Northland Power, Inc. (OTCPK:NPIFF) Q3 2022 Earnings Conference Call November 10, 2022 10:00 AM ET
Company Participants
Mike Crawley – President and CEO
Pauline Alimchandani – CFO
Conference Call Participants
Rupert Merer – National Bank Financial
Sean Steuart – TD Securities
Nelson Ng – RBC Capital Markets
Justin Strong – Scotiabank
Mark Jarvi – CIBC
David Quezada – Raymond James
Benjamin Pham – BMO Capital Markets
Operator
Ladies and gentlemen, thank you for standing by. Welcome to this Northland Power conference call to discuss the 2022 3rd quarter results. [Operator Instructions]. As a reminder, this conference is being recorded, Thursday, November 10, 2022 at 10 a.m.
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 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.com.
I will now turn the call over to Mike Crawley. Please go ahead.
Mike Crawley
Thank you, Josh, and good morning, everyone. Thanks for joining us today. Also joining us on the call is David Povall, Executive Vice President of Development, to answer any of your questions on our development activities. This morning, we will review our financial and operating results for the third quarter of 2022. Following our prepared remarks, we’re going to take questions from analysts and look forward to addressing 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 ensures the safety of our employees while also allowing us to maintain high levels of availability at our facilities. We continued our strong performance in the third quarter, delivering solid operating and financial results supported by high power prices in Europe that benefited our offshore wind facilities in the North Sea and continued strength across the rest of our portfolio as well.
Looking at the headline numbers in the quarter. We delivered adjusted EBITDA of $290 million, which was an increase of 38% or $79 million compared to the same period last year. Similarly, for adjusted free cash flow per share and free cash flow per share, we achieved $0.28 and $0.19, respectively, in the quarter compared to $0.15 and $0.05 in the same period a year ago. Our financial and operating performance in the quarter continues a strong pattern of performance we have delivered thus far in 2022. And as noted in our press release yesterday, we are reaffirming our full year 2022 financial guidance previously updated, moved up in August, along with our second quarter results at the time.
A key driver behind this has been our strong operational performance, not only in the quarter but year-to-date, and the strength in European power prices during the quarter. We’ve utilized the higher power prices and the resulting higher realized cash flow across our portfolio to reinvest this cash flow in the development of additional renewable energy capacity and to proactively deleverage some of our assets to enhance the long-term cash flow and economic returns of those facilities. In aggregate, we refinanced over CAD 3 billion of project debt at our Gemini and Spain facilities using the higher cash flows generated in 2022. These actions will ensure the performance of these assets remain resilient going into the next several years.
While power prices in Europe have retreated somewhat in the near term, the emphasis on long-term energy security and the need to accelerate the move from reliance on fossil fuels towards renewable energy sources remains unchanged. As a global leader in renewable energy development with a significant operational and development footprint in Europe, Northland remains ready to contribute to the growth in renewable energy and energy security for the continent. And indeed, we’re doing that with our North Sea cluster, Scott Wind, Baltic Power and other projects that we have under development in Europe.
Turning to our development activities. At our Hai Long project in Taiwan, we continue to progress the project closer to the start of construction. We executed substantially all of the key contracts for suppliers for various elements of the project, including turbines, foundations, cable arrays in both onshore and offshore substations. The project also signed a supply agreement for the Siemens 14-megawatt turbine that it will be using along with a 15-year service contract covering offshore wind logistics and operations and maintenance.
Following the signing of the corporate PPA for Hai Long 2B and 3 in July, efforts have focused on securing nonrecourse project level debt finance, which has garnered strong lender interest from various global and local financial institutions. While the project continues to progress, delays in finalizing that corporate PPA, longer than expected negotiations related to the supply contracts pushed back the launch of project finance and slowed its initial progress. The project finance, however, is now progressing well, and we expect financial close to occur though in 2023 rather than in 2022. This delay in financial close is not expected to impact commercial operations for the project.
In Poland, our 1,200 megawatt Baltic Power offshore wind project has also been making significant progress in securing key elements within its supply chain. The project signed several preferred supplier agreements for wind turbines, export cables and the offshore and onshore substations. The project will utilize 76 turbines, each with the capacity of 15 megawatts to be supplied by Vestas. These turbines are currently the largest turbines available on the market. The project continues to work on securing the remaining key elements and service contracts for the wind facility.
At the North Sea cluster, Nordsee Two, one of the projects within the cluster, was also preselected for funding by the EU Innovation Fund and was awarded a grant of EUR 95 million. The grant was awarded to projects driving technical — technological advancements as part of their development. This grant will be used at Nordsee Two to demonstrate the technical and commercial feasibility of producing hydrogen at sea.
Now shifting gears to our construction activities. Our 2 onshore wind projects in New York State, Ball Hill and Bluestone, which are currently in construction, have experienced delays that impact their construction time lines. At Bluestone, all turbines have been delivered, all foundations are complete and turbine installations, which are well advanced, continued through the quarter and are expected to be completed by the end of the year. However, interconnection and final commissioning are now expected to follow in early 2023.
At Ball Hill, supply chain issues have resulted in a delay of turbine deliveries, although — and as a result, commercial operations is now expected to occur in 2023. All of the turbines, however, have been delivered to port. We also finalized a tax equity commitment for the 2 projects, the first ever for Northland, as part of the long-term funding plan for the projects. We continue to be active in New York State, having assembled a strong team on the ground to grow our development ambitions in the United States and, in particular, in that state.
Turning to operations. We are particularly proud of our German operations team in leading a very successful bearings replacement campaign at Nordsee One. The team was able to replace all 54 turbines — main bearing assemblies and all 54 turbines on budget and ahead of schedule, thus maximizing the potential for revenue generation in the fourth quarter of 2022. The cost for the campaign were fully covered by the warranty bond settlement proceeds received in 2020 related to the warranty obligations of Nordsee One’s turbine manufacturer.
To conclude, despite the global uncertainty and macroeconomic pressures we are facing, we continue to deliver strong operating and financial results and continue to execute on our strategic plan with our key projects achieving milestones as we move the projects closer to their financial close. Northland plays a key role in helping our markets around the world achieve energy security, and our development teams are working hard to identify additional opportunities in our current markets to help accelerate the build-out of renewable energy projects and capacity overall and help Northland scale up.
With that, I will now turn the call over to Pauline for a more detailed review of our financial results.
Pauline Alimchandani
Thank you, Mike, and good morning, everyone. Last night, Northland Power released operating and financial results for the third 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 strong performance across our operating portfolio and higher market prices in Europe, which benefited our offshore wind facilities as well as our onshore facilities in Spain.
Looking at our financial results in the quarter. We generated adjusted EBITDA of approximately $290 million, representing an increase of 38% or $79 million compared to the same period last year. The key factors that contributed to the higher EBITDA year-over-year included a $72 million increase in operating results at our offshore wind facilities in the North Sea, primarily due to higher realized market prices and a stronger wind resource compared to 1 year ago, a $9 million increase in operating results, primarily due to rate escalations at EBSA and higher wind resource at the Canadian renewable facilities, and a $6 million increase in contribution from the Spanish renewables portfolio as a result of a full quarter of contribution compared to a partial quarter in 2021.
This strength was slightly tempered by a $17 million decrease in operating results due to a loss in contribution from the expiry of the PPA and subsequent sale of the Iroquois Falls natural gas facility in April of 2022.
With respect to our free cash flow and adjusted free cash flow, Northland generated approximately $44 million and $66 million in the quarter, respectively. This compares to $11 million and $35 million in the same period a year ago. As a reminder, our definition of adjusted free cash flow excludes early-stage, growth-related expense returns as we believe this provides a better representation of our long-term run rate for free cash flow before investment decisions.
The significant contributors to higher cash flow in the quarter resulted were a $79 million increase in overall contributions across all facilities, leading to a higher adjusted EBITDA, and a $10 million increase primarily from the net proceeds of the EBSA refinancing. And these increases were primarily offset by a $27 million increase in current taxes, primarily at our offshore wind facilities resulting from better operating performance. Cash flows were also reduced by higher debt repayments in the quarter associated with the restructuring of our Gemini and Spanish portfolio debt facilities. The incremental debt payments amounted to $41 million in the quarter and were funded from cash flow generated as a result of higher realized power prices.
On a per share basis, these figures translated into free cash flow of $0.19 and adjusted free cash flow of $0.28 in the quarter compared to free cash flow of $0.05 and adjusted free cash flow of $0.15 at the same time last year.
With respect to our balance sheet, Northland remains in a strong position with ample liquidity to fund our current projects. As at November 9, we had access to approximately $1.2 billion of cash and liquidity, comprising $700 million of liquidity available on our revolving facility and $5 million of corporate cash on hand to help us pursue our growth initiatives. We continue to prudently manage our balance sheet, taking proactive actions to further enhance our cash flow, bolster our corporate liquidity and ensure that Northland remains in a good position to weather the impacts from economic uncertainty.
As noted previously, Northland uses additional sources of liquidity to fund growth in capital investments, including proceeds from our ATM program. In early September, we renewed the program, which allows us to issue up to $750 million of common shares at the company’s discretion. Since instituting the program in early March of this year, we have generated over $700 million of additional liquidity at an average price of $42.11 to fund projects that are expected to achieve financial close in 2023.
As Mike alluded to earlier, and subsequent to quarter end, we proactively restructured $3.1 billion of debt, including our Gemini offshore wind facility and our Spanish onshore portfolio. The restructuring will optimize the debt profile for each facility, resulting in compression of loan margins, enhanced cash flow profiles in the coming years and improvements in the economic values for the 2 assets.
As a result of the restructuring, both facilities incurred higher debt repayments in 2022 with an $82 million payment at the Spanish portfolio, while in Gemini, the debt repayment will reduce our adjusted free cash flow by $68 million at Northland share. In both instances, the repayments were fully made from higher cash flow generated as a result of the higher market prices realized in the year and will not impact Northland’s available liquidity. We pursue these financings on accretive terms to Northland, also deleveraging and derisking our future cash flow profile on the 2 assets. Both restructurings are also considered green financings in accordance with Northland’s green financing framework.
Full details on each facility restructuring is available in our third quarter press release and within the MD&A in our financial report, both of which can be accessed on our website.
We also successfully finalized our first-ever tax equity financing for Northland, securing an equity commitment with a leading U.S. financial institution for the 108-megawatt Ball Hill and 112-megawatt Bluestone onshore wind projects in New York State. The commitment will provide tax equity investment of up to USD 190 million or approximately CAD 250 million to assist with funding the projects. Following the conclusion of the tax equity investment at commercial operations, the long-term structure of the projects will be comprised of tax equity, back-levered nonrecourse debt and equity to fund approximately CAD 600 million of capital costs for the projects.
Turning to our 2022 financial guidance. As noted in our press release, with the strong operating and financial performance in the quarter and year-to-date, we are reaffirming our financial guidance for 2022. For adjusted EBITDA, we expect to generate between $1.25 billion and $1.35 billion this year. For free cash flow per share, we expect the range to be $1.40 to $1.60, while for adjusted free cash flow, we expect to generate $1.85 to $2.05 per share. These ranges include the higher debt payment mentioned earlier relating to the restructuring of the Gemini and Spain portfolio debt.
The revised ranges factor in the potential impacts from the implementation of price caps on wholesale electricity prices in Europe. The price caps are being implemented in response to the surge in wholesale electricity markets. The EU Council established a cap on market revenues of EUR 180 per megawatt hour effective December 1, 2022 through to at least June 30, 2023. Each member state within the EU has an obligation to implement the cap and the flexibility to adapt the EU structure based on the structure of their individual markets.
Depending on how each EU state member finalizes its implementation mechanism, there is potential for impact to Northland’s financial results. Our 2022 financial guidance has been reaffirmed and includes management’s interpretations of the current proposed legislative and regulatory changes, even though they are subject to change and have not yet been finalized or enacted into law.
In conclusion, we delivered strong results in the quarter through the first 9 months of the year. This performance has allowed us to maintain our financial guidance for 2022 despite all the puts and takes. We continue to proactively manage our balance sheet, implementing various initiatives to increase our financial flexibility, enhance future cash flows and ensure that we remain in good financial shape despite economic uncertainties in the global markets.
I will now turn the call back over to Mike for his concluding remarks.
Mike Crawley
Thank you, Pauline. And as Pauline walked you through, we had a very good quarter — sorry, as Pauline can walk you through, we had a very good quarter and a strong 9 months — first 9 months of the year in 2022. We look forward to finishing off the year strong with projects nearing key milestones over the coming months, and we are very excited about the continued growth of Northland. Longer term, our teams continue to actively source new growth opportunities to help accelerate the build-out of renewable energy capacity 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. Josh, please open the line for questions.
Question-and-Answer Session
Operator
[Operator Instructions]. Our first question comes from Rupert Merer with National Bank.
Rupert Merer
You discussed your liquidity position in the prepared remarks. Is this enough to fund your equity needs for construction next year, including Hai Long and Baltic if we don’t see sell-downs? And would you still consider doing sell-downs?
Mike Crawley
It is enough to fund all of the capital requirements for Hai Long with or without sell-downs in terms of our current liquidity position. And we haven’t yet kind of talked to the market about what our funding plan is for Baltic Power beyond that.
Rupert Merer
Okay. Great. How much equity do you anticipate you will need going forward for Hai Long then?
Pauline Alimchandani
I don’t think we’ve stated an exact amount. I think as Mike noted, I think what he stated was that we have the equity we need for Hai Long under various different scenarios.
Rupert Merer
Okay. And what can you say about potential for sell-downs? Is everything still on the table? And are you seeing — is there any evolution in the market demand for investment into development assets?
Pauline Alimchandani
I think the demand is stronger than ever. I think we’re seeing very solid demand for the assets in our portfolio, those early-stage assets and assets that are approaching financial close. So we’re very encouraged by the demand that we’re seeing and the conversations that we’re having globally in our various markets. And I think in our public disclosures, we did say that we’re still working towards achieving this sell-down to bolster liquidity and monetize the value. Timing is — in this type of market timing is tougher to pin down, but we’re still aiming towards 2022, 2023.
Operator
Our next question comes from Sean Steuart with TD Securities.
Sean Steuart
Question for Pauline with respect to the price cap in Europe. There was — you mentioned the potential to impact results and this being factored into the guidance. I’m just trying to understand, does that envision any potential clawback in the Netherlands or in Spain for revenues you would have collected so far this year?
Pauline Alimchandani
Yes. So the one thing I will caveat is that the situation is changing daily every day. We get a piece of new information that results in a slightly different calculation of what the outcome maybe. And at this the point, it’s may be because we’re interpreting what hasn’t yet been proposed or finalized. So I think at this time, based on the scenarios that we’ve run, we have reaffirmed guidance based on the knowledge that we have.
Mike Crawley
Most reasonable assessment of all of the information that’s available in the market at this point.
Sean Steuart
Okay. So are there — can you say if there’s a clawback envisioned in that or not?
Pauline Alimchandani
I think we prefer not to say, I think whether it’s a clawback or a change in how we can get access to market prices. I mean, there’s a whole — there’s a bunch of different scenarios that would impact our financial results. So I think all we’re seeing is we’ve contemplated various different scenarios and reaffirmed our guidance.
Sean Steuart
Okay. There’s mention in the MD&A around a realignment of the business units. And it sounds like there’s more to come on that. Mike, can you give us any sense of what you’re thinking with respect to that and how this restructuring of segments might look?
Mike Crawley
Yes. I mean, I would describe it more as an evolutionary than revolutionary in terms of how we’re reorganizing the business. It’s a bit of a continuing evolution over the last 4 or 5 years as the company has grown globally and has grown in different asset classes to organize ourselves in a way to both operate and develop more efficiently. So more to come in the New Year, but simply spoken it’s looking at reorganizing some teams more along the lines of asset classes or into asset types or types of generation so that they can work more closely together and collaborate more closely together to even better developer projects and even better operator projects as well and get more end-to-end — better end-to-end accountability as well.
Operator
Our next question comes from Nelson Ng with RBC Capital Markets.
Nelson Ng
Great. Just a quick question on Hai Long. So you mentioned that it’s been delayed to 2023. Are you talking about just like a few months delay going into Q1 or something potentially longer in terms of the delay?
Mike Crawley
I think what we’re indicating is that there’s a delay. And if you look back to halfway through the year, I think there’s a lot of anticipation and — around the corporate offtake. And it did take longer to negotiate, so that added a bit of time before we could actually launch the financing. What I can say clearly now is that the financing is moving along well, lots of interest from international and local banks. And — but all we can say at this point is we expect it to move into 2022 rather than being finished at the end of 2022.
Nelson Ng
Okay. And then you mentioned that you pretty much signed the majority of equipment contracts and supplies. So are the equipment contracts in euros or U.S. dollars? And I know currency has moved a lot over the past year, and there’s a lot of moving parts. So I’m not sure if a stronger or weaker euro or U.S. dollar kind of helps or hurts the economics in any way.
Mike Crawley
Supply contracts are in multiple currencies. So — yes, so it’s — I don’t — there’s not a pronounced impact one way or another with movement in one currency and weakening in another currency because they are spread out across multiple currencies.
Pauline Alimchandani
Typically, also, when contracts are executed, hedges are put on at the same time as well.
Nelson Ng
Okay. Got it. So no hedges. Nothing is kind of locked in today. But on the financial close, everything will be locked in, in terms of FX and interest rates.
Pauline Alimchandani
So to be clear, I think there’s 2 components. One is the FX from the cost side, which we know once we sign into contracts, we would look to enter into hedges simultaneously. The other piece is working on the financing right now. Obviously, as we get closer to securing finance commitment is when we can put on the hedges in place.
Nelson Ng
Okay. Got it. And then just moving to Nordsee Two. Can you give a bit more color on the hydrogen project? Or are you essentially adding a — are you getting paid to add an electrolyzer? And can you just give us a bit more details in terms of what you’re looking at there?
Mike Crawley
Yes. It’s to add an electrolyzer to produce hydrogen offshore to offset fuels that are used for vessels and for backup generation at the turbine locations. So it’s is taking a zero carbon form of generation that some ancillaries use carbon-based fuels to decarbonize it even further.
Nelson Ng
Okay. And then just sticking on the hydrogen topic. I know the Canadian government has a tax credit for hydrogen, and the Canadian government has talked about exporting hydrogen, I guess, longer term. Are you exploring hydrogen opportunities in Canada and particularly the East Coast in terms of looking at opportunities there for hydrogen development and export?
Mike Crawley
Yes. I think we’ve — there have been news reports concerning about some of our development activities and activities along the East Coast of Canada. Looking at different opportunities out there, both in Newfoundland and Nova Scotia, and it’s an area where we would have interest.
Nelson Ng
Okay. Great. And just finally, in terms of the investment tax credit more generally for Canada. Are you seeing — like are you shifting or adding additional bodies into Canada in terms of focusing on developments, whether it’s in Quebec or Ontario or other regions? Like has that kind of shifted your focus in terms of geographies?
Mike Crawley
We see lots of opportunity in Canada. I mean, it’s our domestic market. It’s CAD-denominated cash flows. We have a lot of developers and people with expertise in the markets, but also in creating and developing assets in those markets, whether it’s in Western Canada, Eastern Canada or Ontario or Quebec. So yes, we’re watching it closely.
I mean, there’s 3 interesting things that are going on. There’s — in a number of provinces, regulators and system operators are recognizing the need for capacity and are moving forward with the procurements and different initiatives to secure more capacity. Secondly, as you pointed out, there’s some interest at this point, I don’t want to overstate it, but interest in this point in Europe to import green hydrogen or green ammonia from Atlantic Canada, from renewable energy facilities to be constructed in Atlantic Canada going forward.
So that’s of interest. And then the investment tax credit announcement which we received, which is, we think, was very positive, which I guess will be confirmed in the spring budget. It helps facilitate both of those activities, right? And it puts Canada on a competitive footing globally, particularly in relation to the Inflation Reduction Act measures in the U.S.
Operator
Our next question comes from Mark Jarvi with CIBC.
Mark Jarvi
Moving back to Hai Long with a number of the contracts signed, including turbines and the balance of plant. How costs come in relative to the $7 billion to $8 billion number you guys outlined at Investor Day?
Mike Crawley
We’re still in that range.
Mark Jarvi
Okay. And then Taiwan had an RFP for more procurement there. Is that something you guys are actively participating in? Just sort of the appetite for more development in that market right now.
Mike Crawley
Yes. So I think we — I mean, you would expect that — I think we’ve already indicated that we have other projects under development in Taiwan, and there were bids submitted a couple of months ago or 3 months ago. And I think you should not be surprised if we were one of the bidders of that — in that process.
Mark Jarvi
And then you guys there obviously not going of detail on the sell-down. But just conceptually, would the sell-down be only tied to the Hai Long projects? Or the development assets as well could be packaged into a potential sell-down? Or would those be completely separate processes for any partnerships or sell-downs?
Mike Crawley
Yes, I wouldn’t get into that kind of detail right now.
Operator
Our next question comes from David Quezada with Raymond James.
David Quezada
Maybe just a question for me on what you’re seeing in the supply chain currently? It sounds like you’re clearly out there arranging a lot of agreements for supply elements. Just wondering what you’ve seen over the past few months in terms of how things have developed there.
Mike Crawley
Yes, a good question. I mean, to be candid, David, I think what we saw last kind of spring was a lot of movement and a lot of dynamism in the supply chain for a number of reasons. I think over the last few months, we’re seeing things kind of settle down a bit. But we’re very focused on scarcity, scarcity of certain fabrication facilities, scarcity on vessels. So we’re really trying to be proactive and make sure that we get ahead of things on — particularly on some of our larger offshore wind projects, which I highlighted with respect to what we’re doing on Baltic Power on the call today.
David Quezada
Excellent. And maybe just one more for me. Just curious with your kind of earlier stage development project in Korea and Japan, what kind of milestones do you think you could see there maybe over 2023?
Mike Crawley
I would say in both cases, continued development activities. I wouldn’t get into a lot more detail than that. I think we’ve had some good progress in Korea in securing electricity business licenses, which is potentially site exclusivity, which allows you to move into exploring and negotiating interconnection and advancing your environmental permitting. So we expect to see that continue to move forward, both on the existing sites where we have EPLs moving forward with those activities. And on other sites, we would hope to be able to secure additional EPLs. We’ll see how — we’ll see what 2023 brings forth. But we’ve got a very good team on the ground there.
Operator
[Operator Instructions]. Our next question comes from Justin Strong with Scotiabank.
Justin Strong
Just a quick one for me. Just wondering if you could speak to kind of the market conditions that contributed to the delay in Hai Long’s financing. And just a little bit of color on — kind of more color on where you’re currently at there and kind of associated the macro environment that you’re looking at and whether it’s improving.
Mike Crawley
Yes. I mean, there were a few factors, right? So negotiating the CPPA, which is the first CPPA that Northland has ever negotiated, and it’s a 744-megawatt corporate offtake, which I think is among the largest we’ve seen, if not the second largest, I think, in the world that’s been negotiated so far. So yes, I think it took a bit longer than we anticipated to work it out and to work it out on terms that were both acceptable to our offtaker and acceptable to us. So we took the time to do that right and to be careful and thoughtful about how we negotiated such a large important contract. So that took a few more months than we had expected. And as you can imagine, you can’t really launch financing until you have all of your revenue contracts in place. So that was probably the major delay.
I’d say on the negotiation of the some of the contracts, I referred to in the last question that again, to be candid, the last spring, there was kind of a fair amount of kind of movement among certain suppliers as they react to kind of more macroeconomic conditions globally. That did settle down, but it did take us some time to just get all of those contracts finalized longer than we would have normally seen. And finally, just given kind of what’s going on with macroeconomic conditions globally, we’re just finding that there’s more scrutiny from lenders in the Q&A process, which is typical that any project financing. It’s probably a bit more rigorous than it typically is so it’s taking a bit longer. But those would be the main factors, I would say.
Operator
Our next question comes from Ben Pham with BMO.
Benjamin Pham
Maybe start off on Hai Long post financial close. Can you walk through the next milestones, how long it takes to construct and anything else along the way?
Mike Crawley
Yes. So I mean, most 2023 would be primarily fabrication activities, right, for the offshore substation, for the jackets, for starting some work on the cables. And then ’24 and ’25 would be when you see the in-water construction activities move forward. That’s high level.
Benjamin Pham
Okay. And then the delays you’re seeing of Hai Long, which probably seeing at other companies as well. Is that going to be applicable to the other projects like Baltic Power and North Sea?
Mike Crawley
I don’t think so. I mean, we’ll see how the world unfolds over the next few months. But I think on Baltic Power — that’s why in the opening remarks, I wanted to highlight where we are at in locking down our supply chain. We, I would say, are certainly further ahead on that project than we were at this same time on Hai Long. So I think we feel much better about the schedule and getting to financial close around the timing that we’ve indicated to the market on that project.
Benjamin Pham
Okay. Great. And then maybe on — next on the funding side. Has anything changed since maybe early in the year at your Investor Day on that 10% to 15% composition of equity need/asset monetizations.?
Pauline Alimchandani
You mean the funding pie chart that we’ve shown? I mean, the targets in terms of the equity needs and the — I mean, I don’t think the total has changed. I think we said within that component, how we raise that equity between sell-downs and new equity is a fluid situation, and that remains to be the case. But we’re still targeting sell-downs in our business plan.
Benjamin Pham
Okay. So that — I know it’s illustrated, but I mean that’s — assuming CapEx stays the same, it’s still $1 billion to $2 billion through 2026? Or is that different now because of the market condition changes in the quarter?
Pauline Alimchandani
I mean, as we add new projects, I mean, that number changes, right? So every Investor Day, we would update that number. But I think so far, if you’re looking at the same project pool, yes, I mean, that number, I would say, hasn’t changed materially. But as we add new projects, that number does change.
Mike Crawley
And we’ll give you an update at the — at an upcoming Investor Day.
Operator
Thank you. Mr. Crawley, there are no further questions at this time. I will now turn the call back to you.
Mike Crawley
Okay. Thank you to everyone for joining us today. We will hold our next call following the release of our fourth quarter and full year 2022 results in February. In the meantime, we thank you for your continued confidence and support. Have a good day, everybody.
Operator
Ladies and gentlemen, that does conclude the conference call for today. Thank you for participating, and have a pleasant day.
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