Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (January 2020)
44 slides from Capital Power's investor presentation, January 2020
Slide 1: Investor Presentation
Investor Presentation January 2020 Bryan DeNeve, SVP Finance & CFO Sandra Haskins, VP Finance & Treasury
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 6,400 MWs of owned capacity including two wind projects in advanced development / under construction • Strong pipeline of contracted growth opportunities • Highly-contracted and diversified portfolio • Committed to investment grade credit rating In Ope
Slide 3: Our business
Our business Today Tomorrow Investing in emission • Building new facilities • Integration of storage free renewables in Canada and U.S. technologies Investing in critical • Acquiring key facilities • Reduce emissions natural gas generation in Canada and U.S. profile through Replace Image carbon util
Slide 4: Our assets
Our assets 2015 2020F 2025F U.S. 5% Alberta Geographical split Other Alberta U.S. 21% Merchant Alberta Merchant Diversifying Canada Merchant 22% U.S. 28% 25% 23% 32% outside of Alberta Alberta while managing Other Alberta Contracted Alberta Canada Contracted Other merchant exposure 28% 12% Contracte
Slide 5: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) Whitla Wind New Frontier Wind Bloom Wind Beaufort Solar of current generation Shepard Energy Centre Port Dover & Nanticoke 2% portfolio expected to retire this decade Halkirk Quality Wind York Energy Macho Springs East Windsor Average CBEC -
Slide 6: Continued EBITDA growth from new assets
Continued EBITDA growth from new assets(1-5) ($M) $700 Cardinal Point Whitla $600 Goreway Arlington Valley 2019 toll $500 Arlington Valley New Frontier Decatur Energy Centre $400 EnPower East Windsor Cogeneration Center York Energy Centre $300 Bloom Beaufort $200 Macho Springs Kingsbridge 2 Shepard
Slide 7: Growing AFFO per share
Growing AFFO(1,3) per share Forecasting 5-year CAGR of ~9% for 2015-2020 $4.84 $4.98 $3.85 $4.46 $3.58 $3.20 $3.02 2015 2016 2017 2018 2019T 2020T AFFO/share normalized² AFFO/share Normalized AFFO per share growth of ~12% in 2020 1) Represents Adjusted FFO (2018 method), less the portion allocated t
Slide 8: Dividend growth guidance to 2022
Dividend growth guidance to 2022 Annualized dividend $2.30 $2.19 per share(1,2) $2.05 5% $1.92 7% 7% $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 2019 Y/E 2020T 2021T 2022T Delivering consistent annual dividend growth with 5% dividend guidance for 2022 1)
Slide 9: Optimistic outlook for the re-contracting of near term PPAs
Optimistic outlook for the re-contracting of near term PPAs Facility PPA Re-contracting Outlook PPA Expiries Expiry / Island Generation Re-contracting Credit Decatur discussions underway Rating Arlington Valley Kingsbridge 1 Island Generation 2022 • Provides critical back-up Bloom Wind (BC) (A-rated
Slide 10: Ontario Portfolio Re-contracting in Ontario
Ontario Portfolio Ontario 1,159 Re-contracting in Ontario Natural Gas Portfolio MW In July 2019, Ontario IESO announced they were cancelling further work on a capacity market • Decision took into account stakeholder feedback and concerns Ontario IESO reviewed their long-term planning outlook and
Slide 11: Alberta Power Market
Alberta Power Market • Positive outlook for power prices • Demand growth outlook of 2% for 2020 • Decline in baseload supply • Energy-only market has successfully attracted investments into Alberta 11
Slide 12: Positive outlook in Alberta power prices
Positive outlook in Alberta power prices $/MWh 2019 average Positive outlook with 2020-2022 80 power price up 9% forward prices averaging $55/MWh 70 60 $55 $50 50 40 30 20 10 0 2018 2019 2020 Fwds 2021 Fwds 2022 Fwds 2023 Fwds 1) Forward prices as of December 31, 2019. 12
Slide 13: Alberta power market fundamentals
Alberta power market fundamentals Alberta Load Growth(1,2) Load growth has declined with the government-imposed oil curtailments Oil pipeline expansions and/or additional crude-by-rail should allow load growth to resume in 2020 AESO is anticipating load growth above 2% in 2020 Alberta Energy P
Slide 14: Portfolio optimization
Portfolio optimization Alberta commercial portfolio positions 2020 2021 2022 % sold forward(1) 63% 2% 10% Contracted prices(2) ($/MWh) Mid-$50 Mid-$60 Low-$50 EBITDA sensitivity to a $5/MWh $16 $64 $60 change in spot prices(3) ($M) Forward prices(4) ($/MWh) $57 $55 $53 Lower hedge positions in 2021-
Slide 15: Transformation of Genesee
Transformation of Genesee Genesee Performance Standard (industry-leading carbon reduction program) • CO2 intensity reduced 12% by 2021 • Intensity levels of subcritical Genesee1&2 below that of supercritical units • Includes supercritical Genesee 3 turbine upgrade • Heat rate/CO2 improvements flow
Slide 16: Capital Power is well-positioned in Alberta
Capital Power is well-positioned in Alberta Continuation of energy-only market supports market-driven power prices Young Assets High Availability Advantaged Conversion Market Locations Optionality Knowledge • Competitive fixed and variable costs • High capture prices due to high availability and str
Slide 17: 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 17
Slide 18: Robust pipeline of growth opportunities
Robust pipeline of growth opportunities 2020 growth targets Near-Term or In-Construction • $500 million committed In development capital for growth • Expect one renewable development project Genesee Terrace Thermal Expansion CBEC Expansion • Potential for strategically Klo Wind Halkirk 2 Whitla 2 al
Slide 19: Continued success in development: Whitla Wind
Continued success in development Whitla Wind 1 Began commercial operations Dec 1/19 202 MW Located near Medicine Hat, Alberta 20-year PPA with Government of AB Whitla Wind 2 Proceeding with 2nd phase (97 MW) $165M capital cost with completion in 2021 In active discussions with commerci
Slide 20: Continued success in development: Cardinal Point Wind
Continued success in development Cardinal Point Wind 150 MW – 60 GE 2.5 MW turbines Located near Macomb, Illinois 12-year fixed price power contract with investment grade financial institution; 15-year fixed price REC contract Expect to be on-budget ($289- $301M) and on- time (COD in Mar/20)
Slide 21: Financial
Financial • Disciplined growth with focus on contracted cash flows • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year without accessing equity markets • Maintain investment grade credit rating 21
Slide 22: AFFO continues to support dividend growth
AFFO(1) continues to support dividend growth Discretionary cash flow is forecast to be $315M in 2020 $600 $525 $510 $500 $397 $400 $361 ($M) $324 $292 $300 Discretionary cash flow $200 Gross common dividends(2) AFFO payout range $100 44% 37% 40% 41% 49% 44% $- (3) 2015 2016 2017 2018 2019T 2020T Lon
Slide 23: AFFO for 2020
AFFO for 2020 ($M) AFFO from Goreway and development projects offsets Arlington toll decrease 12% year-over-year AFFO growth after normalizing for 2019 Arlington toll (1) 2020 AFFO represents midpoint of $500 - $550M guidance range 23
Slide 24: Cash flow and financing outlook
Cash flow and financing outlook Sufficient funding for current growth projects 2020T Sources of cash flow ($M) Funds from operations(1) + off-coal compensation $670 TEI debt issuance $210 Bond issuances $200 $1,080 Uses of cash flow Dividends (common & preferred shares) ($260) Debt repayment(2) ($42
Slide 25: 2020 Financial targets
2020 Financial targets Key assumptions Based on 63% of the Alberta Commercial baseload generation sold forward at an average contracted price in the mid-$50/MWh range Excludes any impacts from $500M of committed capital for growth Adjusted EBITDA Adjusted funds from operations $485M - $535M $535
Slide 26: Sustainability and Investment Opportunity
Sustainability and Investment Opportunity 26
Slide 27: Sustainability – creating responsible energy for tomorrow
Sustainability – creating responsible energy for tomorrow • Implementing 100% dual-fuel capability at Genesee by 2021 with eventual 100% coal to gas conversion • World leading carbon reduction program (targeting 12% reduction in Genesee GHG emissions by 2020) • Investing in innovative technology – c
Slide 28: Sustainability reporting
Sustainability reporting First integrated annual report to be released on Feb 24/20 that combines annual financial, environment, social and governance disclosures Outlines our sustainability targets • Constructing all new natural gas generation units to be carbon capture and/or hydrogen-ready •
Slide 29: 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 Gas and 2019E 67% renewables 79% Contracted 51% Alberta $4.84(3) Renewables and gas Greater visibility
Slide 30: Attractive investment opportunity
Attractive investment opportunity Delivering on or exceeding 2019 Targets • $1 billion acquisition of Goreway Power (875 MW) in Ontario • Guiding above AFFO target range Proven track record and guidance for sustainable dividend growth • 7% guidance for 2020-2021; 5% for 2022 • Long-term AFFO payout
Slide 31: Appendices
Appendices • Total shareholder return • Alberta portfolio optimization • Alberta’s coal fleet • DCF supports dividend growth • Credit rating metrics • Debt maturity schedule • Summary of assets • Projects under development/construction 31
Slide 32: Executing strategy is creating shareholder value
Executing strategy is creating shareholder value CPX has delivered an average annual TSR of 13.5%(1) since IPO in June 2009 $300 Utilities Index: $272 $250 CPX: $242 TSX Index: $225 $200 $150 $100 $50 $0 Jun 25 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 2009 2009 20
Slide 33: 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 34: Alberta’s coal fleet
Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in End of capacity 2020 coal life Facility (MW) (yrs) (CLP)(1) Current Status Coal to gas conversion expectation PPA status Battle River 3 149 51 2019 Retired Jan 2020 Merchant Sundance 1 288 -
Slide 35: Discretionary cash flow supports dividend growth target
(1) Discretionary cash flow supports dividend growth target $500M $50M $38M(2) 7% 5% AFFO/share Dividend Capital EBITDA AFFO Growth Growth AFFO per share growth from discretionary cash flow covers 5% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple an
Slide 36: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook S&P financial metrics S&P BBB- / P-3 Stable DBRS BBB(low) / Pfd-3 (low) Stable Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) 20% 5.0 15% 4.0 3.0 10% Strong liquidity from cash flow 2.0 5% 1.
Slide 37: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 USD 65 $400 Longer term debt reflects $160 increased confidence $300 $450 $200 $300 $275 $251 USD 230 $100 $210 $65 $50 $0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Slide 38: Summary of assets
Summary of assets Alberta Contracted Alberta Commercial Clover Bar Genesee Genesee Whitla Wind Genesee Joffre Energy Clover Bar Halkirk Shepard Energy 1 2 1 3 Centre Landfill Centre Capacity 430 MW 430 MW 202 MW 516 MW 480 MW 243 MW 5 MW 150 MW 860 MW % owned / 100 / 100 100 / 100 100 / 100 100 / 10
Slide 39: 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 40: Summary of assets
Summary of assets U.S. Contracted New Frontier Roxboro Southport Macho Springs Beaufort Solar Decatur Bloom Wind Arlington Valley Wind Capacity 46 MW 88 MW 50 MW 15 MW 825 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 41: Projects under development / construction
Projects under development / construction U.S. Contracted Alberta Contracted Alberta Commercial Cardinal Point Wind Whitla Wind 2 Genesee 4&5 Capacity 150 MW 97 MW Up to 1,060 MW % owned / operated 100 / 100 100 / 100 50 / 100 Location McDonough / Warren Counties, Illinois Medicine Hat Warburg Fuel
Slide 42: 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 43: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are Whether actual results, performance or achievements will conform to the Company’s provided to inform the Company’s shareholders and potential investors about expectations and predictions is subjec
Slide 44: Investor Relations
Investor Relations Randy Mah Director, Investor Relations (780) 392-5305 rmah@capitalpower.com 10423 101 Street NW 11th Floor Edmonton, Alberta Canada T5H 0E9 44