DirectCash Payments Inc. Announces Results of Operations for the Three Months Ended March 31, 2016

CALGARY, AB—(Marketwired – May 11, 2016) – DirectCash Payments Inc. (“DCPayments” or the “Company”) (TSX: DCI) today announced consolidated financial results for the three months ended March 31, 2016.


Financial and Operational Highlights:

  • ATM transactions of 31.7 million, up 4%
  • Other Services transactions of 82.5 million, up 5%
  • Active ATM terminals of 21,348, up 2%
  • Revenue of $68.7 million, up 4%
  • Acquired A$1.9 million of ATM processing contracts for approximately 170 ATM locations in Australia
  • Granted license to launch prepaid service offering in Australia
  • Reached agreement to settle all class action lawsuits filed against the Company relating to the Cash Store Financial Services Inc.

Management's Commentary

“This quarter further demonstrated our ability to increase transaction volumes and acquire businesses to grow our global payment footprint,” said Jeffrey Smith, DCPayments' President and Chief Executive Officer. “With our recently awarded financial services license in Australia and a foundation of consistent cash flow, we plan to diversify and grow our product offerings in this market and globally throughout 2016.”

Summary financial and operating results for the three months ended March 31, 2016 are set forth below and complete copies of the Company's consolidated Financial Statements and Management's Discussion & Analysis (“MD&A”) are available on SEDAR at (www.sedar.com).

Summary Operating and Financial Results

     
 
 
Three months ended

March 31
 
 
  2016   2015  
Summary operating results        
Number of machines            
Active ATM terminals(1)   21,348     20,984  
ATM transactions, thousands   31,655     30,437  
Other services transactions, thousands(2)   82,485     78,646  
             
 
 
Three months ended

March 31
 
 
  2016   2015  
Summary financial results        
($ thousands, except for per share amounts)        
Gross profit $ 32,886   $ 32,815  
Gross profit margin(3)   47.9 %   49.7 %
Adjusted EBITDA(4)   15,680     16,598  
  Adjusted EBITDA margin(5)   22.8 %   25.1 %
Net income (loss)   (1,822 )   (2,906 )
  Per share, basic and diluted   (0.10 )   (0.17 )
Funds from operations(5) $ 9,533   $ 10,537  
  Funds from operations per share, basic(5)   0.55     0.60  
  Funds from operations per share, diluted(5)   0.54     0.60  
Dividends declared   6,312     6,332  
  Dividends declared per share   0.36     0.36  
Funds from operations payout ratio(5)   66.2 %   60.1 %
Total assets $ 351,635   $ 372,992  
Total debt(6)   227,784     205,423  
Cash   (10,946 )   (6,059 )
Net debt(7) $ 216,838   $ 199,364  
Common shares outstanding, end of period   17,534     17,589  
             

(1)
DCPayments has included statistics only for sites that recorded a transaction in the last calendar month of the period indicated.

(2)
DCPayments has included the Financial Institution customers' transactions, point of sale transactions, debit and credit cards transactions.

(3)
Gross profit margin means gross profit expressed as a percentage of Revenue.

(4)
An additional GAAP measure — see definition under “Additional GAAP Measure”.

(5)
A non–GAAP measure — see definition under “Non–GAAP Measures”.

(6)
Total debt is calculated as long–term debt including current portion but excluding unamortized transaction costs, as at the end of the period.

(7)
Net debt is calculated as total debt less cash.

The increase in total debt was due to the funding of the CashStore settlement payout, OneCash acquisition, GRG acquisition as well as the Canadian acquisition in December 2015 and March 2016. The increase in total debt was offset by the increase in cash and cash equivalents. The net debt increased by $17.5 million to $217 million.

Outlook

DCPayments is one of Canada's leading independent providers of end–to–end transaction processing and payment solutions, and is one of the three largest deployers of ATMs in Canada, with 7,714 transacting ATMs as at March 31, 2016. DCPayments has a strong strategic position in the payments business and has a significant presence in the highly strategic credit union and financial institution payments processing services segment and ATM outsourcing business. In the ATM business in Canada, emphasis continues to be on maintaining existing customer relationships. With the Other Services line of business we expect to increase our ability to service the existing and acquired customer relationships and increase our sales presence with other clients in Canada.

The Other Services line of business is broadly comprised of transaction processing services, card provisioning, payments processing, reporting and settlement, fraud management, ATM cash and fleet management and project–based consulting services for financial institutions and credit unions as well as managing and processing prepaid card programs and transactions. In this line of business our objective is diversification domestically and expansion internationally, to reduce historical reliance on a small group of large volume customers in certain market segments. In May 2015 the Company launched DC TAG, Canada's first contactless wearable prepaid credit card, with a credit union client in British Columbia. In August 2015, DCPayments launched DC TAG as a direct to consumer product in Canada. DCPayments continues to diversify this business line with plans to launch payment terminals and a mobile payments platform in 2016 and 2017 respectively.

DCPayments is the largest provider of ATMs in Australia and New Zealand with 7,707 transacting ATMs as at March 31, 2016. The Company actively seeks growth opportunities through the existing ATM business platform and to capitalize on the less mature Australian market, where transactions and gross profits per ATM are significantly greater than in the more mature Canadian ATM market. We have been very successful in managing our costs, integrating the Australian acquisitions, and adding management depth. DCPayments' focus in this market moving forward is to drive growth and improve margins. During 2015, the Company applied for an Australian Financial Services License (“AFSL”), which will enable DCPayments to market and sell customers certain prepaid card products in Australia. The AFSL was granted and issued by the regulator on March 29, 2016. DCPayments has executed an agreement with an third party issuer Australian Financial Institution, which will enable the Company to commence prepaid card offerings in early 2016, further diversifying its payments business.

On February 18, 2016, DCPayments successfully completed the tuck–in acquisition of the ATM business of GRG International Limited (“GRG”) in Australia for a total consideration of A$1.9 million (the “GRG Acquisition”). A total of approximately 170 ATM locations and related contracts were acquired in Australia.

Since the acquisition of InfoCash Limited in the United Kingdom in May 2012, DCPayments has grown to be the third largest provider of non–bank branded ATMs in the United Kingdom and has added in excess of 800 ATMs. As at March 31, 2016 DCPayments had 5,563 transacting ATMs in the United Kingdom. DCPayments' focus in this market moving forward is to continue to grow the ATM business in Europe through quality accretive acquisitions and organic growth, adding other product offerings to its Europe division and increasing our margins.

The Company continues to diversify its product offering in the ATM business with the launch of DCC in Australia and the United Kingdom during Q2 2015, which DCPayments expects to see positive results from over the course of 2015 and 2016 as we increase the number of ATMs with DCC enabled.

We continue to focus on the efficient management and operation of our businesses. DCPayments is well positioned with a strong balance sheet and a steady cash flow stream from its payments and transaction processing operations based on long term contracts and industry ,and geographically diversity and across a number of industries to drive long term shareholder value.

Conference Call

A conference call will be held on Thursday, May 12, 2016 at 10:00 a.m. Mountain Standard Time (MST) to review first quarter 2016 results. Jeffrey J. Smith, President & CEO, Patrick W. Moriarty, Chief Financial Officer, and Amanda J. Gallacher, Vice President, Corporate Strategy & Acquisitions, will host the call. The financial results, and an accompanying presentation, will be available on the Company's website at www.directcash.net prior to the conference call.

DCPayments invites participants to listen to the webcast of the conference call by entering: http://www.gowebcasting.com/7482 in your web browser.

To participate in the Q&A session, please call the conference operator by dialing toll–free 1–866–225–6564 or locally 1–416–340–2219. A replay of the conference call will be available until Thursday, May 19, 2016 by dialing toll–free 1–800–408–3053 or locally 1–905–694–9451 and entering passcode 4717428.


Additional GAAP Measure:

DCPayments has presented adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) as a subtotal in its condensed consolidated statement of operations and comprehensive income (loss). Adjusted EBITDA is an important measure utilized by management in assessing the financial performance of the Company relative to its operating plans and budgets. It is also the measurement utilized by the holders of the Company's long–term debt, as described in note 4 to the condensed consolidated interim financial statements, in calculating financial covenants. The Company has presented Adjusted EBITDA prior to unrealized foreign exchange gains and losses and non–recurring other gains (loss). The Company utilizes this presentation of Adjusted EBITDA because it is consistent with the definitions under DCPayments' credit facility agreement. DCPayments has also presented Adjusted EBITDA prior to the deduction for acquisition–related expenses. These expenses relate only to business combinations which are complex, require the pre–approval of the Company's lenders and are financed utilizing long–term debt or the issue of equity or a combination thereof. Costs incurred on recurring asset acquisitions are not considered acquisition–related expenses and are included with other expenses in the consolidated statement of operations and comprehensive income (loss). The Company's Adjusted EBITDA may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to Adjusted EBITDA as reported by such issuers. The Company has provided a reconciliation between EBITDA and net income (loss) which is disclosed in the MD&A for the three months ended March 31, 2016.


Non–GAAP Measures:

There are a number of financial calculations that are not defined performance measurements under GAAP but which DCPayments believes are useful and accepted performance measurements utilized by the investing public in assessing the overall financial performance of the Company and to compare cash flows between entities.


Adjusted EBITDA margin:

Adjusted EBITDA margin means Adjusted EBITDA expressed as a percentage of Revenue.


Adjusted EBITDA per share:

Adjusted EBITDA per share is calculated on the same basis as net income (loss) per share, utilizing the basic and diluted weighted average number of common shares outstanding during the period presented.


Funds from operations and funds from operations per share:

DCPayments calculates funds from operations as net income (loss) plus or minus depreciation, amortization, deferred income taxes expense (recovery), non–cash finance costs, unrealized foreign exchange gains and losses, non–recurring other gains (loss) and other non–cash charges and after provision for productive capital maintenance expenditures (see discussion below). Funds from operations per share is calculated on the same basis as net income (loss) per share, utilizing the basic and diluted weighted average number of common shares outstanding during the period presented. Readers are cautioned that funds from operations cannot be assured to continue at equivalent levels in the future. DCPayments' funds from operations and funds from operations per share may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to funds from operations and funds from operations per share as reported by such issuers. The reconciliation between funds from operations and net income (loss) is disclosed in the “Funds from Operations” discussion in the MD&A for the three months and year ended December 31, 2015.


Productive capital maintenance expenditures:

DCPayments differentiates capital expenditures between growth and productive capital maintenance. There is no such distinction under GAAP, however DCPayments believes it is important to differentiate between them. Maintenance capital expenditures, excluding non–recurring maintenance capital, represent an adjustment to funds from operations while growth capital does not.

Maintenance capital expenditures are defined as expenditures required to service and maintain DCPayments' existing productive capacity, while growth capital is expended to increase DCPayments' productive capacity by adding additional sources of revenue not currently in existence. Current measures of productive capacity that DCPayments utilizes include ATMs and debit terminals under contract. Maintenance capital expenditures include software and hardware upgrades to existing infrastructure, ATM and debit terminal equipment upgrades necessary to meet changing regulatory requirements, contract extension incentives including replacement of equipment under existing or renewed contracts, and fleet vehicle purchases and upgrades. Examples of growth capital expenditures include the acquisition of a competitor's assets, the cost of an ATM in a new location, or technology costs related to new sources of revenue.

Readers are cautioned that the Company's computation of maintenance capital expenditures may differ from similar computations as reported by other issuers and, accordingly, may not be comparable to productive capital maintenance expenditures as reported by such issuers.


Funds from operations payout ratio:

Funds from operations payout ratio means dividends declared as a percentage of funds from operations.


Non–cash working capital:

Non–cash working capital is not a defined GAAP measure. DCPayments calculates changes in non–cash working capital as changes during a reporting period in current assets (excluding cash, cash in circulation and restricted funds) and current liabilities (excluding bank overdraft, restricted funds and current portion of long–term debt).


Dividends:

Shareholders of DCPayments receive monthly payments in the form of dividends. Dividends are funded by the generation of funds from operations of the business. All of the income generated at the level of the various subsidiaries of the Company is taxed by applicable government authorities with the remaining after–tax funds either being retained by the subsidiary or distributed up to the Company where it can be made available for payment of dividends by DCPayments. Continued future distribution of dividends (and the amount of any dividends) is subject to DCPayments' Board of Directors approval. DCPayments' Board of Directors is not obligated to distribute all net available cash as dividends to shareholders.


Forward Looking Information:

This press release offers our assessment of DCPayments' future plans and operations and contains “forward–looking information” relating to future events as defined under applicable Canadian securities legislation.

The Company's actual results or performance could differ materially from those expressed in, or implied by, this forward–looking information. DCPayments can give no assurance that any of the events anticipated will transpire or occur or, if any of them do, what benefits or costs we will derive from them. Forward–looking statements are subject to numerous risks and uncertainties, certain of which are beyond DCPayments' ability to control, including but not limited to general economic conditions, interest rates, foreign currency rates, consumer spending, borrowing trends and regulatory changes to name a few. Additional risks and uncertainties are described in DCPayments' Annual Information Form for the year ended December 31, 2015 which is available at www.SEDAR.com.

The forward–looking information contained in this press release is expressly qualified by this cautionary statement. Certain statements that contain words such as “could”, “may”, “believe”, “should”, “expect”, “will”, “intends”, “plan”, “anticipates”, “potential”, “estimates”, “continues” or similar words relating to matters that are not historical facts constitute “forward–looking information” within the meaning of applicable Canadian securities legislation.

Forward–looking information and statements contained in this press release include statements related to DCPayments' anticipated growth in business, operations and product offerings in our various business segments in the Americas, Australasia and Europe, ability to manage its existing business while focusing on adding new products and services, ability to further diversify domestic customer relationships and expand internationally intention and ability to complete quality accretive acquisitions at reasonable multiples on a go forward basis as opportunities arise, ability to provide consistent cash dividends, ability to drive growth, increase our margins and maintain per ATM profitability, expansion of DCPayments' merchant base through new and innovative products and services, the expectation that the Company will realize positive results from launching DCC and implementing surcharge increases in international markets, ability to realize on expected synergies and ability to realize significant economies of scale and cost savings on acquisitions, ability to continue to acquire long–term recurring services contracts and negotiate renewals thereof in advance of their expiry, ability to maintain current customer relationships, ability to add product offerings in the markets we operate in, ability to diversify both domestically and internationally, ability to increase the servicing of customer relationships and increase our sales presence with other clients, the anticipated benefits of acquisitions, the expectation that acquisitions will be accretive to funds from operations per share in the first fiscal year following the transaction, or at all, , and the sufficiency of funds generated from operations to fund the business.

Readers are cautioned that our expectations, estimates, projections and assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward–looking statements. With respect to forward–looking statements contained within this Press Release, expectations are based on our current strategic plan and management forecasts, the historical financial performance and operational data of acquired entities, our existing contracts schedule, forecast and budgeted projections of increased capital expenditures required based on management's view of the age of capital assets currently in use by DCPayments.

The assumptions and estimates relating to the forward–looking information referred to above are updated quarterly and except as required by law, we do not undertake to update any other forward–looking information.

Additional information about DCPayments is available on SEDAR (www.sedar.com) or DCPayments' website at www.directcash.net.

Northland Power Reports First Quarter Results and Continued Progress on Offshore Wind Construction

TORONTO, ON—(Marketwired – May 11, 2016) –

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES OR ITS POSSESSIONS. ANY FAILURE TO COMPLY WITH THIS RESTRICTION MAY CONSTITUTE A VIOLATION OF U.S. SECURITIES LAW.

Northland Power Inc. (“Northland” or “the Company“) (TSX: NPI)(TSX: NPI.PR.A) (TSX: NPI.PR.B) (TSX: NPI.PR.C) (TSX: NPI.DB.B) (TSX: NPI.DB.C) today reported financial results for the three months ended March 31, 2016.

“Northland's first quarter results reflect continued progress in several key areas,” said John Brace, Chief Executive Officer. “We delivered our Grand Bend project into operations, while continuing to make significant advancements on both of our offshore wind projects currently under construction. We were pleased to see the Ontario Court of Appeal uphold the original decision relating to the price escalators for power sold under our affected power purchase agreements. Our adjusted EBITDA continues to increase, and we have reaffirmed our 2016 guidance in anticipation of another successful year. We remain well–positioned to continue growing the company while delivering robust returns to our shareholders.”


First Quarter Highlights:


Financial

  • Gross profit of $129.3 million for the first quarter of 2016 was in line with the first quarter of 2015 primarily due to higher PPA rates at Iroquois Falls and contributions from the newly operating ground–mounted solar facilities, offset by lower baseload gas–fired PPA rates at Kirkland Lake and the loss of revenue from Cochrane in 2016, whose operations ceased in May 2015 due to its PPA expiry;
  • Sales were 12% lower than first quarter of 2015 primarily due to lower sales at Kirkland Lake, the expiration of Cochrane's PPA, and lower natural gas pass–through costs at Thorold and North Battleford facilities partially offset by positive contributions from Iroquois Falls and the additional ground–mounted solar facilities;
  • Quarterly adjusted EBITDA for the first quarter of 2016 increased by 7% over the same period in 2015 to $103.9 million primarily driven by positive contributions from thermal and renewable operating segments and the establishment of decommissioning reserves in 2015 related to the Cochrane facility;
  • Quarterly free cash flow per share was $0.26 in the first quarter of 2016 versus $0.33 in the first quarter of 2015 primarily due to net proceeds received in 2015 from the sale of the Frampton wind farm and higher debt payments relating to the newly operating ground–mounted solar facilities; and
  • An accounting net loss of $91.7 million for the quarter versus a net loss of $30.6 million in the first quarter of 2015, was primarily a result of marked–to–market non–cash adjustments on Northland's financial derivative contracts.


 Construction

  • Gemini – 600 MW offshore wind farm, North Sea — Construction continues to progress with the project remaining on time and within budget. In February, Northland announced that the first wind turbine was installed and commenced producing power. As of today, 50 wind turbines, representing over a third of the total wind turbines, have been installed with 27 wind turbines producing power and earning pre–completion revenues. Installation of the wind turbines will continue throughout 2016, and may continue into early 2017. Full commercial operations are expected by mid 2017.
  • Nordsee One – 332 MW offshore wind farm, North Sea — Nordsee One continues to progress as expected with the project remaining on time and within budget. In April 2016, the project announced that all 54 foundation monopiles and transition pieces had been successfully installed. The offshore substation jacket foundation was also successfully installed in early May 2016. Construction of the offshore substation topside continues on schedule for installation in the summer of 2016. Production of in–field cables is nearly complete and production of the wind turbines has commenced. Full commercial operations are expected by the end of 2017.
  • Grand Bend – 100 MW onshore wind farm, Ontario — The project declared commercial operations on April 19, 2016 with all 40 wind turbines producing revenues and operating as planned. Commercial operations was ahead of previously disclosed timing due to the contractors and suppliers taking advantage of favourable weather conditions and providing additional staff to advance commissioning. Capital cost of the project was within budget.


Other

  • On April 19, 2016, the Ontario Court of Appeal released its decision in favour of Northland and other industry participants upholding the March 12, 2015 decision by the Ontario Superior Court of Justice with respect to the price escalator for power sold under power purchase agreements with the Ontario Electricity Financial Corporation (OEFC). Northland estimates its share of past and future lost revenue over the life of the relevant agreements would have been in the range of $225 million (originally estimated to be $200 million) had the appeal overturned the original decision. The OEFC has the right to seek leave to appeal the Court of Appeal's decision to the Supreme Court of Canada on the basis that the matter is of national or public importance. Subject to the right to seek leave to appeal, and the outcome of the appeal if leave is granted, Northland anticipates that approximately $90 million of retroactive payments, of the $225 million, will be received in 2016. Going forward, rates under the contracts will continue to be indexed according to the interpretation confirmed by the courts, consistent with the rates that have been applied since February 2015.
  • In March 2016, Kirkland Lake closed a $25 million bank credit facility consisting of a $15 million term loan and $10 million letter of credit facility. The financing will fund the costs of plant upgrades associated with the baseload PPA contract extension negotiated in the summer of 2015, the long–term gas transportation costs and the credit requirements for the new peaking facility's PPA.
  • Management continues to re–iterate 2016 adjusted EBITDA and free cash flow per share guidance. See more detail in the Outlook section of this press release.
         
SUMMARY OF CONSOLIDATED FINANCIAL RESULTS  
3 Months Ended March 31
    2016   2015
FINANCIALS (in thousands of dollars, except per share and energy unit amounts)        
  Sales   178,128   201,596
  Gross profit   129,342   130,157
  Adjusted EBITDA(1)   103,937   97,133
  Operating income   67,024   74,316
  Net loss   (91,651)   (30,616)
           
  Free cash flow(1)   44,866   50,245
  Cash Dividends paid to Common and Class A Shareholders   36,466   30,112
  Total Dividends declared to Common and Class A Shareholders(2)   46,168   42,340
         
Per Share        
  Free cash flow – basic   0.26   0.33
  Dividends declared to Shareholders(2)   0.27   0.27
Energy Volumes        
  Electricity sales volume (megawatt hours)   1,409,723   1,550,176
  (1) See “Non–IFRS measures” for a detailed description.
  (2) Total dividends to Common and Class A Shareholders represent cash dividends plus share dividends issued as part of Northland's dividend reinvestment plan.
         


First Quarter Results – Summary

Thermal facilities
Electricity production during the first quarter of 2016 was approximately 11% lower than the same quarter of 2015 primarily due to a decrease in production at Thorold as a result of fewer economic production periods and dispatch requests. These results were partially offset by increases in production at Spy Hill and North Battleford due to higher dispatch requests than the same quarter of 2015. However, the quantity of electricity produced at those three facilities had a minimal impact on gross profit given the nature of their PPAs. Gross profit at $84.9 million was $6.1 million higher than the same period in 2015 primarily due to the Iroquois Falls' contribution ($5.4 million), associated with the price escalation court decision with the OEFC, as well as a one–time charge of $2.3 million incurred by Thorold in the first quarter of 2015 related to a settlement for plant start–up costs. As a result of the above factors, operating income and adjusted EBITDA were $5.6 million and $5.4 million higher, than the first quarter of 2015.

Renewable facilities
Electricity production during the three months ended March 31, 2016 was 1,664 MWh lower than the same period in 2015 primarily due to a net 10,485 MWh decrease in production at the wind facilities caused by lower wind resources. This decrease was partially offset by an additional 8,821 MWh of production from the ground–mounted solar sites due to the additional solar facilities in operation compared to the first quarter of 2015. Sales during the first quarter of 2016 of $34.9 million were 10% higher than the first quarter of 2015 primarily due to the incremental contribution from the additional ground–mounted solar sites in operation. Plant operating costs during the first quarter of 2016 of $5.3 million were $0.7 million higher than the first quarter of 2015, primarily due to the incremental costs associated with the additional ground–mounted solar sites in operation.

Operating income was $2.3 million lower than the first quarter of 2015 largely due to the inclusion of depreciation on the additional ground–mounted solar facilities while adjusted EBITDA was $1.8 million higher than the same quarter of 2015 largely due to contributions from the additional ground–mounted solar facilities in operation.

Management and administration costs
Management and administration costs were $1.3 million higher than the first quarter of 2015 largely due to higher project development costs.

Finance costs, net
Finance costs, net (primarily interest expense), increased by $4.6 million from the first quarter of 2015 due to the inclusion of interest on the final four ground–mounted solar project debt.

Non–cash fair value losses
Non–cash fair value loss of $142.3 million in the first quarter of 2016 (compared to an $84.3 million loss in the first quarter of 2015) is comprised of a $140.0 million loss in the fair value of Northland's financial derivative contracts combined with a $2.3 million unrealized foreign exchange loss.

Net Loss
The factors described above, combined with a $1.4 million provision for current taxes and a $26.4 million recovery of deferred income taxes, resulted in a net loss of $91.7 million for the first quarter of 2016, compared to a net loss of $30.6 million for the first quarter of 2015.

Adjusted EBITDA
Northland's adjusted EBITDA for the three months ended March 31, 2016 was $6.8 million higher than the first quarter of 2015. Significant factors increasing and decreasing adjusted EBITDA for the comparative quarter are described below:

  • $5.4 million increase in operating results from Northland's thermal facilities largely due to the contribution from the Iroquois Falls facility associated with the OEFC court decision's revision to the price escalator of the PPA rates;
  • $2.1 million increase in management fees from Cochrane due to the establishment of decommissioning reserves in 2015;
  • $1.9 million higher investment income earned on Northland's portion of the Gemini subordinated debt, which is now included in investment income since some wind turbines are operational, and the interest earned on the loan receivable from Grand Bend's equity partner; and
  • $1.8 million increase in operating results from Northland's renewable facilities largely due to the contribution from the additional ground–mounted solar facilities.

These favourable results were partially offset by:

  • $2.3 million increase in corporate management, administration, and other costs; and
  • $2.0 decrease in management fees from Kirkland Lake primarily due to the amended baseload gas–fired PPA rates.

Free Cash Flow, Payout Ratio and Dividends to Shareholders
Free cash flow of $44.9 million for the first quarter of 2016 was $5.4 million lower than the corresponding period in 2015. Significant factors increasing or decreasing free cash flow are described below:

Factors decreasing free cash flow were:

  • $7.5 million net proceeds received in 2015 from the sale of the Frampton wind farm and land leases and options associated with early stage development projects;
  • $3.9 million net interest expense increase primarily due to the inclusion of additional ground–mounted solar project debt; and
  • $3.5 million increase in scheduled debt repayments also related to the ground–mounted solar projects.

Factors increasing free cash flow were:

  • $6.8 million higher adjusted EBITDA from Northland's operating facilities reduced by $1.0 million of investment income from Gemini, which will be included in free cash flow only when cash is received; and
  • $1.2 million decrease in funds set aside for future maintenance.

For the three months ended March 31, 2016, common share and Class A Share dividends declared for the quarter totalled $0.27 per share. The decrease in quarterly free cash flow from 2015, described above, was the primary reason for the increase in the quarterly free cash flow payout ratio to 81% or 103% if all dividends were paid out in cash (i.e. excluding the effect of dividends re–invested through Northland's DRIP).


Outlook

Northland actively pursues new power development opportunities that encompass a range of clean technologies, including natural gas, wind, solar and hydro.

During the first three months of 2016 and through the date of this report, Northland continued to expand its earlier–stage development pipeline, pursuing opportunities that meet the Company's investment criteria in targeted markets including but not limited to, North America, Europe, and Mexico. Northland has identified a number of opportunities in these jurisdictions, in addition to several projects already under development. Northland's sustained focus is on purposefully advancing those development opportunities that align with the Company's business strategy while prudently managing the cost exposure of earlier–stage projects.

Management continues to expect adjusted EBITDA in 2016 to be approximately $500 to $530 million. This adjusted EBITDA guidance includes Northland's share of pre–completion revenues from Gemini (EUR80 to EUR90 million at an assumed average rate of CA$1.48/euro) but excludes the lump–sum retroactive payments to Northland from the amounts owed by the OEFC pursuant to the Global Adjustment decision which is estimated at $90 million. The settlement is pending a decision by the OEFC to appeal with the Supreme Court of Canada as previously described.

In 2016, commensurate with adjusted EBITDA guidance, management continues to estimate the free cash flow per share range guidance of $0.93 to $1.08 per share. This free cash flow per share guidance includes $28 million of expected proceeds from the sale of 37.5% of four ground–mounted solar projects that is subject to meeting certain conditions. Similar to adjusted EBITDA guidance, free cash flow per share guidance excludes the impact from the expected lump–sum retroactive payments pursuant to the Global Adjustment settlement.

Northland's Board and management are committed to maintaining the current monthly dividend of $0.09 per share ($1.08 per share on an annual basis). Northland's management and Board have anticipated the impact of growth and are confident that Northland has adequate access to funds to meet its dividend commitment, including operating cash flows, cash and cash equivalents on hand and, if necessary, use of its line of credit or external financing. Management expects to continue its DRIP to provide an additional source of liquidity.


Non–IFRS Measures

This press release includes references to Northland's free cash flow, free cash flow payout ratio, free cash flow per share and adjusted EBITDA which are not measures prescribed by International Financial Reporting Standards (IFRS). Free cash flow, free cash flow payout ratio, free cash flow per share and adjusted EBITDA, do not have any standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. These measures should not be considered alternatives to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of Northland's results of operations from management's perspective. Management believes that free cash flow, free cash flow payout ratio, free cash flow per share, and adjusted EBITDA are widely accepted financial indicators used by investors to assess the performance of a company and its ability to generate cash through operations.


Earnings Conference Call

Northland will hold an earnings conference call on May 12 at 10:00 am EDT to discuss its first quarter financial results. John Brace, Northland's Chief Executive Officer, Paul Bradley, Northland's Chief Financial Officer and Mike Crawley, Northland's Executive Vice President, Business Development and will discuss the financial results and company developments before opening the call to questions from analysts and members of the media.


Conference call details are as follows:


Date: Thursday, May 12, 2016
Start Time: 10:00 a.m. EDT
Phone Number:
Toll free within North America: 1–844–284–3434

For those unable to attend the live call, an audio recording will be available on Northland's website at (www.northlandpower.ca) from the afternoon of May 12 until May 26, 2016.

ABOUT NORTHLAND

Northland is an independent power producer founded in 1987, and publicly traded since 1997. Northland develops, builds, owns and operates facilities that produce 'clean' (natural gas) and 'green' (wind, solar, and hydro) energy, providing sustainable long–term value to shareholders, stakeholders, and host communities.

The Company owns or has a net economic interest in 1,388 MW of operating generating capacity and 932 MW (642 MW net to Northland) of generating capacity under construction, including a 60% equity stake in Gemini, a 600 MW offshore wind project, and an 85% equity stake in Nordsee One, a 332 MW offshore wind project, both located in the North Sea.

Northland's cash flows are diversified over four geographically separate regions and regulatory jurisdictions in Canada and Europe.

Northland's common shares, Series 1, Series 2 and Series 3 preferred shares and Series B and Series C convertible debentures trade on the Toronto Stock Exchange under the symbols NPI, NPI.PR.A, NPI.PR.B, NPI.PR.C, NPI.DB.B, and NPI.DB.C, respectively.

FORWARD–LOOKING STATEMENTS

This release contains certain forward–looking statements which are provided for the purpose of presenting information about management's current expectations and plans. Readers are cautioned that such statements may not be appropriate for other purposes. Forward–looking statements include statements that are predictive in nature, depend upon or refer to future events or conditions, or include words such as “expects,” “anticipates,” “plans,” “believes,” “estimates,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other similar expressions, or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These statements may include, without limitation, statements regarding future adjusted EBITDA, free cash flows, free cash flow payout ratio, free cash flow per share, dividend payment and dividend payout ratios, the construction, completion, attainment of commercial operations, cost and output of development projects, the resolution of the arbitration claims, plans for raising capital, and the operations, business, financial condition, priorities, ongoing objectives, strategies and outlook of Northland and its subsidiaries. These statements are based upon certain material factors or assumptions that were applied in developing the forward–looking statements, including the design specifications of development projects, the provisions of contracts to which Northland or a subsidiary is a party, management's current plans, its perception of historical trends, current conditions and expected future developments, as well as other factors that are believed to be appropriate in the circumstances. Although these forward–looking statements are based upon management's current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties. Some of the factors that could cause results or events to differ from current expectations include, but are not limited to, construction risks, counterparty risks, operational risks, foreign exchange rates, regulatory risks, maritime risks for construction and operation, and the variability of revenues from generating facilities powered by intermittent renewable resources and the other factors described in the “Risks and Uncertainties” section of Northland's 2015 Annual Report and Annual Information Form, both of which can be found at www.sedar.com under Northland's profile and on Northland's website www.northlandpower.ca. Northland's actual results could differ materially from those expressed in, or implied by, these forward–looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward–looking statements will transpire or occur.

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