of approximately 1,394 MW. Northland’s operating assets comprise facilities that produce electricity from renewable resources and natural gas for sale primarily under long-term PPAs with creditworthy customers in order to provide cash flow stability. Furthermore, Northland has a portfolio of projects in early stages of development.