Northland Power (TSX:NPI) has set itself up to benefit from rising energy demand in 2025 and beyond. Its renewable assets span the globe as well as energy sources. With clean-burning natural gas, wind, and solar assets, Northland is ready for the challenge.
Here’s why you should buy Northland Power stock in 2025.
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Energy demand rising fast
It is widely expected that global energy demand will outpace supply for the foreseeable future. This is being driven by electrification, which is simply the process of replacing fossil fuel systems with electric ones. It’s also being driven by artificial intelligence and the rapid growth in data centres.
As far as Canada goes, the same trends are alive and well. In fact, it’s estimated that power demand will increase 18% from 2023 to 2032. Longer-term, there are even more aggressive forecasts for energy demand that have been put forward. For example, some forecasts are calling for a 75% increase in power demand in Ontario by 2050.
With this in mind, let’s move on to Northland Power and why I think this company is extremely well-positioned to benefit from this positive environment in 2025 and beyond.
In the first nine months of 2024, Northland already saw the positive effect of these bullish trends. For example, earnings before interest, taxes, and depreciation (EBITDA) increased 12% to $950 million. Also, free cash flow came in at $270 million or $1.05 per share.
Northland Power’s upcoming projects to boost cash flow significantly
Looking to the future, the company has three major projects that will enter commercial production in 2025 and 2026. The first project is Hai Long, Northland Power’s offshore wind project in Taiwan. This project is expecting the first power generation in the second quarter of 2025, with full commercial operations by 2027. It will be one of the largest offshore wind projects in Asia.
The second major project is Baltic Power, an offshore wind project in Poland. This project is expecting full commercial production in 2026. Lastly, the Oneida project, which is Northland Power’s Canadian battery energy storage facility, will be in operation this year.
All of these major projects have been on time and on budget. Together, they stand to contribute meaningfully to Northland’s earnings and cash flows starting this year.
Northland Power: Estimates and valuation
We can see the big jump flow through to earnings when we look at Northland Power’s earnings estimates. In 2024, analysts expect the company to generate earnings per share (EPS) of $0.98. In 2025, EPS is expected to increase 49% to $1.46, and in 2026, EPS is expected to increase an additional 34% to $1.96.
Finally, I’d like to take a look at Northland Power’s valuation, which is, I believe, quite attractive given the company’s expected growth as well as the very bullish environment that it finds itself in today. Northland Power stock trades at a mere 17 times this year’s expected earnings and 12 times next year’s expected earnings — quite a steal, in my view.
The bottom line
These days, everything seems to be lining up really well for Northland Power. With three major projects coming on stream in the next couple of years and the bullish energy demand outlook, there are plenty of catalysts to send Northland Power stock higher in 2025 and beyond.
