Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (June 2018)
35 slides from Capital Power's investor presentation, June 2018
Slide 1: Driving a Sustainable Future
Driving a Sustainable Future Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO Investor Presentation June 2018 capitalpower.com
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer 24 Facilities 4,500 MW 3 wind projects (450 MW) with long-term contracts proceeding Strong pipeline of additional contracted growth opportunities capitalpower.com 2
Slide 3: Investment highlights
Investment highlights 2018E Adjusted EBITDA Contracted Merchant Geographic Targeting annual Total Shareholder Alberta 68% 32% 57% Return of 13% BC / ON 100% 0% 24% USA 100% 0% 19% Current dividend is supported by 82% 18% low payout ratio 7% dividend growth is supported by new contracted assets
Slide 4: Discretionary cash flow supports dividend growth target
Discretionary cash flow supports dividend growth target(1) $400M $40M $29M(2) 7.7% 7% Capital EBITDA AFFO AFFO Dividend Growth/Share Growth AFFO growth from discretionary cash flow covers 7% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple and a capit
Slide 5: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) Bloom Wind K2 Wind 5-year Beaufort Solar Shepard Energy Centre average Port Dover & Nanticoke availability Halkirk Quality Wind of 95% York Energy Macho Springs Keephills 3 East Windsor CBEC - Units 2&3 Only 3% of 150 Mile House/Savona existi
Slide 6: EBITDA growth from new assets has supported dividend growth
EBITDA growth from new assets has supported dividend growth(1-5) ($M) $400 Decatur EnPower Waste Heat East Windsor $300 York Energy Bloom Beaufort $200 Macho K2 Shepard $100 PDN Quality Halkirk $0 2012 2013 2014 2015 2016 2017 2018E Growth capex since 2012 averages ~$500M(5) per annum 1) Margins hav
Slide 7: Historical AFFO growth supports dividend growth target
Historical AFFO(1,2) growth supports dividend growth target ($M) Dividends $400 Annualized dividend per share(4) $380 $361 $350 Guidance(5) $324 $292 $300 44% 46% $1.92 $2.05 $256 $1.67 $1.79 $250 41% $1.46 $1.56 49% $1.26 $1.36 $200 51% $150 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018T 2019T
Slide 8: Alberta power market has recovered
Alberta power market has recovered Alberta Load Growth(1) Alberta is experiencing strong demand growth Older coal fired units have started to retire Termination of 2000 MW of PPAs has facilitated ($/MWh) Alberta Energy Prices(2) $/GJ commercial optimization 100 15 75 10 50 Step-change increase
Slide 9: Capacity market design
Capacity market design AESO’s forecast revenue for baseload facilities AESO released 2nd draft of Comprehensive $/MWh Market Design (CMD2) in Apr/18 Start of capacity market $70 Design continues to be constructive, indicating $60 that existing and future assets will have an $50 equal opportunity
Slide 10: Opportunistic hedging strategy
Opportunistic hedging strategy Alberta commercial portfolio positions (As of Mar 31, 2018) 2019 2020 % Sold forward(1) (700 MWs of baseload) 46% 22% Contracted prices(2) Low-$50 Low-$50 ($/MWh) Current average forward prices(3) $56 $54 ($/MWh) Unhedged baseload position plus nearly 500 MW (gas peaki
Slide 11: 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 24% since the Company’s inception 9 years ago $125 $100 $75 $50 $25 $0 (1) Average AB spot power price Capital Power captured AB price 1)
Slide 12: Capital allocation
Capital allocation Prudent share buybacks and debt reduction to optimize capital utilization Dividend 7% annual dividend growth guidance to 2020 Growth Capital Growth Generating $200M+ in discretionary cash flow which equates to $400-$500M in growth capex without a Allocation Opportunities need to a
Slide 13: Financial strength
Financial strength Strong balance sheet and investment grade credit rating Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(1,2) Adj. Debt/Adj. EBITDA(1,2) Agency Ratings Outlook 20% 5.0 15% 4.0 S&P BBB- / P-3 Stable 3.0 DBRS BBB(low) / Pfd-3 (low) Stable 10% 2.0 5% 1.0
Slide 14: 2018 Financial target
2018 Financial target Adjusted funds from operations(1) AFFO(3) per share ($M) $4.00 $3.59 $3.65 $360 to $400(2) $400 $3.21 $3.04 $3.00 $2.51 $300 $200 $2.00 $85 $100 $1.00 $0 Q1/18 2018T $0.00 2014 2015 2016 2017 2018T 2018 AFFO expected to be above Expect ~10% CAGR for the midpoint of the guidance
Slide 15: Current projects under construction/development
Current projects under construction/development 2018 2019 2020 2021 New Frontier Wind Whitla Wind Cardinal Point Wind (North Dakota) (Alberta) (Illinois) 99 MW 201.6 MW (Phase 1) 150 MW 12-year PPA 20-year PPA 12-year PPA $182M $315-$325M $289-$301M COD in Dec 2018 COD in Q4, 2
Slide 16: 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 Ontario Development sites: • 2x wind Nuclear retirements • 1x gas Market renewal • Incremental capacity auctions • Enabling system
Slide 17: Alberta growth opportunities
Alberta growth opportunities $20B+ opportunity (5000 MWs of renewables to be built by the next decade) Halkirk 2 Whitla Wind 2 Renewable Electricity Program • 148 MW • ~100 MW • Next to existing Halkirk facility • Built next to Whitla Wind Round 2 (300 MW) • 37%+ capacity factor (201.6 MW) with COD
Slide 18: US wind development opportunities
US wind development New Frontier Tisch Mills opportunities • • 99 MW MISO • • 100 MW >7 m/s wind speed • 12-year fixed price • MISO contract for 87% of • WI RPS Nolin Hills the facility’s output • Advanced DPP • COD December 2018 • 350 MW • Budget of $182M • >6 m/s wind speed Black Fork • 100-180 MW
Slide 19: Strategies to reduce GHG emissions
Strategies to reduce GHG emissions Reducing carbon emissions at existing facilities Building renewables Exploring Carbon Capture & Storage and carbon utilization • Equity investment in C2CNT, a company applying an innovative technology to capture and transform carbon dioxide into a useful and
Slide 20: Genesee generation station
Genesee generation station Industry leader through the carbon transition Highest availability for Alberta coal plants (95% average last 3 years) Lowest fuel cost from mine mouth operation Youngest units (21 years average) in Alberta Excellent maintenance history and focused reliability progr
Slide 21: Coal-to-gas conversion transition plan
Coal-to-gas conversion transition plan Optimal operational flexibility for Genesee units Anticipate decision point On track to bring Federal coal in 2020 due to significant natural gas to to gas carbon & site by 2020 regulations natural gas extend facility pricing Co-firing provides greatest fuel fl
Slide 22: Sustainability and growth of dividend
Sustainability and growth of dividend Dividend yield 9.5% 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% Long-term average of 6% Dividend yield 6.0% expected to return 5.5% to a 5% to 6% range with the 5.0% removal of the 4.5% Alberta uncertainty 4.0% capitalpower.com 22
Slide 23: A strong past, a stronger future
A strong past, a stronger future AFFO PER SHARE CAGR Decreasing risk and growing cash flows ~10% 2014-2018 Generation Contracted North American technology(1) capacity(1) footprint(1) DIVIDEND GROWTH 2015 42% gas and 66% Contracted 74% Alberta renewables 7% 2018 58% gas and 82% Contracted 57% Alberta
Slide 24: Appendices
Appendices capitalpower.com
Slide 25: 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
Slide 26: 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(1) + coal compensation $505 Estimated proceeds from tax-equity debt (New Frontier Wind) $125 $630 Uses of cash flow Dividends (common & preferred shares) ($215) Develo
Slide 27: Debt maturity schedule
Debt maturity schedule(1) ~$1B in committed credit facilities renewed with 5-year tenor maturing 2022, of which approximately $900M is available(1) $400 $450 $350 $300 $300 ($ Million) $250 $250 US $230 $200 US $65 $150 $160 $100 $50 $11 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 EPCOR Capital
Slide 28: 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 /
Slide 29: 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
Slide 30: 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
Slide 31: Projects under development/construction
Projects under development/construction Alberta Commercial Alberta Contracted U.S. Contracted Whitla Wind Genesee 4&5 Halkirk 2 (Phase I) New Frontier Wind Cardinal Point Wind Capacity Up to 1,060 MW 150 MW 201.6 MW 99 MW 150 MW % owned / operated 50 / 100 100 / 100 100 / 100 100 / 100 100 / 100 Loc
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, and gains or losses on disposals (adjuste
Slide 33: Non-GAAP financial measures (cont'd)
Non-GAAP financial measures (cont’d) Adjusted funds from operations represents net cash flows from operating activities adjusted to include net finance expense and current income tax expense and exclude changes in operating working capital and distributions received from the Company’s joint venture
Slide 34: 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 35: Investor Relations
Investor Relations Randy Mah Senior Manager Common Shares (780) 392-5305 TSX symbol: CPX rmah@capitalpower.com S&P/TSX Index Inclusions: Composite, SmallCap, Capped Utilities 10423 101 Street NW Shares Outstanding: 103.3 million 10th Floor Edmonton, Alberta Market Cap: $2.6 billion Canada, T