Capital Power Corporation · TSX:CPX

Capital Power — Investor Presentation (January 2018)

51 slides from Capital Power's investor presentation, January 2018

1. Slide 1: Driving a Sustainable Future

   Driving a Sustainable Future Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO Investor Presentation January 2018 capitalpower.com

2. Slide 2: Capital Power well-positioned for yield improvement

   Capital Power well-positioned for yield improvement Solid performance  Operational excellence  Asset optimization  Commodity management Strong growth  Achieved though 2017  Positioned for additional growth Dividend guidance  7% annual guidance through 2020  Based on existing growth Declining

3. Slide 3: Execution in 2017

   Execution in 2017 Excellent existing operations  Expect to achieve performance targets on our plants  Excellent realized Alberta power price  Continued efforts on reducing carbon footprint Substantial contracted growth and diversification  Executed on renewables strategy  Acquired five thermal

4. Slide 4: Asset growth providing geographic diversification

   Asset growth providing geographic diversification Acquisitions & completion of Bloom Wind in 2017 has increased geographic diversification Breakdown based on Adjusted EBITDA: U.S. ON 5% U.S. 13% 20% BC 9% AB ON AB 73% 16% 56% BC 8% 2016(1) 2018 Estimate(1) 1) Percentage breakdown based on Adjusted E

5. Slide 5: Alberta power market upside

   Alberta power market upside Step-change increase in AB power prices starting in 2018  Current forward prices in mid-$50/MWh for 2018 and 2019 compared to $22/MWh average in 2017 • Decommissioning and mothballing of older coal units • Higher carbon taxes • Demand growth from improving AB economy • B

6. Slide 6: Executing on strategies to reduce GHG costs/risks

   Executing on strategies to reduce GHG costs/risks Carbon price  Alberta carbon price of $30/tonne in place January 1, 2018  Government model shifts the profile of existing carbon credit value realization but maintains overall value to Capital Power  Federal Government’s indication of $50/tonne ca

7. Slide 7: Genesee Generation Station

   Genesee Generation Station Industry leader through the carbon transition Advantages  Highest availability for Alberta coal plants (96.3% over last 3 years)  Lowest fuel cost from mine mouth operation  Youngest units (21 years average) in Alberta  Excellent maintenance history and focused reliabi

8. Slide 8: GPS program savings

   GPS program savings Program reduces fuel & carbon compliance costs(1) GPS Program - carbon & fuel costs annual savings  Program targets an 11% $40,000 reduction in GHG $35,000 emissions Avoided Costs ($000) $30,000  $50M forecasted capital $25,000 investment accelerated $20,000 resulting in greate

9. Slide 9: Mitigating carbon costs

   Mitigating carbon costs Savings Agreement with Balancing Pool  Agreement in place with Balancing Pool to share savings from reduction in GHG emissions at Genesee 1 & 2. Absent this Agreement, Balancing Pool as the buyer of the PPA would receive 100% of the savings  Under Agreement, Capital Power r

10. Slide 10: Coal-to-gas conversion transition plan

    Coal-to-gas conversion transition plan Optimal operational flexibility for Genesee units  Anticipate decision point in 2020 due to carbon & natural gas pricing  Timing of conversion flexible with conversion period of 9 months or less  Outage of 2 months per unit; capital cost of $25M-$50M per uni

11. Slide 11: Alberta's coal fleet

    Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in End of capacity 2018 coal life Coal to gas conversion Facility (MW) (yrs) (CLP)(1) Current Status Expectation PPA status Battle River 3 149 49 2019 Online ATCO announced CtG by 2020 Merchant

12. Slide 12: Alberta market forecasts

    Alberta market forecasts Uplift in power prices starting in 2018  Announced early retirements and mothballing of coal-fired units reduce supply in the market  Balancing Pool returning PPAs to owners  Demand growth recovering  Pass-through of higher environmental compliance costs  Mandated coal

13. Slide 13: Alberta load growth

    Alberta load growth(1) Fundamentals improving Fort McMurray Wildfires capitalpower.com 13

14. Slide 14: Alberta power market design change

    Alberta power market design change Transition to a capacity market from energy-only market by 2021 Alberta Government Objectives System Reliability Investor Confidence Investment Signals System stability as renewables Opportunity for new and To strike a balance between are brought on under the exist

15. Slide 15: Managing through capacity market design

    Managing through capacity market design Alberta capacity market design  AESO-led market design process • 5 working groups consolidated to 3 in 2018 • Capital Power participating on 3 of 3 • Design to be finalized in 2018 – comprehensive draft January 26; final design expected July 20  Alberta Gove

16. Slide 16: Managing through capacity market design

    Managing through capacity market design Working group recommendations to be considered by AESO in draft design  Several working group recommendations to date support fair treatment of existing assets and preserving a level playing field for competition  Key design details concerning market power a

17. Slide 17: Alberta growth opportunities

    Alberta growth opportunities $20B+ opportunity Halkirk 2  Coal phase-out  Junior developer consolidation • 148 MW • >2,500 MW of capacity • Next to existing facility  Renewable Electricity Program • 37%+ capacity factor • 5,000 MW opportunity • Available transmission  Gas-fired opportunities • L

18. Slide 18: Whitla Wind (phase I) awarded 20-year contract

    Whitla Wind (phase I) awarded 20-year contract Successful bidder in 1st round of REP  One of three three successful proponents selected by AESO under the Renewable Electricity Program (REP) that attracted global participation  Awarded a 20-year contract for 201.6 MW • Specific price guaranteed sub

19. Slide 19: Alberta strategic position

    Alberta strategic position Siksika Nation Siksika Nation • Exclusive agreement to jointly develop new generation • 172,000 acres of land • Solar, wind, and gas project potential • Attractive location • Existing transmission and distribution infrastructure • Ample water • Potential for renewable attr

20. Slide 20: Canadian opportunity set

    Canadian opportunity set Saskatchewan Significant investment required by 2030 Targeting 50% renewable generation capacity by 2030 • 1,600 MW of new wind British Columbia Site C uncertainty Ontario Development sites: Nuclear retirements • 2x wind Market renewal • 1x gas • Incremental capacity auction

21. Slide 21: US wind development opportunities

    US wind development opportunities Tisch Mills Our approach New Frontier • • 100 MW >7 m/s wind speed • 99 MW • MISO Nolin Hills • >8 m/s wind speed • WI RPS • MISO • Advanced DPP • 350 MW • Executed GIA • >6 m/s wind speed • Contracted Black Fork • 100-180 MW • >6 m/s wind speed Garrison Butte • PJM

22. Slide 22: U.S. tax reform

    U.S. tax reform  Investment Tax Credits (ITC) and Production Tax Credits (PTC) eligibility rules remain unchanged  Base Erosion and Anti-Abuse (BEAT) provision • Impacts on investors appetite = modest yield pressure • No material impact on US windfarm model  Corporate tax rate reduced from 35% to

23. Slide 23: Strategically evolving profile

    Strategically evolving profile Decreasing risk and growing cash flows Generation Contracted North American technology capacity footprint 42% gas and 2015 66% Contracted 74% Alberta renewables 56% gas and 2017 81% Contracted 62% Alberta renewables 68% gas and 2020(1) 82% Contracted 52% Alberta renewa

24. Slide 24: Overview of financial strategy

    Overview of financial strategy  Annual 7% dividend growth within AFFO payout ratio of 45- 55%  Provide stability through contracted cash flow profile  Maintain and improve competitive cost of capital  Ensure strong access to capital markets  Provides stability to the dividend  Properly laddere

25. Slide 25: Financing growth in 2017

    Financing growth in 2017 ~$1 billion raised in capital  Raised ~$1.0B in gross proceeds from recent financings in 2017 to fund growth  $244M from tax-equity investor for Bloom Common Tax-equity Shares Wind (Jun) $244M $183M  $183M common share issuance used to partially finance the Decatur Energy

26. Slide 26: Path to 2018 AFFO target

    Path to 2018 AFFO target Acquisitions drives 17% net AFFO growth ($M) 1) Represents midpoint of $305 - $345M original guidance range. 2) Represents midpoint of $360 - $400M guidance range. 26 capitalpower.com 26

27. Slide 27: Growing AFFO per share

    Growing AFFO(1) per share Acquisitions & addition of Bloom Wind in 2017 strengthen AFFO per share in 2017-18 $4.00 4-year CAGR of ~10% since 2014 $3.50 $3.00 $2.50 (2,3) AFFO/share $2.00 $1.50 $1.00 $0.50 $0.00 2014 2015 2016 2017E 2018T 1) Represents Adjusted FFO (2018 method), less the portion all

28. Slide 28: AFFO continues to support dividend growth

    AFFO(1,2) continues to support dividend growth Cash available for common share dividends and growth $400 $380 $365  CAGR of ~10% since 2014 $350 $324 $300 $292 44% 46% $256 $250 41% ($M) 49% $200 51% $150 Gross common dividends(3) Discretionary cash flow $100 $50 $- 2014 2015 2016 2017E 2018T Avera

29. Slide 29: Common share dividend guidance

    Common share dividend guidance Targeting 7% annual increase Annualized dividend 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 2018T 2019T 2020T Target annual AFFO payout ratio of 45-55% Well positioned to deliver consistent annual dividen

30. Slide 30: Contracted EBITDA growth

    Contracted EBITDA growth(1-5) $700 $600 Savona and 150 Mile House Decatur East Windsor $500 York Energy Off-coal compensation $400 Bloom ($M) Macho Springs and Beaufort K2 Wind $300 Shepard PD&N $200 Halkirk Quality Wind Island Generation $100 North Carolina Kingsbridge 1 $0 Genesee 1&2 2014 2015 20

31. Slide 31: Merchant-contracted mix

    Merchant-contracted mix(1,2,3) 81% 82% 58% 66% 67% 2014 2015 2016 2017E 2018T Contracted % Adjusted EBITDA increasingly derived from contracted assets 1) Adjusted EBITDA includes off-coal compensation and excludes corporate costs. 2) Only includes contracted portions of Halkirk and Shepard plants. 3

32. Slide 32: Financial obligations covered by contracted cash flow

    Financial obligations covered by contracted cash flow Operating margin(1,6) to financial obligations(2) and dividends(3) 140% 130% Contracted(5) + merchant ($60/MWh) 120% Contracted(5) + merchant (forwards(4)) 110% Contracted(5) + merchant ($40/MWh) Contracted(5) margin 100% Minimum Alberta power pr

33. Slide 33: Cash flow and financing outlook

    Cash flow and financing outlook Sufficient funding for current growth projects 2018T Sources of cash flow ($M) Funds from operations(3) + coal compensation $505 Estimated proceeds from tax-equity debt (New Frontier Wind) $125 $630 Uses of cash flow Dividends (common & preferred shares) ($215) New Fr

34. Slide 34: AB commercial portfolio positions

    AB commercial portfolio positions Current Position 2018 2019 2020 % baseload generation sold 81% 42% 25% forward(1) Contracted prices(2) ($/MWh) High-$40 Low-$50 Low-$50 Avg. forward prices ($/MWh) $49 $50 $49 EBITDA sensitivity to a $5/MWh $10M $23M $27M change in spot prices(3) ($M) Despite high %

35. Slide 35: Maximizing the commodity portfolio

    Maximizing the commodity portfolio Creating incremental value through market expertise Average realized power prices(1) have exceeded spot power prices ($/MWh) by 23% since the Company’s inception 8 years ago $125 $100 $75 $50 $25 $0 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

36. Slide 36: Financial strength

    Financial strength Strong balance sheet and investment grade credit rating  Investment grade credit ratings Agency Ratings Outlook by S&P and DBRS S&P BBB- / P-3 Stable  Continued to be well capitalized DBRS BBB(low) / Pfd-3 (low) Stable with capacity for leverage Corporate Liquidity(1) Debt to to

37. Slide 37: Credit metrics

    Credit metrics Within DBRS financial criteria for current rating Cash flow/Debt(1) EBITDA/Interest 30% 6.0 25% 5.0 20% 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2017E 2018T 2017E 2018T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(1,2) Adj. Debt/Adj. EBITDA(1,2) 20% 5.0 15% 4.

38. Slide 38: Financial outlook

    Financial outlook  Growing dividend supported by AFFO growth  Financial obligations and dividends covered by contracted cash flow  Financial capacity to fund growth  Access to capital remains strong  In addition to hedges on 700 MW of baseload generation, have ability to capture upside from hig

39. Slide 39: 2018 Development & construction targets

    2018 Development & construction targets Enhance value for shareholders by delivering accretive growth  Complete New Frontier Wind on time and on budget  Committed capital of $500 million for contracted growth  Expect 1-3 wind farms in progress capitalpower.com 39

40. Slide 40: 2018 Financial target

    2018 Financial target Financial target 2018 key assumptions Adjusted funds from operations(1)  Commodity price assumptions ($M) $360 to $400 • $49/MWh average AB power price $400 $365 • ~$2/GJ AECO natural gas $300  81% of AB Commercial portfolio sold $200 forward at high-$40/MWh $100  Excludes a

41. Slide 41: Attractive investment opportunity

    Attractive investment opportunity 2018  Growth in AFFO partially offset by carbon tax  Alberta market Reduced risk / strong • Other coal plants coming off line and significant demand diversification growth – higher prices  Increasing contracted cashflow • Clarity on the new capacity market  Expe

42. Slide 42: Appendices

    Appendices capitalpower.com

43. Slide 43: Debt maturity schedule

    Debt maturity schedule(1) ~$1B in committed credit facilities renewed with 5-year tenor maturing 2022, of which virtually all is available(1) $400 $450 $350 $300 $300 ($M) $250 $250 US $230 US $65 $200 $174 $150 $160 $100 $50 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 EPCOR Capital Markets CAD

44. Slide 44: Summary of assets

    Summary of assets Alberta Alberta Commercial Contracted Clover Genesee Genesee Genesee Clover Bar Bar Shepard Energy 1 2 3 Keephills 3 Joffre Energy Centre Landfill Halkirk 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 /

45. Slide 45: Summary of assets

    Summary of assets Ontario & British Columbia Contracted Island Quality 150 Mile Port Dover & East Generation Wind Savona House Nanticoke Kingsbridge 1 K2 Wind York Energy Windsor Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 270 MW 400 MW 84 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0 100 / 100

46. Slide 46: Summary of assets

    Summary of assets U.S. Contracted Roxboro Southport Macho Springs Beaufort Solar Decatur Bloom Wind Capacity 46 MW 88 MW 50 MW 15 MW 795 MW 178 MW % owned / 100 / 100 100 / 100 100 / 100 100 (sale & 100 / 100 100 / 100 operated leaseback) / 100 Location Roxboro, North Southport, North Luna County, N

47. Slide 47: Projects under development/construction

    Projects under development/construction Alberta Commercial Alberta Contracted U.S. Contracted Genesee 4&5 Halkirk 2 Whitla Wind (Phase I) New Frontier Wind Capacity Up to 1,060 MW 150 MW 201.6 MW 99 MW % owned / operated 50 / 100 100 / 100 100 / 100 100 / 100 Location Warburg Halkirk Medicine Hat Mc

48. Slide 48: 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 from its joint venture interests, and gains or losses on disposals (adjusted EBITDA), (ii) adjusted

49. Slide 49: Non-GAAP financial measures (cont'd)

    Non-GAAP financial measures (cont’d) • Historically, the impacts of tax equity financing structures on adjusted funds from operations have been insignificant. With the commencement of commercial operations of Bloom Wind in 2017, management has revisited the flow of these operations through the adjus

50. Slide 50: Forward-looking information

    Forward-looking information Forward-looking information or statements included 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 m

51. Slide 51: Investor Relations

    Investor Relations Randy Mah 10423 101 Street NW Senior Manager 10th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com capitalpower.com

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