Capital Power Corporation · TSX:CPX

Capital Power — Debt Investor Presentation (September 2017)

42 slides from Capital Power's debt investor presentation, September 2017

  1. Slide 1: Fixed Income Investor Presentation

    CAPITAL POWER Fixed Income Investor Presentation September 2017 Bryan DeNeve, SVP Finance & CFO Tony Scozzafava, VP Tax & Treasury Bloom Wind, Kansas

  2. Slide 2: Credit Highlights

    Credit Highlights  Track record of strong operational performance  Proven operating, development, construction & risk management expertise  Enhanced diversification through acquisitions and organic development  Continue to grow contracted cash flows outside of Alberta, providing geographical div

  3. Slide 3: Agenda

    Agenda 1. Operations & Growth Strategy 2. Alberta Power Market 3. Financial Summary 4. Credit Highlights Appendix 3

  4. Slide 4: Operations & Growth Strategy

    Operations & Growth Strategy 4

  5. Slide 5: Overview of Capital Power

    Overview of Capital Power  Growth-oriented North American IPP with ownership interest in 24 facilities in Canada and the U.S. totaling ~4,500 MW  Young fleet with an average facility age of 12.8 years(1)  Strong balance sheet and commitment to investment grade credit ratings  Strong and stable c

  6. Slide 6: Overview of Capital Power

    Overview of Capital Power MW % Adj. EBITDA(1) Alberta commercial facilities 1,506 MW 32% • 2 Coal facilities, 3 natural gas facilities, 1 landfill gas facility, and 1 renewable facility Alberta PPA facilities 860 MW 23% • 2 Coal facilities Ontario and BC contracted facilities 946 MW 25% • 2 Natural

  7. Slide 7: Proven track record of high fleet availability

    Proven track record of high fleet availability Average facility availability of 94% in the past 5 years 18,000 100% 16,000 98% 14,000 12,000 96% Generation 10,000 95% 95% 95% (GWh) 8,000 94% 94% 93% 6,000 4,000 92% 91% 2,000 0 90% 2012 2013 2014 2015 2016 2017T Generation Average facility availabili

  8. Slide 8: Diversification by geography

    Diversification by geography Recent acquisitions and completion of Bloom Wind has increased geographical diversification Geographical breakdown based on Adjusted EBITDA U.S. ON 5% U.S. 13% 22% BC 9% AB AB ON 52% 73% 17% BC 9% 2016(1) 2018 Estimate Nearly 1,300 MW of contracted generation added outsi

  9. Slide 9: Strengthening contracted cash flow profile

    Strengthening contracted cash flow profile Acquired 2 contracted natural gas and 2 waste heat assets  Acquired York Energy and East Windsor York Energy (50% of 400 MW) facilities in Ontario and two BC waste heat assets in April 2017 for ~$515M including ~$270M of debt  York Energy and East Windsor

  10. Slide 10: Strengthening contracted cash flow profile

    Strengthening contracted cash flow profile Decatur Energy Center  Completed the acquisition of Decatur Energy Center in Jun/17 for $603M (US$448M) • 795 MW natural gas-fired facility located in Decatur, Alabama • Fully contracted until December 2022 with high probability of re-contracting based on

  11. Slide 11: Completion of Bloom Wind project

    Completion of Bloom Wind project Company’s first wind development project in the U.S.  Bloom Wind began commercial operations on June 1/17  178 MW project in Kansas completed one month ahead of schedule with construction costs below budget  10-year fixed price contract covering 100% of the output

  12. Slide 12: Disciplined pursuit of growth opportunities

    Disciplined pursuit of growth opportunities Genesee 4&5 Halkirk 2  Development of wind and Whitla Wind thermal in Alberta New Frontier Nolin Hills Wind Wind Garrison Butte  Development of U.S. wind Wind Tisch Mills Willow Wind • Preserved full Production Tax Creek Wind Black Fork Wind Credit (PTC)

  13. Slide 13: Improving long-term contracted profile

    Improving long-term contracted profile(1,2,3,4) $600 Savona & 150 Mile House Decatur East Windsor $500 York Energy Adjusted EBITDA ($M) Off-coal compensation $400 Bloom Macho Springs and Beaufort $300 K2 Wind Shepard PD&N $200 Halkirk Quality Wind $100 Island Generation North Carolina Kingsbridge 1

  14. Slide 14: Financial obligations & dividends covered by contracted cash flow

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

  15. Slide 15: Alberta Power Market

    Alberta Power Market CapitalgS 15 gpital

  16. Slide 16: Alberta market forecasts

    Alberta market forecasts Current low power price environment  Oversupply in the market  Lower demand from weak AB economy  Low natural gas prices Expected uplift in power prices  Announced early retirements and mothballing of coal-fired units  Balancing Pool’s plan to terminate all Sundance PPA

  17. Slide 17: Alberta demand

    Alberta demand Alberta demand showing recovery  Nine consecutive months (Nov 2016 – Jul 2017) of positive normalized load growth; continues to show signs of recovery  Average normalized growth in Q2/17 is the highest quarter since 2012 (1) 1) Alberta Internal Load normalized for weather and impact

  18. Slide 18: Carbon competitiveness regulation

    Carbon competitiveness regulation  Specified Gas Emitters Regulation (SGER) effective to the end of 2017. Levy under Carbon Competitiveness Regulation (CCR) effective starting in 2018 2017 2018 2019 2020 Compliance regulation SGER CCR Compliance requirement 20% 55% to 65% (Down to best gas standard

  19. Slide 19: Alberta opportunity set

    Alberta opportunity set Significant investment required over the next 13 years  Up to $20 billion  Phase-out of coal facilities by end of 2030 or earlier  5,000 MWs in renewables to replace retirement of coal units with balance in natural gas and other to meet demand  Capital Power well-position

  20. Slide 20: Coal-to-gas conversion

    Coal-to-gas conversion Genesee will continue to be an industry leading generation facility  Decision on timing of converting coal units to gas depends on carbon and natural gas pricing, supply-demand balance, regulatory framework for converted units, and capacity market design  Genesee facility ha

  21. Slide 21: Alberta's coal fleet

    Alberta’s coal fleet Retirements under federal & provincial regulations and conversion to gas AESO max Age in 2017 End of coal life Expected Life (coal to gas Facility capacity (MW) (years) (CST & CLP)(1) conversion) Battle River 3 149 48 2019 Decommissioned Sundance 1 288 47 Jan 1/18 Decommissioned

  22. Slide 22: Coal compensation

    Coal compensation Coal phase-out agreement with AB Government Capital Power will receive  14 annual payments of $52.4M totaling $734M  Annual payments started on July 31, 2017 and continue through to July 31, 2030  Based on proposed NBV adjusted for consideration of potential for non-stranded ass

  23. Slide 23: Wind development in Alberta

    Wind development in Alberta Capital Power has two wind projects ready to be bid into the REP Whitla Wind Halkirk 2 300 MW on 33,000 acres in south 150 MW on 18,000 acres in central eastern Alberta Alberta next to existing Halkirk facility 38-41% capacity factor 37-39% capacity factor Available trans

  24. Slide 24: Alberta power market design change

    Alberta power market design change Transition to a capacity market from energy-only market  Government committed to ensuring existing investments would be treated fairly, and new market framework would continue to promote a level playing field between existing and potential new capacity  Tremendou

  25. Slide 25: Capacity market

    Capacity market Baseload revenue – Alberta vs. PJM  Capacity market creates a more stable revenue stream relative to selling into the Alberta market  Revenue under the Alberta energy only market for the period of 2009 through 2021 is $57/MWh for Capital Power’s baseload assets (including trading g

  26. Slide 26: Financial Summary

    Financial Summary 26 CapitalgS gpital

  27. Slide 27: Commitment to financial strategy

    Commitment to financial strategy Maintain investment grade credit rating Maintain ongoing Ensure Ensure access to cost economic Financial stable competitive capital discipline in Strategy dividend to fund growth growth growth throughout business cycle Manage financing risk 27

  28. Slide 28: Continued strong cash flow generation

    Continued strong cash flow generation ~43% of cash flow in 2017 expected to be discretionary cash flow ($M) $500 $475 $400  Annual cash flow $400 $384 $362 expected to increase 43% ~24% in 2017 $300 37% 45% 42%  Including off-coal compensation, $200 34% generating ~$205M in 36% 34% 38% discretiona

  29. Slide 29: Financial outlook

    Financial outlook  Last half of 2017 will include full AFFO and EBITDA contributions from the acquisitions (Veresen’s thermal power business, Decatur Energy) and Bloom Wind  Q3/17 AFFO will include the off-coal compensation payment received in July  Alberta Commercial baseload positions: 2018 201

  30. Slide 30: Alberta power market trading

    Alberta power market trading  Portfolio optimization activities focused on managing exposure to commodity risks, reducing volatility and creating incremental value Average realized power prices(1) have exceeded spot power prices by 20% since 2009 ($/MWh) $125 $100 $75 $50 $25 $0 Q3 Q4 Q1 Q2 Q3 Q4 Q

  31. Slide 31: Commitment to maintaining investment grade credit ratings

    Commitment to maintaining investment grade credit ratings Agency Ratings Outlook S&P BBB- Stable Equity issuance  Issued ~$1.5B in common and DBRS BBB(low) Stable preferred equity since IPO to fund growth and preserve investment grade ratings  2017 - $150M preferred share offering to reduce indebt

  32. Slide 32: Investment grade credit metrics

    Investment grade credit metrics Within DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt(1) EBITDA/Adj. Interest 30% 7.0 25% 6.0 20% 5.0 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2016A 2017T 2016A 2017T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(1,2) Adj.

  33. Slide 33: Debt maturity schedule

    Debt maturity schedule(1) $1B in committed credit facilities renewed with 5-year tenor maturing 2022, of which ~$962M available in 2017(1) $400 $350 $300 $300 $250 ($M) $200 $250 US $230 US $65 $150 $174 $160 $100 $50 $0 2018 2019 2020 2021 2026 (2) EPCOR Capital Markets CAD Private Placement USD Pr

  34. Slide 34: Credit Highlights

    Credit Highlights  Track record of strong operational performance  Proven operating, development, construction & risk management expertise  Enhanced diversification through acquisitions and organic development  Continue to grow contracted cash flows outside of Alberta, providing geographical div

  35. Slide 35: Appendices

    Appendices

  36. Slide 36: Summary of assets

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

  37. Slide 37: Summary of assets

    Summary of assets Ontario & British Columbia Contracted 150 Port Dover Island Quality Mile & Kingsbridge York East Generation Wind Savona House Nanticoke 1 K2 Wind 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

  38. Slide 38: Summary of assets

    Summary of assets U.S. Contracted Macho Beaufort Roxboro Southport Springs 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, Southport, Luna County, Beaufort Deca

  39. Slide 39: Projects under development/construction

    Projects under development/construction Alberta Commercial Alberta Contracted US Contracted Genesee 4&5 Halkirk 2 Whitla Wind New Frontier Wind Capacity Up to 1,060 MW 150 MW 300 MW 99 MW % owned / 50 / 100 100 / 100 100 / 100 100 / 100 operated Location Warburg Halkirk Medicine Hat McHenry County,

  40. Slide 40: 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, discretionary cash flow (DCF), and gains or losses on disposals (a

  41. Slide 41: 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

  42. Slide 42: 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

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