Aug 11, 2017
Executives
John Brace - Chief Executive Officer Paul Bradley - Chief Financial Officer Mike Crawley - Executive Vice President, Development
Analysts
Nelson Ng - RBC Capital Markets Sean Steuart - TD Securities Rupert Merer - National Bank Ben Pham - BMO David Quezada - Raymond James Mark Jarvi - CIBC Capital Markets Jeremy Rosenfield - Industrial Alliance. Bill Cabel - Desjardins
Operator
Ladies and gentlemen, thank you for standing by. Welcome to this Northland Power conference call to discuss the 2017 Second Quarter Results.
[Operator Instructions] As a reminder, this conference is being recorded Thursday, August 10, 2017, at 10:00 a.m. Conducting this call for Northland Power are John Brace, Chief Executive Officer; Paul Bradley, Chief Financial Officer; Mike Crawley, Executive Vice President of Business Development; and Adam Beaumont, Director of Finance.
Northland Power management has asked me to caution you that their summary of results 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. The release is available at www.northlandpower.ca.
I will now turn the call over to John Brace. Please go ahead.
John Brace
Thank you very much, operator, and good morning, everyone. Thank you for joining us on this summer day as we review our results for the second quarter of 2017 and provide an update on some important organizational developments.
I'm pleased to report that our second quarter was very successful across all parts of the business. However, before we dive into the details I am excited to share some significant news with you.
As you have likely already seen in yesterday's press release, Northland has concluded its strategic review. As part of the review we had many interesting discussions and examined many different alternatives.
Currently, we continue to make substantial progress on our operations and development fronts yielding numerous growth opportunities that are now available to us. For example, over the last year or so, we completed €2.8 billion Gemini project, ahead of schedule and under budget.
We completed $365 million Grand Bend wind farm, ahead of schedule and under budget. And we are nearing the completion of the $1.2 billion Nordsee One project, and we demonstrated that we can compete in the increasingly competitive infrastructure market through the announcement of our third offshore wind project, Deutsche Bucht.
In addition, as is obvious from our quarterly release we are producing very positive financial and operating results. We believe that the company now has a stronger platform than when the strategic review was launched.
A case and point is the fact that DeBu will be funded without raising new equity. Given all of this, the Board of Directors and management have determined that the best path for Northland and our shareholders is to continue as an independent Canadian public company and a leader in the international clean energy infrastructure sector.
Northland's continued positive performance and growth reinforces our enormous enthusiasm about this company's future. So let me focus on some of our key performance highlights, and then Paul will take a deeper dive into the numbers.
As I said, we produced excellent financial results, including year-over-year improvements due in no small part to our first offshore wind farm, Gemini achieving full operations in April. The project has already produced over $500 million in revenue meeting our expectations.
More specifically, we achieved a 62% increase in adjusted EBITDA, a 106% increase in gross profit and then more than doubled our free cash flow per share over the second quarter of 2017. Overall, all of our operating assets performed efficiently and most importantly, safely in the second quarter.
As announced in early July, we have successfully negotiated a permanent long-term enhanced dispatch contract for the balance of the time period of our Iroquois Falls facility's original power purchase agreement. The contract, which took effect July 1, will result in reduced greenhouse gas emissions, cost savings for Ontario electricity consumers and is expected to provide better economics for Northland.
This was a win all around. These factors have allowed us to materially increase our EBITDA and free cash flow guidance per share for the year.
Paul will speak more about this in a moment. Turning to construction.
We continued to make great progress on our Nordsee One offshore wind farm. The project is advancing as per plan, with 44 of the total 54 turbines installed to date.
The project, which began producing power on March 31, is already generating precompletion revenues. Our team will continue turbine installation in parallel with the progress of commissioning of the turbines, and we expect the project to be completed by the end of the year.
With Gemini in full operation and Nordsee One advancing to plan, we are in a great position to move forward on another large project. As we announced on March 3, we intend to acquire 100% ownership of our third offshore wind project.
Deutsche Bucht, or DeBu, is a 252-megawatt offshore wind project located in the German North Sea. This acquisition clearly demonstrates Northland's success in completing for and winning the best projects in the industry.
DeBu is located approximately 80 kilometers from Nordsee One and is currently in advanced development. We expect to reach financial close shortly with construction to begin shortly thereafter.
Project completion is expected by the end of 2019. DeBu is entitled to receive a fixed feed-in tariff subsidy for approximately 13 years under the German Renewable Energy Act, similar to our Nordsee One project.
While the offshore wind market has become very competitive, as I said, DeBu demonstrates that there are still great projects out there with returns that meet Northland's rigorous criteria. Our 100% ownership of DeBu underscores Northland's commitment to becoming an international leader in offshore wind development, construction and operation.
In addition, the project is investigating the addition of two demonstration turbines, which would use suction bucket foundations instead of the monopile design that we used on Nordsee One and Gemini. The final investment decision for these two turbines is subject to achieving certain development milestones.
If built, they will contribute an additional 17 megawatts of capacity, which would further improve the returns of the project. Mike Crawley is with us and can answer any additional questions about DeBu or the rest of our development pipeline.
Before I turn the call over to Paul, I would like to share some more good news with you. On August 1, Morten Melin officially joined Northland in the role of Executive Vice President, Construction.
Morten has extensive experience working in the international renewable energy sector, including his involvement on more than 25 offshore as well as several onshore wind projects. Most recently, Morten was Vice President, Engineering, Procurement and Construction for DONG Wind Energy Power based in Europe.
Throughout his career, Morten has successfully led his team's projects to completion on time, on budget and with excellent health, safety and environmental performance records. Further, he has successfully fostered a focus on global organizational effectiveness and maximizing project value through all phases of an asset's life cycle.
Morten's technical and infrastructure project management experience will enhance Northland's ability to develop and build large scale projects in multiple international locations. Morten is already hard at work and we are very pleased to have him on the Northland team.
At this point, I would like to turn it over to Paul Bradley.
Paul Bradley
Thank you, John, and good morning everyone. Last night Northland Power released its 2007 second quarter results.
As John mentioned, it was indeed another successful quarter. Northland's adjusted EBITDA of $168 million represents a 62% increase over the same period in 2016.
This increase is primarily driven by an $85 million increase in operating results from Gemini, which achieved commercial operations on April 28, 2017, as well as positive contributions from our Grand Bend, North Battleford and Iroquois Falls facilities. These favorable results were partially offset by a $12 million decrease in operating results from the idling of the Kingston facility as a result of its PPA expiration in January 2017, a $6 million decrease from Northland solar facilities due to lower production, primarily attributed to the summer weather we've all been experiencing here in Ontario, and a $4 million increase in corporate management and admin costs primarily related to early stage development projects and personnel costs and a $5 million increase in other miscellaneous items.
As for free cash flow, Northland generated a total of $100 million for the quarter, more than double the same period in 2016. The most significant factor was the increase in contributions from Gemini, which is partially offset by the Kingston remarketing initiative and lower contributions in the ground mounted solar.
This total includes results from the day Gemini became operational as well as a onetime cash distribution received at Gemini's full completion, representing Northland's share of net precompletion revenues in excess of the amount required by the project lenders to fund construction cost. These favorable results in free cash flow were partially offset by a $19 million decrease in the operating results due to the aforementioned idling of Kingston and lower production at ground mounted solar; $15 million payment of contingent consideration to the vendor of Gemini, resulting from the better-than-expected construction economics, an $8 million increase in debt service costs, primarily due to the inclusion of Gemini and Grand Bend debt as well as an increase in corporate management and administration cost, and miscellaneous items previously mentioned.
Quarterly free cash flow per share was $0.57 in the second quarter of 2017 versus $0.27 in the second quarter of 2016. This was largely a result of the factors just mentioned.
The GAAP net income for the quarter was $62 million compared to $23 million in the second quarter of 2016. The variance net income is due to increase in operating income and is partially offset by the lower noncash gain related to financial derivative contracts and an increase in finance costs.
As we noted last quarter, on January 1, 2017, Northland undertook and early adopted hedge accounting under the requirements of IFRS 9 to reduce the impact of mark-to-market adjustments in net income resulting from any volatility in foreign currency and interest rate movements. If Northland had not applied hedge accounting under IFRS 9, then an additional $31 million in mark-to-market adjustments would have been recorded in net income for the second quarter of 2017.
Moving on to our financial outlook for 2017. Management has increased its expected adjusted EBITDA and free cash flow guidance.
We now expect adjusted EBITDA for 2017 to be in the range of $710 million to $750 million, previously we had guided in the range of $660 million to $710 million. This increase and tightening is a result of our solid performance a favorable foreign exchange rate and an improved outlook for the Gemini, Iroquois Falls and North Battleford facilities.
Along with the increase in adjusted EBITDA guidance, the Gemini debt renegotiation and the planned use of cash and credit instead of preferred shares to fund DeBu, management has increased the expected 2017 free cash flow per share guidance to be in the range of $1.18 to $1.30 per share, up from the $1.03 to $1.18 per share previously disclosed. It is worth noting, consistent with Gemini during construction, Nordsee One's net precompletion revenue is excluded from the free cash flow calculation because the cash will be primarily used to fund construction cost pursuant to the credit agreement.
I'll now turn the call back to John for concluding remarks.
John Brace
Thank you very much, Paul. Just past the halfway point in 2017 we are feeling very positive.
Nordsee One is progressing to plan. We again achieved strong operational and financial results, and we are proving successful in our offshore wind investments.
As I said at the start of this call, the strategic review process is now complete, and we continue to have enormous enthusiasm about Northland's future. We are committed to delivering growth and will continue to build value by finding, acquiring and developing the best projects in our industry, benefiting our shareholders and the environment.
As always, thank you for your continued support of our business. We will now be pleased to take your questions.
Operator, could you please handle the questions?
Operator
Thank you [Operator Instructions] Your first question comes from the line of Nelson Ng with RBC Capital Markets.
Nelson Ng
Thanks, good morning, everyone.
Paul Bradley
Good morning.
Nelson Ng
A quick question on funding DeBu. I think you mentioned that it'll be funded through cash and through the credit facility.
I was just looking at the cash and the balance sheet and there's I think almost $400 million, excluding restricted cash. I was just wondering, how much of that is at the holdco level and available to fund DeBu?
Paul Bradley
Yes. So I think we're looking at probably funding it two thirds from our financing or line of credit and about a third from the cash on hand.
And as good stewards of the balance sheet, we always want to leave a fair bit of liquidity on there for future activities just for emergency purposes, but that's about the rough ratio. We'll fund it between credit and cash.
Nelson Ng
Okay, got it. And then just a quick question on Gemini.
How was the actual wind or generation relative to the long-term average for Gemini?
John Brace
So far, Europe has been a little short of long term averages. It's, I think, uniform throughout the industry.
So Gemini's actual wind production or megawatt hour production is a little bit shorter than long-term expectations. That being said, we should not forget Gemini's contract structure power subsidy contract is structured in such a way that we do not need to deliver all of our normal expectations in order to receive the full subsidy for the project.
Basically we get paid an extra 25% on our revenues and only have to produce 80% of our forecast in order to capture the full subsidy, which is the lion's share of our revenues.
Paul Bradley
Yes, and I would just add to that. The turbines are performing quite well under the wind curve that they are experiencing.
John Brace
Yes.
Nelson Ng
Okay. Thanks for that color.
And then just one last question. On the strategic review, was there -- did you guys look at or was there an assessment of whether there's any kind of new geographies or technologies that Northland should pursue?
And I guess, if that was looked at, are there any -- I was just thinking, are there any kind of new geographies that you might look at?
John Brace
I'll chip in before Mike Crawley may want to say something. We -- I think strategic review or not, we continually keep our heads above water looking for new areas of opportunity, areas that may be meeting our criteria for political stability, rule of law, financial stability and the basic drivers for new power infrastructure, those drivers being either just pure demand growth or technology obsolescence in the existing markets or a change in trust in those areas towards more renewable and clean energy project.
So that's something we do all the time. I don't know Mike, if you've got anything to add to that.
Mike Crawley
No. I mean, I think, like in terms of kind of the markets we're in right now, we -- John was saying, we look for markets for either of strong load growth, an asset retirement cycle coming up or an aggressive decarbonization plan.
And usually, if you get two out of three of those, it's a pretty good market. So right now in terms of traditional renewables the markets that we're looking at in that regard are Alberta, Saskatchewan in Canada and then Mexico as we stated earlier.
And in terms of other markets internationally we're focused on emerging markets for offshore wind where we think we can leverage our learnings from Europe and enter into markets for offshore wind just starting to play a significant role, such as Taiwan. And that's currently our focus.
And if other markets meet that criteria, we would look at them seriously.
Nelson Ng
Okay, thanks for the color, Mike. I’ll get back in the queue.
Operator
Your next question comes from the line of Sean Steuart with TD Securities.
Sean Steuart
Thanks, good morning everyone. Three questions.
With the review wrapped up and the potential for rapid declines in your payout ratio, can you give any comments with respect to dividend policy going forward?
Paul Bradley
Hi, Sean. Well I think we've been for the last several years saying that when Gemini and Nordsee One are completed that we would -- or shortly around that time period that we would revisit the dividend.
And I think that's firmly on track. And as you saw from the quarterly release, that completion of Nordsee One is fairly imminent.
So I would say, not today, but stay tuned.
Sean Steuart
Got it. And for John or Mike, I guess.
Context, I guess, on the scale of prospective developments that you might pursue going forward. I guess, a part of the strategic review is opening up avenues to pursue larger scale procurements.
Any context you can give on scale of projects that you might be interested in going forward?
Paul Bradley
Yes. I'll just give a quick lead and let Mike answer it.
But I think one of the things that came out of the strategic review for us is that shortage of available capital is not a constraint for us. But optimizing how we use it, when we use it, may be.
So I would suggest and I'll let Mike answer more fully that the availability of capital wouldn't necessarily be the driver for what we pursue. And as a matter of due course, we may look at slightly changing the way that we use capital, raise capital or partner or not, given where we are in our cycle.
But as far as the capital side, I think, I'll turn it over to Mike here, but whenever he can bring in the house that meets our rigid criteria, I've promised him I'd find the money for it.
Mike Crawley
I'll hold you to that, Paul. Yes.
So just to add on to what Paul said, in terms of kind of the more traditional onshore wind and solar and the Mexico gas fire development, I mean those are projects that have some scale, but have generally relatively modest equity ticket. The offshore projects, obviously, that we're pursuing have much larger capital requirements.
But what you see in some of those projects, particularly when you go underneath your restrictions, sometimes it does make sense for a number of reasons to bring a partner in at a certain stage of the development of those projects.
Sean Steuart
Okay. Thanks for that context.
I’ll get back in the queue.
Mike Crawley
Okay.
Operator
Your next question comes from the line of Rupert Merer with National Bank.
Rupert Merer
Hi, Good morning, everyone.
Paul Bradley
Good morning, Rupert.
Rupert Merer
So the conclusion of the review you've concluded, you've got the right strategy for shareholders. Can you talk about anything else you learned in the strategic review or any relationships you gained that could change the way you do business in the future?
Paul Bradley
I'd probably offer, Rupert, that as part of our normal course of business, we've got quite a number of folks that are out there talking to pretty much everybody in the industry anyway. And just given the capital climate that we're in, I just say metaphorically, we've got a line around the block outside our office building here of parties that would love to coinvest with us in our projects that we have.
I think we're going to review it probably accelerated or revisiting of a lot of those folks and a lot of the ideas and whatnot. And I think as I sort of alluded to earlier, capital availability is not really the constraint that we have for Northland, and I think several parties we got to know better might be somebody that would become a partner in our list for consideration, should we have a project that's either too big for us or we decide to risk share or for other reasons want to bring on a partner.
But I think it was one of those situations where we learned that we don't need to worry about that part of it. And really that having some people in other jurisdictions that we've gotten closer to could be helpful on the margin for certain deals and certain other initiatives that we might undertake.
But I think the real key learning for us was that we actually do have a pretty good situation, particularly with the results that we've had in the last year and the successes. And I think we could say in a position where we can lead the discussions as to who we want to bring in and how as we march forward rather than hitching our wagon at somebody today and then having them dictate how we're going to capital partner in the future.
Rupert Merer
Thanks for that. And you've mentioned all long as being business as usual at Northland.
So I'm sure you've kept an eye on the consolidation of the U.S. yieldco space recently.
Have you seen any change as to level of competition in the U.S. market with this consolidation?
Or are you seeing any opportunities for Northland that are arising from this consolidation?
Mike Crawley
So. I mean, in terms of kind of our view of the U.S.
market, I mean we've been paying attention but not yet. Moving on, if we ever seen a good opportunity in the offshore wind sector in the northeast and along the Eastern Seaboard, there's, obviously, a lot of market developments in terms of announcements on procurements of offshore wind or intent to procure offshore wind.
So we're keeping an eye on that, but we haven't [technical difficultly] Sorry, I think I lost my microphone there. In terms of -- I'm not sure if you cut all that.
So the -- was most of that answer come through? Do you want to go 10 seconds?
So we're keeping close eye on the offshore wind sector in the Eastern Seaboard. There's a number of announcements that have been made around procurements or intent to procure offshore wind.
We haven't found the right entry into that sector. So we're going to keep an eye into that market.
Yes, we're keeping on eye on that. In terms of onshore renewables in the U.S., it is highly competitive.
And you're seeing a move away from kind of utility PPAs to more C&I-type PPAs or off-takes or hedges, which perhaps are not quite as attractive to us as they would be to perhaps other investments. So I think that's kind of our current view of the U.S.
market.
Rupert Merer
So the level of competition doesn't seem to be in decline at all in your view?
Mike Crawley
No.
John Brace
That's a correct conclusion. Sorry, Rupert, we're struggling with malfunctioning microphones here.
Yes, so very competitive marketplace.
Rupert Merer
Great. Thank you.
Operator
Your next question comes from the line of Ben Pham with BMO.
Ben Pham
Okay. Thanks.
Good morning. Just with some of the questions on the strategic review and then some of your answers and I think I'm hearing I wanted to clarify.
Looks like you guys were potentially looking at potential planned partnerships as part of your review?
John Brace
Ben, there was fairly wide spectrum of opportunities we were looking at. And I should probably leave it at that.
It covered quiet a wide waterfront.
Ben Pham
Okay. And then can you guys add a bit more color to your view of strong access to capital?
Is that just simply your low payout ratio and your ability to manage that? Or is that more something else where if you kind of market today, you think there's a lot of demand for probably shareholders?
Paul Bradley
I think it's -- one of the things that we solidified in our learnings was that we do have quite significant long-term stable interest in providing equity capital for Northland so long as we continue to perform the same way we've been performing. And we continue to bring projects that have that meet rigorous criteria but deliver good financial results.
I think we do have a pretty deep interest on the equity side. In addition, at a project level, I think we also now understand a lot better as to the art of the possible of taking on investors at a different level in the company should that be more attractive, better for our common shareholders or otherwise.
And that's something that is a whole another set of ways to fund the equity contributions needed in our projects. And ultimately, we're here to make sure that our common shareholders take the lion's share of the benefits versus people that offer certain things that come along with coinvestment or other governance rights when you bring them in at project levels.
But to the extent that we find projects that we say, hey, for one reason or another, this may not be appropriate for the Northland shareholders to fund 100% of it, we feel very confident we can pick up any balance we need from external sources at the project level.
Ben Pham
Okay.
John Brace
Ben, I might add to that. It also, I think, is reflective of our fortunate track record of being able to deliver projects on time, on budget and have them performed the way they are supposed to perform.
And I think, our record in itself gives confidence to people in organizations who might want to invest alongside of us in some form or fashion.
Ben Pham
Okay. And then maybe question on staffing and your bench rate now.
And you've mentioned a new hire. But did you guys -- do you guys see a lot of turnover in the last 12 months as that you went through your review internally and I guess think what your staffing today and even at the senior levels, no COO.
I mean, is there anything you need to add to that or anything you need to change there?
John Brace
I think that my answer probably would be in twp parts, Ben. The first part being the strategic review itself did not, I believe, result in any departures of any sort.
So I think put that aside. Yes, we've had some retirements.
And most of those retirements had been replaced from internal, I would like to say, absolutely fantastic people. And so we're very happy with that.
You are correct in pointing out that we had the retirement of our Chief Operating Officer, and we are searching for a replacement for him. But in the meantime, I can assure you that the organization has stepped up to cover him and cover that spot very well.
So I think we're so organizationally and operationally doing very well. And we have some exciting prospects for his replacement and hope to put one in place in due course.
Ben Pham
Okay. Thanks John and its pretty guys you’re staying around.
Thanks.
John Brace
Thank you.
Operator
Your next question comes from the line of David Quezada with Raymond James.
David Quezada
Thanks. Hi, everyone.
My first question. Just looking at your opportunity set in European offshore wind, certainly, the DeBu project had a pretty attractive older-style tariff system.
Wondering what -- was that a rare project? Or is there kind of an opportunity set of similar projects out there with that older-style tariff scheme?
And I guess just in the broader context of how aggressive some of the other bidding rounds have been recently?
Mike Crawley
Yes. So in terms of Europe, I mean, it's kind of in terms of the tariff regimes, it's split a bit between leasing in the continent where there is subsidies and then what you see on -- or in the Germany and the Netherlands versus subsidy in what you see in the U.K.
and France versus more of a typical PPA that we'd be used to in Northern America more of a take-or-pay PPA. So we're looking for opportunities, both in Germany and Netherlands, but also, we're focused on the U.K.
and also keeping an eye on some of the developments in France. So what you've seen in terms of kind of the last German auction, it does signal a more competitive environment, but it is distinct to the nature of how the German subsidy works, and it is not necessarily something that would be replicated in another market for example, like the U.K., which is also moving quite aggressively forward with offshore wind procurement as well.
So some opportunities in Europe maybe better suited for Northland than others going forward, and we're obviously going to tilt towards those opportunities as we assess what's coming forward. But overall, the general thrust in Europe is a continued effort to procure more offshore wind, and that bodes well for our development opportunities.
David Quezada
Okay, great. That's helpful.
And my only other question, and I apologize if you addressed this already. Was there any update on the progress or timing of the development in Taiwan?
Mike Crawley
So, this year, I think we updated on the last call has been about submitting and securing approval for the environmental assessment on our twp offshore sites that we're developing in Taiwan. So we, in March, submitted the environmental assessment to the regulators and to the government.
We have had one panel review, which there's some media coverage of that already. And based on that panel review, we've been preparing some clarifications and some further responses for the Bureau of Energy, and those will be submitted in the coming weeks.
And then we expect to have another panel review early in the fall, at which point we'll see what reaction we get from that. But in our view, things are moving as we expect it in terms of kind of the permitting of the site, and the only other development that we've seen is an increase in the capacity available for interconnecting offshore wind projects in the area, where we're developing our projects, which is obviously positive.
David Quezada
Okay. That’s all I had.
Thank you.
Operator
Your next question comes from the line of Mark Jarvi with CIBC Capital Markets.
Mark Jarvi
Good morning, everyone.
John Brace
Good morning.
Mark Jarvi
Question on Gemini. One of your partners there Siemens, obviously probably not long-term asset owners.
Has there been any update or any conversation with them around intent to sell whether or not they're going to run a formal process or you guys are negotiations around [Indiscernible]?
Paul Bradley
Yes. Sorry, I just missed the second half of your question.
It's about...
Mark Jarvi
Whether or not you're running a formal process or any -- whether or not you guys engage them to look at acquiring their interest?
Paul Bradley
Yes. So I think if you review the partnership holdings, we've got the contract of the turbine supplier and then we've got a bit of a local utility.
So I think people can kind of make their assessments as to when the usefulness of any one of them might have kind of run its course. We're not at liberty to really speculate at what some of our coinvestors are doing.
But to the extent that they do wish to monetize, we would take a look at their stake. But I might argue that they might have better buyers, and we might have better use of our capital in paying full retail for an operating asset, so probably just leave it there.
Mark Jarvi
Okay. And then when you think about DeBu financial close, I think you guys are originally targeting midyear or so.
We're around that point now. How far off is that?
And when you think about where the debt financing might land, how that compare versus what you guys have done for Gemini?
Paul Bradley
Yes. On the first one, I'd say, don't stray too far from the news releases.
It's fairly imminent that the financial close will take place on that. It's down in the paperwork, pushing paper at this point.
As far as the financial markets, the underlyings are probably roughly even with where we are in Nordsee One, but the spreads have come in a fair bit. So we'll see a favorable spread to the cost of underlying debt capital.
And so that'll make much lower interest rate for Nordsee -- for DeBu over Nordsee One. It will still be a bit better even then what the Gemini restructured amount was because in a restructuring you probably have a little less pull than you do on a fresh financing where you can choose the lenders based on competitiveness.
Mark Jarvi
Okay, interesting. And then just going back to strategic review, you said you've put that sort of all up sort of different opportunities, and you talked about sources of capital.
What about recycling of capital? Whether or not you guys are putting more thought around maybe asset disposition as a source of capital to fund new growth?
Paul Bradley
Well, I mean, I think we look at the balance sheet as something that we have to look at the velocity of our capital, but it would all be good fun until the taxman shows up. So if we sell an asset for retail, we got eventually or probably immediately pay capital gains tax.
So on an after-tax basis, you got to take that cash and invest it in a cash flow stream equal or better than the one you just gave up. And at the end of the day, you might have higher velocity, but the question is, are you really creating more long-term value for the shareholders.
And the other thing is given the nature of our business, which tends to have a longer gestation period between when you need to put capital in a project and when that project is complete and spinning out cash, you certainly take in a cash flow stream that was immediate, and you invested the money in something that will probably be delayed a bit in producing cash. So it isn't quite as sexy as it sounds.
But honestly, there might be some optimizations that we can look at. I don't know that full asset sale and recycling the capital on after-tax basis would be the shareholder maximizing answer for us.
Mark Jarvi
So those comments are certainly consistent what you guys have commented in the past. So I would say, nothing has changed through the process that opened your eyes to any opportunities?
Paul Bradley
I'd say generally. I mean there might be areas where we can trim down our ownership interest a little bit to kind of supplement some various other things that we need or want.
But yes, generally, we just haven't seen -- we know it does work for others, and it works pretty well for others that do, say, for example, solar projects or even onshore wind where the cycle is a lot quicker. You can kind of imagine and where the projects are more fungible.
But I'd also argue those are where the project returns are also much lower. So if we want to get in that game or higher volume, lower returns, then the higher velocity capital equation maybe something that could work for us.
But just given the nature of where we have been playing most lately, that doesn't really compute out to be the best source of capital.
Mark Jarvi
Okay. Thanks for the answers.
Operator
[Operator Instructions]. Your next question comes from the line of Jeremy Rosenfield with Industrial Alliance.
Jeremy Rosenfield
Yes. Thanks.
Just following a little bit on that last question about recycling capital but from a different perspective, through the strategic review, I'm just curious if you've [Indiscernible] anything specifically on the relative attractiveness or the relative value of the various assets in your portfolio?
Paul Bradley
Yes. Jeremy, I think it’s an interesting question.
It's kind of like people have been fighting since the beginning of the time whether crunchy peanut butter or smooth peanut butter is better. We had people just all over our European assets.
We had people all over our North American assets and some that like them both. It's just a big world out there.
It's one of the learnings, I think that we take from it. But I think we could have done a transaction with any piece of the portfolio or the whole thing if we really had said that was the value maximizing side.
But yes, it's pretty amazing what -- and the types of things people look for. It's just very, very diverse out there.
I think that's one of the items that has given us sort of a renewed confidence in our current structures that we are sort of not a little more obscure on various places at which we can access capital in the various parts of the maturity, time line of a project, the technologies and the various jurisdictions that we look at, there is different slices of capital that appeal to a lot of those parts of the world. And do the same earlier with [Indiscernible] public markets, there's a bit of a profile of deals that, that type of investor generally likes and there's some boundaries on it.
And to the extent that we end up where we have a good deal, but it may be closer to edge of the boundary perhaps we lighten up a little bit on the public markets funding and add a bit of alternative funding to something like that. But I think what -- again just to repeat the lessons learned really has to do with the way we can supplement different forms of capital, where it's better for our common shareholders in the long run.
Jeremy Rosenfield
Okay. And then, I'm thinking you discussed the dividend and maybe implication there.
But just from a capital allocation perspective, obviously, growth probably that use of capital and dividend obviously to provide something to shareholders. But have you thought also about potentially using excess capital to repurchase shares and what type of signal that would send to the market based on where you see the intrinsic value of the stock relative to the market price?
Paul Bradley
Yes. Well, I think all of that is constantly on our minds and our board's mind as to what is the best use of capital.
I think one of the things that maybe we could look at -- I don't know if anybody's got their screens up, but our share price currently is barely affected by today's announcements. And I think we would consider that as a better price level.
That would be hard to justify potentially to be buying back if there was weakness somewhere along in the future, maybe that's something we could consider. But I think you hit on a very important point, Jeremy, which is that is going to be a very critical analysis for management and the board to make on we've got two sides of the shareholdings.
We got those that generally prefer to have a steadily raising dividend, and we've got a lot of shareholders who said if their money is better spent on doing deals like Gemini and Nordsee One, do that please because that's going to be better for us in the long run. So we got to balance the interest.
Just like any type of society, we've got to look at the different stakeholders and find the right balance there, and we will do that. And we appreciate that people do have different needs.
So we'll do our best to cater to what's best for the collective.
Jeremy Rosenfield
Okay, great. Thanks for that.
Operator
Your next question comes from the line of Bill Cabel with Desjardins.
Bill Cabel
Hey, guys. Just a quick question on the Temerty shares and how you would want your investors to sort of consider that or think about it going forward, there's obviously a view out there that he wanted to sell and may very well could be the seller in the future.
I think people would want to know how you think they should consider that as they look at Northland on the ongoing concern basis?
John Brace
Bill, thank you for that question. I'd like to start off with stating a very important fact here, feature here is that Jim has always expressed utmost enthusiasm for Northland Power and his investment in Northland Power ever since day one all the way through.
I've never heard anything but that from him. So start there.
And then progress to the fact that Jim someday may decide to do something. But given his shareholdings in the company, the size of that shareholding and the impacts on not only him personally but everyone else and his attitude towards the success of all other shareholders in the company, I can bet that if someday Jim does decide to do something, he will do that in a very rational and ordered fashion that will be to the benefit of Jim, of course, but also to the benefit to the other shareholders in Northland.
He's always kept his view of them very high in his mind.
Bill Cabel
Okay. That’s great.
Thanks a lot. That was all I had.
John Brace
Thank you.
Operator
Mr. Brace, there are no further questions at this time.
I would now turn the call back over to you.
John Brace
Well, thank you, everyone, for joining us today. I hope you got the impression that first of all, as a company, we are and continue to do very well.
And on top of that, we remain as excited about our future as ever. And I think, I would if anything were to come out of this, I would hope that you think of us that way.
We will hold our next earnings call following the release of our third quarter results in November of this year. With that operator would you please end the call.
Operator
Ladies and gentlemen, that does conclude the conference call for today. Thank you for participating, and have a pleasant day.