Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (January 2019)
37 slides from Capital Power's investor presentation, January 2019
Slide 1: Delivering a Sustainable Future
Delivering a Sustainable Future Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO Investor Presentation January 2019
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 5,100 MWs of owned capacity • Highly-contracted portfolio • History of dividend growth with 7% annual growth guidance out to 2021 • Strong pipeline of contracted growth opportunities • Committed to investment grade credit rating capitalpower.com 2
Slide 3: Young fleet with long asset lives
Young fleet with long asset lives Average age 15 years(1) New Frontier Wind 95% 5-year average availability Bloom Wind Beaufort Solar Shepard Energy Centre (2019 target of 95%) Port Dover & Nanticoke Halkirk Quality Wind York Energy Macho Springs of current generation Keephills 3 East Windsor 3% por
Slide 4: EBITDA from new assets has supported dividend growth
EBITDA from new assets has supported dividend growth(1-5) $500 Arlington Valley 2019 toll Arlington Valley Whitla $400 New Frontier Decatur EnPower Waste Heat $300 East Windsor York Energy Bloom $200 Beaufort Macho K2 $100 Shepard PDN Halkirk $0 2012 2013 2014 2015 2016 2017 2018E 2019T Quality Grow
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 $1.26 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019T 2020T 2021T Target long-term annual AFFO payout ratio of 45-55% Delivering consistent annual dividend growth
Slide 6: Alberta Power Market
Alberta Power Market • Robust outlook for power prices • Demand growth of 3-4% • Reasonable capacity market design capitalpower.com
Slide 7: Positive Alberta power market fundamentals
Positive Alberta power market fundamentals Alberta Load Growth(1) • Alberta is experiencing strong demand growth • New summer peak record of 11,169 MW on Aug 10/18 • Older coal fired units have started to retire • Termination of 2,000 MW of PPAs have facilitated commercial ($/MWh) 100 ($/GJ) 15 opti
Slide 8: Stable outlook in Alberta power prices
Stable outlook in Alberta power prices 70 Material improvement in Quarterly Annual 2018 power prices 60 • Coal plant retirements / 50 mothballing • Robust demand growth 40 • Higher carbon tax $/MWh 30 20 10 0 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 2016 2017 2018 2019 2020 2021 Fwds Fwds Fwd
Slide 9: Capacity market design
Capacity market design Final design is consistent with our view of a properly designed capacity market for Alberta AESO’s forecast revenue for baseload facilities • AESO has finalized its proposed market design Capacity market • Design is constructive and provides an equal ($/MWh) commences in $70 N
Slide 10: Portfolio optimization
Portfolio optimization AB commercial portfolio positions 2019 2020 2021 Nearly 500 MW % sold forward(1) 73% 31% 1% (gas peaking, wind) available to capture Contracted prices(2) ($/MWh) Low-$50 Low-$50 Low-$70(3) the upside from low natural gas prices, Forward prices(4) ($/MWh) $56 $46 $45 higher pow
Slide 11: 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 23% since the Company’s inception 9 years ago $125 $100 $75 $50 $25 $0 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/1
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 • Maximal capacity volumes due to high availability and strategically located wind assets • Coa
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: Current projects under construction/development
Current projects under construction/development Additional 350 MWs of long-term contracted wind facilities to be added by Mar/20 2018 2019 2020 2021 New Frontier Wind Whitla Wind Cardinal Point Wind (North Dakota) (Alberta) (Illinois) 99 MW, 12-year PPA • 201.6 MW (Phase 1) • 150 MW Project comp
Slide 15: 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 16: Sustainability Strategy
Sustainability Strategy • Focus on building renewables • Leveraging low natural gas prices by co-firing gas at coal facilities • Coal-to-gas conversion • World leading carbon reduction program targeting 10% reduction in GHG emissions • Carbon capture investments (C2CNT) capitalpower.com capitalpower
Slide 17: Coal-to-gas conversion (dual-fuel capability)
Coal-to-gas conversion (dual-fuel capability) A staged approach to ensure maximal operational flexibility is maintained % of Genesee site capacity from natural gas Increase 2 other units to 100% capacity • Timing dependant on Increase market pricing & 1 unit to structure, carbon taxes, Increase 2 10
Slide 18: Financial
Financial • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year without accessing equity markets • Share price appreciation driven by dividend growth and risk reduction 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 $295M in discretionary cash flow in 2019 ($M) $600 $500 $400 39% Gross common dividends(3) $300 46% 44% Discretionary cash flow 41% $200 49% 51% $100 $- (4) 2014 2015 2016 2017 2018T 2019T Long-term AFFO payout rati
Slide 20: AFFO for 2019
AFFO for 2019 Higher Alberta power prices and AFFO from Arlington and New Frontier offset K2 divestiture $550 $70 $500 ($20) $485 ($10) $450 $65 $445 ($40) $400 $380 $350 $300 2018T AFFO New Facilities AB Uplift K2 Divestiture Other 2019T AFFO Arlington - 2019 2019T AFFO toll (1) Normalized 17% year
Slide 21: Growing AFFO per share
Growing AFFO(1,3) per share 5-year CAGR of ~12%(4) since 2014 $4.74 $4.35 $3.59 $3.65 $3.21 $3.04 $2.51 2014 2015 2016 2017 2018T 2019T AFFO/share normalized² AFFO/share 1) Represents Adjusted FFO (2018 method), less the portion allocated to the non-controlling interest (calculated consistent with t
Slide 22: Cash flow and financing outlook
Cash flow and financing outlook Sufficient funding for current growth projects 2019T Sources of cash flow ($M) Funds from operations(3) + off-coal compensation $615 Proceeds from disposal of K2 Wind $215 Debt issuances $650 $1,480 Uses of cash flow Dividends (common & preferred shares) ($235) Debt r
Slide 23: Financial targets
Financial targets 2019 key assumptions • Based on 70% of the Alberta Commercial baseload generation sold forward at an average contracted price in the low-$50/MWh range • Excludes any impacts from $500M of committed capital for growth Adjusted funds from operations(1) Adjusted EBITDA ($M) ($M) $600
Slide 24: Sustainability and dividend growth
Sustainability and dividend growth Dividend yield 9.5% 9.0% 8.5% Coal compensation Alberta Government announced announces Climate 8.0% Leadership Plan 7.5% 7.0% 6.5% Long-term average of 6% 6.0% Dividend yield closer to historic 5-6% 5.5% range with recovery in Alberta power prices and more clarity
Slide 25: Strategically evolving our portfolio
Strategically evolving our portfolio Generation Contracted North American AFFO per share(2) technology(1) capacity(1) footprint(1) 2014 33% Gas and renewables 58% Contracted 76% Alberta $2.51 2019 64% Gas and renewables 77% Contracted 55% Alberta $4.74(3) Renewables and Greater visibility Geographic
Slide 26: Appendices
Appendices • Alberta’s coal fleet • DCF supports dividend growth • Credit rating metrics • Debt maturity schedule • Summary of assets • Projects under development/construction capitalpower.com
Slide 27: 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 28: Discretionary cash flow supports dividend growth target
Discretionary cash flow supports dividend growth target(1) $500M $50M $36M(2) 8.1% 7% AFFO/share Dividend Capital EBITDA AFFO Growth Growth AFFO growth from discretionary cash flow covers 7% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple and a capit
Slide 29: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook Within S&P financial criteria for current rating S&P BBB- / P-3 Stable DBRS BBB(low) / Pfd-3 (low) Stable 20% Adj. FFO/Debt(1-4) 5.0 Adj. Debt/EBITDA(1-4) 4.0 15% • Strong liquidity from
Slide 30: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 US $65 $450 $160 $400 $300 $300 $300 $200 $250 US $230 $100 $0 2019 2020 2021 2022 2023 2024 2025 2026 Capital Markets CAD Private Placement USD Private Placement 1) Debt amounts as of January 16,
Slide 31: 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 32: Summary of assets
Summary of assets Ontario & British Columbia Contracted Quality 150 Mile Port Dover & Island Generation Wind Savona House Nanticoke Kingsbridge 1 York Energy East Windsor Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 400 MW 84 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0 100 / 100 100 / 100 50 /
Slide 33: 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 34: Projects under development / construction
Projects under development / construction Alberta Commercial Alberta Contracted U.S. Contracted Whitla Wind Genesee 4&5 (Phase I) 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, Ill
Slide 35: 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, gains or losses on disposals and unrealiz
Slide 36: Forward-looking information
Forward-looking information Forward-looking information or statements in this presentation and in responses to questions are provided to inform the Company’s shareholders and potential investors about management’s assessment of Capital Power’s future plans and operations. This information may not be
Slide 37: Investor Relations Contact
Investor Relations Contact Randy Mah 10423 101 Street NW Director 11th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com capitalpower.com 37