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A wind farm in Pincher Creek, Alberta is shown in this 2010 file photo. The pop in Northland’s share price reflects investor interest in companies that can deliver dividend increases and keep expanding their business.TODD KOROL/Reuters

Just more than a year ago, chief executive John Brace had to hit the pause button on growth initiatives at Northland Power Inc., one of the country's largest renewable-power companies: Its board of directors decided to launch a strategic review in July, 2016, a process that was widely expected to see the $4-billion company sold to a rival or pension fund. Chinese power producers were reported to be kicking tires.

Mr. Brace supported the decision to step back and look at Northland's options, saying on Friday in an interview: "It's always important to ask: How can we do things better?" But the veteran engineer, who has been with Northland for 29 years, said: "The review meant we had to pause on a number of exciting development projects."

For 13 months, a small team of Northland executives fielded offers and weighed the company's future. Bay Street's view of the company shifted: Hedge funds bought up stock in anticipation of a takeover and analysts started valuing Northland as a target, not a going concern. The CEO kept the rank-and-file focused on completing existing projects, including building three major wind farms in Europe, one of which carries a $1.9-billion price tag. But looking back, Mr. Brace admits the potential sale of the company "was always on my mind."

On Aug. 9, Northland ended the review with an unexpected announcement: The board endorsed staying independent and the company took down the "For Sale" sign. No potential buyer came forward with a compelling offer.

Normally, if a takeover target fails to find a buyer, the stock price takes a beating, as the hedge funds all head for the exits. However, Northland's share price jumped 10 per cent on news the review was done, as the company also announced strong financial results, with quarterly profit that more than doubled from the previous year to $62-million. In a report, analyst Jeremy Rosenfield at Industrial Alliance Securities Inc., summed up the mood by saying: "Notwithstanding the potential for share price turbulence from the strategic update, we believe its end will allow investors to refocus on Northland's underlying fundamentals."

The pop in Northland's share price reflects investor interest in companies that can deliver dividend increases – the company is expected to boost its distribution to shareholders later this year – and keep expanding their business. While a takeover would have provided a one-time payday, Desjardins analyst Bill Cabel said the renewable-energy company can create significant wealth for years to come by developing green-power facilities. Mr. Cabel estimates that simply finishing work on those three large European wind farms over the past 13 months added in excess of $500-million to Northland's market capitalization.

As Northland shifts from pause to play, Mr. Brace said the company is moving forward with up 6,000 megawatts of renewable-energy projects – to put that in perspective, Ontario's massive government-owned hydroelectric stations at Niagara Falls generate 2,800 megawatts of electricity. This pipeline is found in markets where Northland is already operating; Europe, Canada, Mexico and Taiwan. With the review complete, Mr. Brace said one of his priorities is breaking into the world's largest power market by "finding an entry point into offshore wind projects in the United States."

While Mr. Brace declined to say when and where he plans to expand in the United States, the company is already adding experience in American markets. Northland recently landed a new chief operations officer, Troy Patton, who starts later this month and has 20 years of experience in U.S. wind farms, including senior roles at General Electric, a major manufacturer of wind turbines.

As Northland looks at taking on projects in the United States and the regions where it already operates, the CEO said the company can shoulder developments that cost up to $2-billion. Mr. Brace said one reason the strategic review was launched 13 months ago was to ensure Northland had the best possible access to the cash needed to build large, expensive power facilities that take years to complete. Coming out of the process, Mr. Brace said: "We've learned that if we can find good projects, we have no issues raising capital."

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The Canadian Press

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+2.62%22.35

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