Northland Power, Inc. (NPIFF) Q4 2022 Earnings Call Transcript

Northland Power, Inc. (OTCPK:NPIFF) Q4 2022 Earnings Conference Call February 24, 2023 6:00 AM ET

Company Participants

Mike Crawley - President and CEO

Pauline Alimchandani - CFO

Wassem Khalil - Senior Director, IR & Strategy

Conference Call Participants

Sean Steuart - TD Securities

David Quezada - Raymond James

Nelson Ng - RBC Capital Markets

Rupert Merer - National Bank

Mark Jarvi - CIBC

Andrew Kuske - Credit Suisse

Naji Baydoun - IA Capital Markets

Brett Castelli - Morningstar

Nicholas Boychuk - Cormark Securities

Operator

Ladies and gentlemen, convey you for opinionated by. Welcome to this Northland Power Conference Call to talk nan 2022 Fourth Quarter Results. During nan presentation, each participants will beryllium successful a listen-only mode. Afterwards, we will behaviour a question-and-answer session. [Operator Instructions] As a reminder, this convention is being recorded, Friday, February 24, 2023, astatine 10:00 a.m.

Conducting this telephone for Northland Power are Mike Crawley, President and Chief Executive Officer; Pauline Alimchandani, Chief Financial Officer; and Wassem Khalil, Senior Director of Investor Relations and Strategy.

Before we begin, Northland's guidance has asked maine to punctual listeners that each figures presented are successful Canadian dollars and to be aware that definite accusation presented and responses to questions whitethorn incorporate forward-looking statements that see assumptions and are taxable to various risks. Actual results whitethorn disagree materially from management's expected aliases forecasted results. Please publication nan forward-looking statements conception successful yesterday's news merchandise announcing Northland's Power results and beryllium guided by its contents successful making finance decisions aliases recommendations. The merchandise is disposable astatine www.northlandpower.com.

I will now move nan telephone complete to Mike Crawley. Please spell ahead.

Mike Crawley

Thank you, Latonia, and bully greeting to everyone. Thanks for joining america coming for our first net telephone of 2023. This morning, we're going to reappraisal our financial and operating results for nan fourth 4th and afloat twelvemonth 2022. Following our prepared remarks, we will return questions from analysts and look guardant to addressing those questions.

To footwear things off, arsenic we ever do, I want to reiterate that nan wellness and information of our labor and our stakeholders ever comes first. Our rigorous adherence to our wellness and information protocols ensures nan information of our employees, while allowing america to support a precocious level of readiness astatine each of our facilities.

We continued our beardown capacity successful nan 4th fourth and result for nan afloat year, delivering coagulated operating results and financial results successful 2022, starring america to transcend nan precocious extremity of our guidance ranges for some EBITDA and free rate travel per share.

A cardinal driver down our financial results has been our beardown operational performance. Our teams person worked difficult this past twelvemonth to guarantee that our accommodation are operating astatine precocious readiness levels, allowing america to seizure a beardown upwind and star assets this past twelvemonth and capitalize connected precocious powerfulness prices successful Europe.

Looking astatine nan header numbers, we delivered adjusted EBITDA of $353 cardinal successful nan 4th fourth compared to $364 cardinal astatine nan aforesaid clip a twelvemonth ago. On an yearly basis, adjusted EBITDA successful 2022 stands astatine conscionable awkward of $1.4 cardinal compared to $1.1 cardinal successful 2021. This consequence represents a grounds for Northland, an accomplishment of which we are each very proud.

For adjusted free rate travel per stock and free rate travel per share, we achieved $0.16 and $0.06, respectively, successful nan quarter, compared to $0.80 and $0.69 successful nan aforesaid play a twelvemonth ago. While connected a afloat twelvemonth basis, we person delivered adjusted free rate travel of $1.95 per stock and free rate travel per stock of $1.61. This compares to $1.77 per stock and $1.40 per share, respectively, successful 2021. Pauline will supply a much elaborate look into nan financial numbers later successful nan call.

Reflecting connected our accomplishments successful 2022, I'm very proud of nan efforts and results that our squad delivered to proceed to position Northland astatine nan forefront of nan world power transition. The world accent connected power information and nan request to accelerate nan move from fossil fuels to renewable power sources remains unchanged. A important build-out of renewable power will beryllium needed complete nan adjacent decade to facilitate these objectives.

Over nan people of nan year, we made beardown advancement successful advancing cardinal improvement projects, root further opportunities and position ourselves successful immoderate of nan champion markets to capitalize connected this growth. Our maturation pipeline now sits astatine astir 20 gigawatts and is good diversified crossed technologies and markets. Having a robust improvement pipeline gives america optionality successful position of which projects we determine to put our superior in. And to beryllium clear, it doesn't mean that we'll beryllium building each of these projects. In fact, it allows america to beryllium selective successful wherever we deploy our capital.

Our beingness connected nan crushed successful cardinal markets is an important occurrence facet going forward. Energy security, decarbonization policies are driving accrued targets for offshore upwind and accelerating permitting clip lines, peculiarly successful Europe, wherever we person already established a patient portfolio.

For onshore renewables, we person consciously picked onshore markets wherever we forecast beardown maturation for renewables, spot bully argumentation support going guardant and wherever location is simply a favorable finance climate.

Last year, we brought nan attraction backmost to our home market, Canada by securing a 1.6 gigawatt star portfolio and improvement squad successful nan state of Alberta. This is simply a large measurement guardant successful nan Canadian marketplace for us. Alberta is presently nan astir prolific marketplace wrong Canada for renewable improvement pinch a robust firm offtake market. The acquisition adds a improvement pipeline of star and retention projects, of which 220 - nan 220-megawatt Jurassic Project would scope commercialized operations arsenic early arsenic 2025.

In Ontario, we acquired a mostly liking successful a 250-megawatt late-stage grid-connected artillery retention task successful nan confederate extremity of nan province. The Oneida Energy Storage Project, 1 of nan largest successful North America and surely nan largest successful Canada. With that, Northland will beryllium nan mostly proprietor of nan task and will return nan lead domiciled successful its construction, financing and operations.

The task will use from a 20-year fixed value statement for gross payments pinch nan IESO, nan strategy usability successful Ontario for nan mostly of nan capacity from nan project. The remaining capacity will gain marketplace revenues done income into nan wholesale market. Financial adjacent for nan task is expected successful 2023, pinch afloat commercialized operations targeted to commence successful 2025.

Turning to our improvement activities successful Hai Long. The task has now executed each of its worldly contracts pinch suppliers and commenced early building works, including starting nan fabrication of cardinal components. The financing of nan task is progressing, albeit slower and much challenging than expected owed to macro and market-specific factors.

As portion of our business strategy successful December, we announced an statement pinch Gentari International Renewables, whereby Gentari will get 49% of our liking successful Hai Long. This translates into an effective ownership of 29.4% for Centari pinch Northland, still retaining 30.6% ownership of nan project.

Northland will proceed to return nan lead successful nan building and cognition of nan project. In addition, we besides signed an exclusivity statement for further imaginable partnerships pinch Gentari successful Taiwan. Closing of nan transaction connected this is taxable to definite conditions and regulatory approvals.

At Baltic Power, we are very pleased really nan Polish authorities responded to immoderate of nan marketplace disruptions that person happened successful nan past twelvemonth by making definite changes to nan CfD aliases nan gross contract. The project's 25-year CfD is now denominated successful euros alternatively of nan Polish Zloty, and ostentation indexation has been revised to a guidelines twelvemonth of 2022 from 2023, helping offset nan inflationary value pressures successful this past year.

In South Korea, we've been awarded energy business licenses aliases EBLs, for astir 1.3 gigawatts of offshore upwind projects, including for Dado water and Bobae. Northland is besides pursuing further early-stage improvement opportunities successful nan state from aggregate projects pinch up to 1.8 gigawatts of capacity.

Lastly, astatine our La Lucha star project, we proceed to activity to execute commercialized operations for nan project. In January, we received support of nan hold of nan procreation licence for La Lucha, and we are now coordinating pinch due regulatory authorities to initiate testing of nan task successful bid to execute commercialized operations, which is expected later this year.

All successful all, a very progressive twelvemonth for Northland. And contempt nan world uncertainty and macroeconomic pressures, we proceed to present beardown operating and financial results and proceed to execute connected our strategical plan.

With that, I will now move nan telephone complete to Pauline for a much elaborate reappraisal of our financial results.

Pauline Alimchandani

Thank you, Mike, and bully morning, everyone. Last night, Northland Power released operating and financial results for nan 4th fourth and afloat twelvemonth of 2022. Our financial capacity successful nan twelvemonth was solid, wherever we generated results that exceeded our financial guidance, supported by beardown capacity crossed our operating portfolio.

Our operating assets achieved a precocious level of availability, which provided a bully backdrop to capitalize connected nan stronger upwind and star assets and nan higher powerfulness prices successful Europe that benefited our offshore upwind facilities.

Specific to nan 4th quarter, nan early completion of nan base replacement run astatine Nordsee One meant that nan turbines were afloat disposable to return advantage of nan seasonal stronger wins successful nan quarter. This helped to present 4th fourth results that exceeded management's expectations.

Adding each this up, we achieved results that were stronger than our revised guidance. Specifically, we achieved adjusted free rate travel per stock that came successful astatine nan precocious extremity of nan guidance range, while free rate travel per stock and adjusted EBITDA some exceeded nan precocious extremity of their respective guidance ranges.

When comparing to nan midpoint of our original financial guidance issued successful February of past year, our afloat twelvemonth 2022 results were astir 17%, 24% and 11% higher than its guidance for adjusted EBITDA, free rate travel and adjusted free rate travel per share, respectively.

In fact, we were capable to execute this consequence moreover aft derisking our business done astir $150 cardinal of indebtedness repayments astatine Gemini and Spain that were announced pinch our 3rd 4th results, but were funded successful nan 4th quarter.

Looking astatine nan circumstantial financial results, we achieved afloat twelvemonth adjusted EBITDA of astir $1.4 billion, representing an summation of 23% aliases $260 cardinal compared to $1.1 cardinal successful 2021. The cardinal factors that contributed to nan higher adjusted EBITDA year-over-year included, higher contributions from our offshore upwind portfolio resulting from a operation of higher marketplace prices and a stronger upwind assets compared to 2021, higher contributions from our Spain portfolio owed to a afloat twelvemonth publication successful 2022 compared to 5 months successful 2021.

The Spanish portfolio besides benefited from higher regulated posted prices successful 2022, helping lend to nan wide summation successful contributions from nan portfolio and a onetime guidance interest and different optimizations from nan restructuring and upsizing of our Kirkland Lake in installments facility. This spot was somewhat tempered by a alteration successful operating results owed to nonaccomplishment successful publication connected nan expiry of nan PPA and consequent waste of nan Iroquois Falls earthy state installation successful April of 2022.

With respect to our adjusted free rate travel and free rate flow, Northland generated astir $461 cardinal and $380 million, respectively. This compares to $386 cardinal and $307 cardinal for 2021. The important factors contributing to nan $75 million, a 19% summation successful year-over-year adjusted free rate travel were an summation successful wide publication crossed each accommodation resulting from amended operating results, an summation successful nan onetime guidance interest and different optimizations from Kirkland Lake arsenic antecedently discussed and onetime proceeds from nan waste of nan Iroquois Falls and Kingston businesslike earthy state facilities.

These increases were partially offset by higher existent taxes arsenic a consequence of stronger financial results and a alteration successful publication from nan Spanish portfolio, chiefly owed to nan onetime main costs upon nan indebtedness restructuring.

On a per stock basis, these figures translated into adjusted free rate travel of $1.95 and $1.61, respectively, compared to $1.77 and $1.40, respectively, for 2021. These results generated a rolling 4-quarter adjusted free rate travel and free rate travel nett payout ratios of 43% and 52%, respectively, calculated connected nan ground of rate dividends paid compared to 45% and 56% for nan aforesaid play ending December 31, 2021.

With respect to our equilibrium sheet, Northland retains ample liquidity to money our existent projects. As of December 31, we had entree to astir $1 cardinal of rate and liquidity, comprising $600 cardinal of liquidity disposable connected our revolving installation and $500 cardinal of firm rate connected manus to thief america prosecute our maturation initiatives.

We proceed to prudently negociate our equilibrium sheet, taking proactive actions to further heighten our rate flow, bolster our firm liquidity and guarantee Northland remains successful a bully position to money its maturation needs. Part of these actions see utilization of aggregate sources of liquidity to money maturation and superior investments, including proceeds from our ATM program.

We besides proceed to utilize task refinancing arsenic a instrumentality to optimize nan indebtedness profile, heighten early rate flows and make further liquidity to money our growth. With higher rate flows successful 2023 crossed our portfolio, we were capable to proactively deleverage immoderate of our assets to derisk nan semipermanent rate travel floor plan while besides enhancing nan economical return of nan projects done favorable refinancing terms. In total, we refinanced complete CA$3 cardinal of task indebtedness successful 2022 and generated astir $80 cardinal of further liquidity successful nan year.

As outlined astatine our Investor Day connected February 3, we person an estimated $2.2 cardinal of equity superior deployment towards projects targeted for financial adjacent this year. Of nan $2.2 cardinal request is expected to money Hai Long, Baltic Power and our recently announced Oneida Battery Storage Project successful Ontario.

Of this, astir $1.7 cardinal has already been originated and/or announced done proceeds from nan ATM programme and nan early expected proceeds from nan Hai Long business sale, which is not yet closed. The remaining $500 cardinal is expected to beryllium funded done further imaginable sell-down proceeds, hybrid bonds, liquidity connected hand, imaginable ATM issuances and plus refinancing. We judge location is ample redundancy and sources disposable to america to money our remaining equity requirements for 2023.

Turning to our 2023 financial guidance, arsenic antecedently disclosed. For adjusted EBITDA, we expect to make betwixt $1.2 cardinal and $1.3 cardinal this year. Guidance for 2023 free rate travel per share, we expect nan scope to beryllium $1.30 to $1.50, while for adjusted free rate flow, we expect to make $1.70 to $1.90 per share.

As a maturation institution pinch a important pipeline of improvement projects, Northland is committed to unlocking worth by deploying early-stage finance superior aliases devex to beforehand our projects. As such, successful 2023, we expect to deploy improvement expenditures of astir $100 cardinal aliases astir $0.40 [ph] per stock to money expenditures to beforehand secured projects. This would see expenditures connected our Scotland Offshore Wind project, North Sea 3 and Delta projects successful Germany, nan Korean projects, nan precocious acquired Alberta star portfolio and Oneida successful summation to different Canadian and U.S. opportunities.

In conclusion, we delivered beardown results successful nan 4th and for nan year, which surpassed nan precocious extremity of nan guided ranges for adjusted EBITDA and free rate flow. We besides achieved a grounds level of adjusted EBITDA. We are proud of nan accomplishments we person achieved together arsenic nan squad complete nan past year, and we are gearing up ourselves to proceed to present connected our stated objectives successful 2023.

I will now move nan telephone backmost complete to Mike for his concluding remarks.

Mike Crawley

Thank you, Pauline. As Pauline mentioned, we had a very bully 4th and a awesome twelvemonth successful 2022. We look guardant to different beardown twelvemonth successful 2023. And pinch projects nearing cardinal milestones, we are very excited astir nan continued maturation of Northland.

This concludes our prepared remarks. We'd now beryllium happy to return your questions. Antonio, please unfastened nan statement for immoderate questions.

Question-and-Answer Session

Operator

Certainly. [Operator Instructions] One infinitesimal for our first question. And our first mobility comes from Sean Steuart of TD Securities. Your statement is open.

Sean Steuart

Thank you, bully morning. Question for Pauline successful to start. You stayed progressive connected nan ATM successful nan 4th quarter. Can you speak to your comfortableness continuing to usage that installation arsenic nan stock prices travel nether moreover much unit since nan Investor Day. Is that still from your perspective, value-accretive instrumentality to usage correct now?

Pauline Alimchandani

So we person benignant of aggregate sources of superior disposable to us. I would opportunity that nan ATM usage should beryllium viewed arsenic a semipermanent instrumentality successful nan consciousness of opportunistically being utilized complete nan adjacent mates of years to money nan projects astatine financial close. And that will mean we are progressive connected it astatine points successful clip wherever it's opportunistic and not progressive connected it erstwhile a constituent of clip wherever it's not opportunistic, and we person different sources of superior disposable to us.

Right now, our priorities astatine nan commencement of nan twelvemonth is to alteration ourselves to rumor firm hybrid bonds, and we are presently moving connected that arsenic a root of superior successful summation to looking astatine different refinancing opportunities and looking to spot and adjacent connected different type of firm financing that tin thief america benignant of money nan remaining acuity requirements this year. And successful summation to that, arsenic you know, we've besides commenced a mates of selldown proceeds arsenic well.

So I mean, each of it successful total, I think, is much than ample to money what's near for this year. And I don't want to remark connected benignant of nan near-term usage of nan ATM program, but certainly, complete nan agelong term, we intend to enactment progressive connected it.

Sean Steuart

Okay. And tin you - pinch respect to nan hybrid, tin you speak to nan costs of that indebtedness arsenic you spot it correct now?

Pauline Alimchandani

Not yet. I deliberation it's still early, and we're still benignant of figuring retired pricing successful terms. But yes, I mean, it's -- arsenic you know, we repaid nan Pref [ph] astatine nan extremity of nan year, its nary longer a merchandise that deliberation made consciousness to america from a costs position and an ongoing portion of our superior building going forward. I deliberation firm hybrids are much cost-effective instrumentality for us. Also nan benignant of standing agencies are benignant of supportive of nan product. So it will beryllium nan instrumentality successful our superior building going forward, but -- and we deliberation it will beryllium amended than Pref, but we're still moving done nan position of nan insubstantial that we scheme to issue.

Sean Steuart

Okay.

Mike Crawley

I mean location is 2 points - cardinal points, Sean, are that we're number one, continuing to look to get up of our backing needs and enactment good up of our backing needs. And second, create optionality and usage nan champion tool, nan champion instrument, fixed what marketplace conditions are astatine immoderate fixed time.

Sean Steuart

Got it. Thanks, Mike. And 1 different question, Mike. Just pinch respect to nan delays astatine Hai Long pinch respect to arranging project-level indebtedness there. How overmuch of that is circumstantial to Taiwan overall? And are you anticipating you're seeing immoderate clash for Baltic Power connected that front?

Mike Crawley

I deliberation - no, I would opportunity astir of it is much focused connected Taiwan, and it's specifically related to 1 different project. There's respective offshore upwind projects that person been task financed successful Taiwan. There's 1 that has knowledgeable immoderate important delays. And connected that 1 project, there's immoderate overlap successful lenders. So we've had to walk much clip pinch those lenders explaining our task schedule, our task execution scheme successful much item than we typically would have.

So it's really much circumstantial to that, that's causing america to walk much clip connected Q&A than we astir apt would person expected to. On nan Baltic Power task finance, it is moving guardant well, and there's nary hold successful nan task financing.

Sean Steuart

Okay. That's each I person for now. Thanks very much.

Operator

One infinitesimal for our adjacent question. And our adjacent mobility comes from David Quezada of Raymond James. Your statement is open.

David Quezada

Yeah, thanks. Morning, everyone. Mike, conscionable going backmost to your comments astir being selective pinch your pipeline and obviously, nan pipeline turn rather significantly. Is location immoderate colour you tin supply connected conscionable really your decision-making process mightiness alteration conscionable pinch respect to, I guess, having much options, tin you bid successful immoderate cases much conservatively? And possibly conscionable immoderate commentary connected really your organizational realignment mightiness support that?

Mike Crawley

So David, your first constituent is simply a bully one. Having much options does let you to bid into auctions for power contracts aliases discuss power contracts bilaterally successful a much prudent way, right? You don't person to triumph each auction, which I deliberation is simply a position that you want to beryllium in. Moreover, you besides don't person to build each project. And successful immoderate cases, if you look astatine a project, and that task has, for immoderate reason, much worth to different proprietor because of nan circumstances that, that proprietor astatine that fixed time, find themselves in, that whitethorn beryllium nan amended action for us.

And truthful it really is each astir looking astatine nan superior that we have, which is Pauline mentioned presently is ample, and we proceed to make judge that we get up of our backing needs, but deploying that superior successful nan opportunities that connection nan champion returns.

David Quezada

Okay. Great. Thanks for that. And possibly conscionable 1 much for me. arsenic you've sewage a adjacent magnitude of activity connected nan offshore upwind building beforehand coming, I guess, towards nan mediate aliases nan second portion of nan decade. I wondering if you could touch connected alloy availability, specifically for offshore upwind turbines.

How do you spot that evolving complete clip arsenic activity successful offshore upwind ramps up? And do you person immoderate benignant of for illustration longer-term solutions you could put successful spot to unafraid entree to those vessels arsenic needed?

Mike Crawley

It's a bully question, David. I mean, I deliberation erstwhile you look astatine nan constraints successful renewables and peculiarly successful offshore wind, but 1 of nan biggest constraints aliases concerns for america is alloy availability. So each of our task teams surely are moving difficult to make judge we get up of that and unafraid vessels earlier than we would person otherwise.

We don't person thing to opportunity connected much imaginative aliases longer-term solutions than that. But that surely is thing that we're - our task teams are very, very focused connected getting up of. And I think, David, I do deliberation complete time, nan marketplace signals will lead to much vessels being constructed and much options successful nan market, but there's a lag, right?

David Quezada

That's awesome color. Thanks, Michael. I'll move it over.

Operator

Certainly, 1 infinitesimal for our adjacent question. And our adjacent mobility comes from Nelson Ng of RBC Capital Markets. Your statement is open.

Nelson Ng

Great. Thanks and bully morning, everyone. So a speedy 1 for Pauline. You've mentioned that you redeemed nan - aliases astatine slightest 1 tranche of nan Pref [ph] And I deliberation you person 2 tranches left. Can you conscionable springiness a spot much colour arsenic to why you're redeeming those Pref? Is it chiefly for taxation reasons?

Pauline Alimchandani

No, I deliberation that property are really nary longer benignant of a wide utilized benignant of tool. And I deliberation it was astir apt a mates of years agone astatine nan Investor Day, we discussed benignant of firm hybrids for nan first clip arsenic benignant of nan semipermanent - nan semipermanent merchandise to person successful our superior structure.

And erstwhile we looked astatine nan complaint reset and past nan costs of that merchandise arsenic good against what we tin now do, I think, going guardant pinch nan equilibrium expanse and opportunities and what's disposable to america now, I deliberation we tin do better.

Nelson Ng

Okay. Great, thanks. And you would expect to get immoderate equity in installments connected nan hybrid debt, right?

Pauline Alimchandani

That's correct. Yes. That's correct.

Nelson Ng

Okay. Got it. And past conscionable moving to my adjacent question. In position of nan hybrid upwind improvement successful New York, and you guys springiness a spot much colour connected why you sold that project. I understand that nan task wasn't very economical to commencement disconnected with, but immoderate much colour would beryllium great?

Mike Crawley

So nan task was 1 twelvemonth down nan 2 different upwind projects that we person successful New York. So it would person been impacted by immoderate of nan costs inflation, which nan 2 different projects sewage up of. So that was 1 factor.

But nan different facet besides was that there's different purchaser that had an further gross watercourse that was not disposable to us. And truthful that made for, successful my view, a bully transaction for some of us.

Nelson Ng

Okay. That's great. And past conscionable 1 past question. I deliberation nan MD&A indicated that you guys utilized $38 cardinal of rate for nan Oneida Battery Storage Project and nan Alberta star portfolio. Is this conscionable nan first milestone costs and past nan remainder will astir apt return spot erstwhile those projects yet deed financial close. Is that really nan costs structure?

Mike Crawley

A spot different pinch each, but connected nan erstwhile connected nan Alberta location are early milestone payments. And connected - I don't judge location are - yes. So we don't usually get into nan specifications of nan costs terms.

Nelson Ng

Okay.

Pauline Alimchandani

But past connected nan artillery retention project, it would conscionable beryllium nan financial close, backing construction.

Nelson Ng

Okay. Thanks.

Operator

One infinitesimal for our adjacent question. Our adjacent mobility comes from Rupert Merer of National Bank. Your statement is open.

Rupert Merer

Hi. Good morning, everyone. Coming backmost to hybrid, was this 1 of nan 2 sell-downs that you talked astir doing this twelvemonth aliases location are a mates of connected bridge...

Pauline Alimchandani

No, this is simply a afloat divestiture. So sell-downs subordinate to erstwhile we speak to nan nomenclature. It really is partial sell-down liking and versus this is an outright divestiture.

Rupert Merer

Okay. Great. And nan plus aliases nan location doesn't look to beryllium non-core, should we beryllium reference thing into this? Is this an denotation that possibly your different projects and successful New York could beryllium candidates aliases waste down aliases waste off?

Mike Crawley

No, not - you shouldn't publication thing much into this than nan truth that nan - arsenic I said, nan task was a twelvemonth later, and it ever was scheduled to beryllium built a twelvemonth later. So it did get impacted by higher superior costs arsenic we person seen ostentation successful instrumentality prices successful nan proviso concatenation for renewables complete nan past year, arsenic you know, crossed nan board. So that impacted nan project.

And past - but arsenic importantly, location was a mates of different buyers that had entree to definite transmission authorities that gave them entree to an further gross watercourse that we didn't person entree to.

So it's fundamentally putting nan improvement plus successful nan hands of nan proprietor that tin extract nan astir worth from it. And past some parties stock nan vendor and nan purchaser stock successful that benefit. That really is each it is.

Rupert Merer

Great. Thank you. And past secondly, La Lucha. So you person immoderate testing little near to do there. Is that scheduled yet? Do you person an thought of erstwhile you mightiness beryllium capable to move it on?

Mike Crawley

So each of nan scheduling and nan activity is going connected correct now pinch nan regulator and nan transmission usability successful Mexico. It is moving astatine gait aliases moreover a spot quicker than we had anticipated. The procreation licence was - nan hold was issued astir 2 weeks ago, I think. So it's moved very quickly since immoderate meetings that we had successful Mexico City successful nan 2nd week of January

So it's moving rather quickly, and we're getting a very bully practice from each of nan Mexican authorities. So I can't springiness you an nonstop day connected erstwhile it will beryllium connected, but wherever things are moving well.

Rupert Merer

As nan decorativeness statement approaches here, I ideate you're keeping an oculus connected nan marketplace for pricing aliases contracting. Can you springiness america an update connected that? How does nan marketplace look today? What would beryllium your strategy connected pricing?

Mike Crawley

Well, what I guess, absorbing successful Mexico, is that location hasn't been a batch of further renewable power capacity built retired complete nan past mates of years beyond a mates of ample projects that nan CF did, but location haven't been immoderate IPPs building retired a batch of capacity simply because of nan uncertainty successful nan marketplace nan past 2 years successful Mexico.

At nan aforesaid time, business finance successful manufacturing capacity successful Mexico has continued moving forward. So there's a batch of multinationals still successful Mexico and that are continuing to put successful Mexico that are looking for renewable power capacity to meet their nett zero and their ESG targets.

So yes, we deliberation nan La Lucha plus successful a reasonably bully position arsenic acold arsenic there's not a batch of non-contracted renewable power accommodation successful Mexico that are disposable to business nonaccomplishment takers and power prices are reasonably robust arsenic good successful Mexico comparative to wherever they would person been a mates of years ago. So each of that, we're conscionable moving done to spot what nan revised economics are going to beryllium connected that asset, but that's benignant of wherever we're at.

Rupert Merer

Okay. Thanks. I'll time off it there.

Operator

One infinitesimal for our adjacent question. Our adjacent mobility comes from Mark Jarvi of CIBC. Your statement is open.

Mark Jarvi

Thanks. Good morning, everyone. First mobility is conscionable connected Hai Long. Last year, you signed nan firm PPA, you struck nan woody pinch Gentari to thief support economics of that task and offset immoderate higher CapEx.

Are location immoderate different levers you tin propulsion to amended nan return profile? Could you really summation nan size of nan sell-down to 0 Gentari aliases immoderate different partner? Just funny if location different ways to heighten returns?

Mike Crawley

We wouldn't do that and for a number of reasons, including regulatory. So we wouldn't beryllium expanding nan waste down further than what we've done already, and we're now down to conscionable somewhat complete 30% successful nan wide project. So it's a important simplification from our original 60% position successful that project.

We proceed to look astatine ways to optimize nan task and we'll proceed to do truthful up until financial close. I'm going to beryllium retired location successful 2 weeks' clip arsenic good pinch our Head of Development, looking wrong a bid of meetings. So we proceed to look astatine ways to optimize that task further, yeah.

Mark Jarvi

Is it successful position of conscionable hold [ph] of nan project? Is it still successful position of costs inputs, for illustration what - I don't cognize if you tin stock anything, Mike, successful position of really you tin further optimize nan task astatine this stage?

Mike Crawley

I wouldn't springiness you immoderate specifications astatine this point, and we'll stock them if we're capable to unafraid much optimizations.

Mark Jarvi

Okay. And past astatine nan Investor Day a fewer weeks ago, you indicated that Baltic Power is not thing you see trading down you really for illustration nan charismatic returns and rate flows. But if nan stock value connection and ATMs little charismatic complete nan people of this twelvemonth aliases adjacent year, would you reconsider doing a process possibly connected nan different broadside of financial close?

Pauline Alimchandani

So I deliberation our dues successful Baltic Power coming are still nan aforesaid arsenic astatine Investor Day, but I deliberation we are looking astatine immoderate aliases each opportunities successful our portfolio for sell-downs of improvement assets and aliases yes, opportunities wherever we spot expertise to recycle conscionable Baltic Power connected 1 of them, but location are others.

Mark Jarvi

And conscionable Pauline to prime up connected that comment. In position of timing of sell-down, is location immoderate change? Is it still for illustration nan optimal clip is astir financial close? Are you seeing opportunities to do it sooner connected definite projects?

Pauline Alimchandani

I deliberation we're looking astatine opportunities that are sooner than that.

Mark Jarvi

Okay. Thanks...

Pauline Alimchandani

Earlier on, yes.

Operator

One infinitesimal for our adjacent question. Our adjacent mobility comes from Andrew Kuske, Credit Suisse. Your statement is open.

Andrew Kuske

Thanks, bully morning. I conjecture it's a wide mobility for Mike. And there's a bunch of initiatives crossed Europe, and it varies a small spot by state by state to really accelerate permitting for renewables. If you tin possibly conscionable springiness america a discourse of what you deliberation is improving and that tin really possibly accelerate maturation for you and possibly immoderate of nan challenges that you spot ahead?

Mike Crawley

I deliberation successful nan - surely successful nan mean to agelong term, location is simply a batch of opportunities successful Europe arsenic they put successful spot policies that are going to thrust a semipermanent conversion distant from Russian state and besides accelerate wide their decarbonization ambiance objectives, right? So I deliberation each of that is bully and it's getting overmuch much superior and overmuch much deliberate now than it would person been a year, 1.5 years ago.

On nan efforts to accelerate permitting successful immoderate cases, I deliberation it will thief us. We'll see. I mean we've sewage we're astatine an early shape of looking astatine hybridization aliases adding immoderate star to our upwind assets successful Spain, for example, pinch immoderate permitting would beryllium required truthful that we'd look guardant to, and that's a marketplace wherever mostly been seen arsenic a slower marketplace to licence in, truthful that would beryllium invited and would thief connected that initiative.

On offshore upwind and nan different large-scale projects, nan biggest constraint now is not needfully permitting and is - I deliberation it was David's question, I'm not judge his mobility was earlier successful nan call. It's proviso chain. So I mean, I'd for illustration to benignant of talk very optimistically astir each of nan awesome things are going successful Europe and location are.

But nan astir important point now is to spot much investments successful nan proviso chain, peculiarly successful offshore wind, and that's what's going to unleash and accelerate much offshore upwind investments and make those investments besides going guardant much charismatic connected caller projects arsenic well.

Andrew Kuske

Okay. Appreciate that color. And past I conjecture possibly conscionable indirectly successful proviso chain, but it's a cardinal portion of nan puzzle is conscionable connected nan shipping side, immoderate of nan South Korean shipyards. I conjecture what are your thoughts astir South Korea. You've evidently been exposed to nan marketplace connected a very preliminary basis, BP entered nan market. I guess, a week aliases 2 agone pinch nan JV.

If you could conscionable possibly springiness america immoderate insights and thoughts connected really you spot that marketplace developing? What clip framework are things going to move faster now? And does that indirectly thief successful nan proviso chain, conscionable fixed nan vessel building yards there?

Mike Crawley

It's a bully question. So South Korea is really absorbing offshore upwind marketplace for a number of reasons, including those that you conscionable gave. So there's a batch much attraction being paid to South Korea, including that announcement from BP. We're seeing a spot of a displacement from Japan to South Korea from a batch of developers and from nan proviso concatenation arsenic well.

So we've been progressive location for respective years. We've sewage a very beardown squad connected nan crushed and improvement squad that's been securing these energy business licence aliases tract exclusivity connected projects astir Korea. So it's a marketplace that we're very willing successful that there's location different avenues to offtake presently successful South Korea nan 3 different, I guess, processes, which we tin spell and I won't spell into now. But - truthful that's bully to person optionality successful position of really you root your gross contract.

The portion astir South Korea is it is still a comparatively marketplace for offshore wind. These are ample projects that we person that others have. There's a batch of request for power and renewable power successful South Korea for sure. But these projects are complex, too.

So our adjacent shape is really to get nether nan hood from a creation and an early-stage provender standpoint connected these projects and besides really drill down connected nan offtake and really beryllium retired nan viability of these projects, but we're successful a bully position pinch this galore sites secured, peculiarly erstwhile others are now conscionable trying to get into nan market.

Andrew Kuske

Okay. That's great. Thank you.

Mike Crawley

And successful position of - and sorry, 1 past thing, Andrew, successful position of proviso chain, it - arsenic I said, it is constraint globally. But 1 of nan advantages of South Korea is simply a batch of nan shipyards and fabrication yards that they have. For example, we're sourcing our jackets and cables for portion of our Taiwan task from South Korea.

And it's - truthful it's 1 of those markets wherever erstwhile they - erstwhile you look astatine localization, it really is an advantage wherever mostly erstwhile you perceive localization for projects you deliberation this is going to adhd costs successful South Korea actually, successful my view, is an advantage for that market.

Operator

And 1 infinitesimal for our adjacent question. Our adjacent mobility comes from Naji Baydoun of IA Capital Markets. Your statement is open.

Naji Baydoun

Hi, bully morning. Just wanted to spot disconnected successful Japan. I deliberation there's an auction slated for early this twelvemonth aliases mid-2023. Just fixed benignant of nan - wherever your projects are successful that market. Is it excessively soon for you to participate? And really do you spot benignant of nan changes of nan auction guidelines versus possibly what happened past clip astir playing out?

Mike Crawley

We're gladsome that nan Japanese authorities are revising nan auction rules. We didn't for illustration really nan past auction played retired and had concerns. I deliberation we're still reviewing nan rules astir nan early rounds successful Japan and coming to a determination whether aliases not we will beryllium participating successful them.

Naji Baydoun

Okay. So a spot excessively early, but location is simply a chance that you extremity up deciding to participate successful nan auctions this year.

Mike Crawley

We haven't decided 1 measurement aliases another.

Naji Baydoun

Okay. And conscionable connected Nordsee, connected nan Nordsee Cluster, if you could conscionable springiness america immoderate updates connected contracting there? How precocious are nan negotiations coming for nan cluster A? And past pinch that, is location a position to possibly including Nordsee One and for illustration arsenic a re-contracting pinch either clusters erstwhile you're looking to statement those?

Mike Crawley

Yes. So I don't cognize overmuch to adhd from Investor Day connected nan Nordsee Cluster aliases Nordsee A [ph], nan first half of nan cluster. As I said then, nan procurement process is coming towards a conclusion. So we're moving towards selecting preferred suppliers crossed nan proviso concatenation for Nordsee A, nan first half.

The costs are coming successful supra what our original finance lawsuit were, for sure, fixed nan costs ostentation complete nan past year. So for us, it was ever that nan intent was ever to participate into a firm offtake aliases inferior offtake for those projects and nan constituent we're moving done now is conscionable to spot whether nan summation successful power prices, which location besides has been successful clearing value for firm offtake gets america backmost to nan aforesaid economics pinch nan higher superior costs. So that's what we'd beryllium moving done correct now connected it. On Nordsee One, nan timing does overlap pinch Nordsee Cluster. So location whitethorn beryllium an opportunity to blend nan 2 together, but we're not yet astatine that stage.

Naji Baydoun

Okay. Thank you.

Operator

One infinitesimal for our adjacent question. Our adjacent mobility comes from Brett Castelli of Morningstar. Your statement is open, Brett.

Brett Castelli

Yeah, hi. Thank you. Just a mobility connected early offshore upwind offtake. Curious, Mike, if you spot nan imaginable for, let's conscionable telephone it for illustration a reopener astatine each successful position of early offtake location and possibly immoderate sharing betwixt nan offtake broadside and nan improvement side, fixed nan trends we've seen present recently?

Mike Crawley

So I mean I conjecture it's successful a measurement that's benignant of 2 offtake markets for offshore upwind a sovereign-backed PPAs aliases CfDs that are tally done centralized auctions and thing for illustration Scotwind we'd beryllium expecting to bid into that benignant of a process. And past there's a firm offtake, which is what we're looking astatine for nan Nordsee cluster, 1 of nan options for our South Korean projects down nan road.

So nan I deliberation connected centralized benignant of sovereign auctions for offshore wind, those actions, I think, will spot prices bespeak bids bespeak what existent superior costs are, which whitethorn mean complete clip arsenic much capacity comes disposable wrong nan offshore upwind proviso chain.

On firm offtake, certainly, there's much liquidity successful nan marketplace than location was 2 years ago, much buyers looking to statement and buyers looking to statement for longer tenure than location was 1.5 years aliases 2 years ago, and we're seeing those firm offtake clearing astatine higher prices.

But arsenic I said, I mean, it conscionable - it is simply a spot of a supply-demand situation, and we'll spot if benignant of astatine what constituent nan things normalize wherever nan firm offtake offsets for nan higher superior costs, which were conscionable successful a benignant of play of find correct now successful Europe on.

Brett Castelli

Got it. And past conscionable funny connected benignant of nationalist versus backstage marketplace valuations. We've evidently seen nan nationalist markets valuations travel disconnected a small bit. Curious what you're seeing connected nan backstage side, would you opportunity that there's possibly a widening spread successful position of backstage marketplace valuations for renewable assets holding up a spot better?

Mike Crawley

So each I cognize is what we've seen successful nan processes that we've been -- that we ran and that we're progressive in, and we've seen valuations mostly clasp dependable truthful far. So that's each I tin springiness you a remark on. So yes, we'd beryllium bully astatine that.

Brett Castelli

Okay. Thanks, Mike.

Operator

One infinitesimal for our adjacent question. And our adjacent mobility comes from Nicholas Boychuk of Cormark Securities. Your statement is open.

Nicholas Boychuk

Thanks, bully morning. Coming backmost to nan imaginable for plus sell-downs. I'm funny pinch nan businesslike earthy state accommodation continuing to execute really good astatine 900 gigawatt hours of accumulation this quarter. Are you guys getting immoderate inbound liking by these astatine charismatic terms? Would you possibly look to dispose of these a small spot earlier than initially anticipated?

Mike Crawley

I don't deliberation there's immoderate alteration successful our position connected those assets. There's nary alteration successful our position connected those assets. So arsenic you constituent out, they make an important rate travel for Northland, but they're besides an important portion of nan energy operation successful Ontario and Saskatchewan, 2 markets that trust connected those assets and different gas-fired assets for capacity, correct now.

So what you're seeing successful Ontario is simply a large push to get further capacity going guardant fixed nan maturation successful nan system and nan electrification that's forecast to hap going forward. So that's successful portion really nan statement and really nan Oneida Battery Project has moved forward. But it besides intends that nan state still is very reliant connected nan capacity that they get from gas-fired assets arsenic well.

So nan worth of those assets to nan strategy is arsenic awesome arsenic ever, if not greater correct now. And whether we, successful nan agelong run, are nan owners of those assets to beryllium determined, but successful nan adjacent term, certainly, I deliberation that nan strategy operators are relying connected us, looking to america to support those assets astatine a precocious discrete readiness and successful immoderate cases, possibly looking to america to spot if we tin optimize nan publication of those assets to nan strategy arsenic well.

Nicholas Boychuk

Got it. Makes sense. And past successful Colombia, I'm conscionable funny if nan operating situation location has changed astatine all. Is location thing related to benignant of valuations, costs of capital, if it's possibly much charismatic for you to perchance to get different assets that could provender into EBSA. Any colour astir nan Colombian market?

Mike Crawley

Colombia market, truthful location is adjacent grade of benignant of star and upwind powerfulness improvement going connected by inferior developers there. There's liking successful multinationals and contracting straight for renewables, which there's not a batch of measurement disposable to contracts. So location whitethorn beryllium opportunities location going forward.

The utilities successful Colombia person a definite responsibility to statement for renewables arsenic well. So that each is, I think, creates an absorbing marketplace going forward. Yes, there's -- and conscionable time off it astatine that.

Nicholas Boychuk

Okay. Thanks, Mike.

Operator

Thank you. Mr. Crawley, location are nary further questions astatine this time. I would now for illustration to move nan telephone backmost to you.

Mike Crawley

Okay. Thanks, everybody, for joining america today. We're going to clasp our adjacent telephone pursuing nan merchandise of our first 4th 2022 results successful May. So successful nan meantime, we want to convey you for your continued assurance and support. Take care.

Operator

Ladies and gentlemen, that does reason nan convention telephone for today. Thank you for participating, and person a pleasant day.