Northland Power Annual Report 2021

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FY2021 Annual Report · Northland Power

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Annual Report

Table of Contents

Letter to Shareholders

Management’s Discussion and Analysis

Management’s Responsibility

Independent Auditors’ Report

Consolidated Financial Statements

Consolidated Statements of Financial Position

Consolidated Statements of Income (Loss)

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Changes in Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

110

Corporate Information

Northland Power is a global power producer

dedicated to helping the clean energy transition
by producing electricity from clean renewable

resources. Founded in 1987, Northland has a

long history of developing, building, owning and

operating clean and green power infrastructure

assets and is a global leader in offshore wind.

In addition, Northland owns and manages a

diversified generation mix including onshore

renewables, efficient natural gas energy, as well as

supplying energy through a regulated utility.

Headquartered in Toronto, Canada, with global

offices in eight countries, Northland owns or

has an economic interest in 3.2 GW (net 2.8 GW)

of operating capacity. The Company also has a

significant inventory of projects in construction and

in various stages of development encompassing

over 14 GW of potential capacity.

2021 ANNUAL REPORTNORTHLAND POWER INC.3

Letter to
Shareholders

Dear fellow shareholders,

In 2021, Northland delivered strong financial results, despite the continued
impact of the global pandemic. Our strong performance is a testament to
our entrepreneurial culture and the steps we have taken to evolve Northland
into a more balanced and resilient company. We continue to strengthen
our business by growing our global project pipeline within renewables
and maximizing returns on the facilities we are currently operating.

Being A Key Player in The Global Energy Transition

The global energy transition is accelerating as industries, businesses,
and governments across the globe work towards net-zero plans and
focus on their 2030 decarbonization and climate targets. Our 35-year
history developing power projects combined with being a global leader in
offshore wind, we are well positioned to be a key participant in the energy
transition and contributing to a significant build-out of renewable energy.
Over the past year, we made several key moves to position our company
for success by delivering reliable cash flow from our facilities, executing
on our development projects and growing our development pipeline. Our
leadership and entrepreneurial DNA has helped us grow into a global
company that will play a significant role in this energy transformation.

As we look ahead, we have a clear strategy to develop large volumes of
onshore and offshore renewable power projects in key global markets and
the capabilities to optimize their value through efficient financing, best-
in-class operations, corporate offtake origination, energy storage and,
in time, hydrogen production. As outlined at our Investor Day in early
February, we have almost 3 gigawatts (GW) of installed capacity (over 95%
with long-term revenue contracts) and a 14GW development pipeline.
We have established a strong presence in select onshore renewable
power markets to augment our offshore wind growth which provides
near-term growth in cash flow as demonstrated over the past year.

(continued on page 5)

2021 ANNUAL REPORTNORTHLAND POWER INC.4

Advanced
Growth

1.2 GW

Closed Baltic Power

1.3 GW

Formed German
Nordsee cluster

Double production
by 2027 to

6.5 GW

2021 ANNUAL REPORTNORTHLAND POWER INC.5

Letter to Shareholders Continued

Keeping A Strategic Focus in Key Markets

Reflecting on our accomplishments over the past year,
we closed on our entry into the 1.2 GW Baltic Power
offshore wind project in Poland, for which we also
secured a 25-year indexed CfD or Power Purchase
Agreement (PPA). Work is progressing on moving the
project towards achieving financial close in 2023 with
commercial operations expected in 2026. We expanded
our presence in the German offshore wind market with
the formation of the 1.3GW North Sea cluster with our
partner, RWE, and exercised our step-in rights on the
first of three projects within that cluster: Nordsee Two.
The formation of the cluster is expected to allow the
realization of synergies in development, construction
as-well as operating costs, leading to enhanced returns
for the projects. Similar to Nordsee Two, Northland and
RWE have the same step-in rights for the remaining
projects, Nordsee Three and Delta, which are expected
to come to auction in 2023. Northland holds a 49%
interest in the new joint venture (with RWE holding
51%). The projects will be developed and managed
on a joint basis by both parties and are expected to
achieve commercial operations between 2026 and 2028.

In Asia, we made significant advancements on our
offshore wind development projects. The most notable
is our 1,044-megawatt (MW) Hai Long project in Taiwan
where we are preparing to move the project to financial
close later this year. In the past year, we completed
key milestones for Hai Long, including obtaining the
localization plan after working closely with local supply
chain and government. Tendering of the main components
has resulted in preferred supplier agreements being
signed and securing the supply chain for the project. In
South Korea, we secured our first two electricity business
licenses as part our progression of a larger portfolio of
projects through early development. In Japan, two of
our early-stage projects have been designated under
the government’s auction process as promising areas
with bidding expected to commence later this year.

With respect to near-term growth and cash flow, we acquired
a 551MW portfolio of wind and solar operating assets in
Spain – one of the most promising growth markets for
renewables. To-date, this portfolio has been outperforming
our underwritten assumptions. This acquisition provided
us with immediate cash flow and has helped to position
Northland as a top 10 operator within Span. As we build on
this momentum, we expect to grow this platform through
greenfield development and opportunistic acquisitions.

“

In Asia, we made significant advancements on our offshore
wind development projects. The most notable is our
1,044-megawatt (MW) Hai Long project in Taiwan

“

2021 ANNUAL REPORTNORTHLAND POWER INC.6

We solidified our entry into the United States renewables
market by beginning construction on two of our New York
State onshore wind projects, which are progressing on
schedule and on budget. The two projects, Ball Hill and
Bluestone, have a combined operating capacity of 220MW
and will benefit from a 20-year
indexed Renewable
Energy Certificate (REC) agreements with the New York
State Energy Research and Development Authority.

Lastly, we began to deliver on our Colombian renewable
growth strategy. Leveraging our position in our EBSA
utility, we advanced the 16MW Helios solar project and
the 130MW Suba solar projects. Helios achieved financial
close and commenced with construction activities in 2021
with commercial operations expected by the end of 2022.
Northland has a 50 percent interest in the Suba projects with
commercial operations expected in 2023. Both projects will
benefit from long-term offtake agreements, with Helios
having secured a 12-year PPA and Suba a 15-year PPA.

Continued Financial Strength to Support
Our Growth

testament

Another
the strength of our global
company is the resilience we showed when adverse wind
conditions at our offshore wind facilities in the North
Sea disrupted performance. Offshore wind makes up
the largest component of our EBITDA and cash flow and
while we experienced low wind speeds at these three
facilities, we optimized their performance by operating
at high availability
levels. Our remaining operating
facilities are also performing at historically high levels
of availability, contributing to our strong performance.

Through to our commitment to operational excellence,
we exceeded our guidance expectations
for both
Adjusted EBITDA and Free Cash Flow, with the results
coming in at $1.14 billion and $1.40 per share in 2021.

Our financial position, liquidity and strong balance sheet
continues to help Northland remain in excellent position
to fund our growth objectives. In April, we closed the
largest equity raise in our history (nearly $1 billion) that
funded the Spain portfolio acquisition, supported our
entry into Baltic Power, advanced the New York wind
projects and provided additional corporate liquidity. We
executed several re-financings and debt optimizations
that resulted in over $200 million of additional liquidity
and have access to a $1.0 billion corporate revolving
credit facility (with approximately $0.8 billion of total
available liquidity as of December 31, 2021). This flexibility
can now be utilized to fund growth projects that have
a strong probability of advancing to financial close.

“

We expanded our presence in the German
offshore wind market with the formation of
the 1.3GW North Sea cluster

“

2021 ANNUAL REPORTNORTHLAND POWER INC.7

Driving Towards a Carbon Free World

Looking ahead

Our purpose to build a sustainable and carbon-free world
is reflected in our Environmental, Social and Governance
(ESG) strategy. At Northland, we safely supply reliable,
affordable and clean energy to global communities, while
delivering long-term economic value for shareholders.
This has been our commitment for 35 years and is
core to how projects are developed, constructed, and
operated. The focus of our ESG framework is on continued
decarbonization efforts through our renewable energy
developments, while effectively managing our resources.
This results in us developing and empowering our people,
creating meaningful and collaborative relationships and
partnerships with
local and Indigenous communities
and upholding the highest standards of good and
responsible governance. In 2021, we formalized several
ESG-related strategies and policies, including: Sustainable
Procurement,
Community
Investment, to further solidify our commitment to our ESG
objectives. As we focus on enhancing the reporting around
ESG-related activities, programs, and performance, we
will aim to report in line with the recommendations of
the Task Force for Climate Related Disclosure (TCFD).

Change,

Climate

and

We’ve come a long way since being a solely Canadian
based independent power producer. Today, we are a true
global renewable energy company in a world that has a
significant need for new renewable energy capacity and
has plenty of capital to invest in those assets. We believe
we are well positioned as an originator and developer of
projects. Currently, Northland has 366MW of additional
capacity
for
completion in 2022. We have almost 3GW of gross capacity,
which are projects that are scheduled for financial close
and commencement of construction within the next two
years. Once these projects are complete, our total gross
capacity will nearly double to more than 6.5GW by 2027.
As we look longer-term, we continue to advance a pipeline
identified projects and
of over 10GW encompassing
additional opportunities to support our sustained growth.

in construction, with

the expectation

On behalf of our employees and our directors, we
like to express our sincerest appreciation to
would
our shareholders for the confidence you continue to
demonstrate as we achieve our growth ambitions.
Thank you for your continued support and we look
in 2022.
forward to updating you on our progress

Strengthening Our Bench

Sincerely,

We bolstered our talent by adding key people in roles
across the globe. These experts are vital as we build out
our capacity, grow our global footprint and strengthen
our ability to compete. These additional roles included:

•

Setting up a Project Management Office

• Creating a global procurement group

•

Establishing Corporate PPA origination capabilities

Fortifying our regional development offices
including the establishment of the Madrid growth
platform

•

Establishing an investment management team

• Augmenting our already strong teams with

storage and hydrogen talent

John Brace
Director and
Chair of the Board

Mike Crawley
President and
Chief Executive Officer

2021 ANNUAL REPORTNORTHLAND POWER INC.8

Northland’s

Global Footprint

Facility and
Office Types

Wind: Onshore and Offshore

Wind: Under Construction and
Advanced Development

Electricity Distribution Utility

Solar

Solar: Under Construction

Thermal

Development Offices

Corporate Offices

2021 ANNUAL REPORTNORTHLAND POWER INC.9

4th

Largest offshore
wind operator
globally
measured by
operating capacity

1.14

Billion
2021 Adjusted
EBITDA

2021 ANNUAL REPORTNORTHLAND POWER INC.Management’s Discussion and Analysis

of Northland Power’s Financial Position and Operating Results

Table of Contents
SECTION 1: OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

SECTION 2: STRATEGY AND KEY FACTORS SUPPORTING SUSTAINABLE PERFORMANCE AND GROWTH . . . . . . . . . . . . . . . . . . . 13

SECTION 3: NORTHLAND’S BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

SECTION 4: CONSOLIDATED HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4.1: Significant Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

4.2: Operating Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 5: RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

5.1: Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

5.2: General and Administrative Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

5.3: Growth Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

5.4: Consolidated Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.5: Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

5.6: Free Cash Flow and Adjusted Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SECTION 6: CHANGES IN FINANCIAL POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

SECTION 7: EQUITY, LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

SECTION 8: SUMMARY OF QUARTERLY CONSOLIDATED RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

SECTION 9: DEVELOPMENT, ACQUISITION AND CONSTRUCTION ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

SECTION 10: FINANCIAL OUTLOOK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

SECTION 11: LITIGATION, CLAIMS AND CONTINGENCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

SECTION 12: ESG AND CLIMATE CHANGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

SECTION 13: FINANCIAL RISKS AND UNCERTAINTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

SECTION 14: CRITICAL ACCOUNTING ESTIMATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

SECTION 15: FUTURE ACCOUNTING POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

SECTION 16: CONTROLS AND PROCEDURES OVER FINANCIAL REPORTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

SECTION 1: OVERVIEW

Introduction

The purpose of this Management’s Discussion and Analysis (“MD&A”) is to explain the financial results of Northland Power
Inc. (“Northland” or the “Company”) and to assist the reader in understanding the nature and importance of changes and
trends as well as the risks and uncertainties that may affect the operating results and financial position of the Company.
This MD&A should be read in conjunction with Northland’s audited consolidated financial statements for the year ended
December 31, 2021, and 2020, and Northland’s most recent Annual Information Form (“2021 AIF”). This material is
available on SEDAR at www.sedar.com and on Northland’s website at www.northlandpower.com.

This MD&A, dated February 24, 2022, compares Northland’s financial results and financial position for the year ended
December 31, 2021, with those for the year ended December 31, 2020. Certain prior period disclosures have been
reclassified for consistency with the current period presentation. Northland’s Audit Committee reviewed this MD&A and
the associated audited consolidated financial statements and notes, and its Board of Directors approved these documents
prior to their release.

All dollar amounts set out herein are in thousands of Canadian dollars, unless otherwise stated.

Forward-Looking Statements

This MD&A contains forward-looking statements that are based on certain estimates and assumptions that were considered
reasonable on February 24, 2022; actual results may differ materially. Forward-looking statements are provided for the
purpose of presenting information about management’s current expectations and plans. Readers are cautioned that such
statements may not be appropriate for other purposes. Northland’s actual results could differ materially from those
expressed in, or implied by, these forward-looking statements and, accordingly, the events anticipated by the forward-
looking statements may or may not transpire or occur. Forward-looking statements include statements that are predictive in
nature, depend upon or refer to future events or conditions, or include words such as “expects,” “anticipates,” “plans,”
“predicts,” “believes,” “estimates,” “intends,” “targets,” “projects,” “forecasts” or negative versions thereof and other
similar expressions or future or conditional verbs such as “may,” “will,” “should,” “would” and “could.” These statements
may include, without limitation, statements regarding future Adjusted EBITDA, Free Cash Flow and Adjusted Free Cash Flow,
respective per share amounts, dividend payments and dividend payout ratios, guidance, the timing for the completion of
construction, attainment of commercial operations, the potential for future production from project pipelines, cost and
output of development projects, litigation claims, plans for raising capital, and the future operations, business, financial
condition, financial results, priorities, ongoing objectives, strategies and the outlook of Northland and its subsidiaries. These
statements are based upon certain material factors or assumptions that were applied in developing the forward-looking
statements, including the design specifications of development projects, the provisions of contracts to which Northland or a
subsidiary is a party, management’s current plans and its perception of historical trends, current conditions and expected
future developments, as well as other factors that are believed to be appropriate in the circumstances. Although these
forward-looking statements are based upon management’s current reasonable expectations and assumptions, they are
subject to numerous risks and uncertainties. Some of the factors include, but are not limited to, risks associated with sales
contracts, impact of COVID-19 pandemic, Northland’s reliance on the performance of its offshore wind facilities at Gemini,
Nordsee One and Deutsche Bucht for approximately 50% of its Adjusted EBITDA and Free Cash Flow, counterparty risks,
contractual operating performance, variability of sales from generating facilities powered by intermittent renewable
resources, offshore wind concentration, natural gas and power market risks, operational risks, recovery of utility operating
costs, Northland’s ability to resolve issues/delays with the relevant regulatory and/or government authorities, permitting,
construction risks, project development risks, acquisition risks, financing risks, interest rate and refinancing risks, liquidity
risk, credit rating risk, currency fluctuation risk, variability of cash flow and potential impact on dividends, taxation, natural
events, environmental risks, health and worker safety risks, market compliance risk, government regulations and policy risks,
utility rate regulation risks, international activities, reliance on information technology, labour relations, reputational risk,
insurance risk, risks relating to co-ownership, bribery and corruption risk, legal contingencies, and the other factors
described in this MD&A and the 2021 AIF. Northland’s actual results could differ materially from those expressed in, or
implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or occur. The forward-looking statements contained in this
MD&A are based on assumptions that were considered reasonable as of the date hereof. Other than as specifically required
by law, Northland undertakes no obligation to update any forward-looking statements to reflect events or circumstances
after such date or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or
results, or otherwise.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Non-IFRS Financial Measures

This MD&A includes references to the Company’s adjusted earnings before interest, income taxes, depreciation and
amortization (“Adjusted EBITDA”), Free Cash Flow, Adjusted Free Cash Flow and applicable payout ratios and per share
amounts, measures not prescribed by International Financial Reporting Standards (IFRS), and therefore do not have any
standardized meaning under IFRS and may not be comparable to similar measures presented by other companies. Non-IFRS
financial measures are presented as at Northland’s share of underlying operations. These measures should not be
considered alternatives to net income (loss), cash flow from operating activities or other measures of financial performance
calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of
Northland’s results of operations from management’s perspective. Management believes that Northland’s non-IFRS
financial measures and applicable payout ratio and per share amounts are widely accepted and understood financial
indicators used by investors and securities analysts to assess the performance of a company, including its ability to generate
cash through operations. For reconciliations of these non-IFRS financial measures to their nearest IFRS measure, refer to
Section 5.5: Adjusted EBITDA for a reconciliation of consolidated net income (loss) under IFRS to reported Adjusted EBITDA
and Section 5.6: Free Cash Flow and Adjusted Free Cash Flow for a reconciliation of cash provided by operating activities
under IFRS to reported Free Cash Flow and Adjusted Free Cash Flow.

Adjusted EBITDA

Adjusted EBITDA represents core operating performance of the business excluding leverage, income tax and non-core
accounting items. Adjusted EBITDA is calculated as Northland’s share of net income (loss) adjusted for the provision for
(recovery of) income taxes; depreciation of property, plant and equipment; amortization of contracts and other intangible
assets; net finance costs; interest income from Gemini; fair value (gain) loss on derivative contracts; unrealized foreign
exchange (gain) loss; (gain) loss on sale of development assets; equity accounting; costs attributable to an asset or business
acquisition and other adjustments as appropriate, such as management and incentive fees earned by Northland from non-
wholly owned assets. For clarity, Northland’s Adjusted EBITDA reflects a reduction for its share of general and
administrative costs during development and construction that do not qualify for capitalization.

Management believes Adjusted EBITDA is a meaningful measure of Northland’s operating performance because it excludes
certain items included in the calculation of net income (loss) that may not be appropriate determinants of long-term
operating performance.

Free Cash Flow

Free Cash Flow represents the cash generated from the business that management believes is representative of cash
available to pay dividends, while preserving the long-term value of the business. Free Cash Flow is calculated as Northland’s
share of cash provided by operating activities adjusted for short-term changes in operating working capital; non-
incurred on outstanding debt; scheduled principal repayments and
expansionary capital expenditures;
upfinancings; major maintenance and debt reserves; interest income from Northland’s subordinated loan to Gemini;
proceeds from government grants; preferred share dividends; net proceeds from sale of development assets and where net
proceeds are received in respect of certain transactions entered in to generate cash flow as part of an active asset
management strategy of the overall portfolio; and other adjustments as appropriate. Free Cash Flow excludes pre-
completion sales required to service debt and related operating costs for projects under construction and excludes costs
attributable to an asset or business acquisition.

interest

For clarity, Northland’s Free Cash Flow reflects a reduction for expenditures on development activities until an advanced
project qualifies for capitalization under IFRS. Free Cash Flow for EBSA includes proceeds from ongoing planned debt
upsizing in excess of expansionary capital expenditures. Where Northland controls the distribution policy of its investments,
Free Cash Flow reflects Northland’s share of the investment’s underlying Free Cash Flow, otherwise, Northland includes the
cash distributions received from the investment. Free Cash Flow from foreign operations is translated to Canadian dollars at
the exchange rate Northland realizes on cash distributions.

Management believes Free Cash Flow is a meaningful measure of Northland’s ability to generate cash flow, after on-going
obligations, to fund dividend payments.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Adjusted Free Cash Flow

Adjusted Free Cash Flow is calculated by excluding growth-related expenditures from Free Cash Flow. Management believes
this measure provides a relevant presentation of cash flow generated from the business before investment-related
decisions (refer to Section 5.3: Growth Expenditures for additional information). Management believes Adjusted Free Cash
Flow is a meaningful measure of Northland’s ability to generate cash flow, after on-going obligations, to reinvest in growth
and fund dividend payments.

The Free Cash Flow and Adjusted Free Cash Flow payout ratios, calculated using the respective financial measure,
demonstrate the proportion of the respective measure paid as dividends, whether in cash, or in shares under Northland’s
dividend reinvestment plan (DRIP). The net payout ratios indicate the proportion of Free Cash Flow paid as cash dividends.
The payout ratios generally reflect Northland’s ability to fund growth-related expenditures and sustain dividends.

SECTION 2: STRATEGY AND KEY FACTORS SUPPORTING SUSTAINABLE
PERFORMANCE AND GROWTH

Business Objective

Northland’s objective is to provide its shareholders with a total return comprising dividends and share value growth from
the successful management of its assets, businesses and investments related to the production, delivery and sale of energy-
related products.

Vision

Northland’s vision is to be a top global developer, owner, and operator of sustainable infrastructure assets, with the
ambition of helping develop a carbon free world by inspiring its people to achieve a sustainable and prosperous future for
all of its stakeholders by embracing and living Northland’s values on a daily basis.

Business Strategy

Northland’s business strategy is centered on establishing a significant global presence as a sustainable power provider with
a primary focus on offshore wind. Northland aims to increase shareholder value by leveraging its expertise and early mover
advantage to create and operate high-quality, sustainable projects in key target markets that are supported by long-term
sales contracts that deliver predictable cash flows. Northland utilizes its operational knowledge and the application of
appropriate technology to optimize the performance of its operating facilities to ensure delivery of essential power to its
offtake counterparties.

To successfully execute its strategy, Northland focuses on each of the following strategic objectives:

(i) Winning Business

The global shift to renewable energy is accelerating as government de-carbonization polices and corporate net-zero targets
are expected to drive significant growth in renewable development over the next decade. This creates significant
opportunities for renewable energy developers, like Northland, who are seeking to help reduce greenhouse gas emissions
to meet de-carbonization targets. Northland is well positioned through its regional development offices to capture
development opportunities that should help facilitate the global advancement of renewable energy targets. Northland
develops, constructs, and operates sustainable infrastructure projects across a range of clean and green technologies, such
as wind (offshore and onshore), solar as well as supplying energy through a regulated utility. Northland is focused on
pursuing renewable growth opportunities in jurisdictions that meet its risk management criteria such as North America,
Europe, Latin America, and Asia. Northland seeks to manages its development processes prudently by regularly balancing
the probability of success against associated costs and risks.

(ii) Building Facilities

Northland aims to increase shareholder value by creating high-quality projects that earn recurring income from long-term
sales contracts with creditworthy counterparties (i.e. government or corporate offtakers). Northland exercises judgment,
discipline and acumen in its construction activities to ensure maximum success. Northland’s successful record of project
execution results from these core strengths and contributes to consistent investor returns.

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| 2021 ANNUAL REPORT |

(iii) Operating Facilities

A core element of Northland’s strategy is the optimization of sales and predetermined costs through sales contracts with
creditworthy counterparties. For renewable power generation facilities, Northland does not incur an associated cost of
sales, and generally enters into long-term operating and maintenance (O&M) contracts with leading service providers at
predetermined rates. For the efficient natural gas generation facilities, the key terms of our operating facilities’ long-term
power purchase agreements (PPA) and fuel supply contracts are aligned such that revenues and cost escalations are
substantially linked for each facility. Northland’s utility asset operates under a regulatory framework with the vast majority
of sales derived from its regulated methodology, which provides it with substantially fixed remuneration and pass-through
of major costs to customers. This approach provides largely predictable operating income and cash flow, while ensuring
ongoing environmental sustainability and the health and safety of stakeholders.

Northland’s management aims to maximize returns through a focus on efficient and effective facility operations; longer-
term asset management; and structuring sales supply and maintenance agreements to maximize sales, while carefully
managing risk. In addition, Northland applies an active approach to overall portfolio management, which may result in
optimizations from asset sales and financing/re-financing opportunities as part of its return objectives and funding strategy.

With a commitment to continuous improvement, Northland’s operations group shares its experiences with the
development, engineering and construction groups on an ongoing basis, to ensure all knowledge gained is factored into the
development and construction of any new projects Northland undertakes.

(iv) Organizational Effectiveness

Underpinning Northland’s strategy is a focus on strong management of key corporate functions such as: human resources
and talent management; construction; environmental management; health and safety; finance and accounting;
information systems, Environmental, Social and Governance (ESG) strategy and reporting, and
management
communications. Our growth ambitions require a robust human capital strategy to ensure we have the necessary
competencies and capabilities to delivery on our strategy. Within offshore wind, a key differentiator will be attracting and
retaining the best talent to develop, construct, and operate large complex projects. Management is committed to
organizational effectiveness as an essential component of Northland’s long-term success and continued growth.

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| 2021 ANNUAL REPORT |

SECTION 3: NORTHLAND’S BUSINESS

As of December 31, 2021, Northland owns or has a net economic interest in 2,817 megawatts (MW) of power-producing
facilities with a total gross operating capacity of approximately 3,240MW and a regulated utility. Northland’s facilities
produce electricity from clean energy sources for sale primarily under long-term PPAs or other revenue arrangements with
creditworthy counterparties. Northland’s utility is a distributor and retailer of electricity compensated under a regulated
framework. These operating assets provide stable cash flow and are primarily located in Canada, Germany, the
Netherlands, Spain and Colombia. Northland’s significant assets under construction and development are located in
Mexico, Taiwan, Poland, Germany, Colombia and the United States. Refer to the 2021 AIF for additional information on
Northland’s key operating facilities as of December 31, 2021, and refer to SECTION 9: DEVELOPMENT, ACQUISITION AND
CONSTRUCTION ACTIVITIES for additional information on Northland’s key development projects.

Northland’s MD&A and audited consolidated financial statements include the results of its operating facilities, as
summarized in the following table:

Offshore Wind

Efficient Natural Gas
Onshore Renewable
Canadian Wind
Canadian Solar
Spanish Wind
Spanish Solar

Utility
Total
(1) Presented at Northland’s economic interest.

Geographic
region

Gross Production
Capacity (MW)

Net
Production
Capacity (MW) (1)

The Netherlands/
Germany

Canada

Canada
Canada
Spain
Spain
Colombia

1,184

973

394
130
443
116
n/a
3,240

894

943

314
115
435
116
n/a
2,817

(2) As at December 31, 2021, Northland’s economic interest was unchanged from December 31, 2020, with the exception of the Spanish portfolio (refer
to Section 4.1: Significant Events), which Northland acquired on August 11, 2021. The Spanish portfolio’s results are consolidated in Northland’s
financial results as of the acquisition date.

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| 2021 ANNUAL REPORT |

In addition to operational assets, summarized below are Northland’s most significant projects under construction and under
development as well as other identified projects. The table below excludes the Company’s larger pipeline of earlier stage
development opportunities which may or may not be secured.

Project

Geographic
Region

Technology

Gross
Capacity
(MW)

Current
ownership

Development
Stage

Contract type

Estimated
COD

Construction Projects

Ball Hill

United States

Onshore Wind

Bluestone

United States

Onshore Wind

La Lucha

Mexico

Helios

Total

Colombia

Solar

Capitalized Growth Projects

Suba

Colombia

Solar

High Bridge

United States

Onshore Wind

108

112

130

366

130

100

Hai Long

Baltic Power

Nordsee Two

Total

Taiwan

Poland

Offshore Wind

1,044

Offshore Wind Up to 1,200

Germany

Offshore Wind

433

Identified Growth Projects

Nordsee Three

Nordsee Delta

Chiba

Germany

Offshore Wind

Japan

Offshore Wind

Dado Ocean

South Korea

Offshore Wind Up to 1,000

Scotwind

Hecate

Scotland

Offshore Wind

Canada

Offshore Wind

2,340

400

2,907

420

480

600

100%

50%

100%

60%

49%

50%

100%

Under
construction

20-year PPA

2022

20-year PPA

2022

TBD

2022

12-year PPA

2022

Late-Stage

15-year PPA

Mid/Late-Stage

20-year PPA

2023

Late-Stage

20-year PPA

2026/2027

Mid/Late-Stage

Mid-Stage

25-year CfD
TBD (1)

2026

Mid-Stage

Early/Mid-Stage

Early-Stage

2027 - 2030+

Total
Total Pipeline (2)
(1) Nordsee Two has secured interconnection rights for zero subsidy bid, with the intention to secure a long-term corporate power purchase agreement.

5,240

8,513

(2) Excludes ~5,900MW of other pipeline projects.

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| 2021 ANNUAL REPORT |

SECTION 4: CONSOLIDATED HIGHLIGHTS

4.1: Significant Events

Significant events during 2021 and through the date of this MD&A are described below. Refer to SECTION 9:
DEVELOPMENT, ACQUISITION AND CONSTRUCTION ACTIVITIES for additional information on projects and acquisitions.

COVID-19 and Business Update

The COVID-19 pandemic (“COVID-19”) has had significant effects across global economies and sectors, including reduced
power demand within the renewable energy sector. Each of Northland’s operating facilities are deemed to be essential
infrastructure and, as such, operations have continued uninterrupted to date.

Management has taken prudent and comprehensive measures to safeguard the health and well-being of all employees,
contractors as well as host communities. All of Northland’s facilities continue to operate as expected and preventative
measures remain in place in accordance with Northland’s crisis response plans and applicable local government directives.
Management continues to actively monitor the situation, which remains uncertain, and may take further actions as
required or recommended by authorities.

There have been no material adverse effects on Northland’s ability to meet working capital requirements, debt covenants,
or continue future growth activities as a result of COVID-19. As such, there are currently no impairment indicators identified
for Northland’s financial and non-financial assets as a result of COVID-19. As the situation evolves, management will
continue to assess if any material changes to the key assumptions for the recoverable amounts of Northland’s assets have
taken place.

While the vast majority of Northland’s sales are contracted under long-term agreements with creditworthy counterparties,
there is some, yet limited, exposure to the wholesale market price of electricity at the offshore wind facilities and to unpaid
curtailment from negative prices. Refer to Section 5.1: Operating Results for additional information. Refer to SECTION 13:
FINANCIAL RISKS AND UNCERTAINTIES for additional information on risks associated with COVID-19.

The Company continues to have sufficient liquidity available to execute on its growth objectives. As at December 31, 2021,
Northland had access to $776 million of cash and liquidity, comprising $748 million of liquidity available under a syndicated
revolving facility and $28 million of corporate cash on hand.

Balance Sheet and Environmental, Social and Governance Advancements:

Renewal and upsizing of EBSA’s Credit Facility to $533 million

Extension of $1 Billion Revolving Corporate Credit Facility and Completion of Sustainability Linked Loan Overlay

In September 2021, Northland extended its $1 billion revolving corporate credit facility with a syndicate of both Canadian
and global financial institutions to 2026 (from 2024) and executed several amendments to increase liquidity available to
fund growth. Concurrently, the Company implemented a Sustainability Linked Loan (SLL) overlay. The SLL is based on
achieving defined targets related to both increasing renewable generating capacity and reducing carbon emissions intensity
and is expected to provide Northland with cost savings if the targets are met. The SLL is an important step in integrating
Northland’s ESG performance with its financing objectives. All margin savings are expected to be used to fund the
Company’s global sustainability initiatives.

Nordsee One Component Issue

As disclosed in early 2021, Northland identified a component defect on several wind turbines at Nordsee One affecting the
main rotor shaft assembly (RSA) and upon further assessment, management concluded the defect could affect all 54 of the
wind turbines, and commenced replacement of the rotor shaft assembly of all turbines. Refer to the Section 5.1: Operating
Results for additional information.

Green Financings Executed

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| 2021 ANNUAL REPORT |

Northland introduced its Green Financing Framework in February 2021, to allow the Company and its subsidiaries to issue
green bonds, loans (corporate and project level) and other financing instruments for Eligible Green Projects. Northland
successfully executed its first two green financings with its onshore wind projects in New York and Helios solar project in
Colombia; the latter being one of the first renewable project financings in the country.

Canadian Solar Portfolio Debt Restructuring

In the third quarter of 2021, Northland restructured and upsized the senior debt on a number of its Canadian solar facilities,
resulting in one-time cash distributions to Northland totaling $40 million. This refinancing constitutes green project
financing supporting Northland’s ESG initiatives.

Fitch Rating

In September 2021, Northland received a second corporate credit rating of BBB (stable) from Fitch Ratings Inc., a global
rating agency, in addition to S&P which also has a BBB (stable) rating.

Equity Offering

In April 2021, Northland completed a bought deal equity offering (the “2021 Share Offering”) of 22.5 million common
shares for aggregate gross proceeds of $990 million. The net proceeds of the 2021 Share Offering were used to fund the
cash purchase price of the Spanish portfolio and equity capital requirements.

Deutsche Bucht Refinancing

In March 2021, Deutsche Bucht amended its debt facility agreement to reduce the interest rate on the facility’s senior debt
to 2.3% (from approximately 2.6%). The amendment also included the addition of a debt service reserve facility, which
released €50 million ($74 million) from funds previously restricted for debt service.

Growth Updates:

To achieve our long-term growth objectives, Northland has established regional development offices to secure certain
growth opportunities across the globe. The activity from these offices has generated a robust portfolio of projects at various
stages of development and construction. The successful achievement of commercial operations of these projects is
expected to deliver long-term, sustainable growth in the Company’s Adjusted EBITDA, Free Cash Flow and Adjusted Free
Cash Flow. The following provides updates on the progress being made on Northland’s active development portfolio.

Spanish Renewables Acquisition

In August 2021, Northland completed the acquisition of the Spanish portfolio with a total combined net capacity of 551MW.
Total cash consideration at closing was €348 million ($511 million), including working capital amounts, with the assumption
of debt totaling €766 million ($1,124 million).

Enhanced Dispatch Contract (EDC) executed for Kirkland Lake Facility

In March 2021, Northland entered into an EDC for its Kirkland Lake facility with Ontario’s Independent Electricity System
Operator. Effective July 2021, the EDC succeeded the baseload PPA for the remainder of its term to 2030.

New York Onshore Wind Projects

Two of Northland’s New York State (“NY Wind”) onshore wind projects, Ball Hill and Bluestone, comprising 220MW,
achieved financial close and the start of construction in 2021. The projects secured green financing in the form of a non-
recourse project/construction loan, tax equity bridge loan and letters of credit. Northland expects to secure permanent tax
equity investments for the two projects ahead of commercial operations in 2022. In early 2020, the three projects were
awarded 20-year indexed Renewable Energy Certificate (REC) agreements with the New York State Energy Research and
Development Authority as part of renewable energy solicitations.

La Lucha Mexican Solar Project Update

The 130MW solar project in the State of Durango, Mexico, completed its activities relating to the physical construction,
however, certain activities relating to the energization of the project continue to be delayed. Final approvals, energization,
testing and interconnection of renewable power projects have generally been delayed in Mexico by pandemic related
government and CFE temporary office closures and reduced operating capacity. In addition, these processes have seen
further delays that are likely related to the uncertainty created by the Mexican government’s so far unsuccessful attempts
to amend electricity sector regulations and constitutionally embedded legislation and timelines remain uncertain as a
result. Efforts to secure commercial offtake and project financing are expected to be finalized only after commercial
operations.

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| 2021 ANNUAL REPORT |

Helios Colombian Solar Project

Northland’s 16MW Helios solar project in Colombia achieved financial close in 2021. The project secured a green loan and
commenced construction, with commercial operations expected in the first quarter of 2022. Helios secured a 12-year PPA
with EBSA, which, in turn, will secure offtake agreements with non-regulated customers.

Hai Long 1,044MW Offshore Wind Project

In July 2021, Hai Long received an amendment to the project’s Environmental Impact Assessment (“EIA”) from Taiwan’s
Environmental Protection Agency to accommodate a larger, 14MW turbine with longer blade lengths and in April 2021, the
project received confirmation from the Taiwan Bureau of Energy that Hai Long 2A had secured approval for the Industrial
Relevance Proposal, which sets out Northland’s commitments to local supply chain and procurement. The project continues
to progress towards financial close expected in the second half of 2022.

Baltic Power, Polish Offshore Wind Project

In June 2021, the Baltic Power project, secured a 25-year Contract for Differences (“CfD”) from Poland’s Energy Regulatory
Office under the Polish Offshore Wind Act at a guaranteed a price of PLN 319.60 per MWh. Construction of Baltic Power is
expected to commence in 2023 following financial close, with commercial operations anticipated in 2026.

Nordsee Offshore Wind Cluster

Subsequent to December 31, 2021, Northland and its German partner, RWE Renewables GmbH (RWE), announced the
formation of a 1,333MW Nordsee Offshore Wind Cluster partnership encompassing Nordsee Two (433MW), Nordsee Three
(420MW) and Nordsee Delta (480MW).

Northland holds a 49% interest in the new partnership, with RWE holding 51%. The projects are expected to be developed
and managed on a joint basis by both parties and are expected to achieve commercial operations between 2026 and 2028.

Colombian 130MW Solar Projects

In November 2021, Northland, in partnership with EDF Renewables, a subsidiary of Électricité de France S.A. (EPA:EDF),
were awarded the right to build two solar projects with a total combined capacity of 130MW. The solar projects will benefit
from a 15-year Power Purchase Agreement (PPA) with multiple energy distribution and commercial entities in Colombia,
starting in 2023. Northland has a 50% interest in the projects with commercial operations expected in the second half of
2023.

Japan Offshore Wind Projects

In September 2021, the Japanese government designated four new sea areas as “promising areas” for the development of
offshore wind projects under its Round Three process. Included in these four areas was Isumi City, Chiba Prefecture, and
the Akita Prefecture, where Northland is exploring the Chiba and Katagami offshore wind projects. These two projects could
have a total productive capacity of up to 900MW when complete.

Scotwind Offshore Wind Project

On January 17, 2022, Northland announced that it was awarded two offshore wind leases in the Crown Estate Scotland
auction with a total combined capacity of 2,340MW. The two leases, one fixed foundation (840MW) and one floating
foundation (1,500MW), will extend Northland’s development runway into the next decade, with commercial operations
expected at the end of 2029/2030 for the fixed and early 2030s for the floating.

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| 2021 ANNUAL REPORT |

4.2: Operating Highlights

The following table presents key IFRS and non-IFRS financial measures and operational results:

Summary of Consolidated Results

Year ended December 31,

FINANCIALS

Sales

Gross profit

Operating income

Net income (loss)

Adjusted EBITDA (a non-IFRS measure)

Cash provided by operating activities

Free Cash Flow (a non-IFRS measure)

Adjusted Free Cash Flow (a non-IFRS measure)
Cash dividends paid (1)
Total dividends declared (2)

Total assets (3)
Total non-current liabilities (3)

Per Share

2021

2020

2019

2,093,255 $

2,060,627 $

1,658,977

1,879,762

1,858,298

1,542,689

808,650

269,879

900,213

485,057

1,137,004

1,170,097

813,700

451,754

984,736

1,609,295

1,321,601

1,224,415

307,401

386,366

172,755

264,200

343,588

415,398

217,918

245,067

318,480

362,275

216,373

12,877,331

11,399,470

10,478,668

8,507,075 $

8,336,835 $

7,569,921

Weighted average number of shares - basic (000s)

218,861

198,774

180,322

Net income (loss) - basic

Free Cash Flow - basic (a non-IFRS measure)

Adjusted Free Cash Flow - basic (a non-IFRS measure)
Total dividends declared (4)

0.82 $

1.40

1.77

1.20 $

1.86 $

1.73

2.09

1.20 $

1.71

1.77

2.01

1.20

ENERGY VOLUMES

Electricity production in gigawatt hours (GWh)

8,879

9,449

9,060

(1) Reduction in cash dividends paid in 2021 compared to 2020 is due to the reinstatement of the DRIP in September 2020.

(2) Represents total dividends paid to common and class A shareholders including dividends in cash or in shares under the DRIP. In September 2020, all

Class A shares were converted into common shares on a ono-for-one basis.

(3) As at December 31.

(4) Excludes the dividend equivalent payment of $0.40 paid upon conversion of 14,289,000 subscription receipts on January 14, 2020.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

SECTION 5: RESULTS OF OPERATIONS

5.1: Operating Results

Offshore Wind Facilities

The following table summarizes operating results of the offshore wind facilities:

Sales/gross profit (1) (2)
Operating costs (2)
Operating income

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

334,034

263,430

1,107,236

1,179,779

49,136

195,091

42,247

127,153

173,742

569,453

665,351

142,466

166,282

653,792

759,692

217,145

Adjusted EBITDA
Free Cash Flow (2)
$
(1) Offshore wind facilities do not have cost of sales and as a result, the reported sales figure equals gross profit.

205,972

179,101

80,145

40,393

(2) For 2020, the sales/gross profit and operating costs includes $93 million pre-completion sales and $9 million related operating costs at Deutsche

Bucht. 2020 Free Cash Flow included excess pre-completion revenue in form of the Deutsche Bucht Completion Distribution.

Northland’s three offshore wind facilities, Gemini, Nordsee One and Deutsche Bucht, are located off the coasts of the
Netherlands and Germany. Wind power generation harnesses renewable wind energy by converting the kinetic energy of
wind into electrical energy. Wind facilities are subject to seasonality, and accordingly, tend to produce more electricity
during winter due to denser air and higher winds compared to summer, the effect of which is reflected in the respective
fiscal quarter’s results. In addition, variability in offshore wind facilities results in similar fluctuations in quarter-to-quarter
financial results. Factors such as exposure to market prices, and turbine or grid availability can also have a significant effect
on financial results, though typically to a lesser extent than variability in wind resource. For the year ended December 31,
2021, Gemini, Nordsee One and Deutsche Bucht contributed approximately 20%, 17% and 17%, respectively, of Northland’s
reported Adjusted EBITDA from facilities.

Results for Northland’s offshore wind facilities are also affected by foreign exchange rate fluctuations between the Euro and
Canadian dollar, which primarily affect sales, net income and Adjusted EBITDA. Northland has entered into long-term
foreign exchange rate hedges, at an average rate of 1.60/€ for 2022 compared to $1.60/€ for 2021 ($1.59/€ for 2020) for a
substantial portion of anticipated euro-denominated Free Cash Flow, mitigating the effects of foreign exchange rate
fluctuations with respect to this metric.

Variability within Operating Results

Gemini has subsidy agreements with the Government of the Netherlands which expire in 2031. Under these agreements,
revenue is earned through a combination of annual average Dutch wholesale market price (APX), a subsidy top-up (SDE)
and a markup to compensate for annual profile and imbalance (P&I) costs, which are variable from year to year. The SDE
mechanism tops-up the APX to effectively a set price of €211 per MWh for up to 1,908 gigawatt hours of annual production
(“Gemini Subsidy Cap”). The SDE mechanism is designed to ensure the full subsidy is received by Gemini annually. For
production beyond the Gemini Subsidy Cap, revenue is earned at the APX less P&I costs. Full APX prices are earned only
when production exceeds 2,385GWh.

The SDE is subject to an annual contractual floor price (“SDE floor”), thereby exposing Gemini to market price risk when the
APX falls below the effective annual SDE floor of €51/MWh for 2021. The APX has been below the SDE floor for the majority
of Gemini’s five years of operation, with the exception of 2021. Northland has purchased financial put contracts for the
majority of production in 2022 to mitigate risk should the APX fall below the SDE floor. These put options were entered into
with a strike price approximately equal to the SDE floor, and only became commercially viable in 2021 as the APX increased
substantially above the SDE floor. The incremental cost of the put options acquired is $2 million for 2022 and is expected to
be similar for 2023. Management intends to enter into further put contracts as appropriate for future years, in accordance
with Northland’s risk management policy.

Nordsee One and Deutsche Bucht have a Feed-In Tariff contract with the German government whereby the associated tariff
is added to the German wholesale market price, effectively generating a fixed unit price for energy sold. Under the German
Renewable Energy Sources Act, while the tariff compensates for most production curtailments required by the system

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| 2021 ANNUAL REPORT |

operator, the facilities do not receive revenue for periods where the market power price remains negative for longer than
six consecutive hours (“negative prices”). The facilities are also subject to unpaid curtailments by the German system
operator for scheduled and unscheduled grid repairs (“grid outages”) of up to 28 days annually at each facility, which can
have a significant effect on earnings depending on the season.

Gemini APX Hedges

In 2020, Gemini experienced a significant decline in the APX below the SDE floor as a result of reduced energy consumption
caused by COVID-19 pandemic-related lockdowns in Europe. As a result, and due to the uncertainty relating to the duration
of the pandemic, in the second quarter of 2020, Northland entered into financial derivatives for 2021, and to a lesser extent
2022 and 2023. At the time, with APX declining below the SDE floor, these derivatives were intended to mitigate further
deterioration of the APX, with some exposure to lost sales should the APX increase above the SDE floor.

Through the first quarter of 2021, the APX commenced increasing above the SDE floor, in part prompted by continued rising
natural gas and carbon prices in Europe, resulting in lost sales for Gemini. As a result, in the second quarter 2021, Northland
entered into offsetting financial derivatives to limit the potential lost sales for 2021 to 2023 under the original financial
derivatives. While limiting sales losses in the future, the offsetting derivatives crystallized financial losses (“APX hedge
losses”) for Northland. For the year ended December 31, 2021, the aforementioned factors resulted in the recognition of
$37 million of financial losses. Losses crystallized for 2022 have been incorporated within Financial Guidance in SECTION 10:
FINANCIAL OUTLOOK.

Nordsee One Component Issue

In 2021, Nordsee One replaced 10 of 54 RSAs and will continue the replacement campaign in 2022 and 2023. Management
expects to replace all remaining RSAs between 2022 and 2023 during seasonally low wind resource periods. In some cases,
Nordsee One may curtail the performance of turbines in order to briefly extend their life, which will reduce electricity
production (“turbine availability”) and sales in 2022 and, to a lesser extent, 2023. This issue is not expected at Gemini and
Deutsche Bucht, which utilize different turbines.

Management expedited the replacement campaign in 2021 to minimize future downtime of the wind turbines, however,
Nordsee One incurred lost sales, due to turbine availability, of €7 million ($9 million at Northland’s share) in 2021. The ten
RSAs were replaced at a cost of €13 million ($16 million at Northland’s share) and the total cost to replace the remaining 44
RSAs is expected to be within a range of €40 million and €50 million ($50 million and $60 million at Northland’s share). The
costs are expected to be almost fully covered by the warranty bond settlement received in 2020 relating to outstanding
warranty obligations of Nordsee One’s turbine manufacturer. Management’s estimate of lost sales in 2022 of €12 million
($15 million Northland share) resulting from the Nordsee One component issue have been included within its 2022
Financial Guidance summarized in SECTION 10: FINANCIAL OUTLOOK.

An important indicator for the offshore wind facilities is the historical average of the power production of each offshore
wind facility, where available. The following table summarizes actual electricity production and the historical average, high
and low for the applicable operating periods of each offshore facility:

Electricity production (GWh)

Gemini
Nordsee One
Deutsche Bucht
Total

Three months ended December 31,

2021 (1)

2020 (1)

Historical
Average (2)

Historical
High (2)

Historical
Low (2)

743
333
320
1,396

786
299
310
1,395

771
324
315

824
346
320

739
298
310

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| 2021 ANNUAL REPORT |

Electricity production (GWh)

Gemini
Nordsee One
Deutsche Bucht
Total

Year ended December 31,

2021 (1)

2020 (1)

Historical
Average (2)

Historical
High (2)

Historical
Low (2)

2,193
968
927
4,088

2,496
1,065
978
4,539

2,358
1,050
948

2,496
1,084
968

2,193
968
927

(1) Includes GWh produced and excludes unpaid curtailments.

(2) Represents the historical power production for the period since the commencement of commercial operation of the respective facility 2017 for

Gemini and Nordsee One and 2020 for Deutsche Bucht) and excludes unpaid curtailments.

Electricity production for the three months ended December 31, 2021, was in line with the same quarter of 2020 primarily
due to lower wind resource, partially offset by fewer uncompensated outages. Electricity production for the year ended
December 31, 2021, decreased 10% or 451GWh compared to 2020 primarily due to the historically low wind resource, as
well as reduced turbine availability at Nordsee One due to the RSA replacement campaign discussed above, partially offset
by fewer uncompensated outages in Germany.

Sales of $334 million for the three months ended December 31, 2021, increased 27% or $71 million compared to the same
quarter of 2020 largely due to higher electricity prices on German production above the Subsidy Cap and the factors
affecting electricity production, as shown below. Foreign exchange rate fluctuations resulted in $26 million lower sales
compared to the same quarter of 2020. Sales of $1,107 million for the year ended December 31, 2021, decreased 6% or $73
million compared to 2020 primarily due to lower wind resource in the North Sea compared to last year and losses at
Nordsee One due to turbine availability, partially offset by fewer periods of uncompensated outages and of negative prices
in Germany. Foreign exchange rate fluctuations resulted in $32 million lower sales for the year ended December 31, 2021,
compared to 2020.

Sales were also adversely affected by factors other than wind resource, as summarized in the following table:

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

Effect of Gemini price hedge (2021) or effect of APX
below the SDE floor (2020) (1)
Lower turbine availability at Nordsee One (due to
RSA campaign)
Unpaid curtailment due to negative prices and grid
outages in Germany
(1) Realized APX hedge losses in 2021 are not reported in Sales but do affect Adjusted EBITDA and Free Cash Flow. Lost sales in 2020 was a result of the

21,843

37,215

13,773

23,397

3,142

8,887

4,094

4,692

—

26,696

60,023

—

APX of €28/MWh, below the SDE floor of €44/MWh.

Operating costs of $49 million for the three months ended December 31, 2021, increased 16% or $7 million primarily due to
timing of repairs and maintenance as well as the expected renewal of the turbine maintenance contract at Gemini.
Operating costs of $174 million for the year ended December 31, 2021, increased 4% or $7 million compared to 2020
primarily due to same factor as above.

Operating income of $195 million for the three months ended December 31, 2021, increased 53% or $68 million compared
to the same quarter of 2020 largely due to higher wholesale market prices at Gemini. Operating income of $569 million for
the year ended December 31, 2021, decreased 13% or $84 million compared to 2020 primarily due to low wind resource in
the North Sea and losses at Nordsee One due to turbine availability, partially offset by fewer periods of uncompensated
outages and of negative prices in Germany.

Adjusted EBITDA of $206 million for the three months ended December 31, 2021, increased 15% or $27 million largely due
to higher electricity prices at Gemini and fewer periods of unpaid curtailments at the two German facilities. Adjusted
EBITDA of $665 million for the year ended December 31, 2021, decreased 12% or $94 million compared 2020 largely due to
low wind resource in the North Sea, losses at Nordsee One due to turbine availability and foreign exchange fluctuations
partially offset by fewer periods of uncompensated outages and of negative prices in Germany.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Onshore Renewable Facilities

The following table summarizes the operating results of the onshore renewable facilities:

Electricity production (GWh) (1) (4)
LTA production (GWh) (1) (2)

Sales/gross profit (3) (4)
Operating costs (4)
Operating income

Adjusted EBITDA

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

598

303

376

353

1,603

1,220

1,364

1,273

113,623

51,078

299,325

217,705

17,766

58,547

83,692

8,041

20,535

31,452

45,532

133,009

211,591

80,851

29,418

98,784

145,946

57,550

Free Cash Flow
(1) Includes GWh both produced and attributed to paid curtailments.
(2) LTA is the average of the historical power production since 2015 for Canadian facilities.
(3) Onshore renewable facilities do not have cost of sales and as a result, the reported sales figures equal gross profit.

37,137

12,950

(4) For 2021, production, sales/gross profit and operating costs include results from the Spanish portfolio acquired on August 11, 2021.

Northland’s onshore renewables comprise onshore wind and solar facilities located in Canada and Spain. Onshore wind
facilities are similar in nature operationally to offshore wind; however, with lower operating costs and generally lower wind
resources. Solar power facilities have lower fixed operating costs per unit of capacity than other renewable power
technologies. Electricity production from solar facilities tends to be less variable than wind but is limited to available
sunlight, which is generally higher in the summer than in the winter. For the year ended December 31, 2021, Northland’s
onshore renewable facilities in Canada and Spain contributed approximately 17% of reported Adjusted EBITDA from
facilities.

The Spanish portfolio, acquired in August 2021, includes 33 operating assets comprised of onshore wind (435MW), solar
photovoltaic (66MW), and a concentrated solar (50MW) located throughout Spain. The portfolio operates under a
regulated asset base (RAB) framework that guarantees a specified pre-tax rate of return of 7.4% for 23 sites and 7.1% for 10
sites, over the full regulatory life of the facilities, regardless of settled wholesale power prices (“pool prices”). Under the
regulatory framework, regulated revenues are adjusted at the start of every 3- or 6-year periods, for onshore wind and
solar, respectively, to offset the variability of spot wholesale market prices in the preceding 3- or 6-year regulatory period.
The next regulatory semi-period will start January 2023.

Under the Spanish framework, the majority of Northland’s Spanish facilities are entitled to receive a guaranteed rate of
return until 2032, with ten solar sites’ rate of return to be reassessed in 2026. As of December 31, 2021, the weighted
average remaining regulatory life of the portfolio is 12 years, with estimated useful life of an additional ten years. The
average remaining regulatory life of onshore wind facilities and solar facilities is 8 year and 19 years, respectively, after
which, power can be re-contracted with alternate offtake and/or sold at prevailing wholesale pool prices.

Revenue from the Spanish facilities is primarily comprised of two main components, return on investment (“Ri”) as well as a
larger component based on pool prices. While a renewables operator may collect the settled pool price per MWh produced,
under IFRS 15, revenue is only recognized at the pool price originally forecasted by the Spanish regulator at the start of the
regulatory semi-period. Under IFRS, any pool price revenue collected significantly in excess of (or below) the stated pool
price in the current regulatory semi-period (known as “band adjustments”) is deferred and recognized over the remaining
regulatory periods. Accordingly, cash amounts collected from higher pool prices in the second half of 2021 are expected to
be primarily realized in sales commencing in 2023, over the remaining regulatory life of the asset, in adherence with IFRS.

In addition, Northland has entered into long-term Euro denominated foreign exchange hedges, at an average rate of $1.73/
€, which hedges approximately 76% of projected distributions from the Spanish portfolio from 2021-2035 to mitigate
foreign exchange rate volatility, consistent with its corporate risk mitigation strategy.

Electricity production at the onshore renewable facilities for the three months ended December 31, 2021, was 59% or 222
GWh higher than the same quarter of 2020 due to the contribution from the Spanish portfolio. Electricity production for the
year ended December 31, 2021, was 18% or 239GWh higher than 2020 due to the same.

From August 11, 2021 to December 31, 2021, the Spanish portfolio generated 286GWh from onshore wind and 81GWh
from onshore solar.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Financial results and Adjusted EBITDA for the three months and year ended December 31, 2021, were higher than 2020 due
to the acquisition of the portfolio of solar and wind facilities in Spain. Excluding the contribution from the Spanish portfolio,
for the three months ended December 31, 2021, production, sales and Adjusted EBITDA were 12%, 7% and 10% lower,
respectively, primarily due to lower resource.

The Spanish portfolio generated sales, Adjusted EBITDA and Free Cash Flow of $92 million, $74 million and $30 million,
respectively.

Efficient Natural Gas Facilities

The following table summarizes the operating results of the efficient natural gas facilities:

Three months ended December 31,

Year ended December 31,

Electricity production (GWh)

Sales (1)
Less: cost of sales

Gross profit

Operating costs

Operating income
Adjusted EBITDA (2)
Free Cash Flow
(1) Northland accounts for its Spy Hill operations as a finance lease.

(2) Includes management and incentive fees earned by Northland.

2021

956

2020
876

2021

3,188

127,475

112,516

433,554

38,065
89,410

14,787

56,856

83,159

28,484
84,032
17,391

57,064

67,618

123,533
310,021

51,483

172,160

274,155

60,535

41,715

168,580

2020
3,546

415,551

103,334
312,217
54,154

219,624

264,094

155,907

The contractual structures of Northland’s efficient natural gas facilities ensure each facility’s gross profit is generally stable,
within a seasonal profile, regardless of production or sales levels, so long as the plant is available. Under some PPAs, the
facility is reimbursed for certain costs of sales by the counterparty. Management also aims to maximize returns through the
re-marketing of natural gas storage and transportation (“gas optimization”) through its energy marketing initiatives. For the
year ended December 31, 2021, Northland’s six efficient natural gas facilities contributed approximately 22% of reported
Adjusted EBITDA from facilities, with the three largest, North Battleford, Iroquois Falls and Thorold accounting for
approximately 19%.

Electricity production for the three months ended December 31, 2021, increased 9% or 80GWh compared to the same
quarter of 2020 due to higher on-peak production and an increase in dispatches, partially offset by the effect of Kirkland
Lake operating under the enhanced dispatch contract compared to the baseload PPA in prior periods. Electricity production
for the year ended December 31, 2021, decreased 10% or 359GWh compared to 2020 due to planned major maintenance
outages at two facilities and due to Kirkland Lake operating under the terms of the EDC. The EDC has the effect of lower
electricity production under dispatch, lower sales but higher gross profit.

Sales of $127 million for the three months ended December 31, 2021, increased 13% or $15 million compared to the same
quarter of 2020 largely due to higher production and annual rate escalations at multiple facilities. Sales of $434 million for
the year ended December 31, 2021, increased 4% or $18 million compared to 2020 largely due to annual rate escalations at
multiple facilities offset by the effect of Kirkland Lake’s EDC.

Operating income of $57 million for the three months ended December 31, 2021, was in line with the same quarter of 2020
as a result of higher gross profits offset by an increase in amortization expense at Iroquois Falls as a result of the expiry of
its PPA in December 2021. Operating income of $172 million for the year ended December 31, 2021, decreased 22% or $47
million compared to 2020 primarily due to planned outages and the increase in amortization expense noted.

Adjusted EBITDA of $83 million and $274 million for the three months and year ended December 31, 2021, increased 23%
or $16 million and 4% or $10 million compared to the same periods of 2020 largely due to the factors described above.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Utility

The following table summarizes the operating results of EBSA:

Sales (1)
Less: cost of sales

Gross profit

Operating costs

Operating income

Adjusted EBITDA

Three months ended December 31,

Year ended December 31,

2021

58,949

18,567

2020
58,065

18,001

2021

225,349

68,923

40,382

40,064

156,426

14,939

16,360

24,112

14,047

15,157

23,053

57,137

59,798

91,510

2020
218,982

69,567

149,415

51,062

52,567

89,765

27,925
Free Cash Flow
(1) Gross sales from regulated electricity sales, including transmission and generation tariffs, which EBSA passes through to the regulator for reallocation.

45,659

16,532

886

EBSA holds the sole franchise rights for electricity distribution in the Boyacá region of Colombia and is an electricity retailer
for the regulated residential sector in the region. EBSA owns and operates an extensive distribution network, serving about
half a million customers. EBSA’s net sales are almost entirely regulated, of which the vast majority is earned from its
distribution business and the remainder primarily from its electricity retail business. EBSA’s results are affected by exchange
rate fluctuations between the Canadian dollar and the Colombian peso. For 2021 Free Cash Flow, Northland hedged the
foreign exchange rate at COP$2880:CAD$1 for nearly all of the anticipated Colombian peso-denominated cash flow,
mitigating the effects of fluctuations with respect to this metric (2020: COP$2,704:CAD$1). For the year ended December
31, 2021, utility operations contributed approximately 7% of reported Adjusted EBITDA from facilities.

EBSA earns revenue by charging customers a rate approved under the regulatory framework administered by the local
regulator, the Comisión de Regulación de Energía y Gas (“CREG”). The rate charged is set for an expected five-year period
and includes amounts retained by EBSA, as retailer and distributor, and amounts passed through to other electricity system
participants, such as the transmission operator. The rate base takes into account the depreciated cost of existing equipment
and anticipated future investments for maintenance and growth. EBSA’s portion of the rate also includes standardized
allowances set by the regulator intended to cover fixed and variable operating costs, including expected increases in
corporate tax rates in 2022. The rate is designed to ensure EBSA earns a predictable and stable return.

Sales and Gross profit of $59 million and $40 million for the three months ended December 31, 2021, were in line with the
same quarter of 2020. Sales and Gross profit of $225 million and $156 million for the year ended December 31, 2021,
increased 3% or $6 million and 5% or $7 million compared to 2020 primarily due to certain optimizations of operations.

Operating income of $16 million and $60 million for the three months and year ended December 31, 2021, increased 8% or
$1 million and 14% or $7 million compared to the same periods of 2020 primarily due to the factors described above.

Adjusted EBITDA of $24 million for the three months ended December 31, 2021, increased 5% or $1 million compared to
the same quarter of 2020 mainly due to the factors described above. Adjusted EBITDA of $92 million for the year ended
December 31, 2021, was slightly higher compared to 2020.

Upsizing proceeds in excess of EBSA’s expansionary capital expenditures of approximately $4 million are included in Free
Cash Flow for the fourth quarter, prorated for the timing of closing. Depending on the level of expansionary capital
investments in 2022, management expects to recognize $35 to $45 million of net proceeds into Free Cash Flow in 2022,
which has been included within the Financial Guidance presented in SECTION 10: FINANCIAL OUTLOOK.

For EBSA, non-expansionary capital expenditure is the expenditure required to maintain its regulated asset base under the
requirements of the local regulator. Such expenditure is largely driven by the requirements of the regulatory framework,
though the timing of the capital expenditures can vary from year to year and can be seasonal, therefore, affecting Free Cash
Flow as reported.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

5.2: General and Administrative Costs

The following table summarizes general and administrative (G&A) costs:

Corporate G&A
Operations G&A (1)
Total G&A costs

Three months ended December 31,

Year ended December 31,

2021

16,328

5,611

2020
15,366

13,024

2021

43,303

24,380

21,939

28,390

67,683

2020
36,158

32,135

68,293

(1) Operations G&A is included in the respective segment’s Adjusted EBITDA and Free Cash Flow presented in Section 4.1 Operating Results.

Corporate G&A costs of $16 million and $43 million for the for the three months and year ended December 31, 2021, were
6% or $1 million and 20% or $7 million higher than the same periods of 2020, respectively, primarily due to higher
personnel and other costs in support of Northland’s global growth.

Operations G&A is incurred at the operating facilities, and for the for the three months and year ended December 31, 2021,
were 57% or $7 million and 24% or $8 million lower than 2020 primarily due to certain non-recurring costs incurred at EBSA
in 2020 and lower facility personnel costs in the fourth quarter of 2021.

5.3: Growth Expenditures

The following table summarizes development costs under IFRS and growth expenditures for non-IFRS financial measures:

Three months ended December 31,

Year ended December 31,

Business development

Project development

Development overhead
Acquisition costs (1)

Development costs

2021

—

13,861

11,229

1,659

2020
6,087

8,286

5,375

—

2021

21,756

14,968

33,270

7,666

26,749

19,748

77,660

Joint venture project development costs (2)

581

2,679

8,971

Growth expenditures (3)
Growth expenditures on a per share basis
(1) Relates to successful acquisition costs only. Excluded from growth expenditures.

25,671

22,427

78,965

0.36

2020
11,530

29,600

26,011

7,474

74,615

4,669

71,810

0.36

(2) Includes Northland’s share of development costs incurred at Baltic Power ($3 million before its capitalization in the third quarter of 2021), Chiba and

other joint venture projects.

(3) Excludes acquisition costs but includes share of project development costs incurred by joint ventures.

To achieve its long-term growth objectives, Northland expects to deploy early-stage investment capital (growth
expenditures) to advance its projects. With regional development offices in Europe, Asia, North America and Latin America
fully functional and with a pipeline of growth opportunities currently secured, Northland expects to incur higher growth
expenditures and capital investments in future years to fund its identified development pipeline and opportunities sourced
through the regional development offices.

Early-stage growth expenditures reduce near-term Free Cash Flow until projects achieve commercial operation but should
deliver sustainable growth in Free Cash Flow over the long-run. These growth expenditures are excluded from Adjusted
Free Cash Flow.

Business development costs are incurred to identify and explore prospective business and development opportunities,
which are expected to result in identifiable development projects intended to be pursued to completion, and include costs
incurred for projects not ultimately pursued to acquisition or to completion. Business development costs for the year ended
December 31, 2021, were higher compared to the same periods of 2020 due to a higher level of development activities
pursuing opportunities.

Project development costs are attributable to identified early- to mid-stage development projects under active development
that are likely to generate cash flow over the long-run. For the year ended December 31, 2021, project developments costs

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

were lower due to timing of activities at the identified projects and the commencement of capitalization for the Hai Long
project in mid-2020. Refer to SECTION 9: DEVELOPMENT, ACQUISITION AND CONSTRUCTION ACTIVITIES for additional
information on identified development projects.

Development overhead primarily relates to personnel, rent and other office costs not directly attributable to specific
development projects. Development overhead reflects Northland’s resources and development offices in key target
jurisdictions focused on securing long-term growth opportunities in those jurisdictions.

Acquisition costs are generally third-party transaction-related costs directly attributable to an executed business acquisition,
such as the Spanish portfolio, and are excluded from Northland’s non-IFRS financial measures. For the year ended
December 31, 2021, acquisition costs totaled $8 million based on costs incurred on successful acquisition pursuits.

5.4: Consolidated Results

The following discussion of the significant factors contributing to the consolidated financial results should be read in
conjunction with Northland’s audited consolidated financial statements for the year ended December 31, 2021.

Electricity production (GWh)

Sales
Less: Cost of sales

Gross profit

Expenses

Operating costs

General and administrative costs

Development costs
Depreciation of property, plant and equipment

Investment income

Finance lease income

Operating income

Finance costs, net

Amortization of contracts and intangible assets

Impairment

Foreign exchange (gain) loss

Fair value (gain) loss on derivative contracts

Other expense (income)

Three months ended December 31,

Year ended December 31,

2021

2,950

2020
2,646

2021

8,879

2020
9,449

640,090

492,834

2,093,255

2,060,627

60,212

57,223

213,493

202,329

579,878

435,611

1,879,762

1,858,298

83,716

21,939

26,749
155,356

81,726

28,390

19,748
132,392

327,894

67,683
77,660

612,755

287,760

262,256

1,085,992

482

2,880

716

2,973

3,218

11,662

300,916

68,293

74,615
529,569

973,393

3,285

12,023

295,480

177,044

808,650

900,213

99,611

(5,594)

—

29,429

(53,021)

15,639

95,094

14,712

—

19,654

(497)

(1,020)

342,417

23,284

29,981

81,318

(116,621)

25,040

365,168

43,361

—

(71,344)

(11,271)

(25,769)

Income (loss) before income taxes

209,416

49,101

423,231

600,068

Provision for (recovery of) income taxes

Current

Deferred

Provision for (recovery of) income taxes

Net income (loss)

Net income (loss) per share - basic

Net income (loss) per share - diluted

35,112

44,776

79,888

129,528

0.45

$
$

21,628

676

22,304

26,797
0.11

0.11

84,410

68,942

153,352

269,879

0.82

$
$

90,282

24,729

115,011

485,057
1.86

1.85

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Fourth Quarter

Sales and gross profit of $640 million and $580 million, respectively, increased 30% or $147 million and 33% or $144 million
compared to the same quarter of 2020 primarily due to contributions from the Spanish portfolio acquired in August 2021
and improved results from the offshore wind facilities relative to 2020, partially offset by the effect of unfavourable foreign
exchange rate fluctuations.

Operating costs of $84 million increased 2% or $2 million compared to the same quarter of 2020 primarily due to additional
costs from the Spanish portfolio and the effect of foreign exchange rate fluctuations

G&A costs of $22 million decreased 23% or $6 million compared to the same quarter of 2020. Of this, operations G&A
decreased by $7 million primarily due to certain non-recurring costs incurred at EBSA in 2020 and lower facility personnel
costs in the fourth quarter of 2021 while corporate G&A costs increased by $1 million primarily due to the higher personnel
and other costs in support of Northland’s global growth.

Development costs of $27 million increased 35% or $7 million compared to the same quarter of 2020 primarily due to
timing of costs incurred to advance early-stage development projects.

Finance costs, net (primarily interest expense) of $100 million increased 5% or $5 million compared to the same quarter of
2020 primarily as a result of the increase in Northland’s debt associated with the acquisition of the Spanish Portfolio.

Fair value gain on derivative contracts was $53 million primarily due to net movements in the fair value of derivatives
related to the Gemini market price, interest rates and foreign exchange contracts.

Foreign exchange loss of $29 million is primarily due to unrealized loss from fluctuations in the closing foreign exchange
rates.

Net income increased $103 million in the fourth quarter of 2021 compared to the same quarter of 2020 primarily as a result
of the factors described above, combined with a $58 million higher tax expense.

2021

Sales of $2.1 billion increased 2% or $33 million compared to 2020 primarily due to contributions from the Spanish portfolio
acquired in August 2021 and rate escalations at the efficient natural gas facilities, primarily offset by lower offshore wind
resource, lower production at Nordsee One due to lower turbine availability, and the effect of unfavourable foreign
exchange rate fluctuations.

Gross profit of $1.9 billion increased 1% or $21 million compared to 2020 primarily due to the same factors affecting sales
described above, partially offset by increased gas costs at the efficient natural gas facilities.

Operating costs of $328 million increased 9% or $27 million compared to 2020 primarily due to additional costs from
Spanish portfolio, the expected renewal of the turbine maintenance contract at Gemini and the effect of foreign exchange
rate fluctuations.

G&A costs of $68 million were in line with 2020 primarily due to higher personnel and other costs in support of Northland’s
global growth offset by lower operations G&A.

Development costs of $78 million increased 4% or $3 million compared to the compared to 2020 due to the timing and
nature of development activities to pursue development projects and opportunities.

Finance costs, net (primarily interest expense) of $342 million decreased 6% or $23 million compared to 2020 primarily as a
result of scheduled repayments on facility-level loans and repayment of borrowings on the corporate revolving facility in
April 2021. 2020 also included interest on convertible debentures redeemed in May 2020.

Impairment expense of $30 million as a result of a goodwill write-off for Iroquois Falls, as its PPA expired in December 2021.

Foreign exchange loss of $81 million is primarily due to unrealized loss from fluctuations in the closing foreign exchange
rate.

Fair value gain on derivative contracts was $117 million compared to a $11 million gain in 2020 primarily due to the
movement in the fair value of interest rate swaps and foreign exchange contracts.

Other expenses of $25 million were $51 million higher for the year ended December 31, 2021, primarily due to share of
increasing joint venture development costs and non-cash write-downs of receivables, while other income in 2020 included
proceeds received from the sale of turbines at Deutsche Bucht as well as insurance proceeds related to its construction.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Net income decreased $215 million for the year ended December 31, 2021 compared to 2020 mainly due to the factors
described above, partially offset by a $38 million higher tax expense.

5.5: Adjusted EBITDA

The following table reconciles net income (loss) to Adjusted EBITDA:

Net income (loss)
Adjustments:

Finance costs, net

Gemini interest income

Share of joint venture project development costs

Acquisition costs

Provision for (recovery of) income taxes

Depreciation of property, plant and equipment

Amortization of contracts and intangible assets
Fair value (gain) loss on derivative contracts

Foreign exchange (gain) loss

Impairment loss

Elimination of non-controlling interests

Finance lease (lessor)

Other adjustments

Adjusted EBITDA

Three months ended December 31,

Year ended December 31,

2021

129,528

99,611

3,843

3,510

1,659

79,888

155,356

(5,594)

(78,047)

29,429

—

(74,593)

(1,113)

20,171

2020
26,797

95,094

4,069

(2,679)

—

22,304

132,392

14,712
(497)

19,654

—

(41,895)

(5,657)

4,222

2021

269,879

342,417

15,810

(4,880)

7,666

153,352

612,755

23,284

(153,536)

81,318

29,981

(260,567)

(7,137)

26,662

2020
485,057

365,168

16,075

(4,669)

7,474

115,011

529,569

43,361
(11,271)

(71,344)

—

(278,709)

(1,803)

(23,822)

363,648

268,516

1,137,004

1,170,097

Gemini interest income reflects interest earned on Northland’s €117 million subordinated debt to Gemini. Semi-annual
principal payments to Northland will commence in 2027 until maturity in 2032. Northland consolidates the financial results
of Gemini and, as a result, Northland’s loan balances, investment income, and interest expense are eliminated upon
consolidation. Gemini interest income is included in Northland’s consolidated Adjusted EBITDA because it reflects returns
generated from an investment in core assets.

Other adjustments primarily include non-cash loss on equity investments for the year ended December 31, 2021. For the
year ended December 31, 2020, other adjustments primarily include proceeds from sale of two turbines and insurance
proceeds received.

Fourth Quarter

Adjusted EBITDA of $364 million for the three months ended December 31, 2021, increased 35% or $95 million compared
to the same quarter of 2020. The significant factors increasing Adjusted EBITDA include:

•

$55 million contribution from the Spanish portfolio of onshore wind and solar facilities acquired in August 2021;

$30 million increase in operating results at Gemini primarily due to slightly higher hedged wholesale market prices
realized on production above the Gemini Subsidy Cap relative to 2020; and

$14 million increase in operating results from EBSA and the efficient natural gas facilities primarily due to contributions
from optimized operations and annual escalations.

Full Year

Adjusted EBITDA of $1,137 million for the year ended December 31, 2021, decreased 3% or $33 million compared to the
same period of 2020. The significant factors decreasing Adjusted EBITDA include:

•

$49 million decrease in operating results at Gemini primarily due to historically low wind resource and realized APX
hedge losses;

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| 2021 ANNUAL REPORT |

•

$45 million decrease in operating results at the German offshore wind facilities primarily due to low wind resource and
losses at Nordsee One due to turbine availability, partially offset by fewer periods of uncompensated outages and of
negative prices in Germany; and

$7 million increase in growth expenditures primarily driven by an increasing level of business development activities;
and a $7 million increase in corporate G&A primarily due to higher personnel and other costs in support of Northland’s
global growth.

The factors partially offsetting the decrease in Adjusted EBITDA were:

•

$74 million contribution from the Spanish portfolio of onshore wind and solar facilities acquired in August 2021; and

$4 million increase in operating results primarily due to contributions from EBSA and the efficient natural gas facilities.

5.6: Free Cash Flow and Adjusted Free Cash Flow

The following table reconciles cash flow from operations to Free Cash Flow and Adjusted Free Cash Flow:

Three months ended December 31,

Year ended December 31,

2021
559,368

2020
310,499

2021
1,609,295

2020
1,321,601

Cash provided by operating activities
Adjustments:

Net change in non-cash working capital balances
related to operations
Non-expansionary capital expenditures

Restricted funding for major maintenance, debt
and decommissioning reserves
Interest paid, net

Scheduled principal repayments on facility debt
Funds set aside (utilized) for scheduled principal
repayments
Preferred share dividends

Consolidation of non-controlling interests

Deutsche Bucht Completion Distribution

Cash from operating activities from projects under
construction
Lease payments
Investment income (1)
Nordsee One proceeds from government grant
and warranty settlement

Share of joint venture project development costs
Foreign exchange
Other (2)

(111,986)

(7,734)

2,294

(100,842)

(278,667)

119,951

(2,710)

(40,240)

—

(2,169)

4,750

10,764

(581)

(2,682)

6,825

13,648

(15,793)

(3,902)

(110,062)

(233,773)

104,140

(2,707)

(26,151)

—

(2,447)

5,432

7,809

(2,679)
855

11,507

(292,499)

(40,558)

(7,505)

(277,908)

(635,901)

635

(10,811)

(90,022)

—

(8,966)

20,153

38,636

(8,971)

9,902

1,921

Free Cash Flow

Add back: Growth expenditures

Adjusted Free Cash Flow

156,341

56,376

307,401

25,671

182,012

22,427

78,965

78,803

386,366

(1) Investment income includes Gemini interest income and interest received on third-party loans to partners on Cochrane Solar.

(2) Other includes adjustments for Nordsee One interest on shareholder loans, equity accounting, acquisition costs and non-cash expenses adjusted in

working capital excluded from Free Cash Flow in the period.

Adjusted Free Cash Flow, is a supplementary non-IFRS cash flow measure including associated per share amounts and
payout ratios. Adjusted Free Cash Flow is calculated by excluding growth-related expenditures from Free Cash Flow.
Management believes this measure provides a relevant presentation of cash flow generated from the business before
investment-related decisions (refer to Section 5.3: Growth Expenditures for additional information). Management believes
Adjusted Free Cash Flow is a meaningful measure of Northland’s ability to generate cash flow, after on-going obligations, to
reinvest in growth and fund dividend payments. Reinvesting in growth is a key part of Northland’s long-term strategy.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

32,333

(28,324)

(15,756)

(309,077)

(789,778)

179,792

(11,364)

(123,609)

93,144

(66,853)

(9,210)

22,450

28,281

(4,669)
5,072

19,555

343,588

71,810

415,398

Scheduled principal repayments on facility debt reflect repayments as paid. Funds set aside (utilized) for scheduled principal
repayments allocates repayments across the quarters in order to more clearly reflect the Company’s performance. Gemini’s
principal repayment schedule is weighted towards the first payment of the year to align with Gemini’s expected annual cash
flow profile, while Nordsee One and Deutsche Bucht’s principal repayments are equally weighted. For 2022, Northland’s
share of Gemini, Nordsee One and Deutsche Bucht’s scheduled principal repayments are €84 million, €82 million and €77
million, respectively (2021 - €83 million, €87 million and €78 million; 2020 - €82 million, €80 million, €84 million,
respectively). For 2022, the Spanish portfolio’s principal repayment is €60 million (2021 - €23 million).

Interest expense is reflected each quarter as accrued in net income and working capital or paid.

In 2014, Nordsee One was awarded a grant under the European Commission’s NER 300 program. The total grant value of
€70 million was recorded as a reduction in property, plant and equipment upon completion of the project. Cash proceeds
from the grant are based on production volumes, and with the final cash payments expected in 2023 for production in
2022. Proceeds under the grant attributable to Nordsee One’s production are included in Free Cash Flow. For the year
ended December 31, 2021, and December 31, 2020, proceeds from this program, based on production, totaled $16 million
and $18 million, respectively.

Fourth Quarter

Free Cash Flow of $156 million for the three months ended December 31, 2021, was 177% or $100 million higher than the
same quarter of 2020. The significant factors increasing Free Cash Flow were:

•

$51 million increase in overall earnings across all facilities, excluding the Spanish portfolio, as described in Adjusted
EBITDA, primarily at the offshore wind facilities due to fewer periods of unpaid curtailments and negative prices at the
German facilities and higher electricity prices on German production above the Subsidy Cap;

$27 million contribution from the Spanish portfolio of onshore wind and solar facilities acquired in August 2021;

$10 million decrease in net interest costs due to scheduled principal repayments on facility-level loans; and

$9 million decrease in non-expansionary capital expenditures primarily at EBSA.

Adjusted Free Cash Flow, which excludes all non-capitalized growth expenditures, amounted to $182 million for the three
months ended December 31, 2021, and was 131% or $103 million higher than the same quarter of 2020. The significant
factors increasing Adjusted Free Cash Flow were as described for Free Cash Flow but exclude the $3 million increase in
growth expenditures (refer to Section 5.3: Growth Expenditures for more information).

Full Year

Free Cash Flow of $307 million for the year ended December 31, 2021, was 11% or $36 million lower compared to 2020.
The significant factors decreasing Free Cash Flow include:

•

$88 million decrease in overall earnings across all facilities, as described in Adjusted EBITDA, but primarily due to low
wind resource at the three offshore wind facilities and turbine availability issues at Nordsee One.

The factors partially offsetting the decrease in Free Cash Flow were:

•

$30 million contribution, net of debt and interest payments, from the Spanish portfolio; and

$18 million decrease in net interest costs due to lower interest costs as a result of scheduled principal repayments on
facility-level loans.

Adjusted Free Cash Flow, which excludes growth expenditures, amounted to $386 million for the year ended December 31,
2021, and was 7% or $29 million lower than 2020 due to the same factors affecting Free Cash Flow but exclude the $7
million increase in growth expenditures.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

The following table summarizes cash and total dividends paid and respective Free Cash Flow payout ratios as well as per
share amounts:

Cash dividends paid to common and Class A
shareholders
Free Cash Flow payout ratio - cash dividends (1)
Adjusted Free Cash Flow payout ratio - cash

dividends (1)

Total dividends paid to common and Class A

shareholders (2)

Free Cash Flow payout ratio - total dividends (1) (2)
Adjusted Free Cash Flow payout ratio - total

dividends (1)

Weighted avg. number of shares - basic (000s) (3)
Weighted avg. number of shares - diluted (000s) (4)
Per share ($/share)
Dividends paid (5)
Free Cash Flow — basic

Free Cash Flow — diluted

Adjusted Free Cash Flow — basic

Three months ended December 31,

Year ended December 31,

2021

2020

2021

2020

44,688

40,652

172,755

217,918

56 %

45 %

63 %

52 %

67,938

60,555

261,730

242,923

84 %

67 %

226,568

201,962

218,861

0.30

0.69

0.80

0.30

0.28

0.39

1.20

1.40

1.77

71 %

58 %

198,774
201,169

1.20

1.73

1.72

2.09

2.07

Adjusted Free Cash Flow — diluted
(1) On a rolling four-quarter basis.
(2) Represents dividends paid in cash and in shares under the DRIP.
(3) Includes common shares and class A shares but excludes common shares issuable upon conversion of outstanding convertible debentures.

1.77

0.80

0.39

(4) Includes common shares, class A shares and any common shares issuable upon conversion of outstanding convertible debentures. In September

2020, all Class A shares were converted into common shares on a one-for-one basis.

(5) Excludes the dividend equivalent payment of $0.40 paid upon conversion of 14,289,000 subscription receipts on January 14, 2020.

At December 31, 2021, the rolling four quarter Free Cash Flow and the Adjusted Free Cash Flow net payout ratio were 56%
and 45%, respectively, calculated on the basis of cash dividends paid, compared to 63% and 52% for the same period ending
December 31, 2020. The improvement in the Free Cash Flow net payout ratio, despite lower Free Cash Flow reported in
2021, was due a higher share count – see table below for DRIP amounts and Equity offering proceeds during the period. The
Adjusted Free Cash Flow net payout ratio was similarly improved compared to the same period ending December 31, 2020.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Sources of Liquidity in Addition to Free Cash Flow to Fund Growth

In addition to generated Free Cash Flow, Northland utilizes additional sources of liquidity to fund growth and capital
investments. Additional liquidity sourced by management during the year ended December 31, 2021, is summarized as
follows:

Year ended December 31,

Dividend Reinvestment Program (DRIP)
Release of funds from debt service reserve (1)
EBSA financing, net of prior debt repayment and costs (2)

Proceeds from Canadian facility up-financing(s)
Proceeds from sale of monobucket foundations and related and insurance
proceeds

2021

88,975

73,723

83,959

39,600

—

Total Liquidity Generated Before Equity Offering

286,257

Equity offering (net proceeds)

950,421

2020

21,983

60,079

113,645

51,942

32,367

280,016

—

Total Liquidity Generated After Equity Offering
(1) 2021 represents the release of cash from Deutsche Bucht’s debt service reserve account following the implementation of a debt service reserve
facility when the senior debt was restructured. 2020 represents the release of cash from Gemini’s debt service reserve account following the
implementation of a debt service reserve facility.

1,236,678

280,016

(2) Of the $84 million distribution received from the EBSA financing, a total of $3.9 million was included in Free Cash Flow.

SECTION 6: CHANGES IN FINANCIAL POSITION

The following table provides a summary of account balances derived from the audited consolidated statements of financial
position as at December 31, 2021 and December 31, 2020.

As at

Assets

Cash and cash equivalents

Restricted cash

Trade and other receivables

Other current assets

Property, plant and equipment

Contracts and other intangible assets

Investment in joint ventures
Other assets (1)

Liabilities

Trade and other payables

Facility-level loans and borrowings
Net derivative liabilities (2)
Net deferred tax liability (2)
Other liabilities (3)

Total equity

December 31, 2021

December 31, 2020

673,692

155,631

383,308

77,950

9,586,466

497,635

131,134

1,037,913

12,543,729

504,583

7,592,214

215,618

470,015

795,588

9,578,018

2,965,711

12,543,729

434,989

192,530

372,137

66,379

8,679,959

533,171

1,759

1,017,433

11,298,357

252,691

7,237,200

582,631

300,567

922,497

9,295,586

2,002,771

11,298,357

(1) Includes goodwill, finance lease receivable, long-term deposits and other assets.

(2) Presented on a net basis.

(3) Includes dividends payable, corporate credit facilities, convertible debentures, subscription receipts, provisions and other liabilities.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Significant changes in Northland’s audited consolidated statements of financial position were as follows:

•

Restricted cash decreased by $37 million primarily due to the release of funds set aside for debt service at Deutsche
Bucht, which were reclassified to cash, as a result of an amendment to Deutsche Bucht’s debt facility agreement,
partially offset by funds set aside for semi-annual bond payments.

Property, plant and equipment increased by $907 million primarily due to the consolidation of the Spanish portfolio and
construction-related activities at Northland’s identified projects, partially offset by depreciation and foreign exchange
fluctuation.

Equity investment increased by $129 million mainly as a result of the purchase price of Baltic Power and the additional
equity contribution accrued in pursuance of the purchase agreement.

• Other assets increased by $20 million primarily due to the consolidation of the Spanish portfolio, partially offset by the
write-off of Iroquois Falls’ goodwill, as a result of the expiry of its purchase price agreement in December 2021 and
foreign exchange fluctuation.

•

Trade and other payables increased by $252 million primarily due to consolidation of the Spanish portfolio,
construction activities and purchase price commitments payable for Baltic Power.

Facility-level loans and borrowings increased by $355 million mainly due to consolidation of the Spanish portfolio and
the EBSA refinancing, partially offset scheduled principal repayments on facility-level debt and foreign exchange
fluctuation.

• Other liabilities decreased by $127 million primarily due to repayment of the revolving corporate credit facility

outstanding from the proceeds of the equity offering in May 2021.

SECTION 7: EQUITY, LIQUIDITY AND CAPITAL RESOURCES

Northland maintains sufficient liquidity to meet short- and medium-term cash needs and ensures that it has access to
sufficient resources to capitalize on investment opportunities and to meet growth expenditure commitments, monthly cash
dividend requirements and other needs in the normal course of operations. Northland finances these commitments
through cash flow from operations, non-recourse project financing, securing partnerships, corporate credit facilities,
convertible debentures and equity, such as common and preferred shares.

Dividends

Northland’s Board of Directors and management are committed to maintaining the current monthly dividend of $0.10 per
share ($1.20 on an annual basis) and are confident that Northland has adequate access to funds to meet its dividend
commitment, including operating cash flows and corporate funds. The Board of Directors reviews the dividend policy
periodically as part of Northland’s overall capital allocation strategy to balance growth requirements and investor
preferences.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Equity and Convertible Unsecured Subordinated Debentures

The change in shares during 2021 and 2020 was as follows:

Shares outstanding, beginning of year
Conversion of subscription receipts
Equity offering
Conversion of debentures
Conversion of Class A shares
Shares issued under the LTIP
Shares issued under the DRIP

Total common and convertible shares outstanding, end of period

December 31, 2021

202,171,075
—
22,500,500
—
—
21,967
2,189,209

226,882,751

December 31, 2020
Shares

179,441,219
14,289,000
—
6,896,136
1,000,000
—
544,720

202,171,075

Preferred shares outstanding as at December 31, 2021, and 2020 were as follows:

As at

Preferred shares outstanding
Series 1

Series 2

Series 3

Total

December 31, 2021

December 31, 2020

4,762,246

1,237,754

4,800,000

10,800,000

4,762,246

1,237,754

4,800,000

10,800,000

In their most recent report issued in March 2021, Standard & Poor’s reaffirmed Northland’s corporate credit rating of BBB
(Stable). In addition, Northland’s preferred share rating was reaffirmed on Standard & Poor’s Canada scale of BB+. In
September 2021, Northland received a second corporate credit rating of BBB (stable) from Fitch Ratings Inc., a global rating
agency.

At December 31, 2021, Northland had 226,882,751 common shares outstanding (as at December 31, 2020 - 202,171,075)
with no change in preferred shares outstanding from December 31, 2020.

As of February 24, 2022, Northland has 227,268,708 common shares outstanding with no change in preferred shares
outstanding from December 31, 2021.

Liquidity and Capital Resources

The following table reconciles Northland’s opening cash and cash equivalents to closing cash and cash equivalents:

Three months ended December 31,

Year ended December 31,

Cash and cash equivalents, beginning of period
Cash provided by operating activities

Cash (used in) investing activities

Cash (used in) provided by financing activities

Effect of exchange rate differences

2021

533,079

559,368

(242,302)

(151,112)

(25,341)

2020
487,037

310,499

(82,336)

(281,611)

1,400

2021

434,989

1,609,295

(1,030,864)

(225,678)

(114,050)

Cash and cash equivalents, end of period

673,692

434,989

673,692

2020
268,193

1,321,601

(839,272)

(389,533)

74,000

434,989

Fourth Quarter

Cash and cash equivalents for the fourth quarter of 2021 increased $187 million from September 30, 2021, due to cash
provided by operations of $559 million, partially offset by cash used by investing activities of $242 million, cash used in
financing activities of $151 million and $25 million effect of foreign exchange translation.

The increase in cash and cash equivalents during the quarter was largely due to higher cash provided by operations,
partially offset by inclusion of the Spanish portfolio, construction-related activities at Northland’s identified projects and
foreign exchange rate differences.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

2021

Cash and cash equivalents for the year ended December 31, 2021, increased $239 million due to cash provided by
operations of $1.6 billion and $114 million effect of foreign exchange translation, partially offset by $1.0 billion of cash used
in investing activities and $226 million in financing activities.

Cash provided by operating activities for the year ended December 31, 2021, was $1.6 billion comprising:

•

$270 million of net income;

$1.0 billion in non-cash and non-operating items such as depreciation and amortization, finance costs, changes in fair
value of financial instruments and deferred taxes; and

$292 million in changes in working capital due to the timing of payables, receivables and deposits.

Cash used in investing activities for the year ended December 31, 2021, was $1.0 billion, primarily comprising:

•

$502 million paid primarily for the acquisition of the Spanish portfolio and Baltic Power, net of cash acquired;

$470 million used for the purchase of property, plant and equipment, mainly for the ongoing construction at New York
Wind, La Lucha and Hai Long projects; and

$55 million of restricted cash used mainly related to the ongoing New York Wind construction.

Cash used in financing activities for the year ended December 31, 2021, was $226 million, primarily comprising:

•

$897 million in principal repayments on project debt including EBSA refinancing in December 2021;

$303 million in net repayment under the corporate syndicated revolving facility;

$281 million of common and preferred share dividends as well as dividends to non-controlling shareholders; and

$281 million in interest payments.

Factors partially offsetting cash used in financing activities include:

•

$950 million received from common shares issued in April 2021;

$518 million of draws on project debt primarily for EBSA refinancing and for construction of the projects in New York;

$76 million change in restricted cash, primarily from funds released from debt service reserve at Deutsche Bucht,
partially offset by funds set aside for debt service.

Movement of foreign currencies, including primarily the Euro and Colombian peso, against the Canadian dollar decreased
cash and cash equivalents by $114 million for the year ended December 31, 2021. Northland aims to mitigate the effects of
exchange rate fluctuations through a variety of mechanisms, including foreign exchange hedges and natural hedges by
corporate debt denominated in USD or Euro for operating expenditures.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Property, Plant and Equipment

The following table provides a continuity of the cost of property, plant and equipment for the year ended December 31,
2021:

Cost balance as
at Dec 31, 2020

Acquired

Additions

Other (1)

Exchange rate
differences

Cost balance as
at Dec 31, 2021

Operations:
Offshore wind
Efficient natural gas(2)
Onshore renewable

Utility

7,174,847 $

1,769,426

— $

—

1,753,440

1,573,274

597,731

—

19,533 $

(2,620) $

(546,819) $

6,644,941

14,461

1,929

32,984

(5,960)

1,934

(1,631)

—
(34,581)
(100,114)

1,777,927

3,295,996

528,970

Construction:
Onshore renewable
Corporate (3)
Total
(1) Includes disposal of assets and amounts accrued under the long term incentive plan (“LTIP”).

11,551,370 $

1,573,274 $

527,153 $

369,124

163,928

89,122

91,998

—

(969)

(876)

(10,122) $

(4,189)
(3,758)
(689,461) $

527,894

176,486

12,952,214

(2) Excludes Spy Hill lease receivable accounting treatment.
(3) Additions primarily related to Hai Long capitalization in construction-in-progress.

Long-term Debt

Northland’s operating facilities and projects under construction are financed primarily with non-recourse project debt with
fixed or hedged interest rates and repayment schedules tied to the terms of the project offtake agreement. Following the
commercial operations date (COD), each project is structured as a special-purpose entity so that an adverse event at one
facility would not affect Northland’s other facilities. By owning and operating high-quality assets and applying its deep, long-
term experience, Northland expects to continue to enjoy a competitive cost of capital, which maximizes returns from
growth opportunities.

The following table provides a continuity of Northland’s debt for the year ended December 31, 2021:

Operations:
Offshore wind

Efficient natural gas

Onshore renewable

Utility

Construction:

Onshore renewable

Corporate

Total

Balance as at
Dec 31, 2020

Acquired

Financings,
net of costs Repayments

Amort. of
costs/fair
value

Exchange
rate
differences

Balance as at
Dec 31, 2021

4,837,429 $

— $

(9,926) $

(476,188) $

19,704 $

(360,983) $

4,010,036

953,458

—

(52,280)

1,380

—

902,558

997,261 1,124,187

39,592

(107,431)

2,258

(23,959)

2,031,908

449,052

—

359,190

(261,433)

711

(29,424)

518,096

—

351,402

—

129,625

—

129,625

371,315

(674,433)

(136)

(6,332)

41,816

7,588,602 $ 1,124,187 $

889,796 $ (1,571,765) $

23,917 $

(420,698) $

7,634,039

Additionally, as at December 31, 2021, $94 million of letters of credit were outstanding under non-recourse project-level
credit facilities for operational use.

In June 2021, Northland entered into non-recourse construction loan, tax equity bridge loan and term loan for Ball Hill and
Bluestone onshore wind projects in New York, amounting to US$381 million (approximately C$475 million), at a 1.45%
interest rate during construction. The maturity date of the loan is December 31, 2024, two years after COD.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

In the third quarter, Northland restructured and upsized the senior debt on a number of its Canadian solar facilities,
resulting in one-time cash distribution to Northland totaling $40 million. This refinancing constitutes green project financing
supporting Northland’s ESG initiatives. In 2021, Northland received cash distributions of $113 million from optimizing and
upsizing project finance and other debt structures to further enhance liquidity to fund growth. These cash distributions are
not included in Free Cash Flow or Adjusted Free Cash Flow.

In December 2021, Northland restructured and upsized EBSA’s long-term, non-recourse financing resulting in $84 million of
incremental cash proceeds to Northland, net of closing costs. The EBSA Facility is structured as a $521 million term loan and
a $12 million debt service reserve credit facility. The restructured facility is denominated in Canadian dollars, and the
principal amount is currently 100% hedged against the Colombian peso. The interest rate on the debt facility, before foreign
exchange hedging costs is 3.7%. In addition, the EBSA Facility now has longer term (3 years compared to 2 years previously).
The upsizing proceeds are expected provide Northland with additional liquidity to fund its Capitalized Growth Projects.
Under the terms of the EBSA Facility, management intends to execute recurring upsizings of the debt, supported by
continued growth in EBSA’s EBITDA.

Debt Covenants

Northland generally conducts its business indirectly through separate subsidiary legal entities and is dependent on the
distribution of cash from those subsidiary entities to defray its corporate expenses, repay corporate debt and to pay cash
dividends to common and preferred shareholders. Most operating subsidiaries hold non-recourse debt, which typically
prohibits distributions if the loan is in default (notably for non-payment of principal or interest) or if the entity fails to
achieve a benchmark debt service coverage ratio, which is the ratio of EBITDA to scheduled principal and interest payments
over a specified time period. Northland and its subsidiaries were in compliance with all debt covenants for the period ended
December 31, 2021.

Corporate Credit Facilities and Letters of Credit

Northland’s corporate credit facilities are available for general corporate purposes, to support operational, construction
and development opportunities and to provide letters of credit issued on behalf of Northland. The corporate credit facilities
are summarized in the following table:

As at December 31, 2021
Syndicated revolving facility

Bilateral letter of credit facility

Export credit agency backed letter of credit facility

Total
Less: deferred financing costs

Total, net

Facility
size

$ 1,000,000 $

Amount
drawn
44,722 $

Outstanding
letters of
credit
206,802 $

150,000

100,000

50,000

$ 1,300,000 $

—

143,765

50,801

39,367

Available
capacity
748,476

6,235

49,199

10,633

Maturity
date
Sep. 2026

Mar. 2023

Mar. 2022
n/a(1)

44,722 $
2,897

440,735 $

814,543

41,825

(1) The $50 million facility does not have a specified maturity date.

• Of the $441 million of corporate letters of credit issued as at December 31, 2021, $235 million relates to projects under

advanced development or construction.

•

In September 2021, Northland extended its $1 billion revolving corporate credit facility with a syndicate of both
Canadian and global financial institutions to 2026 (from 2024) and executed several amendments to increase liquidity
available to fund growth. Concurrently, the Company implemented a Sustainability Linked Loan (SLL) overlay. The
implementation of the SLL is an important milestone for Northland and is aligned with the Company’s ESG initiatives
and green financing framework introduced in February 2021. The SLL is based on achieving defined targets related to
both increasing renewable generating capacity and reducing carbon emissions intensity and is expected to provide
Northland with cost savings if the targets are met.

In July 2021, Northland entered into a new $50 million export credit agency backed corporate letter of credit facility to
support its global growth.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Northland’s corporate credit facilities include provisions that allow for renewals at Northland’s option, subject to approval
by the lenders.

Exposure to LIBOR and EURIBOR

LIBOR and EURIBOR are the two key global benchmark rates used to determine interest rates and value government and
corporate bonds, loans, currency and interest rate swaps and many other financial products. Global regulators have been
working with industry groups and policymakers over the past several years to identify and transition to more robust
reference rates. In Europe, regulators have transitioned to a hybrid calculation methodology for EURIBOR. In the United
States, regulators have identified the secured overnight financing rate (SOFR) as the successor rate for USD LIBOR. Effective
December 31, 2021, USD LIBOR will not be used for new loans, and interest rate swaps will be converted to Term SOFR by
June 30, 2023.

As at December 31, 2021, Northland had €3.8 billion and US$132 million of EURIBOR-linked borrowings and derivatives,
respectively, that extend beyond 2021.

Management is monitoring industry developments and has developed a transition plan, which includes a comprehensive
review of financial exposures, proactive discussions with lenders and an amendment to its corporate credit agreement and
applicable project-level financing agreements to preserve the intended economics. Management does not currently expect
a material financial impact to Northland and continues to monitor and manage the transition.

Financial Commitments and Contractual Obligations

In the ordinary course of business, Northland enters into financial and derivative contracts. The contractual maturities of
Northland’s material financial liabilities as at December 31, 2021, are summarized in the following table:

2022

2023

2024

2025

2026

>2026

Derivative contracts

Euro foreign exchange contracts

184,304

178,830

181,034

184,819

178,076 1,285,441

Colombian peso foreign exchange contracts

390,178

4,693

U.S. dollar foreign exchange contracts

U.S. dollar interest rate swaps

US La Lucha interest rate swaps

Power financial contracts

Facility-level debt at Northland’s share

18,394

129,625

3,803

667

—

627

17,032

8,963

—

583

685

—

580

—

528

—

1,588

—

Gemini

Nordsee One

Deutsche Bucht

Spain

Total in Euro

New York Wind
Total in Canadian dollar (1)
EBSA (2)

All other facilities (3)

€

84,125 €

89,410 €

94,266 €

99,436 € 101,405 € 479,632

88,411
76,507

86,767
78,071

88,119
78,853

83,029
91,091

92,194
92,824

14,100
393,120

60,901

62,764

63,868

64,138

62,855

406,318

€ 309,944 € 317,012 € 325,106 € 337,694 € 349,278 € 1,293,170
US$ — US$ — US$ 102,600 US$ — US$ — US$ —

467,453

478,112

490,320

509,305

526,776 1,950,338

—

514,987

—

115,435

131,915

130,098

126,429

137,369

995,734

Total operating facility liabilities

582,889

610,029 1,266,922

635,733

664,144 2,946,072

Interest payments including swap derivative
contracts

Corporate liabilities

220,968

200,455

186,133

150,638

190,091

369,233

Corporate credit facilities, including interest

44,793

—

Total

$ 1,418,318 $ 1,133,306 $ 1,635,451 $ 971,864 $ 1,077,632 $ 4,602,334

(1) Debt balance was reported at 100% ownership.

(1) Using long-term foreign exchange rates.

(2) EBSA Facility is expected to be renewed annually.

(3) Other includes debt service costs of the efficient natural gas and onshore renewable facilities.

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| 2021 ANNUAL REPORT |

Non-Financial Commitments and Contractual Obligations

The following table summarizes all material fixed contractual commitments and obligations as at December 31, 2021, for
non-financial contracts. The amounts are based on the assumptions of a 2% annual consumer price index increase, a
Canadian dollar/euro exchange rate of $1.51 and Canadian dollar/U.S. dollar exchange rate of $1.28. The table includes
maintenance and services agreements and natural gas transportation demand charges for which Northland is liable
whether or not natural gas is shipped. The construction commitment relates to the construction of the Deutsche Bucht
project. The cash obligations related to the leases for land and buildings, dismantlement and management fees to non-
controlling interest partners are also included.

Maintenance agreements

$ 180,194 $ 167,805 $ 154,813 $ 138,962 $ 666,548 $ 718,898

Construction, excluding debt, interest and fees

1,210

1,235

1,259

1,284

1,310

Natural gas supply and transportation, fixed portion

16,833

15,362

12,727

12,965

13,223

40,652

45,549

2022

2023

2024

2025

2026

>2026

Leases
Decommissioning liabilities

Management fees
Total

54,059
14,301

53,060
14,301

51,314
14,301

49,708
14,302

45,567
14,304

129,197
59,685

5,819

10,159
$ 272,416 $ 255,729 $ 235,496 $ 218,315 $ 742,058 $ 1,004,140

1,106

1,094

3,966

1,082

Except in circumstances where cancellation of the agreements would result in material penalties, the above table does not
include variable contractual obligations of Northland (which typically relate directly to production or meeting performance
criteria). Such obligations include natural gas purchase costs, variable natural gas transportation costs and variable
payments to maintenance providers. Except for certain onshore renewable and efficient natural gas facilities’ PPAs, the
electricity supply contracts contain no penalties for failure to supply.

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| 2021 ANNUAL REPORT |

SECTION 8: SUMMARY OF QUARTERLY CONSOLIDATED RESULTS

Northland’s consolidated financial results are affected by seasonal factors, contract provisions and extraordinary items,
which result in quarterly variations. Northland’s quarterly net income (loss) also varies due to any non-cash impairments/
recoveries and foreign exchange adjustments required to translate euro, U.S. dollar and Colombian peso denominated
balances to the appropriate quarter-end Canadian dollar equivalent and due to fair value movements of financial derivative
contracts.

Accounting policies and principles have been applied consistently for all periods presented in the following table.

In millions of dollars, except per share information

2021

2020

Total sales

Operating income

Net income (loss)
Adjusted EBITDA

Cash provided by operating activities

Free Cash Flow

Adjusted Free Cash Flow

Per share statistics
Net income (loss) - basic (1)
Net income (loss) - diluted (1)
Free Cash Flow - basic

$ 640 $ 432 $ 408

613 $ 493 $ 471 $ 429 $ 668

295

130
364

118

306

(5)

(6)
203

151
360

211

559

280

361

408

156

182

134

147

177

27
269

310

179

109
254

278

149

74
227

365

395

275
421

368

211

224

$ 0.45 $ (0.06) $ (0.09) $ 0.54 $ 0.11 $ 0.43 $ 0.28 $ 1.08

0.45

(0.06) (0.09)

0.54

0.11

0.42

0.28

0.69

0.05

0.03

0.66

0.28

0.30

0.09

1.04

1.10

Adjusted Free Cash Flow - basic
Total dividends declared (2)
(1) Net income (Loss), basic and diluted per share are adjusted due to correction of historical net income allocated to common shareholders and non-

0.30

0.41

0.30

0.21

0.10

0.15

0.30

0.80

0.30

0.73

0.30

0.38

1.17

0.30

controlling interests (“NCI”) in 2021 and 2020.

(2) Q1 2020 excludes $0.40 of dividend equivalent payments declared and paid upon conversion of 14,289,000 subscription receipts.

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| 2021 ANNUAL REPORT |

SECTION 9: DEVELOPMENT, ACQUISITION AND CONSTRUCTION ACTIVITIES

In addition to completed acquisitions and investments made this year, summarized below are Northland’s most significant
projects under construction and under development as:

Scotwind Offshore Wind Project

Nordsee Offshore Wind Cluster

Subsequent to December 31, 2021, Northland and its German partner, RWE announced the formation of a 1,333MW
Nordsee Offshore Wind Cluster partnership encompassing Nordsee Two (430MW), Nordsee Three (420MW) and Nordsee
Delta (480MW). The formation of the cluster is expected to allow the realization of synergies in development, construction
as well as operating costs, leading to enhanced returns for the projects. In September 2021, Northland and RWE exercised
their step-in rights to secure the lease for Nordsee Two, following a competitive auction that resulted in the winning bid
being a zero bid. Northland and RWE also have similar step-in rights for Nordsee Three and Delta, which are expected to
come to auction in 2023.

Colombian 130MW Solar Projects

In November 2021, Northland, in partnership with EDF Renewables, a subsidiary of Électricité de France S.A. (EPA:EDF),
successfully submitted a joint-bid into the renewables auction in Colombia and was awarded the right to build two solar
projects with a total combined capacity of 130MW. The solar projects will benefit from a 15-year PPA with multiple energy
distribution and commercial entities in Colombia, starting in 2023. The PPA will be denominated in Colombian pesos and
will have annual indexation to the Colombian Producer Price index (PPI). In addition, the projects will receive a reliability
charge in US dollars, which is expected to account for approximately 10% of total revenues of the projects. Northland has a
50% interest in the projects with commercial operations expected in the second half of 2023. These projects represent
further execution on Northland’s growth platform in Colombia, leveraging its existing position in EBSA to secure and
develop additional renewable projects.

Japanese Offshore Wind Projects

In September 2021, the Japanese government designated four new sea areas as “promising areas” for the development of
offshore wind projects under its Round Three process. Included in these four areas was Isumi City, Chiba Prefecture, where
Northland is progressing with the development of its Chiba offshore wind project, in consortium with Shizen Energy Inc.
(Shizen Energy) and Tokyo Gas. Additionally, Northland continues to explore an opportunity, the Katagami offshore wind
project, in the Akita Prefecture, through a consortium with Mitsui and Osaka Gas, that was also designated in the promising
areas list. The designation as “promising areas” for these two regions is a key milestone in the early-stage development
processes for these two projects, that could have a total productive capacity of up to 900MW when complete.

Spanish Renewables Acquisition

In August 2021, Northland completed the acquisition of the Spanish portfolio with a total combined net capacity of 551MW.
The transaction included the acquisition of minority interests not included in the initial announced transaction. The
portfolio includes 33 operating assets comprised of onshore wind (435MW), solar photovoltaic (66MW), and a concentrated
solar (50MW) located throughout Spain. Total cash consideration at closing was €348 million ($511 million), including
working capital amounts $53 million, with the assumption of debt totaling €766 million ($1,124 million). The acquisition was
funded using proceeds from Northland’s common equity offering completed on April 14, 2021.

In 2020, the Spanish government made a commitment to achieve 70% of electricity generation from renewable energy
sources by 2030 as part of the Law on Climate Change and Energy Transition. The 2030 target translates into a requirement
for an estimated 35 to 40GW of additional renewables capacity. In support of its 2030 goal, the Spanish government is
expected to auction a further 16.5GW of solar and onshore wind capacity over the next five years. In addition, the Spanish
market has developed into one of the most active corporate offtake markets in Europe, which together with the expected
procurement noted above and an attractive merchant power market, offer several routes to market for new renewables.
Spain has also announced a 2030 target of 4GW of hydrogen and 20GW of storage, which align with Northland’s energy
transition growth objectives. Northland intends to leverage the acquisition of the Spanish portfolio to build a platform with

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| 2021 ANNUAL REPORT |

asset management, development, and operations and maintenance capabilities that can competitively pursue onshore
renewables acquisition and development opportunities across Europe over the next decade.

The Spanish portfolio aligns well with Northland’s priority to diversify and add high-quality, contracted or regulated cash
flows to the business. All the acquired assets are governed under the Spanish regulatory framework, which provides a
regulated return based on a standard set of operating parameters. Once an asset reaches the end of its regulatory life, it is
expected that the project will either sell its generation output in the merchant power market in Spain or secure a
commercial or utility PPA. The framework provides the assets with a regulated sales stream for the remaining regulatory
life, which averages 13 years across the Spanish portfolio, increasing Northland’s average contracted life of its entire power
generation portfolio.

Based on the transaction metrics upon closing, Northland expects the acquisition to be immediately accretive to Free Cash
Flow per share and Adjusted Free Cash Flow per share.

New York Onshore Wind Projects

Northland continues to progress its three onshore wind projects in New York State (“NY Wind”), with two of the projects,
Ball Hill and Bluestone, comprising 220MW, having achieved financial close in the second quarter of 2021 and secured
green financing in the form of a non-recourse project/construction loan, tax equity bridge loan and letters of credit, with a
consortium of lenders totaling US$381 million (approximately C$476 million), at a 1.45% interest rate during construction.
Northland funded investment in the two projects from the equity offering in April 2021 and also expects to secure
permanent tax equity investments for the two projects ahead of commercial operations in 2022. Construction activities for
both projects are in progress. The total capital cost for the first two projects is expected to be approximately $0.6 billion.
Northland’s third New York onshore wind project, High Bridge (100MW), is under active development. In early 2020, the
three projects were awarded 20-year indexed Renewable Energy Certificate (REC) agreements with the New York State
Energy Research and Development Authority as part of renewable energy solicitations.

The New York projects form part of Northland’s broader strategy for onshore renewable development in the United States,
where the Company is targeting a total portfolio of 1GW and has hired a dedicated local team of people to execute on this
strategy. The projects will offer social, economic and environmental benefits to New York State and once complete, are
expected to contribute to the State’s green energy production, helping fulfill New York’s clean energy transformation.

Helios Colombian Solar Project

Northland’s 16MW Helios solar project in Colombia achieved financial close in 2021. The project secured a green loan and
commenced construction, with commercial operations expected in the first quarter of 2022. Helios represents Northland’s
first development project in Colombia which capitalizes on EBSA’s grandfathered rights, allowing it to expand into the
energy generation market in Colombia, to service the power needs of non-regulated municipal, commercial and industrial
(C&I) customers. Helios has secured a 12-year PPA with EBSA, which, in turn, will secure offtake agreements with non-
regulated customers. The total capital cost for Helios is expected to be under $20 million.

Baltic Power Polish Offshore Wind Project

In March 2021, Northland completed its acquisition of a 49% interest in the Baltic Power offshore wind project (“Baltic
Power”) in the Baltic Sea with a total capacity of up to 1,200MW of offshore wind generation, for total cash consideration
of PLN 255 million ($82 million). Baltic Power is a mid-development stage project located approximately 23 kilometers
offshore from Poland’s coast in the Baltic Sea with a total capacity of up to 1,200MW. The project, which has secured its
location permit, filed its environmental permit application in 2020 and signed its grid connection agreement, will allow
Northland to capitalize on the growth in renewable energy demand in a growing Central European market. Baltic Power
adds to Northland’s offshore wind portfolio and provides a new market to enhance the geographic and regulatory diversity
in its asset portfolio.

In June 2021, the Baltic Power project, secured a 25-year Contract for Differences (“CfD”) from Poland’s Energy Regulatory
Office under the Polish Offshore Wind Act. Under the 25-year contract, the project is guaranteed a price of PLN 319.60 per
megawatt hour (MWh), which is adjusted to annual indexation by Poland’s annual average consumer price index. The CfD is
subject to review and final approval from Polish authorities and the European Commission. Upon successful achievement of
all necessary approvals, construction of Baltic Power is expected to commence in 2023 following financial close, with
commercial operations anticipated in 2026.

Pursuant to the joint venture agreement, Northland made development commitments of approximately €33 million ($49
million) to be funded over the next two years, of which $7 million was funded during 2021. As contractual milestones are
met, Northland expects to contribute additional development funding.

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| 2021 ANNUAL REPORT |

La Lucha Mexican Solar Project

The 130MW solar project in the State of Durango, Mexico, completed its activities relating to the physical construction,
however, certain activities relating to the energization of the project continue to be delayed. In order to achieve
commercial operations, the facility requires energization followed by testing, which is conducted by CENACE (Independent
System Operator) and CFE (Federal Electricity Commission). Final approvals, energization, testing and interconnection of
renewable power projects have generally been delayed in Mexico by pandemic related government and CFE temporary
office closures and reduced operating capacity. In addition, these processes have seen further delays that are likely related
to the uncertainty created by the Mexican government’s so far unsuccessful attempts to amend electricity sector
regulations and constitutionally embedded legislation and timelines remain uncertain as a result. Efforts to secure
commercial offtake and project financing are expected to be finalized only after commercial operations. As a result of the
aforementioned delays, total capital costs for the project are expected to be around $200 million.

Chiba Offshore Wind Projects

Northland and Shizen Energy Inc. are jointly developing an early-stage offshore wind development opportunities (“Chiba”)
in Japan. The prospective projects have an expected combined capacity of approximately 600MW. In 2020, Shizen divested
a portion of its investment in Chiba to Tokyo Gas, thereby reducing Northland’s share of the growth expenditures.

Hai Long 1,044MW Offshore Wind Project

The Hai Long project owned 60% by Northland and its 40% partner, Yushan Energy, was allocated a total of 1,044MW
(626MW net to Northland) by the Bureau of Energy of Taiwan under a FIT program and an auction process in 2019. Key
aspects of the Hai Long project are presented in the following table:

Sub-project
Hai Long 2A

Hai Long 2B

Hai Long 3

Total

Gross Capacity (MW)
300

Net Capacity (MW) (1)
180

Year of Grid Connection
2024

Type of Procurement
FIT

232

512

1,044

139

307

626

2025

Auction

(1) Represents Northland’s 60% economic interest.

In July 2021, Hai Long received an amendment to the project’s EIA from Taiwan’s Environmental Protection Agency to
accommodate a larger, 14MW turbine with longer blade lengths. Receipt of the EIA amendment allows Hai Long to
complete further fieldwork to improve wind generation yields. In April 2021, Hai Long received confirmation from the
Taiwan Bureau of Energy that Hai Long 2A had secured approval for the Industrial Relevance Proposal, which sets out
Northland’s commitments to local supply chain and procurement, marking the achievement of a significant milestone.

Hai Long expects to execute additional preferred supplier agreements with major contractors in the near-term. Having
executed a 20-year PPA with Taipower for the Hai Long 2A offshore wind project in 2019, Northland expects to execute
corporate and industrial offtake agreements for the two other sub-projects in the first half of 2022, though opportunities
also exist to enter into economically favourable commercial PPAs to augment the economics of the sub-projects. The
project continues to progress towards financial close expected in the second half of 2022.

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| 2021 ANNUAL REPORT |

SECTION 10: FINANCIAL OUTLOOK

Adjusted EBITDA

For 2022, management expects Adjusted EBITDA to be in the range of $1.15 billion to $1.25 billion.

Free Cash Flow and Adjusted Free Cash Flow

In 2022, management expects Free Cash Flow to be in the range of $1.20 to $1.40 per share and Adjusted Free Cash Flow to
be in the range of $1.65 to $1.85 per share.

As a growth company with a significant pipeline of development projects, Northland is committed to unlocking the value in
this pipeline by deploying early-stage investment capital (growth development expenditures) to advance its projects. As in
2021, with the regional development offices fully functional and several growth opportunities secured, Northland expects
to incur higher development expenditures in 2022. These expenses are expected to be approximately $100 million in 2022
compared to $79 million in 2021, which are included in the aforementioned variance explanations. Early-stage development
investments will reduce near-term Free Cash Flow until the projects achieve commercial operations but are expected to
deliver long-term, sustainable growth in earnings and Free Cash Flow.

In addition, any gains from the future sell-down of ownership interests in development assets would be included in Free
Cash Flow and Adjusted Free Cash Flow as they relate to capturing development profits at key milestones. Currently, the
2022 guidance for Free Cash Flow and Adjusted Free Cash Flow does not incorporate any sell-down proceeds and as such,
net proceeds would increase reported Free Cash Flow in the event they occur in 2022.

Long-Term Outlook

Currently, Northland has 366MW of additional capacity in construction, with the expectation for completion in 2022. The
Company also has almost 3GW of gross capacity mid- to late-stage development projects that are scheduled for financial
close and commencement of construction within the next two years. Once these projects are complete, Northland’s total
gross capacity will nearly double to more than 6.5GW by 2027. Longer-term, the Company continues to advance a pipeline
of over 10GW encompassing its identified projects and additional opportunities to support the sustained growth of the
Company. Northland’s investor day materials provide more details on our growth ambitions including an illustration of our
funding plan and specific project milestones achieved since last year that are expected to create value for shareholders over
the long-term.

SECTION 11: LITIGATION, CLAIMS AND CONTINGENCIES

Litigation, claims and other contingencies arise from time to time in the ordinary course of business for Northland. None of
these contingencies, individually or in aggregate, are expected to result in a liability that would have a material adverse
effect on Northland. Refer to Note 25 of the audited consolidated financial statements for additional information including
any contingencies arising as a result of completed acquisitions.

SECTION 12: ESG AND CLIMATE CHANGE

ESG at Northland

Northland’s primary focus of its Environmental, Social and Governance (ESG) strategy is to build a sustainable and carbon-
free world. Northland’s ability to achieve its objectives is based on its ability to safely supply reliable, affordable, and clean
energy while delivering long-term economic value for shareholders. This has been Northland’s commitment for over 34
years and continues to be core to how projects are developed, constructed, and operated.

The focus of Northland’s ESG framework is on the continued decarbonization efforts through our renewable energy
developments, while effectively managing our resources. This entails developing and empowering our people, creating
meaningful and collaborative relationships and partnerships with local and Indigenous communities, and upholding the
highest standards of good and responsible governance.

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| 2021 ANNUAL REPORT |

As Northland continue to focus on enhancing the reporting around its ESG-related activities, programs, and performance
the Company will be reporting this in line with the recommendations of the Task Force for Climate Related Disclosure
(TCFD).

Climate-related risks and opportunities

As a growth company with a significant pipeline of development projects, Northland is focused on growing its renewable
energy portfolio to support ongoing global de-carbonization efforts. Building on its history of providing clean energy
solutions, Northland’s strategy reflects the demands and complexities of this transition in the short-, medium- and long-
term. Over the next 1-5 years Northland will leverage its existing portfolio and expertise to build out its pipeline of
greenfield and brownfield offshore and onshore development projects in key markets across North America, Latin America,
Europe and Asia. Refer to the 2021 AIF for a summary of regulatory developments in the markets where Northland
operates.

Longer-term the Company’s efforts are centered on expanding its offshore wind presence through continued development
of early-stage projects in Europe and Asia. In addition, Northland is also focused on establishing and expanding a position in
new emerging technologies such as energy storage and green hydrogen. The goal is to create sustainable renewable and
green infrastructure assets that meet the energy demands for accessible and reliable energy, while supporting global
emissions reduction targets. Northland has also committed to reducing its own carbon intensity through the growth of its
renewable energy portfolio and its commitment towards making no further investment in efficient natural gas assets.

Northland recognizes the risks and opportunities associated with climate (both from the transition to a lower carbon
economy and from weather impact). Climate-related risks and opportunities are assessed throughout the project lifecycle.

Northland prioritizes risks and opportunities as part of its decision-making process and incorporates them into its planning
assumptions, investment decision process, project development and operational processes. Northland employs a strategy
that focuses on identifying opportunities in key markets through project management, operations, market analysis,
regulatory assessments, and monitoring.

Northland continues to identify opportunities for access to capital, growth opportunities in new areas (energy storage and
hydrogen), markets and human capital growth. Northland continues to view the climate-related risks as being associated
with the variability of results, risks from acute, chronic weather changes on its physical assets and the potential for
increasing costs due to more stringent regulatory and policy requirements.

Risk Management

Identification and assessment of climate –related risks are done throughout the project life cycle as well as considered as
part of the Enterprise Risk Management (ERM) process and as part of the ESG Steering Committee. Northland’s risk
identification, assessment, response planning, reporting and monitoring are integrated into routine business activities, with
ownership of key risks delegated to the functional leads throughout the organization. Any identified risks are escalated to
the Executive Team, and Board of Directors, and are monitored to ensure appropriate responses.

SECTION 13: FINANCIAL RISKS AND UNCERTAINTIES

Northland’s activities expose it to a variety of risks. Refer to the 2021 AIF for a summary of factors in addition to those
discussed below that could significantly affect the operations and financial results of Northland.

Northland’s risk management objective is to mitigate fluctuations in cash flows and ensure stable cash levels available to
pay dividends to shareholders and fund growth. Northland does not seek to mitigate fair value risk. Northland classifies
financial risks into market risk, counterparty risk and liquidity risk. Northland manages financial risks by identifying,
evaluating and mitigating financial risks in compliance with internal policies and external requirements under non-recourse
project financing arrangements. Northland uses derivative financial instruments to manage certain financial risks but does
not engage in speculative activity. Material financial risks are monitored and reported regularly to the Audit Committee of
the Board of Directors. The risks associated with Northland’s financial instruments and Northland’s policies for mitigating
these risks are described below.

Market Risk

Market risk is the risk that the fair value of Northland’s future cash flows from financial instruments will fluctuate because
of changes in market prices. Financial instruments affected by market risk include loans and borrowings and derivative
financial instruments. Types of market risk to which Northland is exposed are discussed below.

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| 2021 ANNUAL REPORT |

(i) Interest Rate Risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will
fluctuate due to changes in market interest rates. Northland manages this risk by securing fixed-rate debt or entering into
interest rate swap agreements that effectively convert floating rate interest exposures to a fixed rate.

Changes in the fair value of interest rate swap contracts designated for hedge accounting are recorded in Northland’s
consolidated statements of comprehensive income (loss) to the extent that the hedge arrangements are effective. The fair
values for these interest rate swap contracts are based on calculations and valuation models using observable market rates.

(ii) Credit Spread Risk

Credit spread risk as it affects Northland refers to the risk that the loan margin charged by current or future lenders (a
borrower-specific margin added to the underlying interest rate) will increase, making the cost of debt capital more
expensive. Credit spread risk cannot be hedged. Northland manages this risk by: (i) entering into long-term financings with
defined credit spreads over the amortization period whenever possible; (ii) ensuring loans are fully amortized (repaid) by
maturity; and (iii) monitoring credit markets and making prudent decisions about the timing and method of original
financings, refinancing and repricing opportunities.

(iii) Currency Risk

Currency risk arises because the Canadian dollar equivalent of transactions, assets or liabilities denominated in foreign
currencies may vary due to changes in -foreign exchange rates. Northland is exposed to changes in the euro, U.S. dollar,
Colombian peso, Taiwan dollar, Polish zloty, and to a lesser degree, Japanese yen and Korean won for the early stage
projects in those countries. Primary exposure to Northland arises from the euro-denominated financial statements and cash
distributions at Gemini, Nordsee One, Deutsche Bucht,and the Spanish Portfolio, and Colombian peso-denominated
financial statements and cash distributions from EBSA, and development spending at the pipeline projects. Management
manages this risk by hedging material net foreign currency cash flows to the extent practical and economical to minimize
material cash flow fluctuations.

Northland has entered into long-term foreign exchange contracts to fix foreign exchange conversion rates on the majority
of forecasted euro-denominated cash inflows from Gemini, Nordsee One, Deutsche Bucht, and the Spanish Portfolio.
Northland has entered into a short-term rolling hedge program to fix foreign exchange conversion rates on a portion of
distributions from EBSA.

(iv) Commodity Price Risk

Commodity price risk arises where: (i) PPA revenues for efficient natural gas facilities are fixed, not linked to natural gas
prices or the cost of natural gas is not substantively passed through to the off-taker; (ii) PPA revenues or components of
PPA revenues depend upon certain electricity market indices; (iii) a portion of revenue is not contracted and subject to
changes in electricity prices; or (iv) the value of a financial instrument or cash flows associated with the instrument
fluctuates due to changes in commodity prices. Northland is exposed to changes in the Dutch wholesale power price at
Gemini.

Northland manages this risk by: (i) entering into PPAs that provide a fixed price for all, or substantially all, electricity
production, provide a price linked to commodity prices or include pass-through of commodity costs to the off-taker; (ii)
entering into financial power and natural gas hedges to stabilize contractual economics, including natural gas costs and
electricity prices. Northland has entered into derivatives to stabilize the effect of changes in Dutch wholesale power prices.

Northland has exposure to Dutch electricity market prices under Gemini’s PPA when the market price falls below the
contractual floor price. For the year ended December 31, 2021, the average wholesale market price was above the
contractual floor price, so the revenue was fully compensated by the feed-in-tariff mechanism.

Northland has indirect exposure to German electricity market prices under the Nordsee One and Deutsche Bucht PPAs
whereby the facilities do not receive revenue for periods where the market power price remains negative for longer than
six consecutive hours.

Northland has exposure to Ontario electricity market prices through variable components of certain efficient natural gas
revenue contracts and at facilities, such as Kingston and Iroquois Falls, that do not have a revenue contract.

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| 2021 ANNUAL REPORT |

Counterparty Risk

Counterparty risk is the risk that a counterparty fails to perform its contractual obligations which could result in losses in
financial assets. Northland is exposed to counterparty risk in several areas including: (i) cash and cash equivalents held with
banks and financial institutions; (ii) counterparty exposures arising from: (a) contractual obligations, which include but are
not limited to sales contracts, equipment supply and maintenance contracts, fuel supply and fuel transportation
agreements, energy marketing contracts and construction contracts, (b) derivative financial instruments, (c) trade
receivables due from customers, (d) loan receivables due from partners and other entities, and (e) claims payable by an
insurer; and (iii) unfunded loan commitments from financial institutions for the construction of projects. The maximum
exposure to counterparty risk, other than for the loan commitments, is equal to the carrying value of the financial assets.

Northland manages counterparty risk by contracting with highly creditworthy counterparties wherever possible, such as
government-related entities and large financial institutions. Northland’s cash, derivative financial instruments, unfunded
loan commitments and insurance policies are contracted with creditworthy financial institutions and/or cleared on
exchanges. Northland’s gas, transportation, equipment, maintenance and construction contracts are with highly rated and/
or large, well-capitalized counterparties wherever possible. Northland also manages counterparty risk by conducting
comprehensive initial credit analyses on potential counterparties to material and/or long-term contracts and monitoring
counterparties over time.

The nature of Northland’s business and contractual arrangements, and the quality of its counterparties generally serves to
minimize counterparty risk.

Liquidity Risk

Liquidity risk is the risk that Northland: (i) may not have sufficient funds to settle a transaction on the due date; (ii) may be
forced to sell financial assets or terminate financial liabilities at a value that is not the fair market value; or (iii) may be
unable to settle or recover a financial asset at all. Liquidity risk arises through an excess of financial obligations over
available financial assets at any point in time.

Northland manages liquidity risk to maintain sufficient cash or readily-available funding in order to meet expected liquidity
requirements. Northland achieves this by: (i) maintaining prudent cash balances, availability under committed credit
facilities and access to capital markets; (ii) selecting derivatives and hedging strategies that minimize the risk of material
cash flow impacts; and (iii) actively monitoring open positions to assess and proactively adapt to possible market liquidity
concerns.

Northland is also subject to internal liquidity risk because it conducts its business activities through separate legal entities
(subsidiaries and affiliates) and is dependent on cash distributions from those entities to defray corporate expenses and pay
dividends. Most operating subsidiaries hold non-recourse debt. Such non-recourse financing agreements typically prohibit
distributions if the loan is in default (notably for non-payment of principal or interest) or if the entity fails to achieve a
benchmark debt service coverage ratio, which is the ratio of Adjusted EBITDA to scheduled loan principal and interest
payments over a specified time period. For the year ended December 31, 2021, Northland and its subsidiaries were in
compliance with all debt covenants.

Northland will be required to refinance, renew or extend debt instruments as they become due. The ability to refinance,
renew or extend debt instruments is dependent on the capital markets up to the time of maturity, which may affect the
availability, pricing or terms and conditions of replacement financing.

Refer to Note 25 in the audited consolidated financial statements for the year ended December 31, 2021, for additional
information related to Northland’s commitments and obligations.

Risks related to COVID-19 pandemic

Each of Northland’s operating facilities are deemed to be essential infrastructure and, as such, operations have continued
uninterrupted to date. Additionally, Northland’s long-term agreements with creditworthy counterparties have significantly
reduced the risk of material expected credit losses. However, certain risks relating to lower demand for power globally
include increased negative pricing at Nordsee One and Deutsche Bucht, lower wholesale market-based prices at Gemini,
higher unpaid curtailments in general, increased volatility in the value of financial instruments and reduction in sales and
net earnings. Other risks include potential delays in construction timelines as a result of construction services and
contractor unavailability or unavailability of key personnel resulting in the interruption of production and lower availability
of power infrastructure, thus affecting sales, operating costs and net earnings.

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| 2021 ANNUAL REPORT |

Management has considered the risks above and determined that there have been no material adverse effects on
Northland’s ability to meet working capital requirements, debt covenants, or continue future growth activities due to
COVID-19. As such, there are currently no impairment indicators as a result of COVID-19 identified for Northland’s financial
and non-financial assets. As the situation evolves, management will continue to assess if any changes to the key
assumptions for the recoverable amounts of Northland’s assets have taken place.

Taxation

In September 2021, the Dutch Ministry of Finance submitted the 2022 Budget and Tax Plan to parliament for approval,
which included rules within the corporate income tax act to limit the ability to deduct interest from 30% to 20% of tax
EBITDA (as defined in the Dutch budget) and to increase the corporate income tax rate from 25% to 25.8%. These proposals
were enacted by parliament in December and came into effect on January 1, 2022. These new rules will have a negative
impact on Gemini’s free cash flow and have been incorporated within the 2022 Financial Guidance.

On February 4, 2022, the Department of Finance released for public comment, draft legislative proposals (and
accompanying explanatory notes) to implement most of the remaining measures from the 2021 federal budget, including
the proposed interest limitation rules that are anticipated to become effective January 1, 2023. The proposed interest
limitation rules would limit net interest deductions to 40% of tax EBITDA in 2023 and 30% of tax EBITDA starting January 1,
2024.

On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) reconfirmed their
commitment to global tax reform, including a new 15% global minimum tax rate on a country-by-country basis. In
December 2021, the OECD released an updated version of the proposed rules that provide a template for countries to
translate into domestic law. In addition, the European Commission published a proposed European Union (“EU”) Directive
on ensuring a global minimum level of taxation for multinational groups in the EU that closely follows the OECD proposals.
The OECD and EU proposals are expected to come into effect as early as January 1, 2023.

If enacted, the Canadian interest limitation rules and the OECD/EU minimum tax of 15%, along with any other potential tax
law changes that could be enacted, may impact Northland’s Free Cash Flow starting in 2023. Further analysis will be
required as additional details and final legislation are released.

Potential Future Taxation Rate Changes

On April 19, 2021, the Canadian Federal Finance Minister tabled the 2021/2022 budget, which included a proposal to
introduce interest limitation rules in Canada effective January 1, 2023, with net interest deductions limited to 40% of ‘Tax
EBITDA’ (still to be defined) in 2023 and 30% of Tax EBITDA starting January 1, 2024. Draft legislation containing details on
the proposed interest limitation rules is anticipated to be released in the first half of 2022.

On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) reconfirmed its commitment
to global tax reform, including a new 15% global minimum tax rate on a country-by-country basis. In December 2021, the
OECD released an updated version of the proposed rules that provide a template for countries to translate into domestic
law. In addition, the European Commission published a proposed European Union Directive on ensuring a global minimum
level of taxation for multinational groups in the EU that closely follows the OECD proposals. The OECD and EU aim for the
global minimum tax to come into effect as early as January 1, 2023.

The Canadian interest limitation rules and the OECD/EU minimum tax of 15% may impact Northland’s financial results in
future years beyond 2022 if ultimately enacted and passed into law.

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SECTION 14: CRITICAL ACCOUNTING ESTIMATES

Preparing the consolidated financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, income and expenses. Northland’s operating facilities
and investments primarily operate under long-term contracts with creditworthy counterparties. As a result, management
believes it is not exposed to critical accounting estimates to the same degree as merchant businesses of comparable size.
For Northland, the amounts recorded for depreciation of property, plant and equipment and contracts, fair value of
financial assets and financial liabilities, decommissioning liabilities, deferred development costs, leases, LTIP, impairment of
non-financial assets, income taxes and accounting for non-wholly owned subsidiaries are based on estimates and
management’s judgment. By their nature, these estimates are subject to measurement uncertainty, and changes in these
estimates may affect the audited consolidated financial statements of future periods. Estimates and accounting judgments
are based on historical experience, current trends and other assumptions that are believed to be reasonable under the
circumstances.

In making these estimates and judgments, management relies on external information and observable conditions where
possible, supplemented by internal analysis as appropriate. These estimates and judgments have been applied in a manner
consistent with that in the prior year and there are no known trends, commitments, events or uncertainties that
management believes will materially affect the methodology or assumptions utilized in this annual report.

Additional information on the significant estimates, judgments and assumptions that have the most significant effect on the
recognition and measurement of assets, liabilities, income and expenses are discussed in Note 3 in the audited consolidated
financial statements for the year ended December 31, 2021.

SECTION 15: FUTURE ACCOUNTING POLICIES

Management assesses each new IFRS or amendment to determine whether it may have a material impact on Northland’s
consolidated financial statements. As at December 31, 2021, there have been no accounting pronouncements by the
International Accounting Standards Board expected to materially affect Northland’s consolidated financial statements
beyond those described in Note 2.18 of the annual audited consolidated financial statements.

SECTION 16: CONTROLS AND PROCEDURES OVER FINANCIAL REPORTING

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered
and reported to senior management, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), on a
timely basis so that appropriate decisions can be made regarding public disclosure.

An evaluation of the effectiveness of the design and operation of Northland’s disclosure controls and procedures was
conducted as of December 31, 2021, by and under the supervision of management, including the CEO and CFO. Based on
this evaluation, with the exception of the limitation on scope as described below of design and operation related to the
Spanish portfolio, the CEO and CFO have concluded that Northland’s disclosure controls and procedures, as defined in
National Instrument 52-109, “Certification of Disclosure in Issuers’ Annual and Interim Filings” (NI 52-109), are effective to
ensure that information required to be disclosed in reports that are filed or submitted under Canadian securities legislation
is recorded, processed, summarized and reported within the time periods specified in those rules and forms.

Internal Controls over Financial Reporting

Management is responsible for establishing and maintaining adequate internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of audited financial statements for
external purposes in accordance with IFRS.

Northland’s internal controls over financial reporting are designed and operating effectively to provide reasonable
assurance regarding: (i) prevention or timely detection of the unauthorized transactions that could have a material effect on
Northland’s audited consolidated financial statements, and (ii) the reliability of financial reporting and preparation of
audited consolidated financial statements for external use purposes in accordance with policies, procedures and IFRS.

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As a result of their inherent limitations, internal controls over financial reporting can provide only reasonable assurance, not
absolute, and may not prevent or detect all misstatements. Further, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions.

An evaluation of the effectiveness of the design and operation of Northland’s internal controls over financial reporting was
conducted as of December 31, 2021, by and under the supervision of management, including the CEO and CFO, with the
exception of the limitation on scope as described below of design and operation related to the Spanish portfolio. Based on
this evaluation, the CEO and CFO have concluded that Northland’s internal controls over financial reporting provide
reasonable assurance regarding the reliability of financial reporting and the preparation of the audited consolidated
financial statements in accordance with IFRS.

No changes were made in Northland’s internal controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, Northland’s internal controls over financial reporting for the year ended December 31,
2021.

Limitation on Scope

Northland completed the acquisition of the Spanish portfolio on August 11, 2021. Management has not yet fully completed
its review of internal controls over financial reporting for the Spanish portfolio and has limited the scope of design,
operation and evaluation of disclosure controls and procedures and internal controls over financial reporting. Such scope
limitation is permitted in accordance with NI 52-109, since the Spanish portfolio was acquired less than 365 days before the
financial year end. Management has performed procedures to assess the accuracy and completeness of the Spanish
portfolio’s financial information for the period covered by this MD&A, as summarized below.

As at
Sales (1)
Net income (1)
Current assets

Non-current assets

Current liabilities

Non-current liabilities
(1) Results from August 11, 2021 to December 31, 2021.

December 31, 2021

92,310

37,177

206,661

1,788,054

127,935

1,330,320

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| 2021 ANNUAL REPORT |

MANAGEMENT’S RESPONSIBILITY

Management is responsible for the preparation of Northland’s consolidated financial statements and annual report.
Management has prepared the accompanying consolidated financial statements in accordance with International Financial
Reporting Standards, and the financial information included in the annual report is consistent with the consolidated
financial statements. Where appropriate, these consolidated financial statements reflect estimates based on the judgments
of management. When alternative methods exist, management has chosen those it deems most appropriate in the
circumstances in order to ensure that the consolidated financial statements are presented fairly, in all material respects.

Management is responsible for the development and maintenance of systems of internal accounting and administrative
cost controls of high quality, consistent with a suitable cost. Such systems are designed to provide reasonable assurance
that the financial information is accurate, relevant and reliable and that Northland and its subsidiaries’ assets are
appropriately accounted for and adequately safeguarded.

The Board of Directors and Audit Committee (consisting of independent directors) are responsible for reviewing the
consolidated financial statements of Northland and the accompanying management’s discussion and analysis and ensuring
that management fulfills its responsibilities for financial reporting.

Ernst & Young LLP, the independent auditor, have examined the consolidated financial statements of Northland. The
independent auditor’s responsibility is to express a professional opinion on the fairness of the consolidated financial
statements. The auditor’s report outlines the scope of their examination and sets forth their opinion on the consolidated
financial statements. Their report as auditor is set out on page 54.

The Audit Committee of Northland meets periodically with management and the independent auditor to discuss internal
controls, auditing matters and financial reporting issues and to satisfy itself that each party is properly discharging its
responsibilities. The Audit Committee also reviews the consolidated financial statements, management’s discussion and
analysis and the external auditor’s report; examines the fees and expenses for audit services; and considers the
engagement or reappointment of the external auditor. The Audit Committee reports its findings to the Board of Directors
for consideration prior to the issuance of the Northland consolidated financial statements to the shareholders. Ernst &
Young LLP have full access to the Audit Committee and meet with the committee both in the presence of management and
separately.

(signed, Mike Crawley)
Mike Crawley

President and Chief Executive Officer

(signed, Pauline Alimchandani)
Pauline Alimchandani

Chief Financial Officer

Toronto, Canada

February 24, 2022

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INDEPENDENT AUDITOR’S REPORT

To the Shareholders of Northland Power Inc.

Opinion

We have audited the consolidated financial statements of Northland Power Inc. and its subsidiaries (the “Group”), which
comprise the consolidated statements of financial position as at December 31, 2021 and 2020, and the consolidated
statements of income (loss), consolidated statements of comprehensive income (loss), consolidated statements of changes
in equity and consolidated statements of cash flows for the years then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated
financial position of the Group as at December 31, 2021 and 2020, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (“IFRS”).

Basis for Opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to
our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
consolidated financial statements of the current period. These matters were addressed in the context of the audit of the
consolidated financial statements as a whole, and in forming the auditor’s opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is
provided in that context.

We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial
Statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matters below, provide
the basis for our audit opinion on the accompanying consolidated financial statements.

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Key audit matter

How our audit addressed the key audit matter

Impairment of Goodwill, Contracts and other intangible assets, and Property, plant and equipment

Based on our risk assessment, with assistance from our
following
valuation specialists, we performed
procedures, among others, on a sample of management’s
cash generating unit impairment tests:

the

•

Assessed
revenues,
the appropriateness of
operating costs, capital expenditures and terminal
values by comparing them to executed or expected
power generation contracts and regulatory power
distribution rates, historical results, third-party
data, current industry, market or economic trends
and evidence obtained in other areas of the audit;
Evaluated the discount rates or earnings multiple
utilized by management, which involved assessing
comparable market data and transactions;
Performed sensitivity analysis on the significant
assumptions to evaluate changes in the recoverable
amount of the CGU; and
Assessed the adequacy of the disclosures included
in Note 21 of the accompanying consolidated
financial statements in relation to this matter.

As at December 31, 2021, the Group’s goodwill, contracts
intangible assets, and property, plant, and
and other
equipment were $753 million, $498 million and $9,586
million, respectively. At each reporting date, management
assessed whether indicators of impairment exist for any
cash generating units (“CGUs”). Further, for CGUs with
goodwill and other intangible assets with indefinite lives,
management assesses at least annually, or at any time if an
indicator of impairment exists, whether there has been an
impairment loss in the carrying value of these CGUs. When
performing impairment tests, the Group estimates the
recoverable amount for each CGU or group of CGUs using
the higher of: (i) the value-in-use method, whereby the net
cash flow is determined based on current business plans and
budgets approved by management; or (ii) the fair value less
costs of disposal method using a multiple of earnings. The
Group discloses significant
judgements, estimates and
assumptions and the results of their analysis in respect of
impairment, including the goodwill impairment charge of
$30 million, in Notes 3 and 21 to the consolidated financial
statements.

Auditing management’s impairment tests was complex,
given the degree of judgement and subjectivity in evaluating
management’s estimates and assumptions in determining
the recoverable amounts of CGUs or group of CGUs. The
significant assumptions and inputs noted in the value-in-use
models were revenues, operating costs, terminal values,
capital expenditures and discount rates. The significant
assumption used in the fair value less cost of disposal model
was the earnings multiple.

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Key audit matter

Business Combination

On August 11, 2021, Northland Power Inc. completed its
acquisition of a Spanish operating portfolio of onshore
renewable projects for aggregate purchase consideration of
$511 million, as disclosed in Note 4 of the consolidated
financial statements. As described in Note 2, Significant
Accounting Policies and Changes
in the consolidated
financial statements, the cost of an acquisition is measured
as the aggregate fair values of the assets acquired and
liabilities incurred or assumed as at the date of the exchange
of control of the acquiree. Where the amounts allocated to
less than the overall
the assets and
consideration paid, the difference is accounted for as
goodwill.

liabilities are

Auditing this business combination was complex due to the
subjective nature of estimating the fair values of identified
assets and liabilities as at the date of acquisition, particularly
property, plant and equipment. The Group used discounted
cash flow models to measure the business enterprise value
and the acquired property, plant and equipment, where the
significant assumptions and inputs were revenues, operating
expenses, and discount rates.

How our audit addressed the key audit matter

To test the Group’s estimated fair valuation of business
enterprise value and property, plant, and equipment we
performed the following procedures, among others:

•

the

over

necessary

Read the purchase agreements to obtain an
understanding of the key terms and conditions and
assessed the appropriateness of management’s
accounting
analysis
considerations;
Involved our valuation specialists to assess the
valuation methodology applied, and the various
inputs utilized to determine the discount rate by
referencing current
industry and comparable
company information as well as cash-flow specific
risk premiums;
Assessed the appropriateness of revenues and
operating expenses by comparing energy prices to
long term forecasts for the Spanish power market,
historical results, the local regulatory regime for
renewable generation, and other third-party data;
Developed independent expectations of the fair
value of property, plant and equipment by
performing
significant
sensitivity analysis of
assumptions; and
Assessed the adequacy of the disclosures included
in Note 4 of the consolidated financial statements
in relation to this matter.

Other Information

Management is responsible for the other information. The other information comprises:

• Management’s Discussion and Analysis

•

The information, other than the consolidated financial statements and our auditor’s report thereon, in the Annual
Report

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information,
and in doing so, consider whether the other information is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

We obtained Management’s Discussion and Analysis and the Annual Report prior to the date of this auditor’s report. If,
based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact in this auditor’s report. We have nothing to report in this regard.

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| 2021 ANNUAL REPORT |

Responsibilities of Management and Those Charged with Governance for the Consolidated Financial
Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of
consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Group’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative
but to do so.

Those charged with governance are responsible for overseeing the Group’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit. We also:

•

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Group’s internal control.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.

Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may
cause the Group to cease to continue as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements, including the
disclosures, and whether the consolidated financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are responsible for
the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit.

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We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Scott Kerr.

Toronto, Canada
February 24, 2022

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Consolidated Financial Statements

Table of Contents

Consolidated Statements of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business
1. Description of Northland's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2. Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3. Accounting Policy Judgments and Estimates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Position
5. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6. Contracts and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8. Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9. Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10. Management of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11. Facility-level Loans and Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12. Corporate Credit Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13. Provisions and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14. Pension and Post-Employment Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16. Non-controlling Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
17. Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18. Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Performance
19. Net Income (Loss) per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
20. Finance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
21. Impairment of Property, Plant and Equipment, Intangible Assets and Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
22. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
23. Operating Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Other
24. Related-party Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
25. Litigation, Claims, Contingencies and Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Consolidated Statements of Financial Position

In thousands of Canadian dollars

As at
Assets

Cash and cash equivalents
Restricted cash (Note 16)
Trade and other receivables (Note 9.3, 16)
Other current assets (Note 9.1)
Derivative assets (Note 18)
Total current assets
Property, plant and equipment (Note 5, 21)
Contracts and other intangible assets (Note 6)
Goodwill (Note 7)
Finance lease receivable (Note 8)
Derivative assets (Note 18)
Long-term deposits (Note 9.2)
Deferred tax asset (Note 22)
Investment in joint ventures (Note 4)
Other assets (Note 9.3)

Total assets

Liabilities and equity

Trade and other payables (Note 8.2)
Facility-level loans and borrowings (Note 11)
Dividends payable
Derivative liabilities (Note 18)
Total current liabilities
Facility-level loans and borrowings (Note 11)
Corporate credit facilities (Note 12.1)
Provisions and other liabilities (Note 8.2, 13, 14)
Derivative liabilities (Note 18)
Deferred tax liability (Note 22)
Total liabilities

Equity

Common shares (Note 15.1)
Preferred shares (Note 15.2)
Contributed surplus
Accumulated other comprehensive loss
Deficit (Note 16)
Equity attributable to shareholders
Non-controlling interests (Note 16)
Total equity

Total liabilities and equity
See accompanying notes.

December 31, 2021

December 31, 2020

673,692 $
155,631
383,308
77,950
124,112
1,414,693 $
9,586,466
497,635
753,373
131,280
148,559
99,697
60,931
131,134
53,563
12,877,331 $

504,583 $
677,378
24,946
197,638
1,404,545 $
6,914,836
41,825
728,817
290,651
530,946
9,911,620 $

4,005,462 $
260,880
3,586
(279,964)
(1,233,085)
2,756,879
208,832
2,965,711

12,877,331 $

434,989
192,530
372,137
66,379
10,649
1,076,684
8,679,959
533,171
708,706
136,198
22,838
79,787
67,626
1,759
92,742
11,399,470

252,691
608,446
20,217
178,510
1,059,864
6,628,754
351,402
550,878
437,608
368,193
9,396,699

2,955,840
260,880
3,225
(279,418)
(1,147,633)
1,792,894
209,877
2,002,771
11,399,470

(signed, John W. Brace)

John W. Brace
Director and Chair of the Board

(signed, Russell Goodman)

Russell Goodman
Director and Chair of the Audit Committee

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Consolidated Statements of Income (Loss)

In thousands of Canadian dollars except per Share and Share information

Year ended December 31,

2021

2020

Sales

Electricity and related products
Regulated electricity
Other
Total sales
Cost of sales

Fuel purchases
Regulated electricity purchases

Total cost of sales
Gross profit

Expenses

Operating costs
General and administrative (G&A) costs
Development costs
Depreciation of property, plant and equipment (Note 5)

Total expenses
Investment income
Finance lease income (Note 8.1)
Operating income

Finance costs, net (Note 20)

Amortization of contracts and other intangible assets (Note 6)

Impairment (Note 7, 21)
Foreign exchange (gain) loss
Fair value (gain) loss on derivative contracts (Note 18)
Other (income) expense (Note 18, 25.2)
Income (loss) before income taxes

Provision for (recovery of) income taxes (Note 22)

Current
Deferred

Total income taxes
Net income (loss)

Net income (loss) attributable to:

Non-controlling interests (NCI) (Note 16)
Common shareholders

Net income (loss)

Weighted average number of Shares outstanding - basic (000s) (Note 19)
Weighted average number of Shares outstanding - diluted (000s) (Note 19)
Net income (loss) per share - basic (Note 16, 19)
Net income (loss) per share - diluted (Note16, 19)

See accompanying notes.

$
$

1,781,785 $
309,312
2,158
2,093,255 $

144,570
68,923
213,493
1,879,762 $

327,894
67,683
77,660
612,755
1,085,992 $
3,218
11,662

808,650 $

342,417

23,284

29,981
81,318
(116,621)
25,040

423,231 $

84,410
68,942

153,352 $
269,879 $

80,320
189,559
269,879 $

218,861
218,861

0.82 $
0.82 $

1,848,846
210,709
1,072
2,060,627

132,762
69,567
202,329
1,858,298

300,916
68,293
74,615
529,569
973,393
3,285
12,023
900,213

365,168

43,361
—
(71,344)
(11,271)
(25,769)
600,068

90,282
24,729
115,011
485,057

103,981
381,076
485,057

198,774
201,169
1.86
1.85

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Consolidated Statements of Comprehensive Income (Loss)

In thousands of Canadian dollars

Net income (loss)

Items that may be re-classified into net income (loss):

Exchange rate differences on translation of foreign operations

Change in fair value of hedged derivative contracts (Note 18)

Deferred tax recovery (expense) (Note 22)

Items that will not be re-classified into net income (loss):

Re-measurement of pension obligation

Other comprehensive income (loss)

Total comprehensive income (loss)

Total comprehensive income (loss) attributable to:

Non-controlling interests (Note 16)

Common shareholders (Note 16)

Total comprehensive income (loss)

See accompanying notes.

Year ended December 31,

2021

269,879 $

2020

485,057

(168,934)

214,196

(30,691)

(3,832)

10,739 $

280,618 $

97,344

183,274

280,618 $

(29,804)

(128,864)

40,800

1,094

(116,774)

368,283

92,028

276,255

368,283

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Consolidated Statements of Changes in Equity

In thousands of Canadian dollars

December 31, 2020

2,955,840 $

260,880 $

(1,147,633) $

3,225 $

(279,418) $

1,792,894 $

Common
shares

Preferred
shares

Deficit

Contributed
surplus

Accumulated
other
comprehensive
income (loss)

Equity
attributable to
shareholders’

Non-
controlling
interests
209,877 $

Total
equity

2,002,771

Net income (loss)

Deferred tax recovery (expense) (Note 22)

Exchange rate differences on translation of

foreign operations

Change in fair value of hedged derivative
contracts (Note 18)

Re-measurement of pension obligation

Total comprehensive income (loss)

Long term incentive plan (Note 15.1)

Recognition of put option

Non-controlling interest disposal
(Note 16)

Non-controlling interest acquired
(Note 4)

Common shares issued, net of costs (Note

15.1)

Common share and NCI dividends declared

(Note 15.1, 15.3, 16)

Preferred share dividends (Note 15.2)

December 31, 2021

See accompanying notes.

—

10,141

—

10,141

911

—

949,597

88,973

—

189,559

—

189,559

—

(264,200)

(10,811)

—

293

—

(30,036)

189,559

(19,895)

80,320

269,879

(655)

(20,550)

(157,925)

(11,009)

(168,934)

185,485

28,711

214,196

(3,809)

(6,285)

—

(3,809)

(23)

(3,832)

193,415

97,344

290,759

1,204

—

1,204

5,739

(8,521)

(2,782)

—

7,850

949,597

—

949,597

(175,227)

(97,718)

(272,945)

(10,811)

—

(10,811)

4,005,462 $

260,880 $

(1,233,085) $

3,586 $

(279,964) $

2,756,879 $

208,832 $

2,965,711

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Consolidated Statements of Changes in Equity - continued

In thousands of Canadian dollars

December 31, 2019, as reported

2,443,209 $

260,880 $

(1,466,235) $

351 $

(174,597) $

1,063,608 $

Common and
Class A
shares

Preferred
shares

Deficit

Contributed
surplus

Accumulated
other
comprehensive
income (loss)

Equity
attributable to
shareholders’

Non-
controlling
interests
447,144 $

Total
equity

1,510,752

Re-allocation of NCI (Note 16)

—

193,957

—

193,957

(193,957)

—

December 31, 2019, as adjusted

2,443,209 $

260,880 $

(1,272,278) $

351 $

(174,597) $

1,257,565 $

253,187 $

1,510,752

Net income (loss) (Note 16)

Deferred income taxes

Change in translation of net

investment in foreign operations

Change in fair value of hedged

derivative contracts (Note 18)

Re-measurement of pension obligation

Total comprehensive income (loss)

Long term incentive plan (Note 15.1)

Recognition of put option

Conversion of subscription receipts (Note

15.1)

Non-controlling interest acquired

Common and Class A share and NCI
dividends declared (Note 15.3)

Preferred share dividends (Note 15.2)

Conversion of debentures (Note 15.1)

December 31, 2020

See accompanying notes.

—

1,597

—

1,597

—

340,147

—

21,979

—

148,908

—

381,076

—

381,076

—

(245,067)

(11,364)

—

3,287

(413)

—

381,076

103,981

485,057

40,492

42,089

308

42,397

(41,334)

11,530

(29,804)

(105,064)

(23,800)

(128,864)

1,085

1,094

(104,821)

277,852

92,028

369,880

—

3,287

(413)

340,147

—

3,287

(413)

340,147

—

2,645

(223,088)

(137,983)

(361,071)

(11,364)

148,908

—

(11,364)

148,908

2,955,840 $

260,880 $

(1,147,633) $

3,225 $

(279,418) $

1,792,894 $

209,877 $

2,002,771

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Year ended December 31,

2021

2020

269,879 $

485,057

Consolidated Statements of Cash Flows

In thousands of Canadian dollars

Operating activities
Net income (loss)

Items not involving cash or operations:

Depreciation of property, plant and equipment

Amortization of contracts and other intangibles

Impairment of goodwill

Finance costs, net

Fair value (gain) loss on derivative contracts (Note 18)

Unrealized foreign exchange (gain) loss

Deferred tax expense (recovery)

Other

Net change in working capital related to operations

Cash provided by operating activities

Investing activities

Purchase of property, plant and equipment
Acquisitions, net (Note 4)

Restricted cash utilization (funding)

Interest received

Warranty settlement and proceeds (Note 25.2)

Other

612,755

23,284

29,981

312,537

(116,621)

81,318
68,942

34,721
1,316,796 $
292,499
1,609,295 $

(469,793)

(501,735)
(55,456)

3,571

—

(61)

Net change in working capital related to investing activities

Cash used in investing activities

(7,390)
(1,030,864) $

Financing activities

Proceeds from borrowings, net of transaction costs
Repayment of borrowings

Interest paid

Restricted cash utilization (funding)

Common share dividends (Note 15.3)
Dividends to non-controlling interests (Note 16)

Preferred share dividends (Note 15.2)

Common shares issued, net of costs (Note 15.1)

Other

Cash used in financing activities

Effect of exchange rate differences on cash and cash equivalents

Net change in cash and cash equivalents during the period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period
See accompanying notes.

889,796
(1,571,765)

(281,479)

76,064

(172,755)
(97,718)

(10,811)

949,597

(6,607)
(225,678) $

(114,050)
238,703
434,989
673,692 $

529,569

43,361

—

351,685

(11,271)
(71,344)

24,729

2,148
1,353,934

(32,333)

1,321,601

(226,574)

(735,882)

91,369
5,290

97,804

(6,539)

(64,740)
(839,272)

2,122,271
(2,173,463)

(314,367)

14,631

(220,261)
(137,622)

(11,364)

341,388

(10,746)

(389,533)

74,000
166,796
268,193

434,989

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Notes to the Consolidated Financial Statements

1. Description of Northland's Business

Northland Power Inc. (“Northland”) owns or holds net economic interests, through its subsidiaries, in power-producing
facilities and a power distribution utility as well as in projects under construction or in development phases. Northland’s
facilities produce electricity from clean energy sources for sale primarily under long-term power purchase agreements
(PPAs) or other revenue arrangements with creditworthy counterparties. Northland’s utility is a distributor and retailer of
electricity compensated under a regulated framework. These operating assets provide stable cash flow and are primarily
located in Canada, Germany, the Netherlands, Spain and Colombia. Northland’s significant assets under construction and
development are located in Mexico, Taiwan, Poland, Germany, Colombia and the United States.

Northland is incorporated under the laws of Ontario, Canada with common shares (“Shares”), Series 1 cumulative rate reset
preferred shares (“Series 1 Preferred Shares”), Series 2 cumulative floating rate preferred shares (“Series 2 Preferred
Shares”) and Series 3 cumulative rate reset preferred shares (“Series 3 Preferred Shares”) that are publicly traded on the
Toronto Stock Exchange (“TSX”). Northland is the parent company for the subsidiaries that operate Northland’s business.
Northland’s registered office is located in Toronto, Ontario.

These audited consolidated financial statements (“Consolidated Financial Statements”) include the results of Northland
and its subsidiaries, of which the most significant are listed in the following table:

Offshore Wind

Buitengaats C.V. and ZeeEnergie C.V. (“Gemini”)
Nordsee One GmbH (“Nordsee One”)
Northland Deutsche Bucht GmbH (“Deutsche Bucht”)

Efficient Natural Gas

Iroquois Falls Power Corp. (“Iroquois Falls”)
Kirkland Lake Power Corp. (“Kirkland Lake”) (3)
North Battleford Power L.P. (“North Battleford”)
Thorold CoGen L.P. (“Thorold”)

Onshore Renewable

Nine solar facilities (“Solar”)
Thirty-three solar and wind facilities ("Spanish portfolio")

Utility

Empresa de Energía de Boyacá S.A E.S.P (“EBSA”)

Geographic region (1)

% voting ownership
as at Dec. 31 2021 (2)

The Netherlands
Germany
Germany

Ontario, Canada
Ontario, Canada
Saskatchewan, Canada
Ontario, Canada

Ontario, Canada
Spain

Colombia

60.0 %
85.0 %
100.0 %

100.0 %
100.0 %
100.0 %
100.0 %

100.0 %
98.5 %

99.4 %

(1) Geographic region corresponds to place of incorporation or, in the case of partnerships, registration, for all entities listed except North Battleford

which is registered in Ontario, Canada.

(2) As at December 31, 2021, Northland’s economic interest was unchanged from December 31, 2020 with the exception of Spanish portfolio, which

Northland acquired on August 11, 2021. Spanish portfolio’s results are consolidated in Northland’s financial results effective on the acquisition date.
Northland owns 100% ownership interest in all the facilities within the Spanish Portfolio, except for one wind facility, where Northland’s ownership
interest is at 66.2%.

(3) Northland holds a 68% controlling interest in Canadian Environmental Energy Corporation (CEEC), which holds 100% of the voting shares of Kirkland

Lake. Northland's effective net economic interest in Kirkland Lake is approximately 77%.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

2. Significant Accounting Policies and Changes

2.01 Basis of Preparation and Statement of Compliance

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB) and are presented in Canadian dollars. All
values are presented in thousands except when otherwise indicated. The comparative Consolidated Financial Statements
have been reclassified from the statements previously presented to conform to the presentation of the 2021 Consolidated
Financial Statements.

The Consolidated Financial Statements for the year ended December 31, 2021 were approved by the Board of Directors on
February 24, 2022.

2.02 Basis of Consolidation

The Consolidated Financial Statements include Northland’s direct and indirect subsidiaries, which are fully consolidated on
the date that Northland obtains control and continue to be consolidated until the date that such control ceases. Northland
determines that it has control over an investee if facts and circumstances indicate that Northland is exposed, or has rights
to variable returns from its involvement with the investee and has the ability to affect those returns through its power. All
intra-group balances and transactions are eliminated on consolidation.

2.03 Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The acquired identifiable assets, liabilities and
contingent consideration that meet the conditions for recognition under IFRS 3, “Business Combinations” are recognized at
their fair values at the acquisition date, except for (i) income taxes, which are measured in accordance with IAS 12, “Income
Taxes”; (ii) share-based payments, which are measured in accordance with IFRS 2, “Share-based Payment”; and (iii) non-
current assets that are classified as held for sale, which are measured at fair value less costs to sell in accordance with IFRS
5, “Non-Current Assets Held for Sale and Discontinued Operations.” Northland did not designate any assets as held for sale
in 2021 and 2020. Any goodwill arising from business combinations is, from the date of acquisition, allocated to each of
Northland’s cash-generating units (CGUs) that are expected to benefit from the synergies of the combination, irrespective
of whether other assets or liabilities of the acquiree are assigned to those units and tested annually for impairment (see
Note 2.07). Goodwill is initially measured at cost, being the excess of the purchase price over Northland’s share in the net
fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

2.04 Investment in Joint Ventures and Associates

An associate is an entity over which Northland has significant influence, which is the ability to participate in the financial
and operating policy decisions, but without controlling or jointly controlling the investee.

A joint venture is a type of joint arrangement whereby, the parties that have joint control of the arrangement have rights to
the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Judgment
is required when assessing the classification of a joint arrangement as a joint venture. When making this assessment,
Northland considers the structure of the arrangements, the legal form of any separate vehicles, the contractual terms of the
arrangements, and other facts and circumstances.

Northland’s investments in a joint venture or an associate is accounted for under the equity method of accounting,
whereby, the carrying value of interest in a joint venture or an associate is initially recognized at cost, which includes
transaction costs and subsequently adjusted for Northland’s share of net income, other comprehensive income (“OCI”),
distributions by a joint venture or an associate and other adjustments to Northland’s proportionate interest in a joint
venture or an associate.

The Consolidated Financial Statements include Northland’s share of the income (loss) and other comprehensive income of
the joint venture, after adjustments to align the accounting policies of the joint venture with those of Northland, from the
date that joint control commences, until the date that joint control ceases.

In addition, when there has been a change recognized directly in the equity (other than due to other comprehensive
income) of the joint venture, Northland recognizes its share of any changes, when applicable, in the consolidated statement
of comprehensive income (loss) and corresponding effect would be reflected in the net carrying value of interest in the joint
venture.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

When Northland’s share of losses exceeds its interest in the joint venture, the carrying amount of that interest (including
any long term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that
Northland has a constructive or legal obligation to contribute to such losses or has made payments on behalf of the Joint
venture. Currently, Northland does not have an investment in associate.

2.05 Property, Plant and Equipment

Property, plant and equipment (PP&E) are recorded at cost, net of accumulated depreciation and any accumulated
impairment losses. The cost of PP&E includes the cost of replacing part of the PP&E and borrowing costs for long-term
construction projects, if the recognition criteria are met. Likewise, when a major overhaul as described below is performed,
its cost is recognized in the carrying amount of the related PP&E as a replacement if the recognition criteria are met. All
other repair and maintenance costs are recognized in profit and loss as incurred. The present value of the expected cost for
decommissioning is included in the cost of the related asset if the recognition criteria for a provision are met. See Note 2.9
for further information about the measurement of the decommissioning liabilities.

Depreciation expense is recognized on a straight-line basis over its estimated useful lives of the asset primarily as follows:

Plant and operating equipment
Buildings and foundations
Lease ROU asset
Leasehold improvements
Other equipment - Vehicles and meteorological towers
Other equipment - Office equipment, furniture and fixtures
Other equipment - Computers and computer software

10 to 35 years
20 to 40 years
1 to 50 years
Over the term of the lease
5 years
5 years
2 years

In general, Northland expects to use its PP&E to their full useful lives and considers residual values, where appropriate, in
calculating depreciation.

Assets included in construction-in-progress (CIP) are transferred to the appropriate PP&E category and amortized once the
assets are available for use, such as when the test period ends and / or the PP&E begins commercial operations.

The costs of all maintenance provided under long-term, fixed-price contracts are charged to the consolidated statements of
income (loss) based on the terms of the contract. All major overhaul expenditures that are not incurred under long-term
maintenance contracts are capitalized and amortized over the average expected period between major overhauls.

An item of PP&E is derecognized upon disposal or when no future economic benefits are expected from its use or disposal.
Any gain or loss arising on derecognition of the asset is included in profit and loss in the period of derecognition.

Government grants related to the construction of capital assets are recorded as a reduction to the cost of the related asset
and amortized over the useful life of the related asset.

2.06 Intangible Assets

The cost of intangible assets acquired is initially recorded at their fair value at the date of acquisition. Intangible assets
acquired separately are measured on initial recognition at cost. Internally generated intangible assets, other than deferred
development costs, are not capitalized, and the expenditure is reflected in profit and loss.

Intangible assets with finite lives are amortized over their useful economic lives and assessed for impairment whenever
there is an indication that the intangible asset may be impaired.

Development costs

Development expenditures on an individual project are recorded as assets on the consolidated statements of financial
position when Northland can demonstrate:

•
•
•
•
•

The technical feasibility of completing the project so that it will be available for use or sale;
The intention to complete, and ability to use or sell, the project;
The project will generate future economic benefits;
The availability of resources to complete the project; and
The ability to measure reliably the expenditures during development.

During the period of development, the asset is tested annually for impairment or if any indicators of impairment are
identified.

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Deferred development costs include pre-construction costs directly related to new projects and are presented under PP&E
as CIP. Capitalization begins once it is determined by management that a given project has a high likelihood of being
pursued through to completion. Costs are capitalized up to the closing of project financing and/or the start of construction,
at which time they are reclassified to the appropriate PP&E category from CIP or recorded as intangible assets, as
appropriate. All indirect research and development costs not eligible for asset recognition are expensed as “development
costs” on the consolidated statements of income (loss).

Contracts

Contracts relate primarily to the fair value of PPAs and management agreements when they were acquired by Northland
and are recorded net of accumulated amortization. Contract amortization is recorded on a straight-line basis over the term
of the agreement.

2.07 Leases or Arrangements Containing a Lease

Lessee accounting

At the inception of a contract, Northland assesses whether the arrangement is, or contains, a lease in accordance with IFRS
16, “Leases”. If the arrangement meets the definition of a lease, a lease obligation and a related right-to use (ROU) asset
will be recorded on the applicable lease commencement date. A lease liability initially measured at the present value of the
unpaid lease payments discounted using the interest rate implicit in the lease (if readily determinable) or otherwise on
Northland’s incremental borrowing rate. A ROU asset is initially measured based on the initial amount of the related lease
obligation, subject to certain adjustments. The lease obligation is remeasured when there are adjustments to future lease
payments arising from a change in applicable indices or rates or changes in lease terms. Upon any such remeasurement, a
corresponding adjustment is made to the carrying amount of the related ROU asset.

Northland applies the cost model to subsequently measure lease ROU assets and applies the same impairment policy as
other PP&E. Lease ROU assets are depreciated over the shorter period of the lease term and useful life of the underlying
asset. The lease term includes any renewal or termination Northland is reasonably certain to exercise. In the case of land
leased for future development, Northland assumes an initial lease term of 5 years. Where leased assets are required for the
operation of the facility, Northland assumes the lease will be renewed to match the term of the facility’s PPA. Northland
reassesses the lease term in response to significant events or changes in circumstances. If a lease transfers ownership of the
underlying asset or Northland expects to exercise a purchase option, the related ROU asset is depreciated over the useful
life of the underlying asset.

Lessor accounting

Northland enters into PPAs to provide electricity and electricity-related products at predetermined prices. At inception of
the contract, Northland assesses whether it is, or contains, a lease in accordance with IFRS 16. If the PPA meets the
definition of a lease and the terms of the contract do not transfer substantially all of the benefits and risks of ownership of
PP&E, it is classified as an operating lease. Where the terms do transfer substantially all of the benefits and risks of
ownership, it is classified as a finance lease.

Finance lease receivables are initially measured at amounts equal to the present value of the net investment in the lease.
Finance lease income is recognized in a manner that produces a constant rate of return on Northland’s net investment in
the lease and is included in operating income.

At the commencement of the lease, which generally coincides with start of commercial operations of the facility, Northland
separates payments and other consideration required by such an arrangement into those for the lease and those for other
elements on the basis of their relative fair values.

2.08 Impairment of Non-financial Assets

Northland assesses at each reporting date whether there is an indication that an asset may be impaired or that previously
recognized impairment losses may no longer exist or have decreased. If any indication exists or when annual impairment
testing for an asset is required, Northland estimates the asset’s or CGU’s recoverable amount. The estimated recoverable
amount is the higher of (i) an asset’s or CGU’s estimated fair value less costs to sell or (ii) its value in use. Where the
carrying amount of an asset or CGU exceeds its estimated recoverable amount, the asset is considered impaired and is
written down to its estimated recoverable amount. When the recoverable amount exceeds the carrying amount for an
asset or CGU previously impaired, the reversal is limited to ensure the carrying amount of the asset does not exceed the
carrying amount that would have been determined, net of depreciation, had no impairment been previously recognized.

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In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessment of the time value of money and risk specific to the asset. In determining fair value
less costs to sell, an appropriate valuation model is used and calculations are corroborated by valuation multiples or other
available fair value indicators.

Goodwill

Goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount for each CGU to which the goodwill relates.
Where the estimated recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized.
Impairment losses relating to goodwill cannot be reversed in future periods.

2.09 Provisions

General

Provisions are recognized when Northland has a present obligation (legal or constructive) as a result of a past event and
where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
Where Northland expects some or all of a provision to be reimbursed (for example, under an insurance policy or warranty
agreement), the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in profit and loss net of any reimbursement.

Decommissioning liabilities

Provisions for decommissioning costs are recorded at the present value of expected costs to settle the obligation using
estimated cash flows and are recognized as part of the cost of the related asset. The cash flows are discounted at a current
pre-tax rate. Where the estimated cash flows reflect the risks specific to the decommissioning liability, a risk-free discount
rate is used; otherwise, a discount rate reflective of the risks specific to the decommissioning liability is used. The unwinding
of the discount is expensed as incurred and recognized in the consolidated statements of income (loss) as a finance cost.
The estimated future costs of decommissioning are reviewed annually and adjusted as appropriate. Changes in the
estimated future costs or in the discount rate applied are added to or deducted from the cost of the asset.

2.10 Share-Based Payments

As part of Northland’s Long-Term Incentive Plan (LTIP), Northland provides share-based compensation to management and
certain employees when projects achieve predetermined milestones (“Development LTIP”) or to recognize achievements,
attract and retain executives (“Deferred Rights”). Northland has the option to settle the LTIP in shares or in cash. The fair
value of the awards is based on the grant date share price and, to the extent that services are provided in advance of the
grant date, Northland’s reporting date share price. The estimated forfeiture rate reflects the shares that will vest upon
achieving project milestone and is revised if there is any indication that the number of Shares expected to vest has changed.
For Development LTIP awards, the cost of the LTIP Shares awarded is recognized over the estimated vesting period and is
capitalized for employees providing services directly involved in the development and construction of the project. The
awards vest when the associated project meets established performance expectations. For Deferred Rights awards, the cost
of LTIP Shares awarded is expensed over the estimated vesting period.

2.11 Cash and Cash Equivalents and Restricted Cash

Cash equivalents comprise only highly liquid investments with maturities of less than 90 days. Restricted cash comprises
amounts contractually restricted for specific uses including amounts funded against future maintenance, debt service and
construction costs at certain Northland subsidiaries.

2.12 Financial Instruments

(a) Financial assets and liabilities

Northland recognizes financial assets and financial liabilities initially at fair value and subsequently remeasure these at
either fair value or amortized cost based on their classification as described below. Financial assets are derecognized when
the rights to receive cash flows from the financial assets have expired or have been transferred and Northland has
transferred substantially all the risks and rewards of ownership.

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Fair value through profit and loss:

Financial assets with the intention of generating earnings in the near term, and derivatives other than cash flow hedges, are
classified as fair value through profit and loss (FVPL). A gain or loss on a financial asset measured at FVPL that is not part of
a hedging relationship is recognized in profit and loss and presented on a net basis in the period in which it arises. For
derivative financial assets, gains and losses are shown within “fair value (gain) loss on derivative contracts”. Northland
classifies loans provided to First Nations partners (Note 16) at FVPL due to the fact that they do not meet the criteria for
classification as amortized cost because the contractual cash flows are not solely payments of principal and interest. This is
the only non-derivative financial asset measured at FVPL and related gains and losses are shown within “other (income)
expense” in the consolidated statements of income (loss). Interest income from FVPL financial assets is included in
“investment income”.

Financial liabilities held for trading, such as those acquired for the purpose of selling in the near term, and derivative
financial instruments entered into by Northland that do not meet hedge accounting criteria are classified as fair value
through profit and loss. Gains or losses on this type of liabilities are recognized in profit and loss.

Amortized cost:

Financial assets held for collection of contractual cash flows that represent solely payments of principal and interest are
measured at amortized cost, and include Northland’s trade receivables, long-term deposits and other receivables. Interest
income from these financial assets is included in “finance costs, net” using the effective interest rate method.

All other financial liabilities are classified as amortized cost using the effective interest rate method. Gains and losses are
recognized in profit and loss when the liabilities are derecognized as well as through the amortization process. The
calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an
integral part of the effective interest rate. This category includes trade and other payables, dividends payable, interest-
bearing loans and borrowings, corporate credit facilities, convertible debentures and subscription receipts.

A third category, fair value through other comprehensive income (FVOCI), is available; however, Northland has not
classified any financial assets or financial liabilities in this category.

(b) Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated statements of financial
position if and only if there is a currently enforceable legal right to offset the recognized amounts and an intention to settle
on a net basis or to realize the assets and settle the liabilities simultaneously.

The individual derivative financial instruments, that a subsidiary enters into, will not be realized or settled simultaneously,
and therefore derivative assets and derivative liabilities are not offset on the consolidated statements of financial position.

Northland determines the fair value of its financial instruments at each balance sheet date based on the following
hierarchy:

•

Level 1 - Where financial instruments are traded in an active financial market, fair value is established by reference to
the appropriate quoted market price at the reporting date. Active markets are those in which transactions occur with
significant frequency and volume to provide pricing information on an ongoing basis.

Level 2 - If there is no active market, fair value is established using valuation techniques, including discounted cash
flow models. The inputs to these models are taken from observable market data where possible, including recent
arm’s-length market transactions, and comparisons to the current fair value of similar instruments; but where this is
not feasible, inputs such as liquidity risk, counterparty risk and volatility are used.

•

Level 3 - Valuations at this level are those with inputs that are not based on observable market data.

Assessment of the significance of a particular input to the fair value measurement requires judgment; any changes in
assumptions may affect the reported fair value of financial instruments.

The fair value of derivative financial instruments reflects the estimated amount that Northland would have been required
to pay if forced to settle all unfavourable outstanding contracts or the amount that would be received if forced to settle all
favourable contracts at year-end. The fair value represents a point-in-time estimate that may not be relevant in predicting
Northland’s future earnings or cash flows.

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(d) Derivatives and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re-
measured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value
depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged
and the type of hedge relationship designated.

Northland designates its derivatives as hedges of:

•

Foreign exchange risk associated with the cash flows of highly probable forecast transactions (cash flow hedges);

Foreign exchange risk associated with net investment in foreign operations (net investment hedges);

Floating interest rate risk associated with payments of debts (cash flow hedges); and

Commodity risk associated with payments under PPAs (cash flow hedges).

The fair values of various derivative financial instruments used for hedging purposes and movements in the hedge reserve
within equity are shown in Note 18.

When a hedging instrument expires, is sold, is terminated, or no longer meets the criteria for hedge accounting, any
cumulative deferred gain or loss and deferred costs of hedging in equity at that time remain in equity until the forecasted
transaction occurs. When the forecasted transaction is no longer expected to occur, the cumulative gain or loss and
deferred costs of hedging are immediately reclassified to profit and loss.

If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains
unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting
either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio
used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit and loss at the time
of the hedge relationship rebalancing.

Cash flow hedges that qualify for hedge accounting

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is
recognized in other comprehensive income (OCI) and accumulated in reserves in equity, limited to the cumulative change in
fair value of the hedged item on a present value basis from the inception of the hedge. The gain or loss relating to the
ineffective portion is recognized immediately in profit and loss, within “fair value (gain) loss on derivative contracts”.

Gains and losses relating to the effective portion of the change in fair value of the entire forward contract are recognized in
the cash flow hedge reserve within equity. Amounts accumulated in equity are reclassified in the period when the hedged
item affects profit and loss.

Net investment hedges that qualify for hedge accounting

Hedges of net investments in foreign operations are accounted for similarly to cash flow hedges. Any gain or loss on the
hedging instrument relating to the effective portion of the hedge is recognized in OCI and accumulated in reserves in equity.
The gain or loss relating to the ineffective portion is recognized immediately in profit and loss within “fair value (gain) loss
on derivative contracts”. Gains and losses accumulated in equity will be reclassified to profit and loss when the foreign
operation is partially disposed of or sold.

Hedge ineffectiveness

Northland’s hedging policy only allows for the use of derivative instruments that form effective hedge relationships. Hedge
effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness
assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. Northland
enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the
hedged item, and so a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of
the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument,
Northland uses the hypothetical derivative method to assess effectiveness.

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(e) Impairment of Financial assets:

Northland accounts for impairment of financial assets based on a forward-looking expected credit loss (ECL) approach. ECL
are measured as the difference in the present value of the contractual cash flows due to Northland under the contract and
the cash flows that Northland expects to receive. Northland assesses all information available, including past due status,
credit ratings, the existence of third-party insurance and forward-looking macro-economic factors in the measurement of
the ECL associated with its assets carried at amortized cost and FVOCI. Northland measures ECL by considering the risk of
default over the contract period and incorporates forward-looking information into its measurement.

Impairment of cash and cash equivalents and restricted cash is evaluated by reference to the credit quality of the
underlying financial institution or investee.

Trade receivables are reviewed qualitatively on a case-by-case basis to determine if impairment exists.

2.13 Revenue Recognition

(a) Electricity generation and related products

Electricity related revenue is recognized over time as electricity and related products are delivered. Each of Northland’s
PPAs contain a distinct performance obligation for the delivery of electricity, delivery of capacity (i.e. availability of
generation), or a combination of the two. Determining what goods or services promised to the customer constitute a
distinct performance obligation requires significant judgment. Northland considered all goods and services promised in its
PPA contracts and determined that while certain promises do have standalone value to the customer, they are not distinct
in the context of the contract. Refer to Note 23 for details on revenue streams disaggregated by technology and geography.

Northland views each megawatt hour (MWh) of electricity and/or capacity delivered to be a series of distinct goods that are
substantially the same and have the same pattern of transfer to the customer as measured using an output method. The
amount that Northland has a right to bill the customer reflects the pattern of transfer and value of the completed
performance to the customer. As a result, Northland applies the “right to invoice” practical expedient under IFRS 15,
“Revenue from Contracts with Customers”, to measure and recognize revenue.

Any pool price revenue collected significantly in excess of the assumed pool price in the current regulatory semi-period is
recognized as deferred revenue. The long-term portion of deferred revenue is presented under provisions and other
liabilities, whereas, the short-term portion of deferred revenue is presented under trade and other payables in the
consolidated statement of financial position. The deferred revenue is recognized as revenue over the remaining regulatory
periods and presented under regulated electricity in the consolidated statement of income (loss). Any pool price revenue
collected less than the assumed pool price in the current regulatory semi-period is recognized as a receivable and presented
under other assets in the consolidated statement of financial position.

(b) Regulated utility

Regulated utility revenues from generation, transmission, distribution and commercialization (i.e.retail) tariffs are
recognized as electricity is delivered to customers. Revenues include amounts billed or billable to customers for generation
and transmission tariffs, which are passed through to third parties. Northland records these revenues on a gross basis since
Northland is responsible for procuring electricity and has collection risk for these amounts.

Payments to customers are recorded as an expense when the payments relate to a separate good or service provided by
the customer and recorded as a reduction in revenue when the payments relate to Northland’s performance obligations
under the contract (e.g. liquidated damages penalties).

Revenue from the sale of electricity at facilities under development and included in CIP is recorded as an offset to PP&E
until certain operational testing requirements are satisfied.

Northland recognizes management fees and operations-related incentive fees as earned based on the terms of its
respective facility agreements as work is performed.

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(d) Interest and investment income

Interest and investment income are recognized as earned in accordance with the terms of the underlying financial
contracts. Interest income earned on third-party loans is included in “investment income” while interest income earned on
cash and cash equivalents balances is included in “finance costs, net” in the consolidated statements of income (loss).

2.14 Borrowing Costs

Borrowing costs directly attributable to the acquisition or construction of a qualifying asset that takes a substantial period
of time to prepare for its intended use or sale are capitalized as part of the cost of the asset. All other borrowing costs are
expensed as incurred. Borrowing costs consist of interest and other costs incurred in connection with the borrowing of
funds.

2.15 Taxes

Current income tax

Income tax assets and liabilities are measured at the amount expected to be recovered from or paid to tax authorities. Tax
rates and tax laws that are enacted or substantively enacted at the reporting date are used in the computations.

Current income tax relating to items recognized directly in equity is recognized in equity and not in the consolidated
statements of income (loss).

Deferred income tax

Deferred income tax is determined using the asset and liability method at the reporting date on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences except:

• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a
transaction that is not a business combination and at the time of the transaction affects neither the accounting income
nor taxable income or loss; and

• Where the deferred income tax liability relates to taxable temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences
can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognized for all deductible temporary differences, carryforward of unused tax credits and
unused tax losses to the extent that it is probable that taxable income will be available against which the deductible
temporary differences, carry forward of unused tax credits and unused tax losses can be utilized except:

• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition
of goodwill or of an asset or liability in a transaction that is not a business combination and at the time of the
transaction affects neither the accounting income nor taxable income or loss; and

• Where the deferred income tax asset relates to deductible temporary differences associated with investments in
subsidiaries, associates and interests in joint ventures, deferred income tax assets are recognized only to the extent
that it is probable that the temporary differences will reverse in the foreseeable future and taxable income will be
available against which the temporary differences can be utilized.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the
asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date.

Deferred income tax relating to items recognized directly in equity is recognized in equity, not profit and loss.

Deferred income tax assets and deferred income tax liabilities are offset if a legally enforceable right exists to offset and the
deferred income taxes relate to the same taxable entity and the same taxation authority.

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Sales taxes

Sales, expenses and assets are recognized net of the amount of sales tax except:

• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in
which case the sales tax is recognized as part of the cost of acquisition of the asset or as part of the expense item, as
applicable; and

• Where receivables and payables are stated with the amount of sales tax included.

The net amount of sales tax recoverable from or payable to the taxation authority is included in the consolidated
statements of financial position.

2.16 Foreign Currency Translation

Northland’s Consolidated Financial Statements are presented in Canadian dollars, which is Northland’s functional currency.
For each subsidiary, Northland determines the functional currency and measures items included in the financial statements
of the subsidiary in that functional currency. The functional currency of Northland’s significant subsidiaries reflects the
primary economic environment in which each subsidiary operates and includes the Canadian dollar, Euro , Mexican peso
and Colombian peso.

The assets and liabilities of foreign operations are translated into Canadian dollars at the closing rate at the date of
respective consolidated statement of financial position and their consolidated statements of income (loss) are translated at
the average exchange rate for each quarterly period. The exchange differences arising on the translation are recognized in
accumulated OCI in equity. On disposal of a foreign operation, the cumulative amount recognized in equity relating to the
foreign operation is recognized in profit and loss.

2.17 Change in Accounting Policies

Northland assesses each new IFRS or amendment to determine whether it may have a material impact on its Consolidated
Financial Statements. As at and for the year ended December 31, 2021, there have been no accounting pronouncements by
the IASB that would materially affect Northland’s Consolidated Financial Statements.

2.18 New standards or amendments and forthcoming requirements

The following standards and amendments to the standards apply for the first time to financial reporting periods
commencing on or after January 1, 2021:

•

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 – The IASB issued to address the issues that arise from the
implementation of the Interbank Offered Rates (IBOR) reforms in Phase 1. The Phase 2 amendments provide additional
temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships
directly affected by IBOR reform.

Northland adopted above amendments as of January 1, 2021, and there has been no impact on the Consolidated Financial
Statements as of and for the year ended December 31, 2021.

IASB has issued following new amendments to the standards before December 31, 2021 with an effective date for
accounting periods ending on or after January 1, 2022:

•

Amendments to IAS 16 (effective from annual period beginning on or after January 1, 2022) – IASB has issued
amendments prohibiting a company from deducting from the cost of property, plant and equipment amounts received
from selling items produced while the company is preparing the asset for its intended use and instead recognizing the
same in the income (loss) account.

Amendments to IAS 1, Presentation of financial statements’ (effective from annual period beginning on or after January
1, 2024) – These narrow-scope amendments to IAS 1, ‘Presentation of financial statements’, clarify that liabilities are
classified as either current or non-current, depending on the rights that exist at the end of the reporting period.
Classification is unaffected by the expectations of the entity or events after the reporting date. The amendment also
clarifies what IAS 1 means when it refers to the ‘settlement’ of a liability.

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•

Amendment to IAS 12, Income Taxes (effective from annual period beginning on or after January 1, 2023) – Requiring
companies to recognize deferred tax on transactions that, on initial recognition give rise to equal amounts of taxable
and deductible temporary differences.

Management is in a process of assessing the impact of the above noted new amendments on the consolidated financial
statements of Northland.

3. Accounting Policy Judgments and Estimates

When preparing the Consolidated Financial Statements, Northland undertakes a number of judgments, estimates and
assumptions about recognition and measurement of assets, liabilities, income and expenses and in applying accounting
policies. The actual results are likely to differ from the judgments, estimates and assumptions and will seldom precisely
equal the estimated results.

The significant judgments, estimates and assumptions that have the most significant effect on the recognition and
measurement of assets, liabilities, income and expenses are discussed below.

PP&E and intangible assets

PP&E and intangible assets are depreciated over their useful lives, taking into account estimated residual values, where
appropriate. Residual values and useful lives are reviewed annually and adjusted prospectively, if appropriate. In assessing
residual values, Northland considers the remaining life of the asset, its projected disposal value and future market
conditions. Useful lives take into account factors such as technological innovation, maintenance programs, relevant market
information and management considerations. Management judgment is also required when Northland acquires entities and
must allocate the purchase price to the fair value of the assets and liabilities acquired, which includes PP&E and intangible
assets. See Note 4.2 for additional details. The carrying amounts of PP&E and intangible assets are analyzed in Notes 5 and
6, respectively.

Deferred development costs

Management monitors the progress of development projects in the prospecting, development and advanced development
phases by using a project management system. Advanced development costs are recognized as an asset in accordance with
IFRS, once management determines a project is economically feasible and risks to project completion have been sufficiently
mitigated, whereas prospecting and development phase project costs are expensed as incurred.

Determining which projects will continue to be pursued and when to begin deferring costs for advanced development
phase projects requires judgment. Management reviews on a regular basis the feasibility of each project that is being
developed and, should management determine that development of a particular project is no longer feasible to be pursued
to completion, the deferred costs are expensed in the period the determination is made.

Decommissioning liabilities

Northland’s decommissioning liabilities relate to wind, solar and closed efficient natural gas facilities. Future remediation
costs, whether required under contract or by law, are recognized based on best estimates. These estimates are calculated
at completion of construction and reviewed annually or more often if there is reason to believe the estimate has changed.
Cost estimates depend on labour costs, efficiency of site restoration and remediation measures, inflation rates and, where
possible, risks specific to the liability. Estimates of pre-tax interest rates that reflect current market conditions, the time
value of money and, where applicable, the risks specific to the liability also affect the liability. Northland estimates the
timing of expenses, which may change depending on the viability of continuing operations. Expected future costs are
inherently uncertain and could materially change over time. Subject to plant closures, Northland expects to use assets at
the efficient natural gas facilities and regulated utility operations for an indefinite period due to continuing equipment
overhauls and rights to the underlying land. As a result, management considers that a reasonable estimate of the fair value
of any related decommissioning liability cannot be made until it is known that the facility will be closed. See Note 13 for
additional details.

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Accounting for investments in non-wholly owned subsidiaries

Northland exercises judgment in determining whether non-wholly owned subsidiaries are controlled by Northland.
Northland’s judgment included the determination of (i) how the relevant activities of the subsidiary are directed (either
through voting rights or contracts); (ii) whether Northland’s rights are substantive or protective in nature; and (iii)
Northland’s ability to influence the returns of the subsidiary. Where subsidiaries are subject to joint control, Northland
applies judgment in determining whether its rights are to the net assets or individual assets and liabilities of the joint
arrangement, which results in accounting for the subsidiary as a joint venture or joint operation, respectively. Refer to Note
16 for details on non-wholly owned subsidiaries.

Fair value of financial assets and financial liabilities

Where the fair values of financial assets and financial liabilities cannot be derived from active markets, they are determined
using valuation techniques, including discounted cash flow models. The inputs to these models are taken from observable
markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. The
judgments include consideration of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about
these factors could affect the reported fair value of financial instruments, see Note 18 for additional details on fair values of
financial instruments.

Impairment of non-financial assets

Northland tests impairment of goodwill, other intangible assets and PP&E based on value-in-use calculations using a
discounted cash flow model. The cash flows are derived from forecasts over the remaining useful lives of the assets of the
CGUs, less an allocation of forecasted corporate costs. The estimated recoverable amount is sensitive to the discount rate
used for the discounted cash flow model as well as the expected future cash inflows. The key assumptions used to estimate
the recoverable amount for the different CGUs are further explained in Note 21.

For certain assets, Northland also uses fair value less cost to sell (FVLCS) method in which most recent market transactions
are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations
are corroborated by valuation multiples for similar transactions or other available fair value indicators. FVLCS approach is
most sensitive to EBITDA multiples.

Income taxes

Preparation of the Consolidated Financial Statements requires an estimate of income taxes in each of the jurisdictions in
which Northland operates. The process involves an estimate of Northland’s current tax exposure and an assessment of
temporary differences resulting from differing treatment of items such as depreciation and amortization for tax and
accounting purposes. These differences result in deferred tax assets and liabilities that are included in Northland’s
consolidated statements of financial position.

An assessment is also made to determine the likelihood that Northland’s deferred income tax assets will be recovered from
future taxable income.

Judgment is required to continually assess changing tax interpretations, regulations and legislation to ensure liabilities are
complete and to ensure assets, net of valuation allowances, are realizable. The impact of different interpretations and
applications could be material.

4. Acquisitions

4.1 Joint Venture in Polish Offshore Wind Development Project in Baltic Sea

On March 24, 2021, Northland completed its acquisition of a 49% interest in the Baltic Power offshore wind project in the
Baltic Sea for a total cash consideration of PLN 255 million ($82 million). In June 2021, Baltic Power secured a 25-year
Contract for Differences (“CfD”) from Poland’s Energy Regulatory Office, under the Polish Offshore Wind Act. The CfD is
subject to review and final approval from Polish authorities and the European Commission.

Baltic Power is structured as a standalone legal entity and Northland has interest in the net assets of Baltic Power.
Accordingly, Northland has classified its interest in Baltic power as a joint venture, accounted for under the equity method.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Additional purchase price commitments

Pursuant to a joint venture agreement, Northland has made additional purchase price commitments of €33 million ($49
million) to be funded over the next two years, of which €7 million ($11 million) was funded during 2021. These
commitments have been recognized within trade and other payables and provisions and other liabilities in Northland’s
consolidated statements of financial position.

The reconciliation between the summarized financial information to the carrying value of Northland’s investment in Baltic
Power as follows:

As at
Current assets (including cash and cash equivalents)

Non-current assets

Current liabilities

Net assets (100%)

Carrying value - Northland's share of net assets (49%)

Net loss for the period ending December 31, 2021 (100%)
Northland's share of net loss for the period ending December 31, 2021 (49%) (1)

(1) Included within other (income) expense on the consolidated statement of income (loss).

4.2 Spanish Renewables Acquisition

December 31, 2021
122,690
$

138,470

(1,508)

259,652

126,087

5,733

2,784

On August 11, 2021, Northland completed its previously announced acquisition of a Spanish operating portfolio of 33
onshore wind, solar photovoltaic, and concentrated solar renewable projects (the “Spanish acquisition”). The transaction
included the acquisition of 100% of the shares in 40 operating entities and 66.2% of the shares in one entity, and was
treated as a business combination under IFRS 3, Business Combinations. Total cash consideration transferred was
€348 million ($511 million) after certain working capital, net debt and other adjustments, and was funded from the net
proceeds of Northland’s common share equity offering completed in April 2021.

The fair value of the assets acquired and liabilities assumed as of the date of acquisition is as follows:
As at

August 11, 2021

Cash

Restricted cash

Trade and other receivables

Other current assets

Property, plant and equipment (Note 5)

Goodwill (Note 7)

Other long-term assets

Deferred tax asset

Trade and other payables

Facility-level loans and borrowings (Note 11)

Provisions and other liabilities

Deferred tax liability
Derivative liabilities

Total identifiable net assets acquired
Less: Non-controlling interests

Net assets acquired

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

90,154

7,262

44,472

4,011

1,573,274

161,010

6,418

43,266

(31,535)

(1,124,187)

(111,685)

(124,409)
(19,483)

518,568
(7,850)

510,718

The Spanish Renewables Acquisition’s Contribution to Northland’s Results

The Spanish acquisition’s results are consolidated in Northland’s financial results effective August 11, 2021. For the year
ended December 31, 2021, the Spanish acquisition contributed approximately $92 million and $37 million to Northland’s
consolidated sales and net income, respectively. If the Spanish acquisition had occurred on January 1, 2021, Northland
estimates that consolidated sales and net income for the year ended December 31, 2021 would have been $92 million
higher and $32 million lower, respectively. In determining these amounts, management has assumed that the fair value
adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition
had occurred on January 1, 2021. Transaction costs of approximately $7 million were included in “Development costs” in
the consolidated statements of income (loss). Refer to Onshore Renewable segment in Note 23 for details on the Spanish
acquisition’s assets and results.

4.3 Acquisition of EBSA Regulated Utility in 2020

In July 2020, Northland finalized the purchase price for its January 14, 2020 acquisition of a 99.2% interest in the Colombian
regulated power distribution utility, Empresa de Energía de Boyacá S.A E.S.P (“EBSA”). Pursuant to the share purchase
agreement, the purchase price had been subject to post-closing adjustments following a review of the final tariff resolution
by the Colombian regulator in respect of EBSA’s rate structure. In the fourth quarter, EBSA completed an offer to minority
shareholders to repurchase their shares of EBSA, as a result of which, Northland effectively now owns 99.4% of EBSA.

The total consideration for the acquisition was allocated to the fair value of the net assets acquired and liabilities assumed
as follows:

As at
Cash and restricted cash

Accounts receivable

Other current assets

Property, plant and equipment

Intangible assets

Goodwill

Other long-term assets

Accounts payable

Interest-bearing loans and borrowings (Note 11)

Deferred tax liability

Other long-term liabilities, including pension liability

Total identifiable net assets acquired

Less: Non-controlling interests

Final purchase consideration

Consideration transferred

January 14, 2020
17,440

42,100

14,842

614,587

10,915

540,427

1,562

(46,485)

(219,163)

(125,654)

(50,536)

800,035
1,594

798,441

The EBSA Acquisition purchase price was settled by transferring cash of $798 million, including the post-closing cash
settlement. The transferring cash was funded through net proceeds from the subscription receipts offering, proceeds drawn
under a fully committed bridge credit facility (“EBSA Bridge”) and Northland’s existing corporate credit facilities. The post-
closing cash settlement based on the final tariff resolution was determined to be $47 million and was paid in the third
quarter of 2020.

Identifiable Net Assets

The determination of the fair value of assets acquired and liabilities assumed is based on estimates and certain assumptions
with respect to the fair values of the assets acquired and liabilities assumed, except for deferred taxes, which are based on
the full amount required under IAS 12. Identifiable net assets decreased by $44 million mainly due to the decrease of
property, plant and equipment as a result of the final tariff resolution.

The purchase consideration in excess of the net identifiable assets acquired of $540 million was allocated to goodwill in the
consolidated statement of financial positions.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

EBSA’s Contribution to Northland’s Results

EBSA’s results are consolidated in Northland’s financial results effective January 14, 2020. For the year ended December 31,
2020, EBSA contributed $53 million to Northland’s consolidated operating income. Transaction costs of $7 million were
included in “development costs” in the consolidated statements of income (loss). Refer to utility segment in Note 23 for
details on EBSA’s assets and results.

5. Property, Plant and Equipment

The following table illustrates movements in Northland’s PP&E cost balance by category:

Construction
-in-progress

Plant and
operating
equipment

Land,
buildings and
leasehold
improvements

Lease ROU
asset

Other
equipment (1)

Total

Cost

January 1, 2020

Additions

Foreign exchange

Acquired (Note 4)
Provisions, disposals and other (2)
December 31, 2020

44,449 $ 8,205,472 $

1,999,675 $

72,648 $

31,389 $ 10,353,633

148,214

65,337

1,508

322,435

18,574

579,220

(264)

(58,786)

1,904

88,588

8,163

(968)

6,870

2,002

806

1,786

5,495

227,820

589

415,122

8,984

615,747

(2,720)

(60,952)

212,481 $ 9,113,678 $

2,097,362 $

84,112 $

43,737 $ 11,551,370

Additions

Transfer from CIP

Foreign exchange

442,190

(24,057)

35,322

22,344

811

1,551

(9,034)

(561,824)

(109,496)

Acquired (Note 4)
Provisions, disposals and other (2)

—

1,515,247

609

(7,864)

(108)

42,774

6,056

527,153

—

162

—

(4,374)

57,943

(1,162)

(4,733)

(689,461)

—

1,573,274

(1,597)

(10,122)

December 31, 2021

622,189 $ 10,116,903 $

1,990,204 $

179,293 $

43,625 $ 12,952,214

(1) Other equipment includes vehicles, meteorological towers, office equipment, furniture and fixtures, computers, and computer software.
(2) Provisions, disposals and other for 2021 includes disposal of assets and recognition of accruals net of amounts paid under the LTIP. Provisions,

disposals and other for 2020 includes an amount received relating to warranty bond for Nordsee (as reduction to cost), which is offset by additional
decommission liability for Gemini and recognition of accruals net of amounts paid under the LTIP.

As at December 31, 2021, construction-in-progress relates to the capitalization for La Lucha project in Mexico, Hai Long
project in Taiwan, Ball Hill and, Blue Stone projects in the United States.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

The following table illustrates movements in Northland’s PP&E accumulated depreciation balance by category:

Accumulated depreciation

January 1, 2020

Foreign exchange

Depreciation

Disposals and others

Construction
-in-progress

Plant and
operating
equipment

Land,
buildings and
leasehold
improvements

Lease ROU
asset

Other
equipment (1)

Total

— $ 1,813,520 $

437,830 $

7,131 $

22,633 $ 2,281,114

—

45,683

14,870

410,851

102,798

(9)

—

326

9,490

—

397

61,276

6,430

529,569

(539)

(548)

December 31, 2020

— $ 2,270,045 $

555,498 $

16,947 $

28,921 $ 2,871,411

Foreign exchange

Depreciation

Disposals and others

—

(91,514)

496,775

(1,622)

(23,201)

98,511

—

(351)

11,768

(1,123)

(701)

(115,767)

5,701

612,755

(2,651)

December 31, 2021

— $ 2,673,684 $

630,808 $

27,241 $

34,015 $ 3,365,748

Net book value

December 31, 2020

212,481

6,843,633

1,541,864

67,165

14,816

8,679,959

December 31, 2021
(1) Other equipment includes vehicles, meteorological towers, office equipment, furniture and fixtures, computers and computer software.

622,189 $ 7,443,219 $

1,359,396 $

152,052 $

9,610 $ 9,586,466

6. Contracts and Other Intangible Assets

The following table illustrates movements in Northland’s intangible asset contract balances:

Year ended December 31,

Cost
Total, beginning of year
Acquired (1)
Foreign exchange

Total, end of year

Accumulated Amortization
Total, beginning of year

Amortization

Foreign exchange

Total, end of year

Net book value

(1) Reflects contracts and intangibles acquired in various acquisitions.

2021

2020

817,057 $

758,609

23,278

(42,616)
797,719 $

24,732

33,716

817,057

283,886 $

237,559

23,284

(7,086)
300,084 $

43,361

2,966

283,886

497,635 $

533,171

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

7. Goodwill

Acquired goodwill was allocated to CGUs expected to benefit from the synergies of the acquisition. Changes in the goodwill
during the years ended December 31, 2021 and 2020 are summarized below:

Change in goodwill , year ended December 31,

2021

2020

Goodwill

Total, beginning of year

Acquisition of business (Note 4)

Foreign exchange

Total, end of year

Accumulated Impairment

Total, beginning of year

Impairment (Note 21)

Total, end of year

Net Book Value

786,806 $

161,010

(86,362)

861,454 $

283,042

540,427

(36,663)

786,806

(78,100) $

(78,100)

(29,981)

—

(108,081) $

(78,100)

753,373 $

708,706

During the year ended December 31, 2021, Northland wrote off $30 million of goodwill relating to the Iroquois Falls facility
as a result of the expiry of its PPA in December 2021, which was the primary economic driver of the facility. Refer to Note
21 for additional information on impairment.

8. Leases

8.1 Northland as Lessor

Spy Hill’s long-term PPA is classified as a finance lease arrangement, whereby Northland is considered to have leased the
Spy Hill facility to Saskatchewan Power Corporation (“SaskPower”) for 25 years ending in 2036. For the year ended
December 31, 2021, finance lease income of $12 million (2020 - $12 million) was recognized.

The amounts receivable under finance lease accounting are as follows:

As at

Minimum lease payments

Within one year

After one year but not more than five years

More than five years

Less: Unearned finance income

Total finance lease receivable
Current portion (Note 9.1)

Long-term

December 31, 2021

December 31, 2020

Minimum lease
payments

Present value of
minimum lease
payments

Minimum lease
payments

Present value of
minimum lease
payments

16,189 $

64,750

157,630

238,569 $

(102,371)

136,198 $

4,918 $

24,308

106,972
136,198 $
—
136,198 $
4,918

16,188 $

64,751

173,818

254,757 $

(114,034)

140,723 $

131,280

4,525

22,372

113,826

140,723

—

140,723

4,525

136,198

The interest rate inherent in the lease was fixed for the entire lease term at the lease inception date at approximately 8.4%
per annum. The current portion of finance lease receivable is included in “other current assets” on the consolidated
statements of financial position.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

8.2 Northland as Lessee

Northland and several of its subsidiaries have entered into leases for land with private and public landowners as well as
leases for buildings and operating equipment. The original terms of these leases range from one to 50 years.

The amount of the lease ROU asset and associated depreciation by type of underlying asset as at December 31, 2021 is as
follows:

As at January 1, 2020

33,168 $

276 $

19,905 $

12,168 $

Land

Vehicle

Equipment

Building

Acquired

Additions

Provisions, disposals and other

Depreciation expense

Foreign exchange

—

2,890

(2,622)

(35)

—

341

—

(203)

—

537

1,269

(3,683)

1,045

806

3,102

418

(2,982)

651

As at December 31, 2020

33,500 $

429 $

19,073 $

14,163 $

Acquired

Additions

Provisions, disposals and other

Depreciation expense

Foreign exchange

57,943

38,657

—

(4,326)

(1,903)

—

961

(39)

(348)

(91)

—

191

—

(4,788)

(1,113)

—

2,965

—

(2,306)

(916)

Total

65,517

806

6,870

1,786

(9,490)

1,676

67,165

57,943

42,774

(39)

(11,768)

(4,023)

As at December 31, 2021

123,871 $

912 $

13,363 $

13,906 $

152,052

The lease ROU asset balance is included in “property, plant and equipment” in the consolidated statements of financial
position.

Northland expenses payments for leases that are short-term (i.e. term of 12 months or less) and low value as well as
variable payments that are excluded from lease payments, such as usage-based fees or utilities charges. For the year ended
December 31, 2021, lease expense of $5 million (2020 - $5 million) was recognized in “general and administrative costs”
and “operating costs” in the consolidated statements of income (loss).

The following table illustrates movements in Northland’s lease liabilities:

Year ended December 31,

Total, beginning of the year

Acquired

Additions

Accretion of interest (Note 20)

Payments

Foreign exchange

Total, end of the year

Current (included in “trade and other payables”)

Non-current (included in “provision and other liabilities”)

2021

67,473 $

57,943

42,774

2,108

(15,363)

(3,953)

150,982 $

12,918

138,064 $

2020

67,008

464

6,626

1,840

(10,398)

1,933

67,473

9,730

57,743

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

9. Other Assets

9.1 Other current assets

Other current assets consist of the following:

As at December 31,
Natural gas inventory

Spare parts and other inventory

Prepaid expenses

Finance lease receivable (current portion) (Note 8.1)

Total

9.2 Long-term Deposits

Long-term deposits consist of the following:

As at December 31,
Decommissioning deposit

Other

Total

2021
664 $

35,945

36,423

4,918

77,950 $

2021
93,197 $

6,500

99,697 $

2020
384

23,753

37,717

4,525

66,379

2020
78,377

1,410

79,787

Gemini provided a letter of credit to the Dutch government to secure future decommissioning liability for Gemini. The letter
of credit is collateralized by a long-term deposit held by project lenders in a money market fund due in 2042 and earns
interest at a rate of 6-month EURIBOR plus 0.8%.

9.3 Other Assets

Other assets consist of the following:

As at December 31,
Government grant receivable

Receivable from Cochrane Solar First Nations Partner (Note 16)

Other

Total

2021
21,403 $
—

32,160
53,563 $

2020
42,703

32,453

17,586

92,742

In 2014, Nordsee One was awarded a grant under the European Commission’s NER 300 program. The total grant value of
€70 million was recorded as a reduction in property, plant and equipment upon completion of the project. Cash proceeds
from the grant are based on production volumes, and with the final cash payments expected in 2023 for production in
2022. As at December 31, 2021, Nordsee One had an accrued government grant relating to its construction, in amount of
$39 million (€27 million) (2020 - $63 million or €40 million), including $21 million (€15 million) in “other assets” and $18
million (€12 million) classified as current and included in “trade and other receivables”.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

10. Management of Capital

Northland’s strategy to finance general development efforts and investments in project entities utilizes internally generated
cash flows, equity issuances and corporate debt, notably corporate credit facility borrowings and convertible debentures.
Refer to Note 12 for additional information.

Northland defines capital that it manages as the aggregate of its equity, including non-controlling interests, interest-bearing
loans and borrowings, corporate credit facilities, convertible debentures and net proceeds from sale of assets. Northland’s
objectives when managing capital are to (i) ensure the stability and long-term sustainability of dividends to shareholders
and (ii) finance assets with non-recourse debt that is fully amortized over the term of the underlying sales arrangements.

As at December 31, 2021, total managed capital was $10.6 billion (2020 - $9.6 billion), comprising equity of $3.0 billion
(2020 - $2.0 billion), non-recourse facility-level loans and borrowings totaling $7.6 billion (2020 - $7.2 billion) and corporate
credit facilities totaling $0.0 billion (2020 - $0.4 billion). As of December 31, 2021, there were no convertible debentures
outstanding.

Northland exercises discretion in the amount of dividends declared to shareholders, the terms of its Dividend Reinvestment
Plan (DRIP), return of capital to shareholders, issuance of new Shares or preferred shares and the issuance or redemption of
convertible debentures.

Northland’s strategy has been to finance its operating entities (which are subsidiaries of Northland) primarily using non-
recourse debt at the subsidiary level. The interest rate on the debt at Northland’s power generation facilities is fixed (or
effectively fixed using interest rate swaps) and principal is fully repaid (amortized) generally over each facility’s PPA term.
This ensures a power generation facility is debt-free at the expiry of its original sales arrangement, after which its
economics become less predictable. For EBSA, the interest rate on the non-recourse debt is effectively fixed over the
lending period, but the principal is expected to be refinanced regularly due to the perpetual nature of its business.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

11. Facility-level Loans and Borrowings

Northland generally finances projects and its operating facilities through non-recourse, secured credit arrangements at the
subsidiary level. These loans and borrowing are summarized in the table below:

Kirkland Lake
EBSA (3)
New York Wind
Nordsee One (3)
Jardin (3)
Thorold (3)
Gemini (3)(5)
Mont Louis
Solar Phase I (3)(4)
North Battleford (3)
Deutsche Bucht (3)
Solar Phase II (4)
McLean's
Cochrane Solar (3)
Grand Bend
Spy Hill (3)
Spanish portfolio (6)
Weighted average and total

Current

Long-term

Rate (1)

Maturity

2.8 %

3.7 %

1.4 %

2.3 %

6.0 %

6.7 %

4.0 %

6.6 %

4.4 %

5.0 %

2.6 %

4.3 %

6.0 %

4.6 %

4.2 %

4.1 %

1.5% - 2.3%

3.6 %

2023 $
2024
2024
2026
2029
2030
2030
2031
2032
2032
2033
2034
2034
2035
2035
2036
2022-2041

Balance as at
Dec. 31, 2021 (2)

11,800 $

Balance as at
Dec. 31, 2020 (2)
11,800

518,096

129,624

678,059

73,223

227,137

2,206,204

63,723

162,121

539,032

1,125,771

116,026

106,587

159,084

297,469

124,584

1,053,674
7,592,214 $
677,378
6,914,836 $

449,052

n/a

897,478

80,141

245,820

2,596,382

68,690

175,114

566,720

1,343,573

92,948

112,771

154,531

313,065

129,115

n/a

7,237,200

608,446

6,628,754

(1) The weighted average all-in interest rates of the subsidiary borrowings.

(2) Excludes letters of credit secured by facility or project-level credit agreements.

(3) Net of transaction costs and/or fair value adjustments.

(4) Solar Phase I and Solar Phase II include the nine entities that comprise Solar.

(5) Includes the amount drawn on the senior debt and the third-party portion of subordinated debt.

(6) The weighted average interest rate and the weighted average remaining term to maturity for all the facility-level loans is 2.0% and 13 years,
respectively.

In July 2021, Northland restructured and upsized the senior debt at some of the Canadian solar facilities that resulted in a
one-time distribution of $29 million and a reduction of the weighted average all-in interest rate from 5.4% to 4.4%.

In August 2021, Northland restructured and upsized the senior debt at the Cochrane solar facilities, resulting in a one-time
distribution of $10 million and a reduction of the weighted average all-in interest rate from 5.4% to 4.4%.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

In December 2021, Northland restructured and upsized EBSA’s long-term, non-recourse financing (the “EBSA Facility”),
resulting in $84 million of incremental cash proceeds to Northland, net of closing costs. The aggregate amount of the
financing was upsized to $533 million, driven primarily by expected growth in EBSA’s EBITDA. The EBSA Facility is structured
as a $521 million term loan and a $12 million debt service reserve credit facility. The restructured facility is denominated in
Canadian dollars, and the principal amount is currently 100% hedged against the Colombian peso. The interest rate on the
debt facility, before foreign exchange hedging costs is 3.7%. In addition, the EBSA Facility now has longer term (3 years
compared to 2 years previously). The upsizing proceeds are expected provide Northland with additional liquidity to fund its
Capitalized Growth Projects. Under the terms of the EBSA Facility, management intends to execute recurring upsizings of
the debt, supported by continued growth in EBSA’s EBITDA.

As at December 31, 2021, $94 million of letters of credit secured by facility or project-level credit agreements was
outstanding (2020 - $29 million).

Changes in facility-level loans and borrowings and corporate credit facilities (see Note 12.1) are summarized in the table
below:

Year ended December 31, 2021

Total, beginning of the year

Acquired debt (Note 4.2)

Financings net of fees paid

Repayments
Other non-cash (1)
Foreign exchange

Facility-level loans
and borrowings

Corporate credit
facilities

7,237,200 $

1,124,187

518,481

(897,332)

24,044

(414,366)

351,402 $

—

371,315

(674,433)

(127)

(6,332)

Total, end of the year
(1) Other non-cash changes include amortization of fair value adjustments and amortization of deferred financings costs.

7,592,214 $

41,825 $

Year ended December 31, 2020

Total, beginning of the year

Acquired debt (Note 4.3)

Financings net of fees paid

Repayments
Other non-cash (1)
Foreign exchange

Facility-level loans
and borrowings

Corporate credit
facilities

6,893,227 $

171,384 $

219,163

571,140

(789,778)

34,097

309,351

—

1,551,131

(1,383,685)

3,042

9,530

Total, end of the year
(1) Other non-cash changes include amortization of fair value adjustments and amortization of deferred financings costs.

7,237,200 $

351,402 $

Total

7,588,602

1,124,187

889,796

(1,571,765)

23,917

(420,698)

7,634,039

Total

7,064,611

219,163

2,122,271

(2,173,463)

37,139

318,881

7,588,602

The estimated fair value of facility-level loans and borrowings and corporate credit facilities as at December 31, 2021 is $7.8
billion (2020 - $7.8 billion).

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

12. Corporate Credit Facilities

12.1 Corporate Credit Facilities

The corporate credit facilities are summarized in the table below:

Facility
size

Amount drawn
as at December
31, 2021

Outstanding
letters of
credit

Available
capacity

Maturity

Amount
drawn as at
December 31,
2020

$ 1,000,000 $

44,722 $

206,802 $

748,476

Sep. 2026 $

354,263

150,000

100,000

50,000

$ 1,300,000 $

—

44,722 $
2,897

41,825

143,765

6,235

Mar. 2023

50,801

49,199

Mar. 2022

39,367

10,633

n/a(1)

—

440,735 $

814,543

354,263
2,861

351,402

Sustainability linked loan (SLL)
syndicated revolving facility (2)
Bilateral letter of credit facility

Export credit agency backed
letter of credit facility
Export credit agency backed
letter of credit facility
Total
Less: deferred financing costs

Total, net

(1) The $50 million facility does not have a specified maturity date.

(2) The amount drawn on the syndicated revolving facility comprises $30 million USD converted to CAD at the period-end exchange rate, $nil CAD and

€5 million converted to CAD at the period-end exchange rate (December 31, 2020 - $234 million, $35 million and €14 million).

During the year ended December 31, 2021, Northland made net repayments of $303 million on the syndicated revolving
facility, with remaining movement in the period due to foreign exchange fluctuations. Repayments were primarily funded
by the proceeds from the equity offering completed in April 2021.

In July 2021, Northland entered into a new $50 million export credit agency backed corporate letter of credit facility to
support its global growth.

Amounts drawn under the syndicated revolving facility are collateralized by a debenture security and general security
agreement that constitutes a first-priority lien on all of the real property and present and future property and assets of
Northland.

12.2 Convertible Debentures

The 2020 Debentures had a maturity of June 30, 2020 and were convertible into Shares at a conversion price of $21.60 per
share at any time prior to the maturity date.

At issuance, Northland estimated the fair value of the embedded holder option as nominal, and as a result, the entire
amount of the Debentures was classified as a liability. The payment of convertible unsecured subordinated debenture
principal and interest was subordinated in right of payment to the prior payment of all senior indebtedness of Northland.

In the second quarter of 2020, Northland completed the early redemption of the 2020 Debentures. Holders converted
approximately $149 million of their 2020 Debentures into 6.9 million new common shares prior to the May 11, 2020,
redemption date. Northland redeemed the remaining approximately $2 million of the 2020 Debentures in cash. As at
December 31, 2021 and 2020, there are no Debentures outstanding.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

13. Provisions and Other Liabilities

13.1 Decommissioning Liabilities

Decommissioning liabilities are recognized for renewable facilities. A portion of Northland’s onshore wind and solar facilities
are located on lands leased from private and public landowners. Upon the expiration of the leases, Northland is obligated to
restore the leased lands to near to their original condition and remove all turbines, solar panels and equipment. Northland’s
obligations for decommissioning of its offshore wind facilities are based on the government regulations in the applicable
jurisdictions.

Northland expects to use its installed assets for an indefinite period. No decommissioning liabilities are recognized for utility
facilities and efficient natural gas facilities until the time Northland determines the facility will no longer be operated or
maintained and should be decommissioned. As at December 31, 2021 and December 31, 2020, no provision were
recognized related to efficient natural gas facilities.

Northland estimated the fair value of its total decommissioning liabilities to be $358 million (2020 - $365 million), based on
an estimated total future liability. A discount rate of -0.5% to 3.9% (2020 - 0.5% to 3.9%) and an inflation rate, where
applicable, of 2.0% (2020 - 2.0%) was used to calculate the fair value of the decommissioning liabilities.

The

following

table

reconciles

Northland’s

total

decommissioning

liabilities

activity:

Year ended December 31,
Total, beginning of year
Additions (1)
Accretion
Acquired (2)
Foreign exchange

Total, end of year

2021
364,573 $
153

4,292

11,377

(22,774)
357,621 $

2020
308,510

35,315

3,926

—

16,822

364,573

(1) Additions for 2020 primarily reflect an adjustment to the decommissioning liability at Gemini as a result of a change in discount rate.

(2) Related to the Spanish portfolio acquired on August 11, 2021.

13.2 Other Liabilities

As at December 31, 2021, provisions and other liabilities on the consolidated statements of financial position included $72
million payable by Nordsee One to the third-party partner in the wind facility under a shareholder loan arrangement (2020 -
$74 million). Under the shareholder loan arrangement, interest is accrued at an annual rate in the range of 10% to 11% and
repayments are made based on the partner’s share of distributable funds from operations.

As at December 31, 2021, provisions and other liabilities on the consolidated statements of financial position also include
deferred revenue (Band Adjustment) balance of $99 million (2020 - nil). The current portion Band Adjustments amounting
to $3 million (2020 - nil) is presented under trade and other payable on the consolidated statements of financial position.

14. Pension and Post-Employment Benefits

One of Northland’s facilities, EBSA, has a defined benefits pension plan (“pension plan”) which has been closed to new
members since 2010, and only a small portion of plan members remain active employees of EBSA. The pension plan
establishes the pension an employee will receive upon retirement based on factors such as employee age, years of service
and compensation levels when employed.

The accounting of pensions involves estimating the cost of the benefit that will be paid in a remote time horizon and
attributes this cost through the expected period in which each employee is expected to receive a pension in accordance
with the plan conditions; this requires the extensive use of estimates and assumptions on inflation, mortality, employee
turnover and discount rates, among other factors.

The liability recognized in the consolidated statements of financial position, in respect of the defined benefits pensions, is
the present value of the defined benefit obligation at December 31, 2021, together with the adjustments of actuarial gains
or losses not recognized. The actuarial losses and gains are recorded against the net equity in other comprehensive income,
in the period they arise.

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| 2021 ANNUAL REPORT |

The present value of the defined benefit obligation is calculated by independent actuaries by discounting the estimated
cash outflows using the interest rates yield curve of the Public Debt Securities of the Government of Colombia adjusted for
inflation for terms approximating the remaining pension obligations.

The movement of the pension obligations balances, as included within provision and other liabilities in the consolidated
statements of financial position, for the year ended December 31, 2021 was as follows:

Change in pension obligations, year ended December 31,

Total, beginning of year
Acquired

Interests net cost

Actuarial adjustments

Payments made directly by the Company

Foreign exchange

Total, end of year

15. Equity

15.1 Common Shares

2021

45,055 $
—

2,077

(6,405)

(3,223)

(6,828)
30,676 $

2020

—

48,591

2,453

1,450

(3,759)

(3,680)

45,055

Northland is authorized to issue an unlimited number of Shares. The change in Shares during 2021 and 2020 was as follows:

December 31, 2021

December 31, 2020

Shares outstanding, beginning of year

202,171,075 $

2,955,840

179,441,219 $

Amount

Shares issued under Equity offering

Conversion of subscription receipts

Conversion of debentures (Note 12.2)

Shares issued under the LTIP (Note 24)

Conversion of Class A shares

Shares issued under the DRIP
Change in deferred taxes (1)

22,500,500

949,597

—

21,967

—

2,189,209

—

911

—

88,973

10,141

—

14,289,000

6,896,136

—

1,000,000

544,720

—

Amount
2,428,594

—

340,147

148,908

—

14,615

21,979

1,597

Total common shares outstanding, end of year

226,882,751 $

4,005,462

202,171,075 $

2,955,840

(1) Relate to difference in treatment between tax and IFRS.

Dividend Reinvestment Plan

The DRIP provides shareholders the right to reinvest their dividends in Shares with a discount to the market price as defined
in the DRIP. Shares issued under the DRIP can be sourced from treasury or purchased on the secondary market at the
election of Northland’s Board of Directors. Northland’s Board of Directors has the discretion to alter the discount or source
of Shares issued under the DRIP.

Effective with the dividend paid on September 15, 2020, to shareholders of record on August 31, 2020, Northland changed
the discount rate applicable to its DRIP, whereby common shareholders may elect to reinvest their dividends in common
shares to 3% discount, from the previous 0% discount.

Share-based Compensation

Northland’s Long-Term Incentive Plan (LTIP) provides for a maximum of 3.1 million Shares to be reserved and available for
grant to employees of Northland and its subsidiaries. As at December 31, 2021, 1.2 million Shares remain available for
future issuance under the LTIP. Shares may be awarded based on development profits, which arise from new projects or
acquisitions (“Development LTIP”). The costs recognized for LTIP in the period depend on management’s best estimate of a
project’s expected development profit and expected timing of project milestones. Awards under the LTIP may be settled in
Shares or in cash, at the discretion of Northland’s Board of Directors.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Shares may also be awarded under the LTIP to recognize achievements or attract and retain executives (“Deferred Rights”).
Grants of Deferred Rights vest over a maximum of a three-year period, and the expected cost is expensed over the vesting
period.

For the year ended December 31, 2021, Northland expensed $2.2 million (2020 - $4.1 million) of costs under the LTIP. No
forfeitures are assumed to occur. The balance of accrued awards related to the Development LTIP is included in liabilities
since these awards are expected to be settled in cash. For the year ended December 31, 2021, Northland settled
$1.8 million of Development LTIP awards in cash related to development projects. Deferred Rights of $1.2 million were
settled in cash and $0.9 million in share issuance.

In addition to the LTIP, stock-based compensation in the form of Restricted Share Units (RSU) and Deferred Share Units
(DSU) may be granted by Northland to employees and directors. These awards are settled and paid in cash and accounted
for as a liability until paid.

Equity offering

In April 2021, Northland completed a bought deal equity offering for 22.5 million common shares for net proceeds of
$950 million.

15.2 Preferred Shares

Northland’s preferred shares balance contains Series 1, Series 2 and Series 3 Preferred Shares.

Series 1 and 2 Preferred Shares

In 2010, Northland issued 6.0 million Series 1 Preferred Shares at a price of $25.00 per share, for gross proceeds of $150
million. The annual dividend rate resets every five years at a rate equal to the then five-year Government of Canada bond
yield plus 2.80%. The holders of the Series 1 Preferred Shares are entitled to fixed cumulative dividends, payable quarterly,
as and when declared by the Board of Directors.

On August 31, 2020, Northland announced the fixed quarterly dividends on the Series 1 Preferred Shares will be payable at
an annual rate of 3.2% ($0.2001 per share per quarter) until September 29, 2025.

Holders of Series 1 Shares and the cumulative rate reset preferred shares, series 2 (“Series 2 Preferred Shares”) had the
right, at their option to convert all or part of their Series 1 Shares or Series 2 Shares, as applicable, on a one-for-one basis,
into shares of the other series, effective September 30, 2020. Consequently, Northland now has 4,762,246 Series 1
Preferred Shares and 1,237,754 Series 2 Preferred Shares outstanding.

The Series 2 Preferred Shares carry the same features as the Series 1 Preferred Shares, except that holders are entitled to
receive quarterly floating-rate cumulative dividends, as and when declared by the Board of Directors, at an annual rate
equal to the then three-month Government of Canada treasury bill yield plus 2.80% (2.80% as of December 31, 2020). The
holders of Series 2 Preferred Shares have the right to convert their shares into Series 1 Preferred Shares on September 30,
2025, and on September 30 of every fifth year thereafter.

As at December 31, 2021 there were 4,762,246 (2020 - 4,762,246) Series 1 Preferred Shares outstanding, representing
equity of $114 million (2020 - $114 million).

As at December 31, 2021 there were 1,237,754 (2020 - 1,237,754) Series 2 Preferred Shares outstanding, representing
equity of $31 million (2020 - $31 million).

Series 3 Preferred Shares

In 2012, Northland issued 4.8 million Series 3 Preferred Shares at a price of $25.00 per share, for gross proceeds of $120
million. The annual dividend rate resets every five years at a rate equal to the then five-year Government of Canada Bond
yield plus 3.46%. The holders of the Series 3 Preferred Shares are entitled to fixed cumulative dividends, payable quarterly,
as and when declared by the Board of Directors.

The holders of the Series 3 Preferred Shares have the right, at their option, to convert their shares into Series 4 Preferred
Shares on December 31, 2022, and on December 31 of every fifth year thereafter, subject to certain conditions.

The Series 4 Preferred Shares, if issued at subsequent conversion dates, will carry the same features as the Series 3
Preferred Shares, except that holders will be entitled to receive quarterly floating-rate cumulative dividends, as and when
declared by the Board of Directors at an annual rate equal to the then 90-day Government of Canada treasury bill yield plus
3.46%.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

As at December 31, 2021 and December 31, 2020, there were 4,800,000 Series 3 Preferred Shares outstanding,
representing equity of $116 million.

Preferred share dividends, excluding tax, were paid as follows:

Series 1

Series 2

Series 3

Total

15.3 Dividends

Dividends declared per Share and in aggregate were as follows:

Dividends declared per Share
Aggregate dividends declared

Dividends in cash
Dividends in shares (1)

Total

2021
3,811 $
904

6,096

2020
3,919

1,349

6,096

10,811 $

11,364

2021
1.20 $

175,966 $

88,234

264,200 $

2020
1.20

213,838

31,229

245,067

(1) In 2020, $2.6 million of dividends declared under the DRIP were sourced from the secondary market.

16. Non-controlling Interests

Non-controlling interests relate to the interests not owned by Northland. Subsidiaries with non-controlling interests that
are material to Northland’s consolidated financial statements include Gemini (40%), Nordsee One (15%) and CEEC (32%).
CEEC has voting control of Kirkland Lake but ownership interest of 8.8% as a result of non-voting ownership interest held by
third-parties.

Summarized financial information for subsidiaries with material non-controlling interests in the consolidated statements of
financial position (shown at 100% totals) are as follows:

As at December 31, 2021
Gemini

Nordsee One

CEEC
Other (2)
Total

As at December 31, 2020
Gemini

Nordsee One

CEEC
Other (2)
Total

Current assets (1)

Long-term assets

Current liabilities

Long-term liabilities

349,101 $

114,737

35,392

296,412

2,891,749 $

1,205,921

23,738

888,494

394,389 $

2,451,059

181,720

27,805

265,942

984,941

10,046

693,043

795,642 $

5,009,902 $

869,856 $

4,139,089

Current assets (1)

Long-term assets

Current liabilities

273,947 $

141,572

24,332

123,374

3,284,280 $

1,377,802

25,219

906,200

303,065 $

Long-term liabilities
2,757,878

191,984

7,996

85,310

836,831

10,924

707,758

563,225 $

5,593,501 $

588,355 $

4,313,391

(1) As at December 31, 2021, restricted cash of $47 million (2020 - $48 million) is included for Gemini, $29 million (2020 - $31 million) for Nordsee One

where the availability of funds is intended for debt repayments.

(2) Other includes subsidiaries with non-controlling interests that are not individually material to Northland’s consolidated financial statements,

including: McLean’s (50%), Grand Bend (50%), Cochrane Solar (37.5%), Energia (12%), EBSA (0.6%) and Spanish portfolio (1.5%).

As at December 31, 2021, Northland had an outstanding receivable balance of $nil from Cochrane Solar’s First Nations
partner (2020 - $35 million). This balance appears at a fair value of $nil (2020 - $35 million) on the consolidated statements
of financial position, including $nil (2020 - $3 million) classified as “trade and other receivables” and the remaining portion
as “other assets”.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

The change in material non-controlling interests during 2021 and 2020 is as follows:

As at January 1, 2020, as reported

Re-allocation of NCI

Gemini Nordsee One
201,627 $

47,085 $

CEEC
153,207 $

Other (2)
45,225 $

Total
447,144

(33,239)

(13,534)

(134,059)

(13,125)

(193,957)

As at January 1, 2020, as adjusted

168,388

33,551

19,148

32,100 $

253,187

Non-controlling interest acquired
Net income (loss) attributable (1), as adjusted
Dividends and distributions declared (1)
Allocation of other comprehensive income (loss), as

adjusted (1)

—

2,645

82,130

11,464

4,644

5,743

103,981

(103,065)

(16,165)

—

(18,753)

(137,983)

(9,265)

1,624

—

(4,312)

(11,953)

As at December 31, 2020

138,188 $

30,474 $

23,792 $

17,423 $

209,877

Non-controlling interest acquired (Note 4.2)
Net income (loss) attributable (1)
Dividends and distributions declared (1)
Allocation of other comprehensive income (loss) (1)
Disposal of non-controlling interests (3)

—

72,559

(73,988)

12,705

—

6,613

(4,296)

197

—

(1,718)

7,850

2,866

7,850

80,320

(2,706)

(16,728)

(97,718)

—

4,122

17,024

(8,521)

—

(8,521)

As at December 31, 2021

149,464 $

32,988 $

10,847 $

15,533 $

208,832

(1) Net income (loss), dividends and distributions, and other comprehensive income (loss) are shown at the respective non-controlling interest share.

(2) Other includes subsidiaries with non-controlling interests that are not material to Northland’s consolidated financial statements, including: McLean’s

(50%), Grand Bend (50%), Cochrane Solar (37.5%), Energia (12%), EBSA (0.6%) and Spanish portfolio (1.5%).

(3) Disposal of NCI relates to NPI’s purchase of NCI interest in one of the subsidiary of CEEC.

The re-allocation of non-controlling interests (“NCI”) and net income (loss) attributable to common shareholders in 2020
relates to the correction of historical net income allocated to NCI, which previously excluded down-stream inter-company
charges such as management fees and inter-company loan interest. Re-allocation of historical cumulative net income
resulted a decrease in carrying value of NCI and accumulated deficit by $194 million as of January 1, 2020.

The change in allocation increased net income (loss) attributable to common shareholders and decreased net income (loss)
attributable to NCI by $20 million for the year ended December 21, 2020. This resulted in the net income (loss) per share –
basic and diluted to increase from $1.76 and $1.75 per share, respectively, to $1.86 and $1.85 per share, respectively. The
change in allocation decreased OCI attributable to common shareholders and increased OCI attributable to NCI by
$4 million for the year ended December 21, 2020.

17. Financial Risk Management

17.1 Market Risk

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

(i) Interest rate risk

For the year ended December 31, 2021, if interest rates had been 100 basis points higher or lower with all other variables
held constant, income before income taxes from the change in fair value of the interest rate swaps prior to the application
of hedge accounting would have been $341 million higher or lower. This change would have had no impact on Northland’s
cash flows.

The counterparties to Northland’s interest rate derivative contracts are well-capitalized financial institutions with strong
credit ratings. See “Counterparty Risk” below.

(ii) Credit spread risk

(iii) Currency risk

Currency risk arises because the Canadian dollar equivalent of transactions, assets or liabilities denominated in foreign
currencies may vary due to changes in foreign exchange rates. Northland is exposed to changes in the Euro, U.S. dollar,
Colombian peso, Taiwan dollar, Polish Zloty, and to a lesser degree, Japanese Yen and Korean Won for the early stage
projects in those countries. Primary exposure to Northland results from the euro-denominated financial statements and
cash distributions at Gemini, Nordsee One, Deutsche Bucht and Spanish portfolio, and Colombian peso-denominated
financial statements and cash distributions from EBSA, and development spending at Hai Long. Management manages this
risk by hedging material net foreign currency cash flows to the extent practical and economical to minimize material cash
flow fluctuations.

Exchange rate gains and losses on the currency derivatives that have been recognized in OCI are recognized in net income in
the same period during which corresponding gains or losses arising from the translation of the consolidated financial
statements of the self-sustaining foreign operation are recognized in net income.

At December 31, 2021, if the Canadian dollar had been 5% higher or lower against the U.S. dollar with all other variables
held constant, income before taxes from the change in fair value of the U.S. dollar foreign exchange contracts prior to the
application of hedge accounting would have been $4 million higher or lower. If the Canadian dollar had been 5% higher or
lower against the euro with all other variables held constant, income before taxes from the change in fair value of the euro
foreign exchange contracts prior to the application of hedge accounting would have been $109 million lower or higher. If
the Canadian dollar had been 5% higher or lower against the Colombian peso with all other variables held constant, income
before taxes from the change in fair value of the Colombian peso foreign exchange contracts (used to effectively hedge
equity distribution from EBSA) would have been $19 million lower or higher.

The counterparties to Northland’s currency derivative contracts are well-capitalized financial institutions with strong credit
ratings. See “Counterparty Risk” below.

(iv) Commodity price risk

Northland manages this risk by: (i) entering into PPAs that provide a fixed price for all, or substantially all, electricity

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

production, provide a price linked to commodity prices or include pass-through of commodity costs to the off-taker; (ii)
entering into financial power and natural gas hedges to stabilize contractual economics, including natural gas costs and
electricity prices. Northland has entered into derivatives to stabilize the effect of changes in Dutch wholesale power prices.

17.2 Counterparty Risk

As at December 31, 2021, approximately 19.7% (2020 - 48.9%) of Northland’s consolidated trade and other receivables,
excluding third-party partner loan receivable, were receivable from creditworthy government-related entities.

In 2021, approximately 54.6% (2020 - 76.0%) of Northland’s consolidated sales were derived indirectly from the sale of
electricity to government-related entities. For electricity and other sales, Northland and its subsidiaries have not provided
allowance accounts and have not purchased credit derivatives to mitigate counterparty risk. All significant accounts
receivable amounts are current as at December 31, 2021.

The nature of Northland’s business and contractual arrangements, and the quality of its counterparties generally serves to
minimize counterparty risk.

17.3 Liquidity Risk

As at December 31, 2021, Northland and its subsidiaries were holding cash and cash equivalents of $674 million (2020 -
$435 million). including $25 million held corporately (2020 - $68 million), and had available borrowing capacity under the
syndicated revolving facility of $748 million.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

The contractual maturities of Northland’s financial liabilities at December 31, 2021 are as follows:

Derivative contracts
Euro foreign exchange contracts

Colombian peso foreign exchange contracts

U.S. dollar foreign exchange contracts
US-Euro Cross Currency Swap

US La Lucha interest rate swaps

Power financial swap

Loans and borrowings

2022

2023-2024

2025-2026

>2026

184,304 $

359,864 $

362,895 $

1,285,441

390,178

18,394

3,803

667

17,032

4,693

129,625

—

1,210

9,648

—

1,108

—

1,588

—

Interest-bearing loans and borrowings - principal

706,311

2,143,626

1,583,191

3,613,988

Interest-bearing loans and borrowings - interest, including
interest rate swaps

Corporate credit facilities, including interest

Leases

Total

275,186

479,953

442,788

476,663

178

54,059

104,374

44,887

95,275

—

129,197

1,650,017 $

3,233,171 $

2,530,144 $

5,506,877

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

18. Financial Instruments

18.1 Fair Value Measurement

The derivative financial instruments consist of the following:

The carrying values of Northland’s financial

instruments as at December 31, 2021 and 2020 are as follows:

As at December 31, 2021
Financial assets at amortized cost (1)
Financial assets at fair value through profit and loss (2)
Financial liabilities at fair value through profit and loss (2)
Financial liabilities at amortized cost (3)

Level 1

Level 2

Level 3

Total

829,323 $

672,766 $

— $

1,502,089

—

272,671

(488,289)

—

272,671

(488,289)

— $

(8,534,764) $

— $

(8,534,764)

As at December 31, 2020
Financial assets at amortized cost (1)
Financial assets at fair value through profit and loss (2)
Financial liabilities at fair value through profit and loss (2)
Financial liabilities at amortized cost (3)
(1) Includes cash and cash equivalents, restricted cash, trade and other receivables, finance lease receivable, long-term deposits and certain other assets.

(8,047,815) $

649,968 $

627,519 $

(616,118)

68,908

Level 3

Level 2

Level 1

— $

—

1,277,487

68,908

(8,047,815)

(616,118)

Total

(2) (2) Includes derivative financial instruments and financial assets at fair value through profit and loss consisting of a third-party partner loan (Note 16).

(3) Includes trade and other payables, dividends payable, interest-bearing loans and borrowings, corporate credit facilities, convertible debentures,

subscription receipts and other liabilities (excluding decommissioning liabilities).

Additional details of Northland’s income and expenses with respect to its financial instruments are as follows:

Year ended December 31,

Income (expense) on financial assets at amortized cost

Expense (income) on financial liabilities at amortized cost

Expense (income) on net financial liabilities at fair value through profit and loss

2021

18,451 $

341,696

2020

20,598

366,532

(116,621) $

(11,937)

18.2 Derivative Financial Instruments

The derivative financial instruments consist of the following:

As at December 31, 2021

Current
assets

Current
liabilities

Long-term
assets

Long-term
liabilities

Total

Derivatives designated for hedge accounting
Canadian dollar interest rate (IR) swaps
Euro IR swaps
Euro foreign exchange contracts
Colombian peso IR swaps
Colombian peso foreign exchange contracts

Derivatives not designated for hedge accounting

Canadian dollar IR swaps
U.S. dollar IR swaps
U.S. dollar foreign exchange contracts
Colombian peso IR swaps
Euro foreign exchange contracts
Euro IR swaps
Colombian peso foreign exchange contracts
Dutch put options
Power forward contracts

Total

19 $
—
4,902
—
1,185

(10,294) $
(72,240)
—
—
—

166 $
819
42,107
68
421

(27,210) $

(170,721)
(1,720)
—
—

—
—
626
96
14,946
—
16,435
2,442
83,461
124,112 $

(6,833)
(598)
(247)
—
—
(5,444)
—
—
(101,982)
(197,638) $

2,549
8,828
—
180
52,381
14,851
—
2,965
23,224
148,559 $

(41,643)
(10,449)
(897)
—
—
(5,714)
—
—
(32,297)
(290,651) $

(37,319)
(242,142)
45,289
68
1,606

(45,927)
(2,219)
(518)
276
67,327
3,693
16,435
5,407
(27,594)
(215,618)

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

As at December 31, 2020

Current
assets

Current
liabilities

Long-term
assets

Long-term
liabilities

Total

Derivatives designated for hedge accounting

Canadian dollar IR swaps
Euro IR swaps
Euro foreign exchange contracts
Colombian peso foreign exchange contracts
Power forward contracts

Derivatives not designated for hedge accounting

Canadian dollar IR swaps
U.S. dollar IR swaps
U.S. dollar foreign exchange contracts
Euro foreign exchange contracts
Cross-currency IR swaps
Colombian peso foreign exchange contracts
Gas forward contracts
Power forward contracts

Total

— $
—
1,461
—
—

—
—
57
6,955
—
—
2,011
165
10,649 $

(12,672) $
(88,709)
(3,607)
(424)
(7,448)

(31,112)
(544)
(702)
—
(7,698)
(86)
(14,515)
(10,993)
(178,510) $

— $
—
7,589
—
—

(50,166) $

(326,841)
(50,481)
(297)
(392)

—
2,845
—
12,280
—
—
124
—

22,838 $

—
(900)
—
(443)
—
(41)
(1,418)
(6,629)
(437,608) $

(62,838)
(415,550)
(45,038)
(721)
(7,840)

(31,112)
1,401
(645)
18,792
(7,698)
(127)
(13,798)
(17,457)
(582,631)

The change in derivative financial instruments for the year ended December 31, 2021 and 2020 is as follows:

Designated in hedge
relationships

Balance as at
Dec. 31, 2020
asset
(liability)

Changes in
fair value
recognized
in OCI (1)

Fair value
changes (2)

Fair value changes
on derivatives not
designated in
hedge
relationships (2)

Foreign
exchange
gain (loss)

Balance as at
Dec. 31, 2021
asset
(liability)

(93,950) $
1,401
(415,550)
—

(13,798)

(25,297)

—

(645)

(26,246)
(7,698)

21,567 $

—
111,666
245

—

5,355

—

71,658
—

3,952 $
—
26,845
—

—

867

—

18,628
—

(14,815) $
(3,620)
3,689
276

— $
—
34,901
(177)

13,798

—

(83,246)

(2,219)

(238,449)

344

—

(10,136)

1,617

(27,594)

5,407

127

48,576
7,698

—

—
—

5,407

(518)

112,616

—

(848)

3,705

(1,233)

16,562

(145)

18,041

(582,631) $

214,196 $

49,059 $

67,562 $ 36,196 $

(215,618)

Canadian dollar IR swaps
U.S. dollar IR swaps
Euro IR swaps
Colombian peso IR swap

Gas forward contracts

Power forward contracts

Dutch put options
U.S. dollar foreign exchange
contracts
Euro foreign exchange contracts
Cross-currency IR swaps
Colombian peso foreign exchange
contracts
Total

(1) Amounts recognized in “Change in fair value of hedged derivative contracts” in the consolidated statements of comprehensive income (loss),

representing the change in fair value recognized in OCI, net of amounts reclassified to the consolidated statements of income (loss) on settlement.

(2) Amounts recognized in “Fair value (gain) loss on derivative contracts” in the consolidated statements of income (loss). These amounts represent fair
value changes, net of realized gains and losses on settlements during the year ended December 31, 2021. Realized gains and losses are recorded in
“Finance costs, net” for interest rate contracts, “Foreign exchange (gain) loss” for foreign exchange contracts” and “Fair value (gain) loss on derivative
contracts” for power forward contracts.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Designated in hedge
relationships

Balance as at
Dec. 31, 2019
asset
(liability)

Changes in
fair value
recognized
in OCI (1)

Fair value
changes (2)

Fair value changes
on derivatives not
designated in
hedge
relationships (2)

Foreign
exchange
gain (loss)

Balance as at
Dec. 31, 2020
asset
(liability)

(65,730) $

(26,788) $

—
(370,208)
(27,155)
(707)

—
(72,103)
—
(6,507)

6,212 $
—
53,031
—
(750)

(7,644) $
1,401
—
13,357
(17,337)

— $
—
(26,270)
—
4

(93,950)
1,401
(415,550)
(13,798)
(25,297)

(361)

(946)

522

140

—

(645)

(3,204)

(21,849)

15,211

—

28,593

—

(671)

—

(125)

(16,404)

(7,698)

(28,645)

(26,246)

(7,698)

(848)

—

(438,772) $

(128,864) $

74,101 $

(62,830) $ (26,266) $

(582,631)

Canadian dollar IR swaps
U.S. dollar IR swaps
Euro IR swaps
Gas forward contracts
Power forward contracts
U.S. dollar foreign
exchange contracts
Euro foreign
exchange contracts
Cross-currency IR swaps
Colombian peso foreign exchange
contracts
Total

(1) Amounts recognized in “Change in fair value of hedged derivative contracts” in the consolidated statements of comprehensive income (loss),

representing the change in fair value recognized in OCI, net of amounts reclassified to the consolidated statements of income (loss) on settlement.

The objective of Northland’s hedges is to reduce volatility in its cash flow related to changes in foreign exchange, interest
rates and market prices for gas and power. The nature of the risks that Northland is exposed to and the related hedge
objectives did not change in the year ended December 31, 2021, with the exception of increased exposure to the
Colombian peso as a result of financing portion of the purchase price made for the EBSA Acquisition.

The effects of applying hedge accounting on Northland’s financial position and performance are described below.

(a) Foreign exchange risk

Foreign exchange forward contracts
Carrying amount (asset/(liability))

Notional amount - EUR

Notional amount - COP

Maturity date
Hedge ratio (1)
Change in discounted spot value of outstanding hedging instruments
since January 1

Change in value of hedged item used to determine hedge
effectiveness

Weighted average hedged rate for the year (including forward
points):

December 31, 2021

46,895 $

972,848

December 31, 2020
(45,759)

854,587

48,672,865,811

96,108,588,173

February 2022-August 2032

January 2021-August 2032

1:1

87,516 $

94,442 $

1:1

(10,593)

(79,827)

EUR foreign exchange forward contracts

COP foreign exchange forward contracts

€0.6121:CAD$1

COP$2880:CAD$1

€0.6153:CAD$1

COP$2,830:CAD$1

(1) The foreign exchange forward contracts are denominated in the same currency as the highly probable future payments (US$) and the net investment

in foreign operations; therefore, the hedge ratio is 1:1.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Foreign exchange hedge
reserve
Total, beginning of the
year 2020
Add: Costs of hedging
deferred during the year
in OCI

Add: Change in fair value
of hedging instrument
recognized in OCI for the
year (effective portion)(1)
Less: Re-classified to
profit and loss

Total, end of the year
2020

Add: Costs of hedging
deferred during the year
in OCI
Add: Change in fair value
of hedging instrument
recognized in OCI for the
year (effective portion)(1)
Less: Re-classified to
profit and loss

Euro contracts

Colombian peso contracts

Cost of
hedging

Forward
component

Cost of
hedging

Forward
component

U.S. dollar
contracts
Forward
component

Total foreign
exchange
hedge
reserve in AOCI

(45,330) $

(8,308) $

— $

946 $

(52,692)

80,828

—

(38)

—

(78,522)

—

(669)

(946)

(24,156)

—

11,342 $

(86,830) $

(2) $

(669) $

3,338

—

(760)

—

— $

—

80,790

(80,137)

(24,120)

(76,159)

2,578

—

96,259

—

4,891

—

101,150

(23,370)

—

(426)

—

(23,796)

Total, end of the year
2021
(1) The deferred tax applicable to the foreign exchange hedge reserve is a $10 million recovery, which has been recognized in OCI.

(1,188) $

(8,690) $

9,429 $

4,222 $

— $

3,773

The hedge ineffectiveness recognized in “fair value (gain) loss on derivative contracts” in the consolidated statements of
income (loss) related to foreign currency contracts (cash flow and net investment hedges) for the year ended December 31,
2021, was $2.5 million (2020 - $2 million).

(b) Interest rate risk

Interest rate swaps

December 31, 2021

December 31, 2020

Carrying amount (asset/(liability))

(279,393) $

Notional amount - CAD

Notional amount - EUR

Notional amount - COP

633,181

2,742,808

29,272,480

January 2022-March 2034

(478,388)

619,022

2,879,036

—

January 2021-June 2033

1:1

118,228 $

(131,569) $

1:1

(96,616)

101

Maturity date
Hedge ratio (1)
Change in fair value of outstanding hedging instruments since January 1 $

Change in value of hedged item used to determine hedge effectiveness
(1) The interest rate swaps mirror the interest rate of the debts; therefore, the hedge ratio is 1:1.

100

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

Interest rate hedge reserve

Total, beginning of the year 2020

Canadian
interest rate
swaps

Euro interest
rate swaps

Total interest rate
hedge reserve

(4,077) $

(234,407) $

(238,484)

Add: Change in fair value of hedging instrument recognized in OCI for
the year (effective portion)(1)
Less: Re-classified to profit and loss

(26,787)

(72,061)

(98,848)

—

Total, end of the year 2020

(30,864) $

(306,452) $

(337,316)

Add: Change in fair value of hedging instrument recognized in OCI for
the year (effective portion)(1)
Less: Re-classified to profit and loss

21,226

110,960

132,186

(2)

Total, end of the year 2021

(9,640) $

(195,474) $

(205,114)

(1) The deferred tax applicable to the interest rate hedge reserve is a $30 million recovery, which has been recognized in OCI.

The hedge ineffectiveness recognized in “fair value (gain) loss on derivative contracts” in the consolidated statements of
income (loss) related to interest rate contracts (cash flow hedges) for the year ended December 31, 2021 was $7 million
(2020 - $9 million).

Power forward contracts

Carrying amount (asset/(liability))

Notional amount - CAD

Notional amount - EUR

Maturity date

December 31, 2021

December 31, 2020

— $

—

(7,840)

6,719

10,822

January 2021-December
2021

Hedge ratio (1)
Change in fair value of outstanding hedging instruments since January 1 $

Change in value of hedged item used to determine hedge effectiveness $

1:1

7,232 $

(6,367) $

1:1

(7,231)

1,927

(1) The power financial swaps mirror the price and quantities of the electricity price exposure in the corresponding facility PPAs; therefore, the hedge

ratio is 1:1.

Power forward hedge reserve

Power forward contract

Total, beginning of the year 2020
Add: Change in fair value of hedging instrument recognized in OCI for the year (effective portion)(1)
Less: Re-classified to profit and loss

Total, end of the year 2020
Add: Change in fair value of hedging instrument recognized in OCI for the year (effective portion)(1)
Less: Re-classified to profit and loss

Total, end of the year 2021
(1) The deferred tax applicable to the power forward hedge reserve is a $0.3 million expense, which has been recognized in OCI.

(418)

(6,499)

(8)

(6,925)

6,911

—

The hedge ineffectiveness recognized in “fair value (gain) loss on derivative contracts” in the consolidated statements of
income (loss) related to power swap contracts (cash flow hedges) for the year ended December 31, 2021 was $0.1 million
(2020 - $1.0 million).

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

101

(d) Hedge ineffectiveness

The fair value of the hedged item used as the basis for recognizing hedge ineffectiveness for the year, by risk category, are:

Fair value of hedged items (hypothetical derivatives)
Cash flow hedge – interest rate risk

Cash flow hedge – electricity price risk

Net investment hedge – foreign currency risk

December 31, 2021

226,863 $

—
7,253 $

December 31, 2020
358,431

1,380

(87,189)

19. Net Income (Loss) per Share

The basic and diluted net income (loss) is calculated as follows:

Net income (loss) for the period attributable to common shareholders (Note 16)

Less: preferred share dividends, net (Note 15.2)

Net income (loss) attributable to common shareholders for basic earnings

Add back: convertible unsecured subordinated debentures interest and amortization

Net income (loss) attributable to common shareholders for diluted earnings

The basic and diluted share amounts are calculated as follows:

Weighted average number of Shares outstanding

Weighted average number of Class A shares

Weighted average number of Shares outstanding, basic

Effect of dilutive securities:

Convertible unsecured subordinated debentures

Year ended December 31,

2021

189,559 $

(10,811)

178,748 $

—

2020

381,076

(11,364)

369,712

1,995

178,748 $

371,707

Year ended December 31,

2021

2020

218,861,235

198,042,137

—

732,240

218,861,235

198,774,377

—

2,394,728

Weighted average number of Shares outstanding, diluted

218,861,235

201,169,105

20. Finance Costs

Net finance costs consist of the following:

Interest on debt, borrowings and bank fees

Amortization of deferred financing costs

Discount on provisions for decommissioning liabilities (Note 13.1)

Lease interest (Note 8.2)

Finance income

Finance costs, net

Year ended December 31,

2021
311,359 $

28,229

4,292
2,108

(3,571)
342,417 $

2020
327,850

36,842

3,926
1,840

(5,290)

365,168

For the year ended December 31, 2021, $2.6 million of finance costs (2020 - $1.9 million) incurred from project financing
related to facilities under construction were capitalized in construction-in-progress.

102

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

21. Impairment of Property, Plant and Equipment, Intangible Assets and Goodwill

Northland's impairment tests are performed either at the facility level, which represents a CGU, or at a group of CGUs for
which goodwill is allocated and monitored. PP&E, intangible assets and goodwill have been allocated to CGUs to determine
the carrying amount.

Except for EBSA, the recoverable amount of the CGUs is determined using the value-in-use method. The Value in use
calculation is based on the net cash flows, which are determined based on current business plans and budgets approved by
management. The calculation of value-in-use for all of the above CGUs is most sensitive to the following assumptions:

•

Growth rate of 2% - The rate is used to extrapolate CGU cash flow projections in the discounted cash flow approach.
The rate is based on readily available published industry research.

Discount rate - Pre-tax discount rates reflect the current market assessment of the risks specific to each CGU. The
discount rate was estimated based on the weighted average cost of capital for the industry. The rate was further
adjusted to reflect the market assessment of any risk specific to the CGU for which future estimates of cash flows have
not been adjusted.

The rates are as follows:

Pre-tax discount rates
Applicable to PPA cash flows:
Applicable to other cash flows (1):

(1) Other cash flows include post-PPA cash flows and utility cash flows.

October 1, 2021
6.5 %

8.5 %

October 1, 2020
6.2 %

7.0 % - 8.2 %

For EBSA, Fair value less cost to sell (FVLCS) method is used. In determining the recoverable amount through FVLCS, recent
market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is
used. These calculations are corroborated by valuation multiples for similar transactions or other available fair value
indicators. FVLCS approach is most sensitive to EBITDA multiple and the multiple assumed ranges from 10.5x - 11.0x.

Northland completed its annual comprehensive impairment assessment based on value-in-use estimates which derived
from the long-range forecasts and market values observed in the marketplace or FVLCS. Except Iroquois Falls which is
discussed below, Northland did not identify any impairments of goodwill or reversals of prior impairments as a result of this
review.

Iroquois Falls

During the year ended December 31, 2021, Northland wrote off $30 million of goodwill for the Iroquois Falls facility and
accelerated depreciation of Iroquois Falls’ property plant and equipment due to the expiry of its PPA in December 2021.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

103

22. Income Taxes

22.1 Tax Expense and Temporary Difference

The following table summarizes the tax expense reported in the consolidated statements of income (loss):

Year ended December 31,

Current taxes

Based on taxable income of current year

Tax on dividend payments

Total current taxation expense

Deferred taxes

Deferred tax on origination and reversal of temporary differences

Deferred tax due to changes in tax rates

Prior-year under (over) provision

Total deferred tax expense (recovery)

Total income tax expense (recovery)

The following table summarizes the tax expense reported directly in equity:

Year ended December 31,

Deferred taxes related to origination and reversal of temporary differences related to
financing fees

Deferred taxes related to change in fair value of hedged derivative contracts

Deferred taxes related to pension expense

Deferred taxes related to foreign exchange

Total income tax expense (recovery) in equity

The following table summarizes the reconciliation of Northland’s effective tax rate:

Year ended December 31,
Combined basic Canadian federal and provincial income tax rate

Income (loss) before income taxes

Income tax expense (recovery) based on statutory rate

Adjustment for non-deductible (taxable) expenses and incentives
Deferred tax expense (recovery) relating to changes in tax rates or change in legal
structure

Rate difference related to temporary differences in foreign jurisdictions

Manufacturing and processing rate reduction

Tax expense associated with payment of preferred share dividends

Benefit not recognized

Minority interest

Other

2021

2020

80,086 $

4,324

84,410 $

85,737

4,545

90,282

57,087 $
12,814

(959)
68,942 $

153,352 $

2021

(10,141) $

50,615

1,378

(21,302)

36,472

(11,344)

(399)

24,729

115,011

2020

(1,597)

(31,074)

(332)

(9,394)

20,550 $

(42,397)

2021

26.5 %

2020
26.5 %

423,231

112,137

(949)

12,814

5,617

(971)

4,324

40,262

(18,698)

(1,184)

600,068

159,018

(29,728)

(11,344)

4,835

2,693

4,546

7,222

(22,400)

169

Total income tax expense (recovery)

153,352

115,011

Northland, while resident in Canada, operates in a number of foreign jurisdictions. The enacted blended tax rates relevant
to the computation of tax expense (recovery) are: Canada 26.5% (26.5% - 2020), Germany 30.1% (29.2% - 2020),
Netherlands 25.8% (25.0% - 2020), Luxembourg 24.9% (24.9% - 2020), Mexico 30.0% (30.0% - 2020), Colombia 35.0% (32% -
2020), United States 26.1%, and Spain 25.0%. In September of 2021, the Colombian government introduced a tax reform to
increase the corporate income rate to 35.0% for 2022 and onwards.

104

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

2021

2020

The following table summarizes the components of the deferred tax asset and liability:

As at December 31,

Deductible temporary differences
Losses available for carryforward

Derivative financial instruments

Canadian renewable conservation expense

Financing fees

Tax credits

Interest available for carryforward

Other

Taxable temporary differences
Contracts

Fair value debt increments

Property, plant and equipment

19,980 $
42,807

19,357

37,304

1,228

43,294

6,874
170,844 $

115,192 $
3,148

522,519
640,859 $

The following table reconciles the opening and ending balance of Northland’s net deferred tax liability:

As at December 31,

Opening balance, net deferred tax liability
Tax liability recognized in business combination

Tax expense (recovery) recognized in income statement

Tax expense (recovery) in OCI

Effect of foreign exchange recognized in OCI

Tax expense (recovery) recognized in equity

Other

Ending net, deferred tax liability

2021
300,567 $

81,143

68,942

51,993

(21,302)

(10,141)

(1,187)
470,015 $

12,803

111,837

21,296

20,961

3,176

27,564

7,330

204,967

126,897

3,146

375,491
505,534

2020
192,226

125,654

24,729

(31,406)

(9,394)

(1,597)

355

300,567

Northland has recognized a deferred tax asset of $15.2 million (2020 - $60.4 million) for Gemini, in respect of tax attributes
available for carry forward. Management has assessed the probability of future taxable income arising within the available
carry forward period of these tax benefits and has concluded that it is probable that the benefit will be realized based on its
estimate of future cash flows.

The following temporary differences have not been recognized in Northland’s Consolidated Financial Statements:

Year ended December 31,

Non-capital losses carried forward

Fair value change in debt instrument

Non-deductible interest carried forward

Property, plant, and equipment

Other deductible temporary differences

Total deductible temporary differences

2021

76,658 $

84,590

119,844

18,856

2,718

2020

55,850

107,051

—

5,723

2,637

302,666 $

171,261

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

105

Northland has operating losses available for carry forward in Canada, Mexico, Spain and Germany, of $43.6 million, $15.8
million, $87.7 million and $0.4 million, which expire beginning in 2026.

The operating losses are expected to expire as follows:

2025 – 2028

2029 – 2033

2034 – 2038

2039 – 2041

Total

Canada

Germany

Mexico

Spain

13,002 $

13,053

12,958

4,541

43,554 $

433 $

—

2,527 $

13,313

—

433 $

15,840 $

—

87,657

22.2 Temporary Differences Associated with Northland Investments

The temporary difference associated with investments in Northland’s subsidiaries is $87 million (2020 - $79 million). A
deferred tax liability associated with these investments has not been recognized because Northland controls the timing of
the reversal and it is probable that the temporary difference will not reverse in the foreseeable future.

Northland periodically assesses its liabilities and contingencies for all tax years open to audit based upon the latest
information available. For those matters where it is probable that an adjustment will be made, Northland has recorded its
best estimate of these liabilities, including related interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to implementation of changes in tax laws. Although Northland believes it has adequately provided for
the probable outcome of these matters, future results may include favourable adjustments to these estimated tax liabilities
in the period the assessments are made or resolved or when the statute of limitation lapses. The final outcome of tax
examinations may result in a materially different outcome than assumed in the tax liabilities.

23. Operating Segment Information

Northland has identified operating segments as outlined below based on the nature of operations, asset class and
materiality. Northland analyzes the performance of its operating segments based on their operating income, which is
defined as sales less operating expenses.

Significant information for each segment for the consolidated statements of income (loss) is as follows:

Year ended
December 31, 2021

Offshore
wind

Efficient
Natural Gas

Onshore
renewable(4)

Utility

External sales

$ 1,107,236 $

433,554 $

299,325 $

225,349 $

Other (1)
27,791 $

Eliminations

Total

— $ 2,093,255

Inter-company sales
(1)

Total sales

Cost of sales

Operating costs
G&A costs (2)
Depreciation of PP&E
Other income (3)
Operating income

—

194,057

(194,057)

—

$ 1,107,236 $

433,554 $

299,325 $

225,349 $

221,848 $

(194,057) $ 2,093,255

—

123,533

—

173,742

51,483

45,532

68,923

57,137

21,037

—

9,173

695

2,323

7,138

126,014

354,868

97,345

118,461

32,353

—

(11,662)

—

9,728

(3,218)

—

213,493

327,894

145,343

612,755

(14,880)

569,453 $

172,160 $

133,009 $

59,798 $

68,287 $

(194,057) $

808,650

Finance costs, net
(1) Other external sales includes energy marketing activities. Other inter-segment sales include inter-company management fees, energy marketing

187,345 $

67,067 $

35,762 $

51,524 $

719 $

— $

342,417

activities and maintenance services, which are eliminated on consolidation.

(2) General and administrative costs includes development costs.

(3) Other income includes investment income and finance lease income.

(4) This include Spain and Canadian onshore Wind and Solar facilities.

106

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| 2021 ANNUAL REPORT |

Year ended
December 31, 2020

Offshore
wind

Efficient
Natural Gas

Onshore
renewable

External sales

$ 1,179,779 $

415,551 $

217,705 $

Utility
218,982 $

Other (1)
28,610 $

Eliminations

Total
— $ 2,060,627

Inter-company sales
(1)

Total sales

Cost of sales

Operating costs
G&A costs (2)
Depreciation of PP&E
Other income (3)
Operating income

—

183,245

(183,245)

—

$ 1,179,779 $

415,551 $

217,705 $

218,982 $

211,855 $

(183,245) $ 2,060,627

—

103,334

—

166,282

54,154

29,418

69,567

51,062

29,428

—

10,116

393

873

12,151

119,375

349,589

50,069

88,630

33,635

—

(12,023)

—

7,646

(3,285)

—

202,329

300,916

142,908

529,569

(15,308)

653,792 $

219,624 $

98,784 $

52,567 $

58,691 $

(183,245) $

900,213

Finance costs, net
(1) Other external sales includes energy marketing activities. Other inter-segment sales include inter-company management fees, energy marketing

214,847 $

53,901 $

57,139 $

29,780 $

9,501 $

— $

365,168

activities and maintenance services, which are eliminated on consolidation.

(2) General and administrative costs includes development costs.

(3) Other income includes investment income and finance lease income.

Significant information for each segment for the consolidated statements of financial position is as follows:

As at December 31, 2021

PP&E, net

Contracts and
other intangibles,
net

Goodwill (1)

Investment in
joint ventures

Offshore wind

5,166,638 $

411,482 $

— $

Efficient Natural Gas
Onshore renewable(2)

Utility

Other

Total

771,487

2,713,912

486,546

447,883

45,281

—

5,636

35,236

120,229

212,209

420,935

—

131,134

— $

—

Total Assets

6,222,659

1,261,107

3,284,149

1,004,008

1,105,408

9,586,466 $

497,635 $

753,373 $

131,134 $

12,877,331

(1) $30M of goodwill relating to Iroquois Falls facility was written off in Q1 2021.

(2) This include Spain and Canadian onshore Wind and Solar facilities.

As at December 31, 2020

PP&E, net

Contracts and
other intangibles,
net

Goodwill

Investment in
joint venture

Offshore wind

5,913,397 $

462,052 $

— $

Efficient Natural Gas

Onshore renewable

Utility

Other

Total

851,973

1,272,994

567,369

74,226

51,531

—

7,630

11,958

150,210

54,731

503,765

—

— $

—

1,759

Total Assets

7,139,292

1,371,760

1,411,351

1,178,569

298,498

8,679,959 $

533,171 $

708,706 $

1,759 $

11,399,470

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

107

Information on operations by geographic area is as follows:

Sales

Germany

Netherlands

Canada

Spain

Latin America

Total

Property, plant and equipment, net

As at
Germany (1)
Netherlands

Canada

Spain
Latin America

Total

(1) Includes PP&E related to non-operating corporate assets.

24. Related-party Disclosures

24.1 Compensation of Key Management Personnel

2021
534,490 $
572,746

666,759

92,310

226,950
2,093,255 $

2021
2,416,943 $
2,769,374

2,223,316

1,509,831

667,002
9,586,466 $

2020
582,198

597,581

661,703

—

219,145

2,060,627

2020
2,759,069

3,194,656

1,995,012

—
731,222

8,679,959

Remuneration of key management personnel, consisting of the Board of Directors and members of executive management,
expensed in the year ended December 31, 2021 and 2020 is outlined in the table below. In 2021, Northland granted Shares
to key management personnel to settle a part of share-based compensation. Share-based compensation is tied directly to
executive seniority and the success of development and construction projects as well as acquisition activities.

Year Ended December 31,

Salaries and short-term employee benefits

Share-based compensation - shares issued under the LTIP (Note 15.1)

Share-based compensation - cash component

Total

2021

8,593 $

911

3,225

12,729 $

2020

6,814

—

5,854

12,668

25. Litigation, Claims, Contingencies and Commitments

25.1 COVID-19

108

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

25.2 Warranty Settlement and Other Proceeds

In 2020, Nordsee One received proceeds from its turbine manufacturer, which filed for insolvency in 2019, to settle all
warranty obligations for the remaining term of the original service agreement. Under the terms of the settlement, Nordsee
One relinquished its rights to make further warranty claims against the manufacturer. Northland recognized the proceeds
as a reduction in “property, plant and equipment” in the consolidated statements of financial position.

25.3 Milestone Payments for Development Project Acquisitions

In the course of business, Northland enters into acquisition agreements that may result in Northland making additional
payments to the seller and/or directly to the development project previously acquired, upon the successful completion of
certain milestones. As at December 31, 2021, Northland’s best estimate of the future contingent payments are
approximately $143 million of contingent payments under its development projects arrangements, with a maximum of
$335 million. These contingent payments were not recognized in the consolidated statements of financial position.

| NORTHLAND POWER INC. |

| 2021 ANNUAL REPORT |

109

Corporate Information

Directors and Executive Officers
Of Northland Power Inc.

Directors

Mr. John W. Brace (Chair)

Ms. Linda L. Bertoldi

Dr. Marie Bountrogianni

Ms. Lisa Colnett

Mr. Kevin Glass

Mr. Russell Goodman

Mr. Keith Halbert

Ms. Helen Mallovy Hicks

Mr. Ian Pearce

Mr. Eckhardt Ruemmler

Executive Officers

Mr. Mike Crawley
President and Chief Executive Officer

Ms. Pauline Alimchandani
Chief Financial Officer

Ms. Wendy Franks
Executive Vice President, Strategy and
Investment Management

Mr. Morten Melin
Executive Vice President, Construction

Mr. David Povall
Executive Vice President, Development

Mr. Michael D. Shadbolt
Vice President and General Counsel

Ms. Rachel Stephenson
Chief People Officer

Ms. Tracy Robillard
Secretary

General Information

Registrar and Transfer Agent

Computershare Trust Company of Canada

100 University Avenue

Toronto, Ontario, Canada

M5J 2Y1

Attention: Equity Services

Common Shares and
Preferred Shares

Northland’s common shares and Series 1,
Series 2 and Series 3 preferred shares are
listed on the Toronto Stock Exchange and
trade under the symbols NPI, NPI.PR.A,
NPI.PR.B and NPI.PR.C, respectively.

Tax Considerations

Northland’s common shares, preferred
shares and convertible unsecured
subordinated debentures are qualified
investments for RRSPs and DPSPs under
the Income Tax Act (Canada).

Contact Information

Investor Relations

Mr. Wassem Khalil

Senior Director, Investor Relations and
Strategy

647-288-1019

investorrelations@northlandpower.com

Northland Power Inc.

30 St. Clair Avenue West

12th floor

Toronto, Ontario, Canada

M4V 3A1

416-962-6262

northlandpower.com

2021 ANNUAL REPORTNORTHLAND POWER INC.11030 St. Clair Avenue West

12th Floor,

Toronto, Ontario, Canada

M4V 3A1

northlandpower.com

investorrelations@northlandpower.com