Capital Power Corporation · TSX:CPX
Capital Power — Debt Investor Presentation (November 2019)
33 slides from Capital Power's debt investor presentation, Nov 4, 2019
Slide 1: Fixed Income Investor Conference Call
Fixed Income Investor Conference Call Bryan DeNeve, SVP Finance & CFO November 4, 2019 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 6,300 MWs of owned capacity including projects under construction • Strong pipeline of contracted opportunities • Highly-contracted and diversified portfolio • Committed to investment grade credit rating • History of dividend growth with 7% annual grow
Slide 3: Our business
Our business Today Tomorrow Investing in emission free • Building new facilities • Integration of renewables in Canada and U.S. storage technologies Investing in critical natural • Acquiring key • Reduce emissions gas generation facilities in Canada profile through Replace Image and U.S. carbon util
Slide 4: Our assets
Our assets 2014 2019F 2024F U.S. 2% Alberta Other Merchant Alberta Geographical split Canada U.S. 25% 21% U.S. 24% Merchant 22% Alberta 29% Diversifying Merchant 40% outside of Alberta Alberta and reducing Alberta Other Contracted Other Alberta Canada Canada Contracted merchant exposure Contracted 2
Slide 5: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) New Frontier Wind Bloom Wind Beaufort Solar Shepard Energy Centre of current generation Port Dover & Nanticoke Halkirk 2% portfolio expected to retire in the next decade Quality Wind York Energy Macho Springs Keephills 3 East Windsor Average
Slide 6: Growth capex since 2012 averages ~$650M per annum
Adjusted EBITDA growth from new assets(1-5) Disciplined growth through focus on contracted opportunities $600 Arlington Valley 2019 toll Goreway Arlington Valley $500 Whitla New Frontier $400 Decatur EnPower Waste Heat ($M) East Windsor $300 York Energy Bloom $200 Beaufort Macho K2 $100 Shepard PDN
Slide 7: Re-contracting of near term PPAs
Re-contracting of near term PPAs PPA Expiries Facility PPA Expiry & Re-contracting Counterparty Outlook Island Generation Re-contracting Decatur discussions underway Island Generation 2022 (BC Hydro) Provides critical back-up Arlington Valley (BC) and reliability services to Kingsbridge 1 Vancouve
Slide 8: Ontario Portfolio and power market
Ontario Portfolio Ontario 1,159 Ontario power market 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 over
Slide 9: Alberta Power Market
Alberta Power Market • Positive outlook for power prices • Demand growth outlook of 1-2% • Decline in baseload supply • Energy-only market has successfully attracted investments into Alberta 9
Slide 10: Positive outlook for Alberta power prices
Positive outlook for Alberta power prices $/MWh Positive outlook with 2019-2021 80 Q3/19 average power YTD average power forward prices averaging $57/MWh price down 15% YoY price up 18% 70 60 $58 $55 $49 50 $47 40 30 20 10 0 (1) (1) (1) (1) Q3/18 Q3/19 Q3/18 YTD Q3/19 YTD 2018 2019 Fwds 2020 Fwds 20
Slide 11: Alberta power market fundamentals
Alberta power market fundamentals Alberta Load Growth(1,2) • Load growth has levelled off with the government-imposed oil curtailments • Oil pipeline expansions and/or additional crude-by-rail anticipated to allow load growth to resume in 2020 • Forward power prices are higher after the decision to
Slide 12: Portfolio optimization
Portfolio optimization Alberta commercial portfolio positions 2020 2021 2022 % sold forward(1) 53% 2% 10% Contracted prices(1) ($/MWh) Mid-$50 High-$60 Low-$50 Current average forward prices(2) $57 $58 $54 ($/MWh) Alberta baseload merchant position now more than half hedged in 2020 • From 41% in Q
Slide 13: 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 14: Genesee dual-fuel capability
Genesee dual-fuel capability • $50M capital costs to completely Optimizing fuel mix between natural gas and coal to transform Genesee 1 & 2 to dual-fuel maximize economic returns and further reduce and 40% gas capability for Genesee 3 greenhouse gas emissions • Financial benefits highly dependent on
Slide 15: 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 16: Growth Strategy
Growth Strategy • Strong renewable pipeline including 1,100 MW of U.S. wind development • Natural gas plant acquisitions • Growth target of $500M committed capital per year for contracted opportunities 16
Slide 17: Goreway Power Station acquisition
Goreway Power Station acquisition Young, high-quality natural gas facility with excellent operating history • Capacity: 875 MW • Location: Brampton, Ontario within the GTA load centre on 21 hectares of land • Commercial Operations: June 2009 (~10 years old) • Equipment: Best in class gas-fired gener
Slide 18: Strategic acquisition of Goreway Power in Ontario
Strategic acquisition of Goreway Power in Ontario $1B acquisition materially increases contracted adjusted EBITDA and accretive to AFFO per share • Transaction: Acquired Goreway Power Station from JERA Financial Projections Co. Inc. and Toyota Tsusho Corporation for $410M cash Full year 2020 conside
Slide 19: 2019 development & construction targets
2019 development & construction targets Construction Whitla Wind Cardinal Point Wind (Alberta) (Illinois) • 201.6 MW (Phase 1) • 150 MW • 20-year PPA with • 12-year PPA with investment Government of Alberta grade financial institution • $315 - $325M(1) • $289 - $301M • COD in Q4/19 • COD in Mar/20 O
Slide 20: Visible pipeline of growth opportunities in targeted markets
Visible pipeline of growth opportunities in targeted markets >2,000 MW Potential wind developments Genesee Expansion Terrace Thermal CBEC Expansion Klo Wind Frederickson 2 Halkirk 2 Whitla 2 >3,500 MW Whitla 1 KWCG Nolin Hills Madoc Solar Potential gas developments Garrison Butte Tisch Mills YEC Exp
Slide 21: Financial
Financial • Disciplined growth and focused on contracted cash flow • Maintain investment grade credit rating • Manage financing risk 21
Slide 22: AFFO for 2019
AFFO(1) for 2019 18% normalized increase driven by development and acquisitions ($M) $550 $25 $510 $500 $25 $17 $470 $65 ($20) ($40) $450 $397 $400 $350 $300 (2) 2018 AFFO New Facilities AB Uplift K2 Divestiture Current tax & Goreway 2019T AFFO Arlington - 2019 2019T AFFO other Acquisition toll (3)
Slide 23: 9-month performance versus 2019 annual targets
9-month performance versus 2019 annual targets 2019 AFFO expected to be at the top end of the range Facility availability Sustaining capex Adjusted EBITDA AFFO $485 to $535M $80 to $90M $870 to $920M $427 95% 95% $677 $58 Q3/19 YTD Revised Q3/19 YTD Revised Q3/19 YTD Revised Q3/19 YTD Revised Target
Slide 24: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook S&P financial metrics S&P BBB- / P-3 Stable DBRS BBB(low) / Pfd-3 (low) Stable Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) 20% 5.0 15% 4.0 3.0 10% • Strong liquidity from cash flow from 2.0
Slide 25: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 USD 65 $400 $160 $300 $450 $200 $300 $300 USD 230 $100 $210 $65 $50 $0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Capital Markets CAD Private Placement USD Private P
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 • 2/3 of generation capacity from natural gas and renewables with focused growth in these areas • Implementation of dual-fuel capability at coal facilities with eventual 100% coal to gas conversion • World leading carbon reduction program (ta
Slide 28: Sustainability reporting
Sustainability reporting 2018 Corporate Sustainability Report (CSR) released July 29/19 • CSR continues to be fully compliant with the internationally recognized Global Reporting Initiative (GRI) Standards Outlines our sustainability targets • Constructing all new natural gas generation units to
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 2019 67% renewables 79% Contracted 51% Alberta $4.84(3) Renewables and gas Greater visibility
Slide 30: Forward-looking information
Forward-looking information Cautionary statement Certain information in this presentation contains forward-looking information related to anticipated events and strategies. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking information as a resul
Slide 31: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to These statements are based on certain assumptions and analyses made by the Company in light of its inform the Company’s shareholders and potential investors about management’s experien
Slide 32: 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 33: Disclaimer
Disclaimer This presentation dated November 4, 2019 (the “Presentation”) has been prepared by management of Capital Power Corporation (the “Corporation”). This Presentation does not constitute an offer to sell to any person, or a general offer to the public of, or the general solicitation from the p
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