Northland Power Inc

TSX:NPI

Earnings Call Analysis

Northland's Q3 Earnings Lower Yet Within Guidance

Northland's third quarter earnings showed adjusted EBITDA at $267 million, an 8% drop, attributed to offshore wind performance with non-recurring high market prices of 2022, offset partly by improved turbine availability and foreign exchange gains. Free cash flow per share was $0.14 and adjusted free cash flow $0.25, compared to $0.19 and $0.28 last year, respectively. The financial outlook for 2023 has been reaffirmed at the lower end, with adjusted EBITDA between $1.2 and $1.3 billion, and free cash flow per share from $1.30 to $1.50, including sell down gains. The company remains focused on the construction of projects and optimizations to potentially enhance returns.

Closing of Financings and Wind Project Developments

Northland Power has had a notable quarter with the closing of more than $10 billion in project financings for over 2-gigawatts of offshore wind projects, Hai Long and Baltic Power. This is indicative of strong partnerships and Northland's reputation, laying the groundwork for future global financings.

Liquidity and Financial Performance

With a comprehensive financial strategy, Northland has managed to fund its projects under construction using proceeds from its ATM program and a corporate hybrid debt at a cost of approximately 6.2%. Their liquidity stands at $563 million, and they're planning the sell down of Hai Long to Gentari. However, Q3 2023 results saw an EBITDA decrease of 8% year-over-year, impacted by a decline in offshore wind facility results and higher costs in general administration and development expenditures. They expect adjusted EBITDA to be on the low end of the $1.2 billion to $1.3 billion range and have a similar outlook on free cash flow per share and adjusted free cash flow per share. Northland stresses disciplined balance sheet management and investment in new projects conditioned on favorable market situations.

Challenges and Strategic Focus

Curtailment issues arose from offshore wind facilities, but improvements to the German grid and potential storage solutions could mitigate future risks. There's also a continued effort to simplify the business and potentially rationalize the operating platform, including the consideration of thermal portfolio adjustments. They are exploring options to maximize the value of their development capabilities, possibly through sell-downs or asset sales, which will enhance liquidity and strategic focus over the next couple of years.

Partnerships and Pending Transactions

Northland is working towards closing an equity investment with Gentari in Q4, contingent upon meeting debt-financing requirements. Challenges with multilateral entities such as ECAs have delayed the process, but discussions are progressing. They have a contingency with short-term bridge financing in case of further delays. Furthermore, Northland retains expertise to explore recontracting opportunities potentially involving green hydrogen, ensuring diversified and lucrative future contracts.

Project Updates and Market Strategy

Northland is reassessing their development footprint, possibly pulling back from less attractive markets while continuing to invest where there's proven success. They maintain that no further committed equity is needed for forthcoming years, hinting at a capacity to sustain themselves with their current pipeline of projects. Any involvement in new projects will be discretionary, based on attractive economics and favorable market conditions.

Earnings Call Transcript 2023-Q3

[Operator]

Welcome to the Northland Power Conference Call to discuss the Third Quarter 2023 Results. At this time all participants are in a listen-only mode. After the speakers' presentation there'll be a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded on Friday, November 10, 2023, at 10 a.m. Eastern Standard Time.Conducting this call for Northland Power, are Mike Crawley, President and Chief Executive Officer; Pauline Alimchandani, Chief Financial Officer.Before we begin, Northland's management has asked me to remind listeners that all figures presented or in Canadian dollars and are -- and precaution that certainly information presented and responses to 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 forward-looking statements section and yesterday's news press release, announced Northwind Power's results and be guided by his contents and making investment decisions or recommendations. The release is available at www.northlandpower.com.I will now turn the call over to Mike Crawley.

[Mike Crawley, executive]

Thank you very much and good morning, everyone. And welcome to Northland's third quarter 2023 earnings call. Before we start, I want to reiterate that the health and safety of our employees and stakeholders always comes first. This is particularly important now that we have three significant projects in construction.As always, I will provide you with the business updates before passing things over to Pauline, who will walk you through our financial results.Let me first start with an update on our offshore wind business. There's no question that it's been a tough year for the offshore wind sector. Supply chain constraints and macroeconomic conditions have hit offshore wind, the most of all of the different renewable technologies. Despite the challenges faced in the sector, I'm pleased to announce that in September, we signed and close the financings on both the Baltic Power and Hai Long offshore wind projects representing over 2 gigawatts of additional offshore wind capacity. These are significant milestones for Northland and a big positive marker for the offshore wind sector. We're particularly proud to have finance both projects for more than 20-year terms totaling over $10 billion of nonrecourse project level debt, with the support from our global financial partners at a competitive all in rate of 5%.But it's important to notice that we have already secured funding for our portion of equity for these projects under construction including Oneida. Both Baltic Power, and Hai Long are progressing well and construction, which I'll speak to shortly. Once they reach full commercial operations in 2026 and 2027, with first turbines generating power in 2025, they will provide a material amount of EBITDA and free cash and cash flow growth for our business.Recognizing the adversities within the sector, we identified an action several measures early to counter changing dynamics in the space to limit potential negative impacts to our projects. For example, we locked in the supply chain early and secured enhancements to the revenue contracts. On Baltic power, this included moving inflation indexation back one year in the 25 year PPA that we have on the project and changing the base currency from Polish Zloty to euros which enabled increased amount of liquidity from debt lenders.Similarly, on Hai Long we were able to secure changes to the corporate PPA including moving the term from 20 to 30 years, which helped us offset the impact of cost increases, we also secured other opportunities -- up or down -- optimizations on the project itself. We already have an attractive visible growth profile once we achieve commercial operations for Baltic Power and Hai Long by 2026 and 2027, respectively, and remain disciplined on our pipeline to ensure that the growth we pursue is profitable and balanced.Earlier in the year, we did not hesitate to walk away from projects like the Nordsee Cluster that no longer met our investment criteria as market conditions changed. And we were also able to recover our sunk cost on that project and secure premium. We also exited early stage non-core offshore wind projects like Katagami in Japan. As well, deciding not to participate in any offshore wind development in the U.S. with a nascent supply chain and expensive upfront lease payments is just another example of us remaining selected and disciplined in our approach to growth.As I alluded to at our offshore wind investor update in September, we are focused squarely on execution of our projects under construction to be delivered on time and on budget. This is the same as we have done in the past, we will continue to take a diligent and disciplined approach to capital allocation ensuring that we invest in high quality profitable for projects that drive value for our shareholders. A large diversified development pipeline, including solar onshore wind, and energy storage provides us the ability to dedicate our resources at any time to the projects and the investments that are most attractive.This is what makes Northland positioned well for success over the long term. Hai Long and Baltic Power are advanced projects with secured construction contracts and financing costs locked down. Therefore, Northland does not see any further offshore wind procurement or financing for the next three years that enables us its flexibility to wait for not just the supply chain bottlenecks to be resolved, but also for a more stable interest rate environment.Subsequent to the Hai Long financial growth both our teams have been focused on closing the sale of the 29.4 stake interest in Hai Long to Gentari announced last year in December. The sell down transaction is currently targeted for the fourth quarter of 2023, subject to the satisfaction of certain closing conditions.In an extension of the strategic partnership formed with Gentari during the third quarter we also closed on a 49% sell down in two early stage offshore wind development projects in Taiwan, NorthWind and CanWind. Gentari's participation in these projects further demonstrates strong interest in the Taiwanese offshore wind sector and in a longer term broader partnership with Northland overall and beyond Taiwan.Now shifting to the onshore renewables business. Last quarter, we achieved financial close Oneida, one of North America's largest energy storage project totaling 250 gigawatts. Construction is progressing as planned with commercial operations expected in 2025. The contracted portion of the project is partially inflation protected. Subsequent to the end of the quarter, our Blue Stone and Ball Hill project in New York commenced early revenue. Both projects totaling 220 megawatts have 20-year revenue contracts with inflation protection, and are expected to contribute an aggregate of $42 million and $15 million of adjusted EBITDA and free cash flow respectively.We are presently working towards substantial completion, at which point we will finalize our tax equity funding with all this expected to be completed in the fourth quarter of the year. We've achieved a great deal this year across both our offshore wind and onshore renewables business. The 2023 goals we stated at our Investor Day earlier this year are being achieved. And we're looking to close on a few more before the end of the year.Now looking at the headline numbers in the quarter, we delivered adjusted EBITDA of $267 million in the third quarter along with adjusted free cash flow and free cash flow of $0.25, $0.14 per share respectively. Pauline will provide a more detailed look into the financial numbers later in the call.Moving to update on the construction progress for our three projects under construction, Hai Long, Baltic Power and Oneida. At Hai Long, fabrication of key components and in water horizontal drilling has commenced. Hai Long, has already logged 5 million working hours while adhering to strong health and safety standards. Foundations for the turbines and offshore substation work has significantly advanced and the offshore backup foundations are in final outfitting and close to being ready to sail out to Taiwan.Fabrication of key components have also begun at Baltic Power. At the Oneida Energy storage project the road and the pond construction and equipment foundation has commenced along with preparation of site for receiving major equipment in the spring. Execution for these three projects is our top priority. We maintain very close communications with the major contractors in our supply chain at both project and corporate level is crucial to ensure the quality of construction and that our projects are delivered on time and on budget.The contractors in our supply chain are reputable with strong track record and expertise in most cases, we have worked with them on previous projects. Most of you may have seen recent media reports on Siemens Energy. There's no indication that this will impact the delivery of turbines to a Hai Long project. As we have reiterated and confirmed the Hai Long that the program remains unaffected and is currently tracking on schedule from material deliveries, that they're fully -- and that they are fully underway for the plant installation in 2025. And of course, there were some further news yesterday on discussions between Siemens Energy and the German government in the news.Delivering these three projects in the operation, they're expected to collectively generate an aggregate adjusted EBITDA at free cash flow of $570 million to $615 million and $185 million to $210 million, respectively on a five-year average basis, resulting in significant value creation -- accretion for Northland's shareholders.With that, I will turn the call over to Pauline, for more detailed review of our financial results.

[Pauline Alimchandani, executive]

Thank you, Mike. And good morning, everyone. Before diving into the quarterly results, I want to take a moment to emphasize the immense quarter we have had with the closing of the financings and more than 2-gigawatts of offshore wind projects. The team work with more than 20 financial institutions each for Hai Long and Baltic Power, which included building new relationships with over 15 commercial global banks and export credit agencies. Developing these new relationships and bolstering existing ones will go a long way in building an ecosystem of partners for future project financings for Northland globally.Closing over $10 billion of project financings in the current market is a testament of the high quality projects we own and is a positive reflection on the capability of our teams, our partners our reputation as a sponsor, leading both financing on behalf of the project and our partners.As Mike noted, all projects and construction have been funded through approximately $900 million in proceeds raised on our ATM program in 2022, and through the $500 million corporate hybrid debt at a net cost of approximately 6.2%. The remaining elements of the funding plan is the closing of the 49% sell down of Hai Long to Gentari, which is targeted for the fourth quarter subject to achieving closing conditions as Mike discussed.Northland had access to $563 million of available liquidity at September 30, including $63 million of cash on hand and approximately $500 million of capacity on its corporate revolving credit facilities as of today. Northland also had a $500 million short term corporate credit facility to help fund its equity contribution in Hai Long, of which $344 million was utilized at September 30, this facility is intended to be repaid subject to the receipt of the proceeds from the sell down of Hai Long to Gentari. The facility matures at the end of November of 2023 and may need to be extended or refinance if there is a delay in the closing of the sell down.In addition, Northland has secured a $1 billion Hai Long related corporate LC facility to support Hai Long credit requirements during construction. Hai Long, Northland's Hai Long related letter of credit obligations, and this facility would decrease by 49% upon closing of the Gentari sell down.Looking at financial results released last night, our third quarter 2023 results were lower compared to Q3 last year, but were in line with our expectations. We generated adjusted EBITDA of approximately $267 million in the quarter, representing a decrease of approximately 8% or $23 million compared to the same period last year. The key factors that contributed to a lower EBITDA year-over-year included, a $50 million decrease in operating results at the offshore wind facilities primarily due to the non-reoccurrence of the unprecedented spike in market prices realized in 2022.This decline was partially offset by higher turbine availability at Nordsee One following the completion of the RSA replacement campaign in 2022 and the effect of foreign exchange fluctuations due to the strengthening of the euro and other items, and a $14 million increase in G&A costs and development expenditures, primarily due to higher costs to support operating projects and the ladder driven by the timing of the spent.The factors partially offsetting the decrease in adjusted EBITDA were a $29 million increase in the contribution from the Spanish Renewables portfolio, primarily due to the increase in band adjustments partially offset by the decrease in both merchant revenue and our [indiscernible], $19 million in gains from partial assets sell down. With respect to our free cash flow and adjusted free cash flow, Northland generated approximately $36 million and $64 million in the quarter respectively. This compares to $44 million and $66 million in the same period a year ago.The significant contributors resulting to the lower adjusted free cash flow and free cash flow in the quarter were a decrease in contribution from the operating facilities leading to lower adjusted EBITDA, a decrease in the results of -- the decrease as a result of higher net proceeds from the EBSA refinancing's that were recognized last year, and the decreases were partially offset from partial assets sell down gains and lower finance costs. On a per share basis, these figures was translated into free cash flow of $0.14 and adjusted free cash flow $0.25 in the quarter compared to free cash flow of $0.19 and adjusted free cash flow $0.28 per share in the same time last year. These results generated a rolling four quarter adjusted free cash flow and free cash flow net payout ratios of 59% and 82% respectively, calculated on the basis of cash dividends paid compared to 32% and 37% for the same period ending September 30, 2022.We continue to focus on managing our balance sheet and we will commit to new projects in future periods only being convinced of walking down financing and returns amidst a more uncertain environment. Further, as Mike mentioned, in addition to working on the closing of the Hai Long sell down transaction with Gentari that is targeted for the fourth quarter we also closed on the 49% sale, sale of NorthWind and CanWind to Gentari, which is reflected in our third quarter financial results. We continue to have a very active working relationship with Gentari as a long term partner.Turning to our 2023 financial guidance as noted in our press release, despite the regulatory changes in Spain, which materially impacted our results last quarter, and the macroeconomic challenges posed this year, we are reaffirming our 2023 financial guidance be at the lower end of the range. For adjusted EBITDA, we expect to generate low end of the range of $1.2 billion and $1.3 billion this year. For free cash flow we expect the range to be at the low end of $1.30 in $1.50 per share, while for adjusted free cash flow we expect to be at the lower end of the range of $1.70 to $1.90 per share. The low end of the ranges include sell down gains.To conclude it has been a significant quarter for Northland with derisking and the achievement of financial goals of our two marquee offshore wind projects. Going forward our focus remains on the execution of our three projects under construction within schedule and budget, which will allow us to potentially enhance project returns further with the optimization levers we have available that were discussed on our offshore wind investor call last month.I will now turn the call back over to Mike for his concluding remarks.

[Mike Crawley, executive]

Thank you, Pauline. And picking up on Pauline's point going forward, we intend to focus on the construction and execution of our projects in progress. In these uncertain times. It's especially crucial to stay constantly engaged with our suppliers throughout the management -- through management and the project team level conversations to ensure we are on track to stay on schedule and our budget - on our budget and manage the impact of any setbacks.Northland has no further committed equity for the subsequent years and we intend to take full advantage of the optionality provided by our growth pipeline. We are focused on being disciplined and selecting the right growth projects that meets our investment criteria in the current environment.This concludes our prepared remarks. And we'd be happy to take your questions. Please open up the lines.

[Operator]

Thank you. [Operator Instructions] First question comes from the line of Nicholas Boychuk with Coremark Securities. Your line is open.

[Nicholas Boychuk, analyst]

Can you spend a little bit on the curtailment issue, seen during this quarter and whether anything can be done to improve transmission or maybe even battery energy storage to monetize that production?

[Mike Crawley, executive]

So we understand there's still further transmission upgrades being pursued over the coming years in Germany. There's also other enhancements to the grid being proposed, including, I think, some announcements recently of adding additional gas capacity to the German grid as well. So all of that, in our view would reduce curtailment in the years ahead or at least be a positive factor in terms of curtailment risk in the years ahead.We have a storage team, which looks at all of our assets in terms of whether or not storage can be added to our projects to manage or mitigate curtailment. But I don't have anything further to say at this point.

[Nicholas Boychuk, analyst]

On the development costs in that earlier stage segment of the pipeline. Is it fair to say that some heavy lifting was done with projects this year, and that project development and development overhead costs might roll over a little bit into 2024? Are you expecting a similar investment to be made in the coming year?

[Mike Crawley, executive]

I think you should expect to see a smaller investment in the next couple of years just given that we're moving more into an execution phase than a development phase. We still have some development activities going on but the waiting will be more towards the execution on projects that are of course now capitalized.

[Nicholas Boychuk, analyst]

And then last for me, it just seems like a lot of regulatory bodies are becoming more open to revising and revisiting previously awarded PPA prices, just to better reflect the cost of building new projects. I'm curious if you're seeing the same dynamic in the Colombian market, and whether or not you might be able to rebid Cuba or other solar projects over the coming years?

[Mike Crawley, executive]

We haven't seen anything in Colombia or in the Colombian market. What we have seen is in the northeast of the U.S., there's a reason as you know, maybe offshore wind auction which came in at $140 per megawatt hours I think on average price, I could be wrong in that exact price, but it came in substantially higher than previous auctions. There's recent news out of the UK, around, potentially lifting this the ceiling or on offshore wind bids going forward and future auctions by 30% or 40%. I can't remember the exact amount, but by a substantial amount. So all of those for us are indications that energy prices, and PPA prices are adjusting to the new capital costs and cost of capital in the sector.

[Operator]

One moment for our next question, please. Our next question comes from the line of Rupert Merer with National Bank. Your line is now open.

[Rupert Merer, analyst]

With the equity investment from Gentari, can you give us more color on the closing conditions to get that deal done? And what's your comfort level with completing it this quarter?

[Pauline Alimchandani, executive]

So as part of the transaction Gentari needs to meet certain requirements in order to be part of the debt financing, which is taking more time to finalize given they are multi-party arrangements. Also, as you know, we've got ECAs involved. So right now, I mean, the discussions and workstreams are progressing. And we're still targeting to complete that in the fourth quarter.

[Rupert Merer, analyst]

And Pauline if it is delayed, is there anything you have to do regarding the financing that's in place?

[Pauline Alimchandani, executive]

Yeah. We've got short term bridge financing that's currently in place. So I think the simplest thing to do would be likely to extend that financing that we have in place.

[Rupert Merer, analyst]

And, Mike, I know you've given us some color on Siemens already. It does remain a topic of interest with investors. And with that, I wonder if you can give us a little more color on the plant and for producing turbines Hai Long? I know, they're not supposed to be delivered until 2025, but can you give us some color on where they're going to be assembled? Anything unique to the supply chain for those turbines. And again, remind us of the carrots and the sticks that you have with Siemens to ensure delivery?

[Mike Crawley, executive]

Yeah, so the bulk of the components are coming from European manufacturing facilities. There is a cell fabrication facility in Taiwan as well. There's some of the cells are going to be sourced. We have typical LDs and penalties in the contract -- supply contract to incentivize on time delivery by Siemens to made, we also have buffers in the contract schedule to give us further assurance in terms of being able to make sure there's no knock on effects in terms of delays.I think -- I probably did that other than the fact that we are -- as you can imagine, been in regular contact with Siemens Gamesa including me with the with my equivalent at Siemens Gamesa given the news of one or two months ago to ensure that that our order was still moving ahead on schedule. And we've been given every assurance and confirmation at my level but also at the project level that that is the case. And of course, we take some comfort from the news yesterday in like a Reuters story around we're in discussions with the German government. Obviously that's to be confirmed in the days and weeks ahead, I presume. But generally we're confident in Siemens Gamesa's ability to deliver and in Siemens Energy's long term viability.

[Operator]

One moment for our next question, please. Our next question comes from the line of Sean Steuart with TD Securities. Your line is now open.

[Sean Steuart, analyst]

Mike, wondering if you can give any general commentary on the potential for rationalization of the existing operating platform to the backstop liquidity. Any new thoughts with respect to the thermal portfolio, potentially EBSA streamlining the portfolio? Is that at all on the radar at this point?

[Mike Crawley, executive]

Listen, we've been clear in the last six months and last year that we are looking for ways to simplify the business moving forward. We -- the business did a lot of prospecting over the last few years and some markets have turned out very well for us. And even like Poland developing very attractive project and constructing a very attractive project in that market. And other areas like Alberta where we've just we've secured a strong pipeline of projects that can be built out at our discretion over the next five, six, seven years.So but other markets, perhaps have been turned out to be less attractive. And so I think what you'll see is as pulling back from some markets that have been proven less attractive, and looking to simplify the business moving forward, but in terms of specific assets, I wouldn't have anything to comment on the call right now on that.

[Sean Steuart, analyst]

Okay, thanks for that.

[Mike Crawley, executive]

I would say on the internal assets. I mean, they are an important part of our fleet. And they do still deliver meaningful cash flow.

[Sean Steuart, analyst]

And then any comments on an appreciating your shifting to more of an execution versus development phase, at least in the midterm. The comfort with the overall liquidity position adjusted for the Gentari to come? Do you feel comfortable that whatever equity investment needs, you might have your balance sheet is set up appropriately right now?

[Mike Crawley, executive]

Let me just on investment decisions, anything that we do on investment decisions is completely discretionary moving forward. So -- and then one of the points I was just - I think we've made at our investor call in September, is that we have the -- we're in a position now where we've got three large projects, through financial flows into construction over the last year that will deliver meaningful cash flow in two to three years' time as they come online. We don't need to source new growth, we don't need to fund new growth over that next two to three years. If we do, it will be if market conditions are favorable, if the projects have attractive economics, but we don't need to pursue any projects during that period of time. So anything we do, like I said will be entirely discretionary. I'll leave it to Pauline to answer the rest of the questions.

[Pauline Alimchandani, executive]

Yeah, I mean, I think as Mike mentioned, we are looking at simplifying the business overall, which will include either for the sell downs and our asset sale. So that would be the focus over the next one to two years, which will of course, generate some liquidity for the business and how we deploy that will be in the best -- in the best interest of the company, the balance sheets, ongoing liquidity, and what's most accretive for us at the time.

[Operator]

One moment for our next question, please. Our next question comes from the line of Mark Jarvi with CIBC. Your line is now open.

[Mark Jarvi, analyst]

I saw that you guys are winding down the hydrogen initiatives. And obviously, it's very early days and a lot of meaningful capital. But just what does that mean, for any future options around the existing offshore wind farms in Germany? I think at one point there was talks about using solar power to move towards a green hydro production or even some of the efforts in Atlantic Canada. Any thoughts on those two aspects where you were looking at Green hydrogen?

[Mike Crawley, executive]

So we folded in [Indiscernible] the hydrogen business unit and as we said, I think in the last quarter, we would no longer be looking at any export hydrogen -- export projects or large scale standalone hydrogen projects. We have retained some talent in hydrogen within the company, which is now embedded within the thermal team which understands fuels well, to look at opportunities like you describe in terms of whether or not there's an off take recontracting opportunity that could involve hydrogen going forward for any of our facilities you referenced and one, but over the next decade for any of our facilities. So we thought it was important to retain some expertise and knowledge in that area. And that is for that reason.

[Mark Jarvi, analyst]

So just to clarify my understanding, there's still some options in Nordsee One as using the power supply, to do something around green hydrogen, as another option for offtake.

[Mike Crawley, executive]

Yeah, to be clear. So we would, we are certainly will be exploring opportunities to sell electrons to a hydrogen producer, depending on how that market develops in the coming years. So understanding green hydrogen in the market for green hydrogen is important in that respect as projects over the next 10 years like with all of the IPPs start to gradually come off their initial contract and need to be recontracted. So it's about having different options and making sure we have the full knowledge and expertise of markets that you could sell the electrons to marketer. You could sell the electrons to a corporate off taker, you could -- in some cases, maybe rebid them in for sovereign contract, or option market develops over the next few years. You could sell them to a green hydrogen producer as well.So we just want to make sure that we understand the market that are in touch with what's going on in the market so that we can choose the most profitable and the most attractive opportunity for recontracting any of our projects over the next 10 years, including Nordsee. One.

[Mark Jarvi, analyst]

And then, a handful of years ago, there was some conversation around Northland maybe getting paid for its development and asset management capabilities. So sort of an asset, like more sort of, I don't know, consulting development expertise model. Obviously, in light of the scarcity of capital, or I guess, discipline you're showing now, are you're getting inbounds, do you have the capacity of your teams to do any of those sorts of initiatives? Or is that just something that's really not on your radar at this point?

[Mike Crawley, executive]

I didn't quite hear at all, was it to do development on a fee for service basis? Is that what it was?

[Mark Jarvi, analyst]

Yeah, exactly.

[Mike Crawley, executive]

Yeah. So I mean effectively, what we're doing away with the sell downs, and by bringing in partner equity into some of our projects, is developing projects, and getting a premium for the sweat equity and the de risking and the value creation that we do through development. So in a way, that's what we're doing, we're still retaining a portion on those projects for our own capital.And also, as we look at our development pipeline and rationalizing our development pipeline, if we divest certain development assets effectively, that's what we're doing is monetizing the value created by those development pipelines, if we decide that there's a better owner, a better constructor and an operator of that asset. So we certainly will be looking at those types of opportunities as well.We haven't looked at, at this point, at doing kind of almost just a pure development model where we're developing projects with no intention of deploying our capital into those projects at any time. I mean, like I said, in some cases, pieces may change, and we may decide that it's it -- there's a better owner for that asset and will be disciplined in that respect. But not at this point in terms of doing fee for service development.

[Mark Jarvi, analyst]

Yeah, I'm sure I'm understanding there's obviously been some disruption, some firms backing, although they're away from offer when they just want to run out your skill set without extending yourselves from a balance sheet perspective, can be leveraged going forward?

[Mike Crawley, executive]

I think it could be. And I think the question, I mean, I don't mean that sell down could, I mean sell down on any project, it could be 25% sell down 50% sell down, it could be even greater. And so, I suppose to your point, it could be all the way to zero given our skill set that we have. I think those decisions don't necessarily have to be made at this point in time. But there is as viewpoint, I think, as you're alluding to, a lot of large players with significant balance sheets and a lot of capital that wants to deploy that capital and offer when but don't have the expertise to develop those projects. And arguably, maybe there may be -- there may be an opportunity there for sure.

[Operator]

One moment for next question, please. Our next question comes from the line of Nelson Ng with RBC Capital Market. Your line is now open.

[Nelson Ng, analyst]

Just quick question on the CanWind and NorthWind sell down. So can you just give a bit more color in terms of the mechanics of how the sell down went and how you recognize $19 millions of gains. Did any past change hands or will Gentari just merely fund the next chunk of development costs?

[Pauline Alimchandani, executive]

No, cash did change hands, and we received that cash in the quarter. And I would say that it followed a very typical valuation process for an early stage development.

[Nelson Ng, analyst]

Okay, got it. And then --

[Pauline Alimchandani, executive]

And going forward now we will share the costs going forward.

[Nelson Ng, analyst]

And then I don't make mention that you guys are not looking to close any new offshore wind projects the next few years. But for CanWind and NorthWind, are you still actively developing that project or is it on hold? Or can you just give us an update on timing and process for those two projects?

[Mike Crawley, executive]

Yeah, I think there's still some clarity and information that everybody who has any of these next round projects in Taiwan is waiting for from the Taiwanese government in terms of what the rules are going to be when the auction is going to be when the bids are going to be. So there's still a lot of information missing to determine, even if the projects are something that we would want to proceed with. So I think it's pretty early days.

[Nelson Ng, analyst]

And then my next question relates to the New York wind projects. So congrats on completing those projects. I think previously, you guys talked about a project cost of about $600 million? Is it still around that level? Or is it a bit higher, given that there was some delay? And then also, can you just talk about the funding or capital structure? I think there was about $190 million of tax equity or so?

[Pauline Alimchandani, executive]

Yeah, no change to the capital costs from the prior disclosures. So all that is, is still in line. The tax equity piece is about $150 million.

[Nelson Ng, analyst]

And then last question, we've heard a lot of so I guess, first of all, I think it's you guys made the right decision to not get involved in any of the U.S. Northeast offshore wind developments. And I know a lot of companies are no longer pursuing it or just getting out of there, out of those developments. But are you -- like, are you currently looking at any opportunities in the U.S. Northeast, given that, like maybe it's the right time to get involved as others are exiting the sector? Can you give some comments on that potential or opportunity?

[Mike Crawley, executive]

No, we're not looking at anything there. I mean our focus not to -- I think I probably said it 20 times in my scripts, that the -- our focus is really truly on executing on the three projects that we have in front of us. I think the -- as we've already seen it in reference to the future round auction prices in the Northeast of the U.S. certainly will rise up and move up, I think. And we've already seen some evidence of that. So I think the market will improve. And I think it's good in the long run for offshore wind, that the projects in the Northeast of the U.S. eventually get built. It'll take longer, and there'll be built maybe different forms. And maybe there'll be different capital and different ownerships coming to -- orders coming into some of the projects, I don't know. But for the near term, we wouldn't be prospecting around looking for that.

[Operator]

One moment for our next question. Our next question comes from the line of Ben Pham with BMO. Your line is now open.

[Benjamin Pham, analyst]

On some of the optimizations you've mentioned, in the past since there are no offshore roster. Are you able to quantify or a directly point to where returns can be in that 10% to 14% targeted range.

[Mike Crawley, executive]

I didn't quite hear the question. Can you -- Ben, can you repeat it, please? Did you hear it, Pauline?

[Pauline Alimchandani, executive]

I think you're looking for us to quantify the direction of the optimizations. Is that right?

[Nelson Ng, analyst]

That's right. On Hai Long. Yeah.

[Pauline Alimchandani, executive]

So I think what we did - what we did at the Investor Day was we tried to say how much in terms of basis points we were able to get, when you look at Nordsee or some of the other projects on the debt optimization, which is probably the most significant optimization. Beyond that would be PCRs would be an optimization for Hai Long, which again, just relies on the project being built on schedule on or ahead of budget.And then last one, always remains is sort of sell downs and then construction optimizations. But I think on the debt refinancing side, I think we quoted 50 to 75 basis points is what we've been able to achieve historically. So, obviously, we just closed the financings. But as of today, I mean, I think that's a fair assumption to use.

[Mike Crawley, executive]

And the only thing that we didn't we only spoke to but we didn't give any ranges too, because I mean, everybody would have to come up with their own view on it is, on any reamortization of the debt to take advantage of the longer tenor on the PPA as well.

[Benjamin Pham, analyst]

Can you also talk about your exposure to the carbon tax in Canada with your gas fleet? Do you think about government's claim [Indiscernible] into next year?

[Mike Crawley, executive]

So I believe and then we'll follow up you after the call. On most of our facilities, it is a pass through? I think it is on a couple of our facilities, it is not. But the I think the one I'm picking up doesn't run all the time, but we can get back to you on that just to confirm that one on one.

[Operator]

Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Mike Crawley for closing remarks.

[Mike Crawley, executive]

Well, thanks for everybody for joining the call today. And we look forward to re engaging with you on our Q4 call coming up in February. Thank you.

[Operator]

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.