Northland Power Inc. (TSX: NPI) is a Canada-based power producer, which focuses on developing, building, owning and operating clean and green power infrastructure assets in Canada, Europe and other selected global jurisdictions.

Key highlights

• Acquired Spanish operating portfolio of onshore renewable projects: The company has completed the previously announced acquisition of a Spanish operating portfolio of onshore renewable projects (the "Spanish Portfolio") totaling 551 MW of net capacity. This deal instantly elevates Northland to the top 10 renewable power operators in Spain, providing a solid foundation for future expansion in a promising market.
• Significant operating and development portfolio: The Company is at an inflection point given the accelerating global trend towards de-carbonization and electrification and its extensive offshore wind development portfolio. It has advanced and secured several projects which would increase its installed gross capacity by at least 2,710 MW over the next few years. These projects, once operational, are expected to enhance the Company’s adjusted EBITDA and free cash flows.

Source: Company

• Healthy liquidity: The Company's liquidity, according to management, is sufficient to handle the impact of COVID-19 while pursuing its growth plans. The company has access to CAD 1,445 million in cash and liquidity as of June 30, 2021, including CAD 838 million in syndicated revolving facility liquidity and CAD 607 million in corporate cash on hand.
• Reliable dividend distribution: The company has paid a constant dividend to its shareholders since 1997, which is a key positive and indicates operational resiliency and stable cash flows. Recently the group declared a monthly dividend of CAD 0.10 per share (CAD1.20 on an annual basis). Furthermore, the stock is carrying a decent dividend yield of ~ 3.032% at the price of CAD 40.45.
• Event update: The company will release its Q3 2021 financial results on November 10, 2021.
  

Financial overview of Q2 2021 (In thousands of Canadian dollars)

Source: Company

• The company posted total revenue of CAD 408.3 million in Q2 2021, against CAD 429.2 million in the previous corresponding period. The fall in revenue was primarily due to lower production in the offshore wind segment and a planned outage at one of Northland’s larger efficient natural gas facilities.
• The operating income in Q2 2021, stood at CAD 117.8 million compared to CAD 149.1 million in pcp. lower revenues and increased operating expenses were the main reason behind this fall.
• The company's posted net loss of CAD 6.3 million against a profit of CAD 74.2 million in pcp, mainly due to the foreign exchange loss of CAD 46 million.
  

Risks associated with investment

The company’s business activities are exposed to a variety of risks and uncertainties such as regulatory changes, rapidly changing market dynamics and volatility in commodity prices, interruptions of production, delays in growth projects, increased credit risk with counterparties, and foreign exchange volatility, etc. 

Valuation Methodology EV to Sales Based

Stock recommendation

Weaker output in the offshore wind sector and a scheduled outage at one of the company’s largest efficient natural gas plants contributed to the lower second-quarter financial performance compared to the previous year. It has, however, successfully established a global platform with geographic and technological diversification across four continents, and it is actively pursuing new sustainable infrastructure opportunities that include a variety of clean technologies, such as onshore and offshore renewables, and electricity grid networks. The Company’s long-term growth strategy is centered on developing its extensive pipeline of projects in Europe and Asia, which can increase long-term cash flow growth potential. Therefore, based on the above rationale and valuation, we recommend a “Buy” rating at the closing price of CAD 39.58 as on November 03, 2021. We have considered Boralex Inc, Capital Power Corp, Brookfield Renewable Partners LP. as the peer group for the comparison.

Technical Analysis Summary

One-Year Technical Price Chart (as on November 03, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.