Northland Power Inc.

Thank you, operator, and good morning, everyone. We also have David Povall joining us today.

David is the Executive Vice President of development, of course. And he's started joining us from Tokyo, where he's been spending a pandemic focused on a lot of our growth opportunities in Asia.

So thanks everybody for joining us this morning. We will review our first quarter 2021 financial results on the call and operating results.

Following our remarks, we look forward to addressing your questions from Alex. To kick things off, we want to reiterate that the health and safety of our employees and stakeholders comes first.

Through diligent planning and rigorous adherence to health protocols, we have maintained high levels of facility availability, delivering essential supply of energy to consumers and industry in Europe, Canada and Colombia. First, looking at the financial results for the first quarter, we reported adjusted EBITDA of $360 million compared to $421 million in first quarter 2020, representing a 14% decrease.

Our free cash flow of $134 million was 36% lower compared to $2211 million. And the same quarter 2020.

On a per share basis, we achieved $0.66 in 2021, which compares to the $1.02 in 2020. I would point out though that the majority of the decline year-over-year is attributable to lower wind resource at our offshore wind facilities in 2021, compared to the first quarter in 2020.

That quarter was a very strong one for offshore wind production with wind generation well above long-term averages. We saw in the first quarter of 2021 in the North Sea is closer to normal winter wind speeds, or be at it somewhat lower than the long-term average Pauline will provide a more detailed look into the financial numbers later in the call.

Strategically, we continue to build momentum on both our short-term and long-term growth initiatives to position ourselves for success. Northland has a growing footprint globally with positions in key growth markets to participate in a global de-carbonization efforts underway and subsequent to the end of the quarter, we expanded this footprint.

First, as we outlined in January, we announced our entry into Poland for the Baltic power offshore wind project and through our partnership with PK and Orland, the Polish oil and gas company, a very strong and influential partner in Poland. We completed the acquisition on March 24th, 2021.

The partnership will provide Northland with a 49% interest in a mid-stage offshore wind development project with the potential of up to 1.2 gigawatts of capacity to be built in the Polish Baltic Sea in the middle of the decade. Baltic power provides Northland with a scale entry into a new market, alongside a strong and influential local partner.

It gives us a healthy balance between reducing the risks of new market entry on the one hand and development opportunities to extract value on the other. The project will benefit from the first round of revenue support through a 25 year contract for difference off take agreement with the Polish government.

Following the closing on March 24th, the project filed an application with Poland's energy regulatory office to secure the CFD and we expect to receive approval for the CFD in the coming weeks. We expect to reach financial close for the Baltic power project in 2023 and commercial operations in 2026, which fits nicely with our other offshore wind projects in Asia.

While offshore wind remains our primary focus to achieve our long-term growth objectives. We're also enhancing our near term development pipeline as part of our strategy to further diversify our portfolio and bolster our cash-flow profile.

This strategy not only supports he had meant advancement of our four to five gigawatts of identified development projects, but it also provides additional critical mass alongside our offshore wind projects to grow our global presence. Most recently we announced the acquisition of a 540 megawatt onshore renewable portfolio in Spain.

This new portfolio aligns well with our priorities and helps to diversify our asset base while adding high quality regulated cash-flow to our business while expanding our presence in Europe as well. The near term free Castile from this portfolio will help fund the development of our large offshore wind projects, particularly as new markets and opportunities continue to emerge for offshore wind globally.

In addition, the acquisition provides us with scale and a platform in the growing Spanish renewables market that immediately positions Northland as a top hand renewables operator in Spain. We expect to leverage this position to grow our presence in Spain and the Iberian peninsula as a whole and to help us establish a European asset management platform that can support our entry into other attractive European renewables markets.

Turning toward development and construction projects, I want to provide a brief update on the various projects. We have underway first touching on our New York wind onshore projects in February we received and accepted contract price offers from NYSERDA for 20 year index, renewable energy credit off-take contracts.

We are also in the final stages of negotiations regarding key agreements for the projects and expect to be able to sign the turbine supply service and maintenance and the balance of plan agreements in 2021. These are all key milestones in the development of the project as we move closer towards financial close, which we expect to execute for two of the three projects later this year with one following after in 2022.

Commercial operations for the first two projects are expected by late 2022 and the last one in 2023. At Hai Long, we received confirmation from the Taiwan Bureau of energy, the Hai Long 2A has secured approval for its industrial relevance plan, which sets out Northland's commitment to local supply chain and procurement marking the achievement of a significant milestone for the project.

Now at La Lucha, as we previously disclosed construction activities are nearing the final stages of completion. Certain construction activities related to the energization of the project have been delayed primarily due to COVID restrictions.

Once you've activities are completed, Northland expects to commence with grid testing, which will be followed by submission of an application for commercial operations to the Mexican regulatory authorities. Based on the current timeline Northland still expects commercial operations that the La Lucha to commence later this year.

Efforts to secure commercial off-take and project financing are expected to be finalized after commercial operations at La Lucha. I wanted to quickly discuss our financial risk management activities as they relate towards Gemini project.

In 2020, the wholesale market, or APX for short traded down low below the SDE floor that applies to our Germany, Gemini PPA. In fact, the APX has average below the SDE floor, the sit Gemini PPA for four of the facilities, five years of operation, but was the worst in 2020.

This resulted in Northland incurring loss revenue of approximately $27 million in 2020 as reported in our annual report in response to the decline in power consumption caused by COVID related lockdowns last year, and the uncertainty related to the length of the COVID pandemic in the second quarter of 2020 Northland entered into financial derivatives for 2021 and to a lesser extent for 2022 and 2023. These derivatives were effective in mitigating downside risk with some exposure to loss revenues, should the APX increase above the SDE floor, because forward market prices were low relative to the Gemini four price at EUR 44.

The hedge we put in place last year protected our downside risk if market prices declined further, but it effectively gave us, gave up upside in revenue. When market prices rose above the floor price, the APX has strongly rebounded lately in part prompted by rising natural gas and carbon prices in the EU as such the APX had ceased to serve its purpose.

Since the APS has now climbed above the floor price in our SDE contract, resulting in $4 million of lost revenue for the first quarter, subsequent to the first quarter, the APX has continued to increase to the current price of $63 per megawatt hour. And as a result, Northland commenced entering into financial directors that will limit Geminis lost revenue for 2021 to similar levels as experienced in 2020.

In closing, we're off to a good start in 2021 with healthy first quarter financial results and good momentum and execution of our growth plans. We continue to accelerate our position as a top 10 global player in offshore wind through our Baltic power offshore wind project in Poland, and have secured an attractive entry portfolio for onshore renewables in Europe, through our Spanish acquisition.

The execution of our strategy and key growth markets will further strengthen Northland's competitive positioning as a global developer and operator within the renewable energy space. I will now turn the call over to Pauline for a more detailed review of our financial results.

Thank you, Mike and good morning, everyone. Last night, Northland power released operating and financial results for the first quarter of 2021.

Our financial performance in the quarter was solid and we generated healthy results for both adjusted EBITDA and free cash flow. Despite experiencing more wind resource in the quarter from our offshore wind segment, our business is primarily focused on offshore wind with over 60% of our adjusted EBITDA being generated from our offshore wind facilities in the North sea.

This segment of our business experiences, natural variations in wind resource, not only year over year, but also within any given year. These fluctuations can result in variability from quarter to quarter.

However, over the course of time, this variability typically balances out. Also as part of our growth strategy, we will also continue to diversify our portfolio and our cash flows.

In the fourth quarter, we generated adjusted EBITDA of approximately $360 million, which was a decrease of $61 million or 14% from the $421 million we generated in the first quarter of 2020. The main factor leading in the year-over-year decrease was the lower wind resource in the North Sea, which saw a 19% decline in production across all three of our facilities in the first quarter of 2021, compared to the same period in 2020.

Note that the first quarter of last year head wind resource significantly above the long-term average. This decline that adjusted EBITDA was offset by additional positive contributions from EBSA.

EBSA only had partial contribution in the first quarter of 2020, the timing of that acquisition. With respect to free cash-flow Northland generated approximately $134 million.

In the first quarter, this was a decrease of $77 million or 36% compared to the same quarter in 2020. As with adjusted EBITDA, the single largest driver behind the year-over-year decrease in free cash flow was the lower offshore wind resource in the quarter that resulted in a decline in overall earnings of $61 million.

In addition to the lower rate resource there was a number of smaller items that contributed to the decrease, including higher scheduled principal repayments, primarily relating to North C1 and higher non expansionary expenses at North Battleford and North C1, which were expected. As disclosed in our fourth quarter results, Northland, commence reporting, adjusted free cash flow, which excludes growth related expenditures from the metric management believes that adjusted free cash flow provides a relevant presentation of cash-flow generated from the business before investment related decisions and is a good and meaningful measure of Northland's ability to generate cash-flow after ongoing obligations to reinvest in growth and fund dividend payments.

In the quarter, we reported adjusted free cash flow of $147 million compared to adjusted free cash flow of $224 million. In the first quarter of 2020 adjusted free cash flow was affected by the same factors impacting free cash flow.

As growth expenditure has remained relatively consistent year-over-year on a per share basis. These figures translated into free cash-flow of $0.66 and adjusted free cash flow, $0.73 respectively in the first quarter.

These get paired to $1.10 per share, and $1.17 per share for free cash-flow. And it just did free cash-flow during the first quarter of 2020, our rolling four quarter free cash-flow and adjusted free cash-flow payout ratios calculated on a cash dividend basis for the quarter ending March 31 we're 73% and 58% respectively.

This compares to ratios of 58% and 52% for the same quarter ending March 30, one of 2020. The increase in both net payout ratios were primarily due to lower free cash flow and adjusted free cash flow.

As explained prior partially offset by the reinstatement of the dividend reinvestment program in September of last year. In addition to free cash-flow generated Northland utilizes additional sources of liquidity to fund growth and our capital investments in March, we successfully completed or Deutsche UBU refinancing resulting in a reduction in the interest rates of the facilities, senior debt and the release of €50 million or Canadian dollar 74 million from the funds previously restricted for debt service immediately enhancing our corporate liquidity subsequent to the end of the quarter.

Northland completed a bought deal equity offering for $22.5 million common shares for aggregate gross proceeds of $990 million. The net proceeds of the offering will be used to fund the cash purchase price of the Spanish portfolio acquisition that Mike mentioned earlier expected to close in the third quarter with the remainder of the net proceeds expected to be applied towards funding capital requirements, including the acquisition of Baltic power expected near term capital commitments for identified development projects and to repay borings under our corporate revolver.

As a result of the equity offering, which closed in April, we estimate we have approximately $875 million of liquidity on hand providing sufficient liquidity to execute on our debt on our identified development initiatives, turning to our financial outlook. Our 2021 financial guidance remains unchanged from February with adjusted EBITFA, continuing to be in the range of $1.1 billion to $1.2 billion.

We expect our free cash flow per share in 2021 to be in the range of $1.30 to $1.50. And lastly, our recently introduced metric adjusted free cash flow per share.

We expect to be in the range of $1.80 to $2 per share. In other corporate events.

Northlands corporate credit rating of triple B Stable was reaffirmed by standard import in their most recent review in March of 2021. Last but not least we released our fourth annual sustainability report highlighting Northland's 2020 ESG achievements and sustainability strategy going forward.

This report is centered around the four pillars of planets, people, community, and business, and sets out how Northland will meet its 2030 targets of reducing its electricity generation carbon intensity by 65% from 2019 levels while increasing our gross, renewable energy capacity by four to five gigawatts around the globe. Our vision is to create a carbon free world and is centered around our efforts to embed the principles of sustainability and ESG into all aspects of our business.

In 2021, we formally launched our ESG framework, which provides greater transparency in how we mitigate risks, meet our ESG reporting obligations and broader stakeholder expectations, while at the same time creating long-term value for our shareholders and our partners. We are committed to enhancing our disclosures in order to further demonstrate our transparency and effective management by reporting and alignment with the GRI standard core also reporting in alignment with FASBI based on our industries and aligning our commitments with the relevant UN sustainable development goals.

We have also committed to reporting in line with TCFD by 2022, all in all. It was a productive quarter for the company as we worked to deliver on our growth objectives, key milestones on our development projects, to de-risk our projects and increase their value and achieve our financial guidance.

With that. I will turn the call back over to Mike for his concluding comments.

Thank you, Pauline Northland. Isn't a advent is in an advantageous position to participate in the global growth in renewable energy.

We have the market position, the growth pipeline, the palette, and the balance sheet to seize the opportunity and create significant value for our shareholders over the long-term. This concludes our prepared remarks.

We'd now be happy to take questions from our analysts operator, please open up the lines.

Inflation is very topical today. Can you talk about the impact of inflation on the cost of your development projects?

Maybe if you could give us some color on what you're seeing in rising costs and how much of the cost is locked in for you, your contracted projects. And do you, do you see any risks to returns with rising costs?

Well, so we certainly track commodity prices closely particularly on our larger projects on, on those projects. We always include a sufficient buffer in our view to account for any rise in commodity prices and driven by inflation overall Rupert.

So when we look at our, our current pipeline of projects right now, we're generally comfortable with where they stand at and, and w the basis on which we underwrote the initial decision to, to begin spending development dollars in them. But it's something that we obviously track on an ongoing basis at certain points as the project matures, we are able to hedge some of that commodity exposure.

And so we keep track of that and obviously take advantage of that the moment when the opportunity is available to, for us to hedge and leave it like that. And then, of course, in terms of interest rates, we also similarly include a buffer in all of our financial models particularly on projects where you have a off-take agreement that is not indexed to inflation.

So we, we try and account for that in the project model to make sure that we're have adequate buffer.

Okay. So putting it all together, you're comfortable, you'll, achieve your target returns on, on the development projects that aren't under construction?

Yeah. Okay, great.

Then sticking on the topic of hedging you gave us some color on the, the APX pricing and the derivatives you had in place. It sounds like you've closed out the position.

One, if you can give us some more color on how the derivatives were structured and the, the impact we're going to see if you have closed out that position, is that primarily a Q2 event, or is this going to be spread through the next few quarters?

Yeah, I'll start off and then I'll hand it over to Pauline. I think we're, well on our way to closing out our position in 2021 2022 and 2023, where we have had a smaller portion of the cash flows in both years.

That, process is just starting now. But I'll turn it over to Pauline to give you a bit more color on the, on the derivative and the impact.

It will occur over the balance of the year as revenue is earned under the under the, the contract for Gemini. So it will be it won't be exactly even through the quarters, but it'll follow the revenue pattern.

Okay. Then can you give me some color on how the contracts were structured?

Sure.

So, I mean, it was basically the contract basically put in a floor at which blow, which we would not suffer any further loss. So it was basically to protect us on the downside if the APX price fell can you do to fall below the SDE floor price, where we would suffer economically under the SDE contract, to the extent that the APX price rose above the floor, we would have to trade back give back some of that upside going forward.

So, as we articulated in the introductory remarks, once the APX price on a sustained basis settled in the first quarter of this year, above that floor price, we deemed that those hedges were no longer effective. And we put in place swaps to basically offset those hedges going forward.

And so as to the, the, the impact of that will be realized as a, those swaps come up.

And forward going forward now, I mean, the because of where the APX price is, it's actually very economical to buy puts right at the SDE floor level and have that to be the downside going forward.

So we have better options now to protect against the downside that we had when the APX price was lower. But this point last year when the pandemic was just starting and it was unclear how long it would last and how significant the economic impact would be at that point, the correct decision in our view was to protect ourselves against the downside.

Now that there doesn't seem to be that downside risk in the immediate term, we're unwinding those hedges, but we, as plumbing said, now, have the opportunity to buy a fixed price, put option a, which will protect those moving forward against downside and future.

Thank you. Good morning.

First question is on Spain and Mike, you touched on the [indiscernible] here is to participate in future onshore growth given aggressive procurement targets at the, at the country level. Can you give us some detail on the organic opportunity set tied to this acquisition and how you're thinking about organic development versus M&A driven opportunities for onshore renewables in Europe?

Yeah, for sure. So, I mean, Sean, well, any large platform of operating shore renewables is a much sought after these days and, and, and trades at a pretty high valuation.

We think we were able to secure this platform at, at what we view in the current market context to be a reasonable valuation is the diversity of it, which suits us well in terms of a mixture of solar wind and also concentrated solar. But we think for other perhaps more passive investors the diversity was less appealing.

So what we see going forward in terms of growth in onshore renewables is generally not going to be in acquiring larger platforms. You know, we haven't generally participated in, that market in terms of M&A, where we see the better the opportunities going forward in, in Spain is number one.

It's a highly fragmented market in terms of ownership of renewable assets. So we've identified about 9 gigawatts of portfolios that are between 100 and 200 megawatts.

So we think as either those portfolio owners look to exit, or as we hopefully approach them that we'll be able to secure bilateral acquisition opportunities, add more favorable economics and you see in well-marketed larger scale platforms for renewables. So that's, that's number one.

And number two is in time. We would look to look at development as well.

There's a very ambitious growth target, I think of 35 to 40 gigawatts of new renewables in Spain by 2030. They also have specific storage and hydrogen objectives in Spain.

So we'd also see as a good platform to participate in that growth, but that will take a bit more time to develop a strategy over that. And we've also noted that the last procurement was, was quite competitive.

So we want to kind of take our time and, and come up with the right development strategy. So in the meantime, it would be more of a focus on acquisition of either a smaller, late stage projects or smaller operating portfolios.

Thanks for that detail. Second question in late April or stead identified some issues with their off shore cable protection, they're spending a lot of money to directly fit some of those assets, and it looks like most of them were built around the same time you guys built out your European platform.

Can you comment on comfort that this won't be an issue for Northland? And does this have any bearing on your thoughts for, future offshore wind project CapEx and potentially returns?

Yeah, so we at all three of our facilities, we didn't look into our interconnection cables, our entire Ray cables as well at the same time, and looked at the cable protection designs that, we have the North sea one project uses a very different cable design, a much more robust cable design. So our view is that it would not be impacted nevertheless we do regular underwater inspections of those cable and protection systems, and we will continue to do so at North C1 and perhaps pay a bit more closer attention to ensure that this different cable design protection design system proves as robust as we think it will be on the Gemini and Deutsche pooped wind farms.

They do use a similar cable protection design, albeit a more recent design than, or stayed uses. But our subsidy inspection campaigns have not identified any issues on those in some ways or status news does give us a good opportunity to add some more rigor and some more detailed to those inspection campaigns because as long as you identify the deterioration before it reaches the protection system on the cable, the protection sheet on the cable it can be easily repaired at a, at a relatively low cost.

The problem is as per our state's announcement that if, if you don't identify it early enough the repairs can be a very costly so we've scheduled in our 2021 survey campaign for Gemini and Deutsche Bucht to not only we will be doing the inspection campaign anyway, but to add some more rigor to it, to make sure that we do identify any, any issues. there is also the impact of the, the sea current where, where the projects are located.

I would, I mean, I believe the worst as UK projects are in an area which would have a stronger currency, which would cause more movement as well. but nevertheless it's a, it's a good opportunity for us to track these cable protection systems more closely to ensure we don't get in the same position, but to be clear we have identified no issues in, in all of our inspection campaigns on our cables.

Great. Thanks.

Good morning, everyone. Quick question on Baltic power, I think a few months ago there was like they set the, I think the maximum price, I think it translates to about, I think €68 per megawatt hour.

Can you just give some more color as to how the actual price is set and like how and how it relates to the like maximum price? Like what's the process and setting the final price?

So I, and David can jump in here as well, but I believe that the, the initial CPAs that were CFD contracts that have been issued so far have been at the maximum price level to the, the project they're kind of being there more or less seem to be issued in the order of the application, roughly. So it, it is identified as the maximum price, but so far the, the CFDs have been issued at that price.

I'm not sure if that answers your question and David, is there any, any other color you'd add to that?

No, that, is correct. Mike, it's a, it's a fairly structured form filling submission process first, you know, and then consider it on a, sort of a, an application time-based, those are typically first to being considered as to, and those who have been awarded now have received at the maximum price.

So you did 19.6 Polish Offshore, should I say, depending on the ethics meets is around [indiscernible], yeah, so it was Mike said in his introduction we have in that process is a Q and a back and forth with some complications and that's what we have. We're just answering his questions at the moment and expect to receive in the next couple of weeks.

Okay. So you're obviously in the queue and you're pretty confident that you'll receive a contract as well.

Absolutely. Yes.

Okay, great. And then just following up on Rupert's comment on, on cost escalation inflation.

So further you mentioned that there's two wind projects in New York that will reach completion by the end of next year. So in terms of locking the price, would you be fixing your construction price like over the next couple of months or at the end of the year?

Can you just give a bit more color as to timing? And then I guess on a related question, can you also talk about Taiwan, which is obviously a much bigger project and I think is financial close still expected for like sometime mid next year?

So, I guess you have to lock in your price sometime mid-year, mid-2022?

Steel prices would get locked in at the point that we secure the - we sign the Turbine Supply Agreement, execute the Turbine Supply Agreement. So on the two projects that would be going to construction this year in New York, those contracts have been executed and the steel price has been locked in.

And we're also moving to secure the balance of plant contracts as well which will lock in other prices all - the balance of the costs in the projects. With respect to Hai Long, the current intent is to reach financial close in third quarter of 2022.

And so that's the track we're on to be in a position to enter into supply contracts before that, at which point we would be locking in steel prices. As I said, there may be other opportunities to hedge some of the exposure to commodity prices moving forward as well prior to locking in the supply contracts.

Yes. And on the interest rate side, we are hedged for 20 years on the New York projects as well.

And as soon as we know sort of the structure term of debt, we do hedge and for Hai Long that's something that's in process and as that starts to get structured and firmed up, we would look to do the same.

Okay. Thanks.

And then just one last question on Taiwan. It looks like there is going to be like a few years of offshore wind RFPs in Taiwan.

I think in the past. Mike, you mentioned that you have a - you're working on about 1.8 gigawatts of offshore wind on your own.

Like can you just tell us or give us a bit more color as to the landscape in Taiwan? Like has the land grab happened already and is like are you working on the 1.8 gigawatts and is it difficult to kind of grow that development capacity right now?

David is obviously closest to that so I'll turn it to you, David.

Yes, I can pick that up. So, you would have been tracking the news so the rules for what's called the [indiscernible] were announced, I think it was in your time zone I think yesterday or the day before.

So, we are just analyzing the detail of that. So, that's the positive news and the confirmation that we were expecting that Taiwan will contract for further offshore wind.

So, that's been good news this week. In anticipation of that and as Mike has referred to in the past, we have been basically identifying the coastline where we think the ultimate sites are and it has actually - it's been announced locally in the press in Taiwan the two sites that we're looking at and we're developing those sites at the moment.

So yes, it's getting increasingly crowded space off the coast of Taiwan, but there are still some good sites which we believe we've identified and are developing and will be - have ready to participate in the round three.

Okay. Just to clarify those two sites relate to the 1.8 gigawatts or they are In addition to those?

It's part of, it yes.

Okay, got it. Thanks.

I'll leave it there.

Thanks. Good morning, everyone.

My first question just I guess related to the European market in general. We've seen carbon prices move quite a bit higher recently and I believe there has even been some commentary from other players that PPA prices have gotten higher.

I'm curious, I know you certainly have a strategy of being a first mover in new markets. But do you see things shaping up in such a way potentially in Europe that the combination of higher carbon prices and potentially I guess a corporate PPA could be an attractive proposition for you either for offshore or onshore I guess?

I think that's a correct observation. So as you know, we've got two expansion projects on Nordsee One so Nordsee Two and Nordsee Three, total of call it roughly 900 Megawatts between the two.

On those projects, we have a step-in right. So, we basically can match the winning bid on those sites in the procurements that are scheduled for 2020 - this September on Nordsee Two and in 2023 on Nordsee Three.

So this step-in right, we basically have to accept whatever the winning bid price is. So we've been running various scenarios obviously from a zero subsidy bid, which has been seen in North Sea offshore wind projects in the last few years all the way up to the ceiling price of I think it's EUR70 or EUR74 - David would be tighter on that number than I am.

So, we've been running all these different scenarios. So obviously in the scenario where you got a zero subsidy bid or a lower subsidy bid, you're going to be looking at what revenue you can recover from the market either through merchant revenue or preferably through as you say a corporate PPA.

So, I think it - for that project, what we're seeing on carbon pricing has been encouraging, the trend lines. And the other thing that is encouraging on that project and other future offshore wind projects too is the pressure - the increasing pressure that you're seeing on large particularly listed companies, but also private companies to procure renewable power.

And certainly the one way to get it at scale is through offshore wind projects. It is something that we're very focused on and we have a Head of Origination, as you may know, offtake origination who is based out of London now and is working on the N2 opportunity and other opportunities.

That's great color. Thanks, Mike.

And then maybe just one more, maybe since David is in Japan right now. Just wondering if there's any update on the early development activities in Japan and Korea?

Anything you can share there?

Yes. I guess the most - key event that's happened is the remember in Japan we have the different rounds and the - our Chiba project we are positioning to participate in round three.

So, that's progressing well. The Chiba Prefecture has, in the use of sort of layman's terms, put their hands up to the government for that round to be included or that area to be included into the third round.

So, we don't know the outcome of that. We'll know that later this year.

But if so, that's a great confirmation that the project will then be able to bid into the round three. So, project development continues on track to - for that to participate in round three if it's chosen.

So, that's good news. And then in the Dado project in Korea, on track for key milestone there.

I think we talked about it before, it's the secure new electricity business license and we remain on track to secure that this year based on the project activities. So, the key - two key highlights in those two markets.

Excellent. Thank you very much.

I'll get back in the queue.

Okay. Thanks.

Good morning. I wanted to go back to some of the questions around raw material cost moving higher and it looks like you're well protected with your buffer and given the fact a lot of projects, you're not going to put the shovels in the ground after your results.

It's probably more the developers that are building next one or two years. You see steel, copper go up to more than 50% over since last August has been quite incredible.

So I'm just I'm wondering maybe broader question then is we've seen cycles like this in the past. You had Inflation in the '80s so you had these PPA contracts of inflation protection, this commodity boom in the past.

So, the industry's seen this before and it's more the consumer that's been hit. So, how do you see this playing out then through the next couple of years here?

Because the movement's been pretty powerful. Is it really the consumers that are going to take the - I guess the pain of this increase?

Like how does the industry respond here?

Well, I mean certainly on any offtake agreements that have not yet been allocated and where there's a bidding process, then it will get translated into higher bid prices and same thing with the corporate PPAs. So in that case it would probably, all other things equal, create a higher price on a corporate PPA as a result.

The - on existing PPAs, as I said, I mean we keep a close eye on that. Particularly any existing PPAs where there is no indexation on that PPA, we keep a close eye.

And to be clear, there is an overall contingency in all of our budgets to account for a number of different unforeseen circumstances, including moving - movements on commodity prices. So yes, to some extent it will be absorbed by the offtakers; but other extent, it will have to be factored in and absorbed by contingency in primarily the developers' budget, but also there's contingency in the suppliers' budget too.

This is a point at which a developer will choose to decline the contest to procure equipment if the price is too high. So, I think it shakes out on both sides.

It depends on the nature of the offtake agreement and the stage of the project.

Okay. So, it looks as if they have a share in situation, but the direction sounds like the power price could potentially go higher here.

Can I ask you do you get the sense that in some of these recent bids that you've seen where prices have been really low and you backed off because of the behavior that those developers are bidding on expectation that levelized costs are going to continue moving lower versus using today's equipment costs to derive the returns?

Yes. I mean we - don't mean to be candid, Ben, for better or for worse we have not really played that game in the past.

For some developers, it has worked in their favor and some others have been caught out. So, we generally have not played in that game.

You see it most - in the most pronounced way on solar projects in the last few years. I think some of the movement in commodity prices will going forward discipline some of that behavior because it will indicate just how unpredictable supply prices can be overall for equipment for a project.

And I think in the last couple of years there's been some fairly big swings in solar panel prices as well. So I think all of that together will I hope discipline some of them more aggressive bidding and procurements going forward.

As you know, we've got some solar projects we are developing in New York State so we'll see how that plays its way out.

Okay. It's good to hear.

And then maybe on the spend side of things. Are you more focused on developing that market out first before looking to adjacent markets?

Well, I think what we've communicated at Investor Day was that we've communicated our focus on New York State, Colombia for the reasons given in terms of what we see as a growth in both those markets in renewables. And we communicated that we were looking at Eastern Europe, slack markets in Eastern Europe where we see still a lot of coal in the grids, but we also take comfort from the fact that a number of those countries are part of the EU and we see a positive long-term economic trajectory for those countries and we see a near-term need for both at a state level, but also at a corporate level to procure renewable energy in those markets given the carbon intensity so - of the grid.

So, that would be the other market that we would be open to in the near term if we found the right opportunity. Given the state that those markets are at in Eastern Europe, it would more than likely if we did anything be more of a development play as opposed to something with operating assets.

Okay. Thank you.

Thanks. Good morning.

I guess the question is for Mike. When you start to think about just the longer-term nature of returns and the big capital needs for offshore wind, does that really help preserve the competitive advantage for some of the early movers like yourself on a longer-term basis for this industry?

If you could just repeat the first part of your question again? Sorry.

Well, if we just think about offshore wind and how long it takes to bring a project online - to win a project to bring it online and just the capital that's involved limits the audience on this and we've seen in other aspects of renewables, a lot of money chasing things. Do you see your competitive advantages being preserved in part because of those realities of offshore wind?

Yes, So, there's a - I'm mixing my analogy - my metaphors, but there's a moat around offshore wind - a greater moat around offshore wind than there is around onshore renewables. In other words, a greater barrier to entry both in terms of the talent that it requires to both develop and construct the projects, but also as you say the length of time that it requires and the development expense that it requires to move the projects forward.

And as well there's new markets still opening up for offshore wind. So in our view, the way to secure these projects and move them forward successfully is to in most cases get the right - a good local partner like we did in Poland and like we've done in Taiwan and in Japan.

Sorry, I got a bit of a beeping in my ear, I'm not sure if it's my headset. Okay.

So, I think in all of those we see ourselves as having a bit of an advantage that we want to leverage moving forward. And as you - I mean the two defining characteristics of our sector right now and I think for the near-term future at least is the need for a lot of additional renewable energy supply in a lot of markets around the world to meet carbon reduction goals.

And number two, just the amount of capital that's coming into the sector to invest in renewable assets. So, that means to me that the best opportunity right now is in developing those projects so as to - which can supply the energy and create an investment vehicle for the capital that's coming in to the sector.

And that's what we're looking to do with offshore wind where those projects are - have a scale too which allows us to bring in other investors into those projects alongside our own capital.

If I may, just as a follow-up to that and really built upon the farm-downs that you plan on doing in the future. Just given the uniqueness of the offshore environment and a few players, do you think you have greater preservation of returns in farm-downs than you would say if you were trying to do the same thing was onshore renewables, whether it be solar or wind?

I think there's probably a greater lift that you can get on the farm-down to be determined because I think you've got - you're starting off with a better return in offshore wind and given the scale of the investment on the farm-down, you're probably attracting a larger pool of investors so you probably have a bigger spread there. So that's to be determined, that's the thesis.

So I'd say the answer is probably yes, but till something's done, I never like to get too far ahead of myself.

Okay. That's great.

Thank you.

Thanks. Good morning, everyone.

Just a continuation of the discussion on procurement and kind of lock-in costs. Looks like you've expanded the Turbine Supply Agreement in Taiwan to Hai Long 2B and 3.

Are those costs all set for Taiwan and then are there options in the agreement with Siemens in terms of like procurement of turbines for Baltic Power, Nordsee Two if you do that in terms of being able to sort of also lock-in sort of some indicative pricing on other projects that you're looking at doing?

So, good question, Mark. I mean on the second part of it, there's no explicit connection to any other projects.

And as you know, we have different partners on different projects as well already, right. So, there wouldn't be any explicit - anything explicit in the contracts on that - in the supply contracts on that.

However, your best leverage with any supplier is other opportunities for them, right, and a pipeline. So having the pipeline of offshore wind projects we have globally coming up, it certainly in our view enhances our negotiation - our negotiating position with any turbine supplier and other suppliers to our projects as well as, but particularly turbine suppliers.

The prices or the costs on those projects - the Taiwan projects will not be locked in until we execute the Turbine Supply Agreement and the service - associated service contract, which we wouldn't anticipate being in a position to - and we have never anticipated being in a position to do until the end of this year or the first kind of quarter of 2022. As we work through the local supply chain and confirm on Hai Long 2A, the local supply commitments that we have to make according to the Industrial Relevance Plan that we referred to in the script at the beginning and as well just working with the regional supply chain on the balance of the procurement for the projects.

So we'd expect to be, as I said, locked in end of this year or early 2022 on the supply prices.

Okay. And then just coming back to the sell-downs and the farm-downs, continue to see a number of deals get done.

When you track some of the deals that have been done either operating assets like Orsted's, slowdown in orders, or even some of the processes that happened already in Taiwan. Have you been able to triangulate what is sort of the difference between the returns and the buyers' IRR at a project at financial close versus COD and how those sort of relative time points in terms of you trying to optimize your returns?

How that - how you see other transactions play out to inform your view of whether or not the sell-down at financial close is - are you leaving money on the table at that point?

I'll do the answer, but Pauline can - because we had walked through an example at the Investor Day as you know back in early February. But I mean high level.

While typically a sell-down at financial close would seem optimal and particularly if you end up guaranteeing some of the construction cost and arguably if you could get the lowest cost capital at financial close on a sell-down, there are other reasons to do sell downs earlier both at the project level - or there can be other reasons both at the project level, but also from a Northland standpoint as we manage how we fund our portfolio globally. So, it is a - there are multiple considerations in terms of when we do the sell-down.

We are seeing more interest from investors in coming into offshore wind projects in particular at earlier stages. So, that perhaps does change our calculation a bit on it.

But Pauline...

Yes. Our strategy I guess right now for the most part is still to sell-down in and around financial close.

All the transactions, we look at each and every single one and I think the metrics that we showed at Investor Day still hold intact. And so in that example, we put out that illustrative 10% 300 basis point promo, which is going to be lower or higher depending on the market and the specific nuances and risks of each project and each project is different.

And in that case, that means the buyer's IRR is 7. I think that still feels reasonable to us looking at recent transactions.

And just my comment about the number of buyers, the people that would have been there at post-COD of operating assets are essentially migrating closer to financial close. You said there is very strong competitive attention out there for - at the time of a sell-down at financial close?

It's interesting because I think what we're starting to hear more of its interest to come in earlier because it's very competitive to come in at financial close. So if there is an avenue to come in earlier, we are hearing more and more interest for that.

So, I think time will tell.

Okay. Thanks for the answers.

Appreciate it.

Thank you.

Thanks, Mark.

Well, thanks everyone for joining us today. We will hold our next call following the release of our second quarter 2021 results in August.

In the meantime, we thank everybody for your continued confidence and support.