Northland Power Inc. and Highland Group Holdings Ltd. , through a wholly owned subsidiary, have signed a definitive agreement whereby Northland will acquire 100% of Deutsche Bucht, a 252 MW offshore wind project currently in advanced development.
Deutsche Bucht, is Northland's third offshore wind project. It is located 95 km northwest of the island of Borkum in the German Exclusive Economic Zone, 77 km from Northland's other German offshore wind project, Nordsee One. The total estimated project cost is approximately €1.2 billion (US$1.27 billion), and once operational, it is expected to generate over 1,000 gigawatt hours of electricity per year.
Northland expects to invest approximately US$400 million of corporate funds with the balance of the project cost provided by project financing and pre-completion revenues. Financial closing is expected mid-2017. Northland expects this investment will be sourced from cash on hand, corporate liquidity, and preferred shares. As a result of the additional financing, management is revising its 2017 free cash flow per share guidance to be in the range of $1.03 to $1.18 per share from $1.10 to $1.25 per share. The project is expected to be accretive on a free cash flow per share basis upon its completion, and provide project returns commensurate with Northland's investment criteria.
The project is entitled to receive a fixed feed-in tariff subsidy for approximately 13 years under the German Renewable Energy Act, equating to approximately EUR 184/MWh for 8 years and EUR 149/MWh for the remainder. The majority of the project returns are expected to be earned during the 13 year feed-in-tariff period, with the remainder of the expected returns earned in the later years from the German wholesale electricity market.
Deutsche Bucht project is currently in an advanced stage of development -- it is expected to begin construction shortly after financial close, with project completion expected by the end of 2019. Like Gemini, DeBu will use a two-contract construction strategy. MHI Vestas Offshore Wind has been selected as the preferred supplier to supply and install the turbines. An affiliate of Van Oord nv, the balance of plant contractor for Gemini and the other preferred supplier, will provide the turbine installation vessel and supply and install the wind turbine foundations and the offshore electrical infrastructure. MVOW will also maintain the turbines under a long-term service contract. DeBu will be connected to the 800 MW BorWin Beta off-shore converter station which has already been constructed.
John Brace, Chief Executive Officer of Northland Power, noted:
"We are pleased to add a third solid and robust offshore wind project to Northland's portfolio. Continued growth in the thriving offshore wind sector is an important component of Northland's strategic development approach. DeBu will support our commitment to deliver long term value to shareholders, while aiding the global transition to clean and green energy sources."
Closing of the acquisition is subject to clearing certain conditions precedent, which the parties will work to complete over the next several months.