Toronto: Northland Power Inc. and Highland Group Holdings Ltd., through a wholly owned subsidiary, announced the signing March 3 of definitive agreement whereby Northland will acquire 100% of Deutsche Bucht, a 252 MW German offshore wind project currently in advanced development.
Deutsche Bucht, or "DeBu," 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 EUR 1.2 billion (approximately $1.8 billion CAD), and once operational, it is expected to generate over 1,000 gigawatt hours of electricity per year.
Northland expects to invest approximately $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 the 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.
DeBu is entitled to receive a fixed feed-in tariff subsidy for approximately 13 years under the German Renewable Energy Act ("EEG"), 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.
DeBu is expected to begin construction shortly after financial close, with project completion expected by the end of 2019.