Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (June 2019)
39 slides from Capital Power's investor presentation, June 2019
Slide 1: Delivering a Sustainable Future
Delivering a Sustainable Future Brian Vaasjo, President and CEO Bryan DeNeve, SVP Finance and CFO Investor Presentation June 2019 capitalpower.com
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 6,300 MWs of owned capacity including projects under construction and announced acquisition • Strong pipeline of contracted growth opportunities • Highly-contracted portfolio • Committed to investment grade credit rating • History of dividend growth wi
Slide 3: Adjusted EBITDA growth from new assets
Adjusted EBITDA growth from new assets(1-5) ($M) $600 Arlington Valley 2019 toll Goreway Arlington Valley $500 Whitla New Frontier $400 Decatur EnPower Waste Heat East Windsor $300 York Energy Bloom $200 Beaufort Macho K2 $100 Shepard PDN Halkirk $0 2012 2013 2014 2015 2016 2017 2018 2019T Quality G
Slide 4: Growing AFFO per share
Growing AFFO(1,3) per share 5-year CAGR of 12%(4) since 2014 $4.84 $4.46 $3.85 $3.58 $3.21 $3.02 $2.51 2014 2015 2016 2017 2018 2019T AFFO/share normalized² AFFO/share 1) Represents Adjusted FFO (2018 method), less the portion allocated to the non-controlling interest (calculated consistent with the
Slide 5: Dividend growth guidance extended to 2021
Dividend growth guidance extended to 2021 Annualized dividend $2.19 per share(1,2) $2.05 $1.92 $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019T 2020T 2021T Target long-term annual AFFO payout ratio of 45-55% Delivering consistent annual dividend growth
Slide 6: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) New Frontier Wind Bloom Wind Beaufort Solar Shepard Energy Centre of current generation Port Dover & Nanticoke Halkirk 2% portfolio is expected to Quality Wind retire in the next decade York Energy Macho Springs Keephills 3 East Windsor Avera
Slide 7: Alberta Power Market
Alberta Power Market • Robust outlook for power prices • Recent demand growth of 3-4%; outlook of 1-2% • Reasonable capacity market design capitalpower.com
Slide 8: New Alberta Government elected Apr 16/19
New Alberta Government elected Apr 16/19 Election Platform Short Term Medium Term (2019-20) (2021-23) Carbon Tax (TIER)(1) • Compliance price reduced • Neutral • Neutral from $30 to $20/tonne Renewables • Eliminate subsidies • Positive • Positive Power Market Design • Capacity market • Negative • Ne
Slide 9: Positive Alberta power market fundamentals
Positive Alberta power market fundamentals Alberta Load Growth(1) Alberta Load Growth(1) • Alberta continues to see strong demand growth • New summer peak record of 11,169 MW on August 10, 2018 • Older coal fired units have started to retire or mothball • Termination of 2,000 MW of PPAs have facilit
Slide 10: Portfolio optimization
Portfolio optimization Alberta commercial portfolio positions 2020 2021 2022 As of date March 31, 2019 The low hedged % on % sold forward(1) 24% 2% 2% the merchant position reflects our higher Contracted prices(2) ($/MWh) Low-$50 Low-$70(3) Mid-$50 fundamental power price view compared to current fo
Slide 11: Coal-to-gas conversion (dual-fuel capability)
Coal-to-gas conversion (dual-fuel capability) A potential staged approach to ensure maximal operational flexibility is maintained Increase 2 other units % of Genesee site capacity from natural gas to 100% dual-fuel Increase capability • Timing dependant on 1 unit to market pricing & 100% dual-fuel s
Slide 12: Capital Power is well positioned in Alberta
Capital Power is well positioned in Alberta Market certainty is returning Young High Advantaged Conversion Market Assets Availability Locations Optionality Knowledge • Competitive fixed and variable costs • High capture prices due to high availability and strategically located wind assets • Implemen
Slide 13: Growth Strategy
Growth Strategy • Strong renewable pipeline including 1,200 MW of U.S. wind development • Potential natural gas plant acquisitions • Growth target of $500M committed capital per year for contracted opportunities capitalpower.com
Slide 14: Overview of Goreway Power Station
Overview of Goreway Power Station Young, high-quality natural gas facility with excellent operating history • Capacity: 875 MW • Location: Brampton, Ontario within the GTA load centre on 21 hectares of land • Commercial Operations: June 2009 (~10 years old) • Equipment: Best in class gas-fired gener
Slide 15: Strategic acquisition of 875 MW contracted gas facility in Ontario
Strategic acquisition of 875 MW contracted gas facility in Ontario $977M acquisition materially increases contracted adjusted EBITDA and accretive to AFFO per share • Transaction: Agreement to acquire Goreway Power Station from Financial Projections JERA Co. Inc. and Toyota Tsusho Corporation for $3
Slide 16: Current projects under construction
Current projects under construction Additional 350 MWs of long-term contracted wind facilities to be added by Mar/20 2019 2020 2021 Whitla Wind Cardinal Point Wind (Alberta) (Illinois) • 201.6 MW (Phase 1) • 150 MW • 20-year PPA • 12-year PPA • $315-$325M(1) • $289-$301M • COD in Q4/19 • COD in Mar/
Slide 17: Visible pipeline of growth opportunities in targeted markets
Visible pipeline of growth opportunities in targeted markets >2,000 MW Potential wind developments Genesee Expansion Terrace Thermal CBEC Expansion Klo Wind Frederickson 2 Halkirk 2 Whitla 2 >3,500 MW Nolin Hills Whitla 1 KWCG Madoc Solar Potential gas developments Garrison Butte Tisch Mills YEC Exp
Slide 18: Financial
Financial • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year without accessing equity markets • Maintain investment grade credit rating capitalpower.com
Slide 19: AFFO growth and conservative payout supports dividend growth
AFFO(1,2) growth and conservative payout supports dividend growth Expect to generate ~$320M(3) in discretionary cash flow in 2019 ($M) $600 $500 $400 37% 44% Gross common dividends(4) $300 44% 41% Discretionary cash flow $200 49% 51% $100 $- (5) 2014 2015 2016 2017 2018 2019T Long-term AFFO payout r
Slide 20: AFFO for 2019
AFFO(1) for 2019 18% normalized increase driven by development and acquisitions $550 $25 $510 $500 $25 $17 $470 $65 ($20) ($40) $450 $397 $400 $350 $300 (2) 2018 AFFO New Facilities AB Uplift K2 Divestiture Current tax & Goreway 2019T AFFO Arlington - 2019 2019T AFFO other Acquisition toll (3) Norma
Slide 21: Cash flow and financing outlook
Cash flow and financing outlook(4) Sufficient funding for current growth projects 2019T Sources of cash flow ($M) Funds from operations(1) + off-coal compensation $645 Proceeds from disposal of K2 Wind $215 January Canadian MTN issuance $300 Subscription Receipts for common shares $150 Preferred Sha
Slide 22: Q1/19 performance versus 2019 annual targets
Q1/19 performance versus 2019 annual targets 2019 AFFO expected to be in the upper end of the range Facility availability Sustaining capex ($M) Adjusted EBITDA ($M) AFFO ($M) $485 to $460 to $870 to $535 $80 to $90 $510 $800 to $920 96% $850 95% $117 $202 $9 Q1/19 2019 Target Q1/19 2019 Target Q1/19
Slide 23: Sustainability and Investment Opportunity
Sustainability and Investment Opportunity capitalpower.com 23
Slide 24: Sustainability – creating responsible energy for tomorrow
Sustainability – creating responsible energy for tomorrow • 2/3 of generation capacity from natural gas and renewables with focused growth in these areas • Implementation of dual-fuel capability at coal facilities with eventual 100% coal to gas conversion Environment • World leading carbon reduction
Slide 25: Strategically evolving our portfolio
Strategically evolving our portfolio Generation Contracted North American AFFO per share(2) technology(1,2) capacity(1,2) footprint(1,2) 2014 33% Gas and renewables 58% Contracted 76% Alberta $2.51 2019 67% Gas and renewables 79% Contracted 51% Alberta $4.84(3) Renewables and Greater visibility Geog
Slide 26: Investment Opportunity
Investment Opportunity Delivering on or exceeding 2019 Targets • Goreway Power acquisition • Guiding above mid-point for AFFO financial target Proven track record and guidance for sustainable dividend growth • AFFO per share growth of 12% • 2013 to 2021 annualized dividend growth of 7% Excellent lon
Slide 27: Appendices
Appendices • Alberta portfolio optimization • Alberta’s coal fleet • DCF supports dividend growth • Credit rating metrics • Debt maturity schedule • Summary of assets • Projects under development/construction capitalpower.com
Slide 28: Maximizing the Alberta commodity portfolio
Maximizing the Alberta commodity portfolio Creating incremental value and stability through market expertise Average realized power prices(1) have exceeded spot power prices by 20% since the Company’s inception 10 years ago $125 $100 $75 $50 $25 $0 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/
Slide 29: Alberta’s coal fleet
Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in End of capacity 2019 coal life Coal to gas conversion Facility (MW) (yrs) (CLP)(1) Current Status Expectation PPA status Battle River 3 149 50 2019 Online Co-firing with gas Merchant Sundanc
Slide 30: Discretionary cash flow supports dividend growth target
Discretionary cash flow supports dividend growth target(1) $500M $50M $36M(2) 8.1% 7% AFFO/share Dividend Capital EBITDA AFFO Growth Growth AFFO growth from discretionary cash flow covers 7% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple and a capit
Slide 31: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook Within S&P financial criteria for current rating S&P BBB- / P-3 Stable Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) DBRS BBB(low) / Pfd-3 (low) Stable 20% 5.0 15% 4.0 • Strong liquidity from
Slide 32: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 US $65 $450 $160 $400 $300 $300 $300 $200 US $230 $100 $0 2020 2021 2022 2023 2024 2025 2026 Capital Markets CAD Private Placement USD Private Placement 1) Debt amounts as of March 31, 2019 exclude
Slide 33: Summary of assets
Summary of assets Alberta Alberta Commercial Contracted Clover Bar Clover Bar Genesee 1 Genesee 2 Genesee 3 Keephills 3 Joffre Energy Centre Landfill Halkirk Shepard Energy Centre Capacity 430 MW 430 MW 516 MW 516 MW 480 MW 243 MW 5 MW 150 MW 800 MW % owned / 100 / 100 100 / 100 50 / 100 50 / 0 40 /
Slide 34: Summary of assets
Summary of assets Ontario & British Columbia Contracted Island Quality 150 Mile Port Dover & Generation Wind Savona House Nanticoke Kingsbridge 1 York Energy East Windsor Goreway Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 400 MW 84 MW 875 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0 100 / 100
Slide 35: Summary of assets
Summary of assets U.S. Contracted Arlington New Frontier Roxboro Southport Macho Springs Beaufort Solar Decatur Bloom Wind Valley Wind Capacity 46 MW 88 MW 50 MW 15 MW 795 MW 178 MW 580 MW 99 MW % owned / 100 / 100 100 / 100 100 / 100 100 (sale & 100 / 100 100 / 100 100 / 100 100 / 100 operated leas
Slide 36: Projects under development / construction
Projects under development / construction Alberta Commercial Alberta Contracted U.S. Contracted Genesee 4&5 Whitla Wind Cardinal Point Wind Capacity Up to 1,060 MW 201.6 MW 150 MW % owned / operated 50 / 100 100 / 100 100 / 100 Location Warburg Medicine Hat McDonough / Warren Counties, Illinois Fuel
Slide 37: Non-GAAP financial measures
Non-GAAP financial measures The Company uses (i) earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from its joint venture interests, and gains or losses on disposals and unre
Slide 38: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to These statements are based on certain assumptions and analyses made by the Company in light of its inform the Company’s shareholders and potential investors about management’s experien
Slide 39: Common Shares Investor Relations
Common Shares Investor Relations • TSX Symbol: CPX Randy Mah • S&P/TSX Index Inclusions: Composite, Director, Investor Relations Canadian Dividend Aristocrats, Small Cap, (780) 392-5305 Capped Utilities rmah@capitalpower.com • Market Cap: $3.2 billion • Shares Outstanding: 107 million shares 10423 1