Capstone Infrastructure Corp · TSX:CSE.PR.A
Capstone Infrastructure — Q3 2015 Earnings Presentation
26 slides from Capstone Infrastructure's earnings presentation, Nov 10, 2015
Slide 1: Q3 2015 Results Presentation
Essential Q3 2015 Results Presentation November 10, 2015
Slide 2: Notice to Readers
Notice to Readers This document is being distributed on a confidential basis by Capstone Infrastructure Corporation (“Capstone” or the “Corporation”). References to “we” “us”, “our” and similar expressions are to Capstone. This document is an outline of matters for discussion only and no representat
Slide 3: Q3 Highlights
Q3 Highlights Reached operational milestones on several fronts ► Two wind projects commenced construction: ► 10-MW Grey Highlands ZEP week of Sept 7 ► 18-MW Ganaraska week of Sept 18 ► Dispatched Cardinal on 28 days ► Lower resources at wind and hydro assets ► Overall tracking to plan ► Post quarter
Slide 4: Q3 2015 Snapshot
Q3 2015 Snapshot Performance In Line with Management Expectations Revenue Adjusted EBITDA1 AFFO1 350 -21.3% -25.0% -75.0% 300 120 40 250 100 35 In $ millions In $ millions 200 30 In $ millions 80 -19.2% -17.1% 25 -63.8% 150 60 20 100 40 15 10 50 20 5 0 0 0 Q3 2014 Q3 2015 YTD 2014 YTD 2015 Q3 2014 Q
Slide 5: Q3 Financial Performance
Q3 Financial Performance In millions of Canadian dollars Quarter Ended Sept 30 Variance Nine Months Ended Sept 30 Variance or on a per share basis unless otherwise noted 2015 2014 (%) 2015 2014 % Revenue 84.1 104.1 (19.2) 255.8 325.0 (21.3) Net income 5.0 6.8 (26.6) 4.9 34.7 (85.9) Adjusted EBITDA1,
Slide 6: Financial Overview: Revenue
Financial Overview Revenue Drivers of Revenue Variance 350 -21.3% 300 250 200 In $ millions 150 -19.2% ► New Cardinal contract 100 ► Additional factors: 50 ► Lower production at wind and hydro assets ► Impact of AMP6 rates at Bristol Water 0 Q3 2014 Q3 2015 YTD 2014 YTD 2015 ► Reduced power pool pri
Slide 7: Adjusted EBITDA
Adjusted EBITDA1 Variance in AFFO Drivers of Adjusted EBITDA Variance Q3 2015 Adjusted EBITDA by Business2 ► Factors affecting 120 -25.0% revenue impacted AEBITDA 100 ► Helped by contributions from 80 new wind projects: ‒ Skyway 8 60 In $ millions -17.1% ‒ Saint- Q3 2015 Adjusted EBITDA by Geography
Slide 8: Adjusted Funds from Operations
Adjusted Funds from Operations1 Drivers of AFFO Variance Q3 2015 AFFO by Business2 ► Primarily related to 40 -75.0% lower Adjusted EBITDA factors in 35 the power segment 30 ► Opted to defer 25 dividend from Bristol Water In $ millions 20 ► Pending dividend 15 from Goulais Q3 2015 AFFO by Geography2
Slide 9: Financial Overview: Expenses
Financial Overview Expenses Drivers of Expense Variance 180 -19.9% 160 140 120 100 In $ millions 80 -18.3% 60 ► Reduced expenses from lower production-related costs at Cardinal 40 ► Lower administrative expenses 20 0 Q3 2014 Q3 2015 YTD YTD 2014 2015 9
Slide 10: Steady Organic Growth
Steady Organic Growth Broke ground on next phase of wind projects ► Focus on building out wind pipeline ► Construction has commenced on three projects ‒ Grey Highlands ZEP 10 MW (week of Sept 7) ‒ Ganaraska 18 MW (week of Sept 21) ‒ Grey Highlands Clean 18 MW (week of Oct 19) ‒ Settlers Landing 10 M
Slide 11: Bristol Water CMA Conclusion
Bristol Water CMA Conclusion Made important gains over Ofwat plan ► Final determination published on Oct 6, 2015 ► Net improvement of £40M through higher operating expenses and scope reductions ► Modest increase in WACC ► Affirmed small company premium, embedded debt costs and removed “customer bene
Slide 12: Bristol Water CMA FD vs Ofwat FD
Bristol Water CMA FD vs Ofwat FD Significant Improvements Item Ofwat FD CMA FD WACC 3.60% 3.67% Opex £188m £218m Maintenance Capex £130m £122m Enhancement Capex1 £91m £89m Menu Revenue Penalty £17m £0m PAYG Rate 55% 55% Inclusion of Small No Yes Company Premium Company Specific No Yes Embedded Cost
Slide 13: AMP6 Plan
AMP6 Plan Substantial Rate Base Growth Continues The CMA Decision Results in Substantial Rate Base Growth With a Corresponding Increase in Equity Value RCV Growth AMP 5-6 AMP6: 34% £600 Expected Growth AMP5: 52% £500 Growth £400 £300 £200 £100 £0 2010A 2015A 2020F Figures in £m 2010A 2015A 2020F RCV
Slide 14: Cash Resources
Cash Resources As at Sept 30 As at Dec 31 (in millions of Canadian dollars unless otherwise noted) 2015 2014 Power 28.8 36.6 Utilities- Water 13.0 13.3 Corporate 3.4 8.9 Unrestricted cash & cash equivalents 41.2 58.8 Less: cash with access limitations Power (15.2) (18.2) Utilities – Water1 (13.0) (1
Slide 15: Debt Profile
Debt Profile Capital structure aligned to cash flow profile of businesses Long-Term Debt Maturity Profile In Compliance with all Covenants1 Covenant Sept 30, 2015 Amherstburg DSCR Min 1.20x 1.70x Hydros Senior Bonds – DSCR Min 1.20x 1.58x Subordinated bonds - DSCR Min 1.05x 1.51x Erie Shores DSCR Mi
Slide 16: 2015 Outlook
2015 Outlook1 ► Adjusted EBITDA in 2015 expected to be between $115M to $125M, reflecting: • Lower contribution from Cardinal; • Reduced power pool rates in Alberta; • Bristol Water operates under Ofwat’s Dec 2014 final determination between Q2 and Q4; • A return to normal annual dividends from Värm
Slide 17: Priorities in 2015
Priorities in 2015 Secured improved outcome at Bristol Water ► CMA final determination contained important gains over Ofwat plan ► Dividends to Capstone will be in line with expectations contribute to return to target payout ratio Pursue Growth Initiatives ► Completed two new wind facilities (net 24
Slide 18: Solid Fundamentals
Solid Fundamentals High quality, growing diversified portfolio Solid financial management All near-term projects have reached COD and next phase projects have begun construction Experienced team with strong relationships across the infrastructure spectrum 18
Slide 19: Appendix
CAPSTONE INFRASTRUCTURE
Slide 20: Power Segment Performance: Seasonality
Power Segment Performance Seasonality Actual Average long-term production (GWh) (1) Q3 2015 Type PPA Expiry Q1 Q2 Q3 Q4(2) Annual Wind(3) 2020 - 2037 93.3 165.5 129.3 102.4 145.7 542.9 Biomass(3) 2029 46.7 49.8 45.5 50.0 49.1 194.4 Hydro 2017 - 2042 23.5 31.4 56.3 29.2 41.6 158.5 Solar 2031 12.9 7.2
Slide 21: Power Segment Performance
Power Segment Performance For the quarter ended Sept 30, 2015 (in millions of Canadian dollars Gas Wind1 Biomass1 Hydro Solar Development2 Total unless otherwise noted) Power generated (GWh) 48.1 93.3 46.7 23.5 12.9 n/a 224.5 Capacity factor (%) 30.1 18.3 87.3 29.8 29.1 n/a n.m.f. Availability (%) 1
Slide 22: Utilities Segment Performance: Bristol Water
Utilities Segment Performance Bristol Water Quarter Ended Sept 30 Variance (in millions of Canadian dollars unless otherwise noted) 2015 2014 (%) Water supplied (megalitres) 21,347 21,745 (1.8) Revenue 57.1 61.2 (6.7) Adjusted EBITDA before non-controlling interest 27.0 31.2 (13.5) Adjusted EBITDA 1
Slide 23: Utilities Segment Performance: Värmevärden
Utilities Segment Performance Värmevärden Quarter Ended Sept 30 Variance (in millions of Canadian dollars unless otherwise noted) 2015 2014 (%) Heat production (GWh) 117 126 (7.1) Interest income 0.7 0.7 Adjusted EBITDA & AFFO1 0.7 0.7 1 – Värmevärden’s contribution to Capstone’s AFFO consists of in
Slide 24: Non-GAAP Performance Measures
Non-GAAP Performance Measures Definitions This presentation contains figures that are performance measures not defined by International Financial Reporting Standards (IFRS). These non-GAAP and additional GAAP performance measures do not have any standardized meaning prescribed by IFRS and are, there
Slide 25: Non-GAAP Performance Measures (continued)
Non-GAAP Performance Measures Definitions (continued) Adjusted Funds from Operations (AFFO) AFFO is a non-GAAP financial measure that assists management, investors and other stakeholders in analyzing the cash flow available for future growth capital investments, acquisitions and dividends to common
Slide 26: Additional Details
Additional Details Glossary Investor Information AMP Quick Facts As at Sept Asset management plan, which is developed by water utilities in the UK 30, 2015 every five years & approved by Ofwat. Common shares outstanding 94,186,632 (TSX:CSE) Annual long-term average production (LTA) An average produc
Capstone Infrastructure — Q3 2015 Earnings Presentation on 6ix