Northland Power: Pruning Development Portfolio With Sale of Nordseecluster
We maintain our CAD 35 fair value estimate for no-moat Northland Power NPI following the sale of its stake in an offshore wind development portfolio. We view shares as undervalued following weakness year to date.
On May 25, Northland Power announced the sale of its 49% stake in the Nordseecluster of offshore wind projects (consisting of three projects totaling 1.6 gigawatts of gross capacity) to partner RWE. We view the announcement as having a negligible impact on our fair value estimate given the limited sale price (EUR 35 million).
Stepping back, we view the sale announcement as consistent with Northland’s past comments of high-grading its 19-gigawatt development portfolio. Offshore wind cost inflation has placed pressure on project returns, and developers, such as Northland, are being increasingly disciplined in making positive investment decisions. We see the sale as reducing Northland’s medium-term capital needs while leaving ample development projects to grow its portfolio.
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