Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (August 2015)
45 slides from Capital Power's roadshow presentation, August 2015
Slide 1: Capital Power Investor Meetings August 2015
CAPITAL POWER INVESTOR MEETINGS August 2015 Brian Vaasjo, President & CEO Tony Scozzafava, VP Taxation & Treasury
Slide 2: Capital Power overview
Capital Power overview IPP with ownership interest in 17 facilities in Canada and the US totaling more than 3,200 MW(1) Capital Power builds, owns and operates power plants Substantial growth in contracted operating margins expected to significantly cover financial obligations and growing divi
Slide 3: Capital Power's value proposition
Capital Power’s value proposition 3
Slide 4: Modern fleet
Operational excellence Modern fleet Helps keep availability high and reduces risk of unplanned outages Average weighted facility age of the current fleet is 11.7 years(1) Shepard and K2 Wind reached COD this year adding 490 MW to the fleet First solar project (Beaufort Solar) expected to be co
Slide 5: Proven track record of high fleet availability
Operational excellence Proven track record of high fleet availability Plant availability consistently 90%+ in past 6 years 18,000 100% 16,000 96% 14,000 95% 94% 95% 93% 12,000 92% 91% Generation 10,000 90% (GWh) 90% 8,000 6,000 85% 4,000 2,000 - 80% 2009 2010 2011 2012 2013 2014 2015T Generation Ave
Slide 6: Excellent track record of development
Operational excellence Excellent track record of development Outstanding track record of completing 7 construction projects (supercritical coal, natural gas, wind) totaling 1,691 MW Asset Capacity / fuel On-time On-budget In-Service Genesee 3(1) (AB) 516 MW / coal + 2005 Kingsbridge 1 (ON) 40 MW /
Slide 7: Capital Power is the leading developer in the AB market
Operational excellence Capital Power is the leading developer in the AB market Generation built in Alberta since 2004(1) 1800 Genesee 4&5 Renewables Thermal 1600 Proposed Genesee 4&5 1400 1200 1000 (MW) Proposed Genesee 4&5 800 600 400 200 0 Capital Power ENMAX TransAlta ATCO Other 1) Includes Shepa
Slide 8: Financial strength
Strong financial base Financial strength Strong balance sheet and investment grade credit rating Investment grade credit ratings Agency Ratings Outlook Debt-to-capital ratio remains below S&P BBB- / P-3 Stable long-term target of 40% - 50% DBRS BBB / Pfd-3 (low) Stable Debt to total capitalizati
Slide 9: Credit metrics
Strong financial base Credit metrics(1) Above DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt EBITDA/Adj. Interest 30% 6.0 25% 5.0 20% 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2015T 2015T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(2) Adj. Debt/Adj. EBIT
Slide 10: Continued strong cash flow generation
Strong financial base Continued strong cash flow generation Funds from operations (FFO) $450 Cash flow expected to increase $400 48% ~8% in 2015 $350 36% 40% ~40% of 2015 FFO is 37% discretionary cash flow (DCF) $300 At the mid-point of guidance $250 range, generating ~$200M in ($M) 33% cash f
Slide 11: Improving contracted cash flow
Contracted cash flows Improving contracted cash flow(1,2) Substantial expansion in contracted operating margin from 2012 to 2016 $400 $350 $300 } Shepard & K2 Wind K2 Wind } Shepard 3 wind Macho Springs $250 projects PD&N ($M) $200 Halkirk Quality Wind $150 Island Generation North Carolina $100 King
Slide 12: Strong financial coverage
Contracted cash flows Strong financial coverage Contracted operating margin to With addition of Shepard financial obligations(1) and dividends(2) and K2 Wind in 2015, 100% substantial expansion in our contracted operating margin 90% Annual dividend growth of 10 cents in 2014 (7.9%) and 80% 2015
Slide 13: Dividend increase
Contracted cash flows Dividend increase A 10 cents per share increase (7.4%) to the annual dividend Effective with Q3/15, quarterly dividend increased 7.4% to $0.365 Annualized dividend from $0.34 per share per common share(1) $1.46 Contracted cash flow base has grown significantly with the rece
Slide 14: Capital allocation
Strong financial base Capital allocation (1) Growing contracted cash flow base supports Dividend dividend growth Growth Capital Growth (2) Well positioned to fund or partially fund Allocation Opportunities any new significant growth opportunities in the near term with discretionary cash flow Repurch
Slide 15: Alberta demand relative to oil prices
AB power market upside Alberta demand relative to oil prices Oil & gas development drives load growth in Alberta Alberta demand growing modestly in new oil price environment 2015 year-to-date load growth of 1.5% Long term fundamentals remain strong Alberta Load Growth & West Texas Intermediate
Slide 16: Expected coal unit retirements - CST
AB power market upside Expected coal unit retirements - CST Retirements under the federal Capital Stock Turnover (CST) regulations Alberta coal generation (MW) Generation End of Life 6,500 Capacity (Final 6,000 Facility (MW) Regulations) 869 MWs by 2019 Battle River 3 149 2019 5,500 Sundance 1 288 2
Slide 17: Alberta market forecasts
AB power market upside Alberta market forecasts ($/MWh) ($/GJ) 100 Alberta Energy Prices (1) 15 75 10 50 5 25 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Power Gas 1) Forecasts represents the average forecast from three leading 3rd party consulting firms. 17
Slide 18: Changes to AB's emissions regulations
Alberta outlook Changes to AB’s emissions regulations Specified Gas Emitters Regulation (SGER) in Alberta requires facilities that emit 100,000 tonnes or more of greenhouse gases per year to reduce emissions intensity by a specific target Alberta Government announced on June 25 changes to SGER:
Slide 19: Diverse generation fleet in Alberta
AB power market upside Diverse generation fleet in Alberta Well positioned to capture value in Alberta’s merchant market Expected AB power generation stack for 2015(1) 100% Other Clover Bar Energy Centre Gas peaking 30% • Most responsive peaking facility in the AB market 90% • Captures peak pricing,
Slide 20: AB commercial portfolio positions
AB power market upside AB commercial portfolio positions Alberta portfolio hedged positions (% sold forward) As of Jun 30/15 2016 2017 Percentage sold forward(1) 86% 25% Average contracted prices(2) ($/MWh) High-$40 High-$50 Well positioned to weather the bottom of the power market cycle with a sign
Slide 21: Alberta power market trading
AB power market upside Alberta power market trading Portfolio optimization activities focused on managing exposure to commodity risks, reducing volatility and creating incremental value Average realized power price has exceeded spot power prices ($/MWh) by 19% on average over the past 5.5 years $1
Slide 22: Financial obligations & dividends significantly covered by contracted cash flow
AB power market upside Financial obligations & dividends significantly covered by contracted cash flow Operating margin(1) to financial obligations(2) and dividends(3) 180% Contracted + 160% merchant ($70/MWh) 140% 120% Contracted + merchant ($40/MWh) 100% Contracted margin 80% Minimum Alberta power
Slide 23: Growth opportunities in Canada
Growth Growth opportunities in Canada Natural gas and wind development sites Wind Natural Gas 23
Slide 24: Genesee 4&5
Growth Genesee 4&5 Joint venture partners with ENMAX to develop, construct, own, and operate the 1,060 MW natural gas-fired combined cycle facilities 8-year tolling agreement with ENMAX for 50% of CP’s share of the output All major regulatory approvals received to proceed with construction; Ca
Slide 25: Growth opportunities in the U.S.
Growth Growth opportunities in the U.S. Natural gas and renewable development sites 1 Wind Natural Gas Solar 25
Slide 26: Element Power US
Growth Element Power US In Dec/14, completed the acquisition of Element Power US for ~US$69M (includes US$52M of project financing) Primary driver for the acquisition was to build a portfolio of development projects in strategic locations in the U.S. • 10 wind development sites • 4 solar develop
Slide 27: Element Power US – strategic fit
Growth Element Power US – strategic fit Market Strategy Element Sites SPP • Strong wind regime • 200 MW wind project in Kansas • Adjacent to transmission build-out • Affordable land positions • Low construction cost Upper • Coal dependency • 99 MW wind project in North Dakota Midwest • Strong wind r
Slide 28: Beaufort Solar
Growth Beaufort Solar Construction underway on the 15 MW solar project in North Carolina, U.S. Fully contracted facility with a 15-year PPA with Duke Energy Commercial operations date (COD) targeted for Dec/15 Sale leaseback structure; sell to tax equity investor at COD in exchange for lease
Slide 29: Financial outlook
Outlook Financial outlook Average Alberta power price of $43/MWh in first half of 2015, consistent with our original forecast assumption of $44/MWh At the beginning of the year, Alberta baseload position for 2015 was significantly hedged in the mid-$50/MWh No change to revised FFO guidance; ex
Slide 30: 2015 YTD performance versus annual targets
Outlook 2015 YTD performance versus annual targets Operational and financial targets ($M) 100% Plant availability Sustaining capex $100 95% $75 94% 94% 90% $50 $65 85% $25 $35 80% $0 2015 YTD Target 2015 YTD Target Plant operating & maintenance expenses Funds from operations ($M) $200 $180 - $200 ($
Slide 31: Why invest in Capital Power
Summary Why invest in Capital Power Strong contracted cash flow growth supports annual dividend growth • Excellent assets in good markets with solid operating Operational performance • On-going improvements to operating cost base, fleet excellence availability and risks • Substantial growth in contr
Slide 32: Alberta power market
Appendix Alberta power market Competitive wholesale and retail energy market Installed generation capacity of 16 GW Entire province is a single zone where power prices are determined by the bid price of the incremental power generator – no capacity market Well functioning and stable market d
Slide 33: Alberta generation and load mix
Appendix Alberta generation and load mix Current installed generation(1) Generation mix outlook in 2034(2) (MW and % of installed capacity) Wind Biomass/Other Wind Biomass/Other 1,434 409 3% 2,679 MW 864 MW 9% 11% 3% Hydro 894 Hydro Coal 6% 894 MW 2,509 MW 4% 10% Coal 6,271 39% Cogen Gas-Fired 6,737
Slide 34: Alberta demand by end use
Appendix Alberta demand by end use 2013 Demand by end use(1) 2034 Demand by end use(1) Farm Farm 3% 1% Commercial Commercial 20% 19% Industrial 40% Industrial 45% Residential 11% Residential 13% Oilsands Oilsands 19% 29% Demand from Industrial and Oilsands account for 64% of current demand, that is
Slide 35: Historical Alberta prices
Appendix Historical Alberta prices Daily average power prices 800 700 600 500 ($/MWh) 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Annual average power prices and AECO (Annual power prices have averaged $65/MWh in the past 14 years) 100 89.95 10 8.27 8
Slide 36: Alberta market design
Appendix Alberta market design Stable market design has signalled the addition of 7 GW of new generation 1600 45% 1400 40% 35% 1200 30% 1000 25% Capacity 800 Reserve (MW) 20% Margin 600 15% 400 10% 200 5% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E New Capacity A
Slide 37: Alberta power market summary
Appendix Alberta power market summary Alberta’s market design framework Has attracted continued investment by various parties for different fuel types Ensures investment risk is borne by investors and not ratepayers/taxpayers Provides participants with options and choices for managing their co
Slide 38: CST and CASA framework
Appendix CST and CASA framework Capital Stock Turnover (CST) Clean Air Strategic Alliance (CO2) (CASA) (NOx and SO2) Limits unscrubbed coal-fired plant Compliance through meeting life to 45-50 years physical BATEA(1) or use of credits to financially comply 41st to 50th years Unit Commercial Op
Slide 39: Debt maturity schedule
Appendix Debt maturity schedule(1) $1.0B in credit facilities with 5-year tenor maturing 2020, of which $800M is available $400 $375 $350 $300 $250 $250 $226 US $230 ($M) $200 $174 $150 $139 $100 US $65 $50 $10 $0 2015 2016 2017 2018 2019 2020 2021 2026 (2) EPCOR Debt Capital Markets Debt Bank Debt
Slide 40: Summary of assets
Appendix Summary of assets Clover Bar Clover Shepard Genesee Genesee Genesee Keephills Energy Bar Energy 1 2 3 3 Joffre Centre Landfill Halkirk Centre Alberta Contracted Alberta Commercial 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
Slide 41: Summary of assets
Appendix Summary of assets Kingsbridge Island Quality Port Dover Macho 1 Generation Wind & Nanticoke K2 Wind Roxboro Southport Springs Ontario & British Columbia Contracted U.S. Contracted Capacity 40 MW 275 MW 142 MW 105 MW 270 MW 46 MW 88 MW 50 MW % owned / 100 / 100 100 / 100 100 / 100 100 / 100
Slide 42: Projects under development/construction
Appendix Projects under development/construction Beaufort Solar Genesee 4&5 U.S. Contracted Alberta Commercial Capacity 15 MW Up to 1,060 MW % owned / 100 / 100 50 / 100 operated Location Beaufort County, North Carolina Warburg, Alberta Fuel & Solar Combined-cycle natural gas (Mitsubishi J-Class equ
Slide 43: Non-GAAP financial measures
Non-GAAP financial measures The Company uses (i) earnings before finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, and gains on disposals (adjusted EBITDA), (ii) funds from operations (FFO), (iii) normalized earnings attributable to co
Slide 44: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation 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 appropriate for othe
Slide 45: Investor Relations Contact
Investor Relations Contact Randy Mah 10423 – 101 Street NW Senior Manager 10th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com