Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (September 2023)
43 slides from Capital Power's investor presentation, September 2023
Slide 1: Investor Presentation
Investor Presentation Avik Dey, President & CEO September 2023
Slide 2: Table of Contents
Table of Contents • Corporate profile Page 3 • Investment case for CPX 4 • Genesee 1&2 Repowering project 8 • Robust growth opportunities 11 • Strong positioning in the Alberta power market 21 • Executing on our financial strategy 24 • Value proposition 31 • Appendix 32 2
Slide 3: Powering a sustainable future for people and planet
Powering a sustainable future for people and planet Corporate Profile(1) Toronto Stock Exchange (TSX: CPX) Shares outstanding: ~117 million Market cap: ~$4.8 billion Trailing 12-month avg daily trading volume: 535K shares Dividend yield: ~5.9% 52-week low/high share price: ($39.16 / $51.83) Investme
Slide 4: Investment Case for CPX
Investment Case FOCUS ON RELIABLE POWER for CPX • Stable and growing cash flows from a contracted Reliable, affordable and sustainable power producer delivering and merchant power generation portfolio disciplined growth BALANCE SHEET STRENGTH • Investment-grade credit rating DISCIPLINED GROWTH • His
Slide 5: Growth-oriented North American energy transition company
Growth-oriented North American energy transition company • Capital Power builds, acquires and operates high-quality, utility-scale generation facilities (wind, solar, natural gas and coal) across North America • Committed to achieving net zero by 2045 via our strategic path – off coal in 2024, accel
Slide 6: North American footprint
North American footprint 29 operating facilities (~7,500 MW) Fuel split (by MW) Natural Gas / Coal 12% Renewables 20% Natural Gas 68% Projects under development • 224 MW renewable generation in Alberta (Halkirk 2) and North Carolina (Maple Leaf Solar) • 512 incremental MW from Genesee repowering • ~
Slide 7: Our strategy – Powering our future
Our strategy – Powering our future Delivering increasingly cleaner energy on the Pathway to Net Zero Acquire and/or optimize natural gas assets • Public and investor sentiment evolving on natural gas for reliability and affordability • Re-contracting proving out • Excellent opportunities in AESO (Al
Slide 8: Genesee 1&2 Repowering project
Genesee 1&2 Repowering project • Transition from dual-fuel to gas resulting in 58% Increase in generating capacity to 1,392 MW • 35% decrease in absolute annual emissions • 57% decrease in GHG intensity • Attractive proforma economics • Following completion, Genesee 1&2 will be the most efficient Na
Slide 9: Genesee 1&2 Repowering project
Genesee 1&2 Repowering project Project delivers long term value Project schedule • Extension of asset useful life and deliver • Revised commissioning timelines due to long-term cash flow growth construction delays • Improved performance and competitiveness • Heat rate efficiency delivers advantage S
Slide 10: Repositioning Genesee 1&2
Repositioning Genesee 1&2 Retired Capacity Asset (MW) Battle River 3 149 Keephills 1 395 Sundance 1 280 Sundance 2 280 Sundance 3 368 Sundance 4 406 Sundance 5* 406 Sundance 6** 401 Battle River 4** 155 Battle River 5** 385 Sheerness 1** 400 Sheerness 2** 400 Keephills 2** 395 Total 4,420 Retirement
Slide 11: Robust growth opportunities
Robust growth opportunities • Growth strategy aligns with our sustainability goals • Decarbonization is an immense opportunity for gas and renewables technologies • Strong renewable growth pipeline in Alberta and the United States with one project announced and another planned for 2023 11
Slide 12: Key trends and market drivers
Key trends and market drivers Key criteria we look for in energy markets that we invest in includes: Strong long-term fundamentals • Positive economic outlook underpinned by population growth and a trend of growing electricity demand • Opportunities for contracting and re-contracting assets Comm
Slide 13: Sources of adjusted EBITDA from growth since 2013
Sources of adjusted EBITDA(1) from growth since 2013 ($M) $900 $800 $700 $600 $500 $400 $300 $200 $100 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E Natural Gas Renewables 1) Adjusted EBITDA is averaged over the periods starting with the first full year of operations after commissioning
Slide 14: Our growth pipeline: 4,700 MW and growing
Our growth pipeline: 4,700 MW and growing Significant near-term growth opportunities in Western Canada, Ontario, North Carolina and MISO market 924 MW wind 2,486 MW solar 700 MW 295 MW gas 2,300 MWh battery storage Wind Solar Gas Battery Storage Solar + Battery Storage 14
Slide 15: Our midlife natural gas strategy in action
Our midlife natural gas strategy in action Acquire midlife gas Enhance value Re-contracting Leverage brownfield advantages Island Generation Accretive & contracted CT upgrades extended through 2026 Ontario facilities: Advantaged location Carbon mitigation Decatur renewed • Efficiency u
Slide 16: Natural gas critical to North American reliability
Natural gas critical to North American reliability Meeting peak demand in all market conditions 16
Slide 17: 5 successful Ontario projects adding ~350 MW
5 successful Ontario projects adding ~350 MW Contracts executed for all projects with Ontario IESO; COD targeted in 2025 Expedited Long-Term RFP ($655M cost) Project Contracted Term Capacity York Energy East Windsor Expansion (106 MW) 81 MW summer To 2040 (~15 years) Centre 100 MW winter 228 MW York
Slide 18: MISO: highly favourable market fundamentals
MISO: highly favourable market fundamentals MCV’s output will be even more critical in the mid-2020s Midland Shifting generation mix Cogeneration 1633 MW • Peak demand of ~12GW and population of ~10 million • Legacy energy production from coal • 5 GW of baseload retirements over the next 5 years • M
Slide 19: U.S. solar growth
U.S. solar growth North Carolina • Maple Leaf Solar – executed 25-year, fixed price renewable PPA with Duke Energy Progress for 100% of output • 73 MWac (92 MWdc) capacity with a cost of $219M and Hornet Solar (75 MW) expected COD in Q4/26 • 3 well-positioned solar projects (160 MW total) being bid
Slide 20: Genesee Carbon Capture Project
Genesee Carbon Capture Project Positive technical assessment complete • Pre-final investment decision (FID) work finalized with positive results including FEED study Commercial and financing progress • Productive discussions with government entities ongoing • Strong support for project to advance Al
Slide 21: Strong positioning in the Alberta power market
Strong positioning in the Alberta power market • New supply (thermal and renewables) under construction adds ~6,300 MW over the next few years • New renewables and efficient gas supply will displace less efficient thermal units • Demand expected to increase modestly year-over-year • Capital Power we
Slide 22: Alberta power market
Alberta power market Large volume of new capacity under construction MWs Under Construction 4500 • Currently ~36,000 MW of projects in the AESO 4000 Storage queue and AUC e-filing 3500 • ~1,800 MW belonging to Capital Power Other 3000 Suncor Cogen Wind • Close to 6,300 MW are under construction 2500
Slide 23: Alberta power pricing
Alberta power pricing Market progresses through supply-demand balance cycle Alberta Energy Market Prices - Third-Party Range 7x24 APP ($/MWh) 180 160 140 120 100 80 60 40 20 - 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 (2) Range Historical APP(1) Forwards as of Jul 06, 202
Slide 24: Executing on our financial strategy
Executing on our financial strategy • Strong and resilient cash flow generation funds growth capex and maintains investment grade credit rating • Strong track record of annual dividend increases with dividend growth guidance of 6% per year to 2025 • 5-year TSR of 123%(1) (trailing 5-year period endi
Slide 25: Stable financial strategy
Stable financial strategy Maintain Funding growth Maintain Deliver annual financial stability towards a net investment grade dividend growth zero future credit rating • Strong liquidity available • Internally generated • Credit metrics exceed • 6% annual dividend on $1B of credit facilities cash flo
Slide 26: Alberta commercial portfolio
Alberta commercial portfolio Reducing volatility and risk through hedging Power Hedged Volume GWh 2024 2025 2026 10,000 9,000 Power 8,000 Hedged volume (GWh) (3) 8,500 7,000 5,500 7,000 6,000 Weighted average hedged prices(1) ($/MWh) (3) Mid-$70s Low-$70s Low-$70s 5,000 4,000 Forward Alberta power p
Slide 27: Delivering a decade of dividend growth
Delivering a decade of dividend growth Annual dividend guidance of 6% per year to 2025 6% per year ~7% CAGR $2.46 $1.26 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E 1) Subject to market conditions, economic outlook, cash flow forecast, and Board approval at the time. 2) 2013 to
Slide 28: Cash flow and financing outlook
Cash flow and financing outlook(1) Strong cash flow to fund growth in 2023 Credit facilities / DCM Debt repayments $110M $90M(3) DRIP $20M $275M $965M (1) $965M AFFO Common $835M(2) dividends $600M Committed growth/ (3) enhancement capex Expected Sources Expected Uses 1) Figures represent financing
Slide 29: 2023 targets
2023 targets Exceeded committed capital for growth target Facility availability Sustaining capex ($M) Adjusted EBITDA ($M) AFFO ($M) 94% 94% $135 to $145 $1,455 to $1,515 $805 to $865 $73 $728 $361 Q2/23 YTD 2023T Q2/23 YTD 2023T Q2/23 YTD 2023T Q2/23 YTD 2023T Trending to be above the midpoints of
Slide 30: 2023 growth targets
2023 growth targets Continue progress on Genesee 1 and 2 Repowering project based on revised schedule (2024) and $1.35B budget Advance Genesee CCS project Continue progress on Halkirk 2 Wind project on time (Q4/24) and on budget ($274M) Announce investment decision on two renewable projects $600M Ta
Slide 31: Value proposition
Value proposition Delivering TSR Foundational Principles Operational Disciplined Strong Sustainability Excellence Growth Balance Sheet Delivering on Genesee 1&2 Repowering Project Priorities • Improved performance • Reduced emissions Continued execution of our proven midlife natural gas strategy • C
Slide 32: Appendix
Appendix • Alberta power market – supply • Alberta power market – fuel source breakdown • Credit rating metrics • Debt maturity schedule • Decarbonization approaches across our portfolio • Political and environmental regulations 32
Slide 33: Alberta power market
Alberta power market A market in transition Unit Additions and Retirements (MW) 4000 3000 2000 Storage Coal Dual Fuel 1000 Coal-to-Gas Cogen 0 Gas CCS Gas Other -1000 Solar Wind -2000 -3000 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Source: AESO actuals
Slide 34: Alberta power market
Alberta power market Gas provides the majority of electricity output 2022 Generation 2025 Generation 2030 Generation Other 3% Hydro 2% Other 1% Other 1% Hydro 2% Hydro 2% Solar 5% Solar 1% Solar 6% Converted Coal 12% Gas 3% Gas CCS 9% Converted Wind 22% Converted Gas 1% Gas 12% Gas 53% Wind 9% Gas 6
Slide 35: Financial stability and strength
Financial stability and strength Strong balance sheet and continued commitment to investment grade credit ratings On the back of a strong 2022, 2023 forecast to be BBB- / Stable a solid year with credit • Target FFO to Debt > 20% metrics above current • Target Debt to EBITDA < 4x ratings threshold B
Slide 36: Debt maturity profile
Debt maturity profile(1) Well spread-out debt maturities supported by long asset lives • Strong liquidity with $1B in sustainability linked credit facilities maturing in 2028 • Underlying on refinancings in 2024 – 2026 hedged well below current rates ($M) $600 $500 USD 65 $400 $160 $300 USD Private
Slide 37: Decarbonization approaches across our portfolio
Decarbonization approaches across our portfolio CCUS = Carbon Capture Utilization & Storage, DAC = Direct Air Capture, NBS = Nature Based Solution • Continue to work through the technical viability and economics of these approaches in the short term to enable their deployment in the medium to long t
Slide 38: Political and environmental regulations
Political and environmental regulations Government of Canada Confirmed Alberta, Ontario and B.C. will continue to implement their own carbon pricing systems for industrial emitters through 2030 (Nov 2022) Budget 2023 significant funding and programs to support investment across zero/low-emitting
Slide 39: Political and environmental regulations
Political and environmental regulations Alberta Amendments to TIER Regulation in effect Jan 1 in accordance with framework confirmed as part of 2022 Federal benchmark equivalence review (Jan 2023) “Alberta’s Emissions Reduction and Energy Development Plan” established 2050 carbon neutrality obje
Slide 40: Political and environmental regulations
Political and environmental regulations Ontario / British Columbia “Powering Ontario’s Growth” report sets out Ontario Government’s policy initiatives for long-term energy planning. Support for large-scale nuclear and SMRs, competitive procurement for renewables and storage, and recognition that n
Slide 41: Non-GAAP financial measures and ratios
Non-GAAP financial measures and ratios 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, gains or losses on disposals a
Slide 42: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform our electricity and other energy and carbon prices; shareholders and potential investors about management’s assessment of Capital Power’s future plans and performance; opera
Slide 43: Investor Relations
Investor Relations Katherine Perron (780) 392-5335 kperron@capitalpower.com 10423 101 Street NW 10th Floor Edmonton, Alberta Canada T5H 0E9 capitalpower.com 43
Capital Power — Investor Presentation (September 2023) on 6ix