Frequently Asked Questions

Distributions and their tax status
Prospects for profitable growth
Power generation industry considerations



Distributions and their tax status

Q: Where is there information on the tax treatment of the Fund’s distributions?
A: On the Tax Status page of this website.

Q: Are units in the Fund eligible for registered plans?
A: Yes, the trust units are qualified investments for trusts governed by registered retirement savings plans (RRSPs), registered education savings plans (RESPs), deferred profit-sharing plans (DPSPs) and registered retirement income funds (RRIFs) under the Canadian Income Tax Act. The investment is not considered foreign property. See Tax Status.

Q: Does the Fund have a distribution re-investment plan (DRIP)?
A: The Fund offers a DRIP that allows Unitholders to re-invest the distributions they receive in units of the Fund purchased on their behalf in the market. Additional information is available on the DRIP page of this website.

Q: Can I specify that my cash distributions be sent by cheque directly to my home address?
A: No, because units must be purchased through a licensed investment broker, and cash payments are made to Unitholders through the broker. Any directions regarding these payments should be discussed with your broker.



Prospects for profitable growth

Q: What are the Fund’s competitive advantages?
A: The Fund benefits from several competitive strengths within the independent power generation industry and within the income trust sector. Independent investment analysts and others have cited the following advantages:

  • The Fund sells an essential product, electricity, for which demand is growing, the price is firm and there is a need for new supply in many locations.
  • The Fund’s electricity sales are secured almost entirely under long-term power purchase agreements that, in combination with long-term fuel supply contracts, assure profitability. Governments and load-serving utilities where the Fund operates are encouraging electricity generation investment by signing new long-term power purchase agreements.
  • The Fund’s assets are strategically located, long-lasting, efficient and environment-friendly with predictable future requirements for maintenance and capital.
  • Northland Power Inc. (NPI), the parent company of the Fund’s Manager, has been an industry leader in developing and operating safe, clean, economical power projects since 1988. Its professionals are entrepreneurial and forward-looking while also being risk-averse.
  • As a developer of power projects, NPI is uniquely qualified to provide a knowledgeable and disciplined assessment of the risks and opportunities related to acquisitions and investments that the Fund may be considering.
  • The Fund’s relationship with NPI provides it with growth opportunities through participation in greenfield development projects, such as the Mont Miller wind project, which generally provide higher returns than acquisitions of existing projects.
  • The Fund’s low cost of capital allows it to compete effectively for assets that meet its investment objectives.

Q: What is the Fund’s strategy for profitable growth?
A: The Fund aims to deliver reliable distributions and competitive returns to Unitholders by owning dependable power projects that meet its investment objectives. The Fund intends to build on its existing base of high-quality, contracted generation facilities so as to increase its cash flow stream and the long-term value of its portfolio. The Fund’s strategy is to negotiate long-term power purchase agreements with creditworthy customers, as well as long-term fuel supply contracts, and to invest in highly efficient and environment-friendly power generation facilities. In the process, the Fund will seek to diversify its sources of revenue by investing in a variety of promising geographic areas and generation technologies. The Fund will leverage its Manager’s expertise in negotiating long-term sales and supply contracts, developing power generation solutions that meet the specific needs of customers, maximizing operating performance while minimizing risks, and maintaining a strong balance sheet to ensure access to favourably priced capital.



Power generation industry consideration

Q: How will the restructuring of the electric power market affect the Fund?
A: Ontario Electricity Financial Corporation continues to meet off-take obligations; however, power purchase agreement changes are required for the transition to the competitive market. Further information on deregulation can be found in the section of this website.

Q: Will high prices of natural gas affect the Fund’s distributions?
A: The Fund’s facilities have long-term gas contracts expiring from 2015 to 2017 that ensure the adequate supply of gas with price escalation relating, in part, to the electricity-selling price for Iroquois Falls contracts and to the Consumer Price Index for the Kingston CoGen contract. Increases in the selling price of electricity under the power purchase agreements are also indexed, effectively allowing natural gas cost increases under the contract to be reflected in higher electricity revenues. The price under gas supply agreements is also subject to renegotiation (“reopener”) at certain specified dates. Each reopener may result in the price going up or down, but by no more than 15% in any reopener year. If the reopener results in the gas price going up, Ontario Electricity Financial Corporation (OEFC) will pay Iroquois Falls Power Corp. (IFPC) approximately 50% of the additional cost of the gas. IFPC will pay OEFC approximately 40% of any savings resulting from the gas cost going down because of the price reopener. In addition, the contracts provide opportunities to further offset the reopeners through limited gas resale rights.