Northland Power Inc

TSX:NPI

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Northland Power conference call to discuss the 2022 first quarter results. [Operator Instructions]

As a reminder, this conference is being recorded, Wednesday, May 11, 2022, at 10:00 Eastern Time. Conducting this call for Northland Power are Mike Crawley, President and Chief Executive Officer; Pauline Alimchandani, Chief Financial Officer; and Wassem Khalil, Senior Director of Investor Relations and Strategy. Before we begin, Northland's management has asked me to remind listeners that all figures presented are in Canadian dollars and to caution that certain information presented and responses to your questions may contain forward-looking statements that include assumptions and are subject to various risks.

Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents in making investment decisions or recommendations. This release is available at www.northlandpower.com.

I will now turn the call over to Mike Crawley. Please go ahead.

[Mike Crawley, executive]

Thank you, Catherine, and good morning, everyone. Thanks for joining us today. This morning, we will review our financial and operating results for the first quarter of 2022. Following our prepared remarks, we will take questions from analysts and look forward to addressing all of your questions.

To kick things off, as we always do, I want to reiterate that the health and safety of our employees and stakeholders always comes first. Our rigorous adherence to our health and safety protocols in all respects, ensures the safety of our employees while allowing us to maintain a high level of availability at our facilities.

We delivered strong results in the quarter on the back of higher production and higher market prices in our offshore wind segment, a stronger wind resource in the Nordsee compared to this time last year across our 3 facilities, coupled with continued strength in energy prices in Europe resulted in very good performance for our offshore wind segment.

Along with the continued strength across our remaining portfolio, this has set us up for a very good start to the year. Looking at the headline numbers in the quarter, we've delivered adjusted EBITDA of $420 million, which was an increase of 17% or $60 million compared to the same period last year. Similarly, the adjusted free cash flow per share and the free cash flow per share, we achieved $0.84 and $0.77 respectively, in the quarter, representing increases of 15% and 17%, respectively, compared to the same period a year ago. And Pauline will go into the details of the quarter shortly.

We continue to progress our key development projects and our teams are sourcing new growth opportunities in identified markets. As we've noted previously, the acceleration in the global energy transition will require a substantial build-out of renewable energy over the next decades to realize government decarbonization policies and corporate net zero targets.

With the recent energy crisis in Europe, we are also seeing a renewed focus on energy security and the commitment to accelerate the development of renewable energy in Europe. These commitments include higher targets for renewable generation in countries such as Germany, the U.K. and the Netherlands and specifically, higher targets for offshore wind. Germany has committed to increasing offshore wind capacity by 10 gigawatts to a total of 30 gigawatts by 2030.

And the Netherlands has committed to doubling its offshore wind capacity by 2030, adding over 10 gigawatts of incremental capacity in a bid to meet its climate goals and reduce its dependence on fossil fuels. We are also seeing commitments to streamline the regulatory process with the aim of reducing the approval times for projects, thereby accelerating the development and the build-out of projects. As evidenced by the recent announcement from the U.K. government committing to planning reforms that will see its growth in offshore wind accelerate to 50 gigawatts by 2030, including 5 gigawatts specifically of floating offshore wind.

With several key projects in operation and under development across Europe, Northland, we believe, is well positioned to help achieve these objectives. In January, we expanded our presence in the German offshore wind market with the formation of the 1.3 gigawatt North Sea cluster with our partner, RWE. The offshore wind segment is all about size and scale and the formation of the cluster provides us with both and is expected to allow for the realization of synergies in development, construction and on operations.

Also in January, we announced a successful bid for 2 offshore wind leases totaling 2.3 gigawatts off the coast of Scotland. The 2 leases, 1 fixed and 1 floating foundation are -- foundation project, are early-stage offshore wind development opportunities that will extend our development pipeline into the next decade. And with our position in the 1.2 gigawatt Baltic Power offshore wind project in Poland, we are solidifying our position as a key player in this offshore wind build-out across Europe and indeed around the world.

We are very confident that these accelerated policies and targets will result in the advancement of existing development projects, but are also mindful that investments also need to be made to alleviate pressure on the European and global offshore wind supply chain and its ability to invest in ramping up capacity, which is pressed in the face of rising inflation and rising commodity prices. The focus by these countries on enabling a large-scale build-out of offshore wind towards and beyond 2030 bodes well for companies like Northland, and we welcome the opportunity to accelerate this build-out.

Now turning to our construction activities. Construction at our New York onshore wind projects is progressing well, on schedule and on budget. The 2 projects, Ball Hill and Bluestone have a combined operating capacity of 220 megawatts, and commercial operations are expected later in the year. The 2 projects benefited from 20-year indexed renewable energy certificate agreements with NYSERDA.

In Colombia, we celebrated the inauguration of the first phase of our 16-megawatt Helios solar farm in February. Construction and energization of the 10-megawatt first phase is complete and it's expected to provide enough electricity to meet the needs of 15,000 homes annually. Construction on the remaining 6 megawatts continued with full commercial operations expected by the end of the year, Helios will benefit from a 12-year power purchase agreement.

On the development front, our 1044-megawatt Hai Long project in Taiwan is preparing to move to financial close later this year. The project team is diligently completing a revenue, construction, financing and other necessary contractual arrangements, including supplier agreements for all of the key construction contracts, which will allow commencement of construction activities once the project achieves financial close.

On our other near-term development projects, including Baltic Power, Nordsee Two, which is part of the Nordsee cluster and Suba, we continue progressing the projects with the team securing the permits and contracts necessary to keep advancing these projects closer to their respective financial close dates.

We are very excited about the new opportunities that are arising as a result of rising electricity prices and the European push for energy security. Our teams across our global development office are working hard to identify opportunities for Northland to help accelerate the build-out of renewable energy projects, which we hope to share with you in due course.

With that, I will now turn the call over to Pauline for a more detailed review of our financial results.

[Pauline Alimchandani, executive]

Thank you, Mike, and good morning, everyone. Last night, Northland Power released operating and financial results for the first quarter of 2022. Our financial performance in the quarter was solid, where we generated healthy results for adjusted EBITDA, adjusted free cash flow and free cash flow. These results were supported by stronger performance across our offshore wind segment due to an improved wind resource in the quarter compared to a year ago, coupled with higher market prices that benefited our Gemini wind farm.

Financial results from our onshore renewables segments were also very strong year-over-year, reflecting consistent performance across our Canadian onshore assets, coupled with the contribution from the Spain assets acquired in 2021. However, these results were tempered by weakness in the Spanish assets during the quarter, primarily due to a lower wind resource.

Looking at our financial results in the quarter, we generated adjusted EBITDA of approximately $420 million, representing an increase of 17% or $60 million, compared to the $360 million generated in the same period last year. The key factors that contributed to the higher EBITDA year-over-year included a $63 million contribution from the Spain portfolio, which was not included in our first quarter results a year ago, a $21 million increase in operating results from our offshore wind segment, resulting from higher wind resource, increased APX market pricing that benefited the results at Gemini and fewer periods of uncompensated outages and negative pricing.

This strength was slightly tempered by the reduced turbine availability at Nordsee One, due to the rotary assembly replacement campaign, which recommenced in late March. The stronger results were also partially offset by a couple of other key items, including a $25 million decrease in operating results from our efficient natural gas portfolio in Canada, spending from the expiry of the Iroquois Falls PPA in December of 2021. As Mike noted, we subsequently sold Iroquois Falls alongside our Kingston facility early in the second quarter.

Also offsetting the strength in EBITDA was a $9 million increase in our G&A costs and growth expenditures to support global growth. With respect to free cash flow and adjusted free cash flow, Northland generated approximately $174 million and $192 million in the quarter, respectively. This represents an increase of $40 million and $45 million or 30%, compared to the same period a year ago.

As a reminder, our definition of adjusted free cash flow excludes growth-related expenditures, and we believe this provides a better representation of our long-term run rate for free cash flow. Overall, the key items leading to higher cash flow in the quarter, compared to a year ago, included a $36 million contribution from the Spain portfolio, coupled with a $13 million contribution from the net proceeds of the EBSA refinancing and an additional $6 million contribution resulting from lower interest costs due to the scheduled principal repayments on facility level loans.

These increases were partially offset by an $18 million increase in current taxes at our offshore wind facilities resulting from better operating performance year-over-year. Digging into EBSA a bit more. In December, we restructured and upsized EBSA's long-term nonrecourse debt financing, resulting in $35 million to $45 million of incremental net cash proceeds to Northland. The upfinancing was completed on the basis of growth in EBSA's projected EBITDA growth for 2022 based on increases in the rate base.

For the quarter, we have included net upsizing proceeds of $13 million in our free cash flow and expect to amortize the remaining proceeds across the 3 quarters in 2022, weighted more towards the latter half. These proceeds have already been included in our financial guidance for 2022. Under the terms of the EBSA facility, Northland intends to execute recurring upsizing of EBSA's debt supported by continued growth in its EBITDA, as market conditions permit.

On a per share basis, these figures translated into free cash flow of $0.77 and adjusted free cash flow of $0.84 in the quarter, compared to free cash flow of $0.66 and adjusted free cash flow of $0.73 per share same time last year. These results generated a rolling 4-quarter adjusted free cash flow and free cash flow net payout ratios of 42% and 52%, respectively, calculated on the basis of cash dividends paid, compared to 58% and 73% for the same period ending March 31, 2021. The improvement in both net payout ratios was due to higher reported adjusted free cash flow.

With respect to our balance sheet, Northland remains in a very strong position with ample liquidity to help fund our development initiatives. As at May 10, 2022, Northland had access to approximately $890 million of cash and liquidity, comprising $590 million of liquidity available on our revolving facility and $300 million of corporate cash on hand to help us pursue our growth initiatives. In addition to free cash flow generated, Northland utilizes additional sources of liquidity to fund growth and capital investments, including proceeds from strategic debt refinancings and debt optimization.

I want to take a moment and discuss the recent announcements in Spain that could impact our current portfolio. In response to the unprecedented high energy prices for consumers in 2022, in March of this year, Spanish authorities announced the approval of an exceptional update to the regulatory framework for calendar 2022 to mitigate the effects of higher energy prices.

Under the Spanish framework, the majority of Northland's Spanish facilities are entitled to receive a guaranteed rate of return over the regulatory life of the assets. Revenue from the Spanish facilities is primarily comprised of 2 main components: return on investment or Ri subsidy as well as a larger component based on pool prices. The measures introduced will result in the semi regulatory period from Jan 1, 2020 to December 31, 2022, being divided into 2 periods. One from Jan 1, 2020 to December 31, 2021, and the second one running from Jan 1, 2022 to December 31, 2022.

The update was done earlier than expected, and these amendments remain to be finalized, but are not expected to affect the long-term financial performance of the Spanish portfolio. As of now, our expectation is that the changes will not have an impact on the returns that will stay at 7.4% over the regulatory life of the assets. We continue to assess any financial impacts on the assets once any further amendments are finalized and issued. Currently, we do not expect any significant impact to our 2022 IFRS revenue, although we are still continuing to assess impacts to current and future years with our advisers and expect to have clarity in the coming months.

Turning to our 2022 financial guidance, as noted in our press release, we reaffirmed financial guidance for this year. For adjusted EBITDA, we expect to generate between $1.15 billion and $1.25 billion this year. Given the variability of the offshore wind performance and uncertainty with respect to the macro factors, including energy prices, our viewpoint on the 2022 guidance remains unchanged. For free cash flow per share and adjusted free cash flow per share, we expect to generate $1.20 to $1.40 and $1.65 to $1.80 (sic) [ $1.85 ], respectively.

As a growth company with a significant pipeline of development projects, Northland is committed to unlocking value by deploying early-stage investment capital or DEVEX to advance our projects. As such, in 2022, we are still expecting our development expenditures to amount to $100 million or around $0.45 per share to fund expenditures to advance the Nordsee cluster, Scotland and our Japan and Korea strategies in addition to others.

I would like to point out that our 2022 guidance ranges for free cash flow and adjusted free cash flow do not incorporate any sell-down proceeds and as such, net proceeds from sell-downs would increase our reported free cash flow in the event that they occur. In conclusion, we delivered very strong first quarter results to start the year, leaving us on solid footing for -- to achieve our full year financial guidance.

I will now turn the call back over to Mike for his concluding remarks.

[Mike Crawley, executive]

Thank you, Pauline. And as Pauline mentioned, we had a very good start to the year. And looking ahead, we see some big opportunities to further accelerate our growth. We have an operating portfolio of over 3 gigawatts, of which the majority is under long-term revenue contracts and a 14-gigawatt development pipeline to fuel our growth going forward. Our teams continue to actively source new growth opportunities to help accelerate the build-out of renewable projects and further grow our global position as a leading renewable energy producer.

This concludes our prepared remarks. We'd now be happy to take your questions. Katherine, please open the line for questions. And just a reminder that we have David Povall here as well, the Executive Vice President of Development for Northland.

[Operator]

[Operator Instructions] Our first question comes from Nelson Ng with RBC Capital Markets.

[Nelson Ng, analyst]

My first question relates to Hai Long in Taiwan. I believe you're still working with, I guess, a number of parties on a potential corporate PPA. Can you just give some color on the corporate PPA market in Taiwan. Obviously, oil and gas prices are higher. And I think that's supportive of higher power prices. But can you just talk big picture about how the current power price environment is in Taiwan and your progress on corporate PPA.

[Mike Crawley, executive]

Yes. I mean the driver, Nelson, of the corporate PPA market, which really has emerged in the last 2 years and in Taiwan in [indiscernible] is these global corporate net zero targets, renewable energy targets, whatever you want to call it, that are filtering down through the supply chain, right? So a lot of the suppliers to the technology sector are based in Taiwan, and so they're looking to procure renewable power directly.

A lot of the energy or the electricity coming out of the grid in Taiwan is still quite carbon-intensive. So they're looking to -- they have to procure renewable power directly through contract and the government certainly has been creating all the regulatory changes to make that possible. So all the same Nelson, lots of interest in procuring renewable power from corporates in Taiwan.

[Nelson Ng, analyst]

Okay. And then just on the big picture in terms of inflationary costs, higher interest rates and supply chain, I guess, issues. How have -- have things changed, I guess, since your Investor Day update, are you still pretty comfortable with the rough estimate in terms of project costs?

[Mike Crawley, executive]

Yes. I think we're generally in that same ballpark that we announced at Investor Day. If nothing locks in until financial close or shortly prior to financial close, and commodity prices and then some of the contracts are indexed, so they move around until financial close, but there's no material change from what we had disclosed at Investor Day in terms of capital cost.

[Nelson Ng, analyst]

Okay. That's great. And then just on financial close, I know back then, you were talking about the Q3 financial close. Are you now looking out of financial closer to Q4?

[Mike Crawley, executive]

Yes. I'd say kind of more likely late Q3, but drifting into early Q4.

[Nelson Ng, analyst]

Okay. And then just one final question. In terms of Spain, the results were pretty good in Q1. Like was that generally consistent with your expectations heading into the year? Or are things going to change due to some of the regulations they're going to put in place.

[Pauline Alimchandani, executive]

So for this year, Q1 is a strong contributor to the overall annual performance of Spain, I would say that they were slightly behind expectations due to lower wind resource experienced in the first quarter, which we do not perceive to be anything beyond temporary.

[Operator]

Our next question comes from Rupert Merer with National Bank.

[Rupert Merer, analyst]

Pauline, first, just to follow up on Nelson's question. If we look at the average price you reported in the quarter, for Spain at, say, CAD 280 a megawatt hour. Should we expect any change to that for the rest of the year? Or is that consistent with say, the average price we could expect with the changes that you're seeing in Spain.

[Pauline Alimchandani, executive]

Yes. It's very difficult for us to provide sort of better guidance or color on that because there is an adjustment component per se, and it depends on where the prices ultimately are for the balance of the quarters. As of now, I would say that, that's a good assumption, but subject to change.

[Mike Crawley, executive]

I mean across all of our European assets in all the markets that we're in, the forwards, you can even take a look at the forwards. They remain quite high, quite strong. But we'll have to see what the actuals end up being and there's not always a direct relationship.

[Rupert Merer, analyst]

Okay. Very good. And then switching gears, can you talk about Mexico. Can you give us an update on La Lucha, and maybe what are you seeing in the Mexican market with higher energy prices and how that might impact La Lucha?

[Mike Crawley, executive]

Good question. So I mean the quick update on what's going on with the sector in Mexico and how that impacts La Lucha. So 2 things occurred over the last month in Mexico with respect to energy policy. One, we saw the rough referral from the Senate to the Supreme Court of Mexico get heard and decided upon in the last month. And so there -- the vote was, I think, 7 to 4 by the court, I guess, against the legislation that the administration had tried to pass a year ago or past a year ago to try and basically reverse some of the energy reforms that had been constitutionally embedded by the previous administration.

So while a majority of the justices is -- would have declared that, that legislation was unconstitutional, they needed 8 to make it a formal declaration from the court that it was unconstitutional. So it ends up leaving you in a bit of an ambiguous situation, so it means that all of the injunctions that have been filed by private power producers, including Northland remain in effect and further injunctions can still be filed.

And the -- certainly, the lower court decisions have been similar by -- in terms of being -- determining that the legislation that was passed a year ago, by Congress was unconstitutional. So that's the one piece that's gone, that happened. The second piece is that the administration tried to meet the 2/3 requirement in a congressional vote to constitutionally embed the changes that they wanted to make to reverse the liberalization of electricity markets in Mexico and they failed to get that threshold.

And the administration seemed to signal after that, that they were going to move on to other priorities. So that in the medium to long term is -- we would view as a good result for La Lucha and for the power generation sector in Mexico in general. They certainly are seeing higher energy prices in Mexico as a result of higher gas prices, which is typically on the margin in Mexican power market.

I think, again, in the medium to long term, that could bode well. In the near term, we're just working closely with all of the regulatory bodies to get the final permits required to get our project interconnected along with other private generators in Mexico. The process is moving. It's just moving slowly.

[Rupert Merer, analyst]

Okay. So the outlook for that, is that still a '22 event that should be producing online before the end of the year?

[Mike Crawley, executive]

I mean our best view on it is to look at how long it has taken others to move through this process to get an FM claim approved and then move on to getting interconnected. And so based on how long it took other projects to move through, we would expect to be able to move through by the summer, but that's simply looking at, as I said, other projects and then how long it took them in applying that to La Lucha.

[Operator]

Our next question comes from Ben Pham with BMO.

[Benjamin Pham, analyst]

I had a couple of questions on Spain. And I'm wondering, you're disclosing this quarter, I think it's $65 million or so EBITDA from Spain, and correct me if I'm wrong. And then you've said that Spain will add $75 million for the full year. So are you well above tracking on Spain so far? It's only been one quarter.

[Pauline Alimchandani, executive]

On a -- we can get back to you on EBITDA, but on -- sort of have the free cash flow numbers that are off the top of my head. So there is seasonality, right, in the portfolio. So Q2 and Q3 are going to be sort of lower contribution quarters. And the way that the debt amortization currently works is not quite matched to be a cash flow generation of the portfolio. I think in time, we would like to hopefully change that. So there should be some lower contribution quarters upcoming. And we'll get back to you on the EBITDA question.

[Benjamin Pham, analyst]

Okay. And the way you're booking the merchant upside now as you're spreading out over the next 12 13, 14 years or so versus booking the current quarter?

[Pauline Alimchandani, executive]

So actually, the way that the IFRS revenue treatment works, at least under the previous method of accounting, which we're still holding, is that most of the adjustments, so we experienced more benefit in 2021. So in Q4, we had stronger results. And then it will be pushed forward for recognition to 2023. So there really wasn't that much of the historical pool prices being reflected in 2022. What -- where there's uncertainty still is what the prices are for this year.

[Benjamin Pham, analyst]

Okay. Got you. And then your comment, Pauline, in a note around that -- a review of the high spot price impact on consumers is, is it essentially get it's -- it's more really how to deal with the merchant prices versus looking at the ROEs, which should be moving higher in this environment versus going lower?

[Pauline Alimchandani, executive]

I guess the way to think about it is, over the life cycle of the assets, we are guaranteed a return. What's splitting up the regulatory period does is the resets happen sooner versus over a long period of time. So it gives them opportunity to course correct in more discrete shorter-term periods versus over a longer-term 3- to 6-year period, which was the regulatory cycle currently.

[Benjamin Pham, analyst]

Okay. Got you. And one final one on EBSA. Can you remind how that inflation works, is rate base adjusted each year by inflation. Is that how that works?

[Pauline Alimchandani, executive]

That's right. That's how it works, yes.

[Operator]

We have a question from Mark Jarvi from CIBC Capital Markets.

[Mark Jarvi, analyst]

Question just on Taiwan and the potential sell down. As you move through that process, are you set on a specific percentage? Or do you adjust based on pricing while taking a bid and/or just how much equity you want to ultimately commit to those projects?

[Mike Crawley, executive]

So we have disclosed that we are looking going forward at doing sell-downs across our portfolio globally at different stages of development to bring in third-party equity and to monetize some of the development value that we've created in our portfolio which -- and use that as part of the -- essentially part of the capital stack to fund the -- our equity contribution to the -- to projects in general. We haven't said anything specific on Taiwan or Hai Long at this point yet on any kind of a sell down.

[Mark Jarvi, analyst]

But can you just comment on whether or not once you start the process, you kind of have that very well-defined process in terms of the amount you're going to sell? Or is it something that can evolve and the sizing of it can change through that process.

[Pauline Alimchandani, executive]

I think any sell-down pursuit would be a negotiation. And as we're -- just general commentary in terms of -- you're mostly discussing sell-down opportunities of mature assets with financial investors, who generally want to deploy larger amounts of equity into renewables. So obviously, the percentage ultimately is a factor, but it's also the equity that they wish to deploy. So ultimately, it's a negotiation, and it's not going to be set on each and every sell-down that we pursue.

[Mark Jarvi, analyst]

Got it. Okay. And then just in terms of the corporate PPA market, as you look ahead, and there's the tender this year from new projects, is that an option for those projects in terms of different ways in terms of getting the sort of maximizing the revenue for any of those projects you might bid in, in terms of what bid to tender and Thai power and then kind of set those opportunities on core PPA and whether or not that's feasible.

[Mike Crawley, executive]

Sorry, I didn't quite get the question, but the -- sorry, maybe Paula, did you figure out?

[Pauline Alimchandani, executive]

Could you repeat it? You sort of broke up a little bit.

[Mark Jarvi, analyst]

Yes. It was just on the bidding that can happen this year with -- in Taiwan, where there's an upcoming RFP, whether or not -- yes, corporate PPAs are an option on top of whatever you could procure in that RFP.

[Mike Crawley, executive]

I think -- yes, I mean, I think certainly, what I can speak to is kind of market speculation and so on and around round 3, right around the next round this year and next year for offshore wind procurement in Taiwan. And I think there's a -- there could very well be a corporate offtake involve, just as you saw in Germany where the market evolved to where there were corporate offtake assumptions underwriting bids into the procurements there?

[Mark Jarvi, analyst]

Great, Mike. And then you mentioned earlier on in your opening remarks about the high spot prices and energy independence being supportive and team is working hard to find new opportunities. Is that a hint that you could see something later this year in terms of some new onshore level growth whether in the existing markets or new markets?

[Mike Crawley, executive]

Well, I mean, I think we've talked about an interest in general on onshore renewables in Eastern Europe. I certainly wouldn't want to give the impression of anything large coming. I think it's more kind of anything that we would do in onshore renewables in EU, Eastern Europe would be modest-sized projects in terms of kind of contribution, so kind of more incremental growth likewise in Spain likely, which is our other target market for onshore renewables in Europe.

For offshore, we are seeing, as I said in my remarks at the beginning, different countries in Europe looking to find ways to either increase their overall target for offshore wind and/or look at ways to accelerate the permitting of current projects that are being proposed. So we're tracking that closely and obviously, trying to see how we can be part of the solution for what Europe is looking at in terms of getting more renewable power to reduce their reliance on Russian gas.

[Mark Jarvi, analyst]

And just to clarify, are you -- are the Nordsee cluster projects potentially something that can advance sooner?

[Mike Crawley, executive]

I don't know. I mean, like I said, it's early days, but -- yes. I would just be speculating if I answered that question.

[Operator]

We have a question from John Mould with TD Securities.

[John Mould, analyst]

A couple of questions on behalf of Sean. Maybe just looking at your Canadian development opportunities and starting with Ontario you divested a couple of gas-fired units expired PPAs. And it looks like there's a sizable need for supply emerging after the Pickering closure in 2025. How are you looking to position yourself in the Ontario market in terms of future growth opportunities. And maybe more specifically, what could a potential path forward look like for the Marmora pumped storage initiative?

[Mike Crawley, executive]

Well, we've been tracking what's going on with the system operator in Ontario in terms of their forecast for both capacity and energy. So as you seem to be close to it too, there's an increasing awareness of the need for capacity in Ontario, post 2025. And I think that you'll start seeing -- I think that there'll also be an emerging need for energy in Ontario as well going forward, maybe not as early as the need for capacity. So -- yes. So we're always actively looking for ways to advance the Marmora project. We think it is an excellent asset in terms of providing flexible capacity to the system. And we're also looking at other ways to be able to contribute to the -- what we see as growing needs for incremental capacity and possibly energy in Ontario.

[John Mould, analyst]

Okay. And maybe just Gemini get back. You've got a couple of operating wind farms there. And -- so I'm sure you're aware of the government's announced 2.3 gigawatts of tender opportunities. Have you got any expansion opportunities at existing sites? And are you looking to be active in that market more broadly? Or are you essentially happy with what you've got operating there at this point?

[Mike Crawley, executive]

Our main focus in Quebec is on extending the contract life of those assets, the power purchase agreement on those facilities in Quebec. And we certainly believe that we're in a much better position than we would have been 5 years ago, given the signals that Hydro-Quebec and the Quebec government are putting out in terms of needing additional renewable energy capacity.

[Operator]

[Operator Instructions]

We have a question from Andrew Kuske with Credit Suisse.

[Andrew Kuske, analyst]

Just wondering if you could give us high-level thoughts on the GIP WPD deal and what that really means for future farm downs that you may engage in and really plan to engage in and just sort of general industry trends for maybe acceleration of offshore developments.

[Mike Crawley, executive]

I'll say a couple of words, and I'll turn it over to David Povall, our Head of Development, who's on the line as well. I mean we're certainly seeing lots of interest amongst financial investors, funds like [ GWP ], but also oil and gas majors, as you know, and other infrastructure and power sector investors in offshore wind specifically and also a lot more interest in getting in at an earlier stage in the development of projects. And as you know, these projects take several years to move from inception to operation.

So -- yes, there seems to be a lot of interest and it's -- and you're also continuing to see new markets open up for offshore wind. It really is the one way that you can get significant scale which is increasingly becoming a priority, both to decarbonize electricity grids, but also to meet kind of corporate net zero targets as we talked about earlier. But thirdly, to be able to facilitate, and this is kind of, obviously, at an earlier stage, facilitate the production of green hydrogen. You need a significant volume of green electrons and ideally low-cost green electrons. So I don't know if David, you've got anything more on this, closer to the WPD stuff in Taiwan.

[David Povall, executive]

Yes. No, I think, Andrew, anything to add to what Mike said, it's a confirmation of the trend of the appetite for investors into the renewable sections or into offshore wind. And in particularly in this case, you quote one example, I think, as we all know, there's a number of others out there. And to what Pauline said before and what those financial investors need is somebody like Northland who, of course, has the ability to originate projects and develop projects and take them through just the financial close. So for us I see it as a positive trend that we can work with them in the way we want to work with them in terms of the partnership and unlock projects and unlock their capital for them. So I think it will work very well for us. It's a good trend.

[Andrew Kuske, analyst]

That's helpful. And then maybe kind of a related question is when you think about just your existing asset positions, can you maybe talk a little bit about the tactical and strategic positioning of just the existing transmission that you have out to your facilities? And does that give you an advantage for further expansions and just maybe accelerated efforts in Europe to increase offshore wind exposure?

[Mike Crawley, executive]

I don't think the -- certainly -- I don't think the export cables or the transmission infrastructure to our existing facilities offers much opportunity to kind of expand our capacity. Where the opportunity more lies for us in Europe is to build on our existing market position, our relationships, our partnerships to pursue incremental projects in those markets, whether it's Poland, Germany, U.K. And I think it's more along those lines than -- technically, there's not much opportunity to add more capacity through the existing transmission lines.

The other opportunities also, just started talking to regulators about extending permits and allowing us to basically extend the asset life on some of our existing facilities. In terms of kind of adding more generating capacity to existing interconnects. The one market where we're starting to look at that is in Spain in terms of hybridization, so adding solar capacity to existing wind facilities to try and maximize or optimize the use of an interconnect. So there's -- that's the one area where we're looking at that.

[Operator]

We have a question from Naji Baydoun with iA Capital Markets.

[Naji Baydoun, analyst]

Just had one question on onshore renewables and the outlook in North America. I think you had a 1 gigawatt long-term target for Canada and the U.S. I'm just wondering if you can give us any updates on sort of solar prospects in New York and maybe some of the other markets you're thinking about?

[Mike Crawley, executive]

So we've got a development team in New York State that's actively developing a number of solar projects throughout the state. The state has got an aggressive target for onshore and offshore renewables but onshore. And so running annual procurements, NYSERDA is running annual procurement. So that's one area of focus. We've identified the Northeast of the U.S. and California as markets where we would like to either develop or potentially acquire renewable energy capacity. And so nothing more to say on that, but those are our target markets.

[Operator]

And there are no other questions at this time. I'd like to turn the call back to Mr. Crawley for any closing remarks.

[Mike Crawley, executive]

Okay. Well, thanks to everyone for joining us again today. We'll hold our next call following the release of our second quarter results in August. And in the meantime, thanks for your continued confidence and support.

[Operator]

Ladies and gentlemen, that does conclude the conference call for today. Thank you for participating, and have a pleasant day. You may now disconnect.