Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (April 2022)
33 slides from Capital Power's investor presentation, April 2022
Slide 1: Investor Presentation
Investor Presentation Brian Vaasjo President & CEO Sandra Haskins SVP Finance & CFO April 2022 1
Slide 2: Growth-oriented North American energy transition company
Growth-oriented North American energy transition company x3 • Highly-contracted, young and diversified portfolio • Targeting 10-12% total shareholder return; 18% average annual TSR in past 5 years • Off coal in 2023 and targeting net carbon neutral before 2050 Operational facilities • 27 facilities,
Slide 3: Our strategy and path to net carbon neutral by 2050
Our strategy and path to net carbon neutral by 2050 Investing in emissions Building and acquiring Integration of free renewables facilities in Canada and the storage technologies U.S. Reduce emissions profile Investing in critical Acquiring key facilities through decarbonization natural gas generati
Slide 4: A market leader in the Alberta power market
A market leader in the Alberta power market • Continue to reposition and optimize assets to maintain leadership position • Largest provider of new generation over the last 20 years • Leading developer and owner of renewables in the province • Leading efforts to decarbonize Repowering Solar thermal g
Slide 5: Renewable and storage acceleration
Renewable and storage acceleration COD of Whitla Wind 2 in Dec/21 and Halkirk Wind phase 2 Secured 1,298 MW of U.S. solar 100% contracted as of Apr/22. commencing sites with battery potential COD of Strathmore Solar in Q1/22, North Carolina solar projects Long-term contracting of renewables Enchant
Slide 6: Natural gas – necessary long-term role in power
Natural gas – necessary long-term role in power • Natural gas essential to maintain system reliability and integrate renewables • Decarbonization will be essential to long term resiliency • Role of natural gas will transition from serving baseload energy requirements to serving capacity • Well posit
Slide 7: Substantial progress on advancement of CCUS
Substantial progress on advancement of CCUS Alberta CCUS hub CCS financial support Carbon policy de-risking • Collaboration with Enbridge for • $1.8 - $2.0B project cost for • Required for Genesee CCS to “Open Access Wabamun carbon capture advance Carbon Hub” progressing well • Expect sufficient Fed
Slide 8: Growth strategy
Growth strategy • Growth strategy aligns with our sustainability goals • Decarbonization is an immense opportunity for gas and renewables technologies • Strong renewable growth pipeline in Alberta and the U.S. • Demonstrating success in recontracting natural gas assets 8
Slide 9: Consistent substantial growth in renewables
Consistent substantial growth in renewables (MW) 2000 Halkirk 2 Bear Branch Hunter's Cove Hornet 1500 Enchant Strathmore Whitla 2&3 Buckthorn 1000 Cardinal Whitla New Frontier Bloom 500 Beaufort Macho Springs PDN Halkirk 0 Quality 2016 2017 2018 2019 2020 2021 2022 2023 2024 9
Slide 10: Development pipeline supports sustainable growth
Development pipeline supports sustainable growth 3,300+ MW generation Wind (~1000 MW) Solar (~2300 MW) 3,350 MWh battery storage Battery Storage Targeting $500M of committed capital for growth 10
Slide 11: Recontracting of natural gas assets
Recontracting of natural gas assets Securing long term PPAs provide stable cash flows + Decatur (Alabama) Arlington (Arizona) Island Generation (BC) Goreway (ON) Extended enhanced Extended tolling agreement Current PPA expires Developments in Ontario Decatur contract by 10 by 6 years to 2031 with Ap
Slide 12: Alberta power market
Alberta power market • Demand fully recovered from COVID-19 and low oil prices • All-time summer and winter record demand set in 2021 • Demand expected to increase modestly year-over-year • Robust market with average power price of $102/MWh in 2021; 2022 forward prices ~$90/MWh 12
Slide 13: Alberta power market
Alberta power market Need for reliable, flexible natural gas capacity AESO capacity by technology • Today there is still 4,000 MW of inefficient Gas Coal Wind Converted Gas Hydro Other coal, converted coal, or dual fuel capacity 7% • Peak winter and summer load hours in 2021 5% saw ~85% of load bein
Slide 14: Repositioning Genesee 1&2
Repositioning Genesee 1&2 Retired Capacity Least Asset (MW) Competitive Battle River 3 149 Sundance 1 280 Sundance 2 280 Sundance 3 368 Sundance 5* 406 Sundance 4 406 Keephills 1 395 Sundance 6** 401 Battle River 4** 155 Battle River 5** 385 Sheerness 1** 400 Sheerness 2** 400 Most *Suspended Compet
Slide 15: Repowering Genesee 1&2 delivers long term value
Repowering Genesee 1&2 delivers long term value Lower operating costs, useful asset life extension, long-term cash flow growth Favourable economics – $1.2B capital cost including $195M for 210 MW battery storage. 20%+ levered returns 512 MW net capacity increase (total 1,372 MW) Best-in-class NGCC t
Slide 16: Alberta portfolio optimization of short- and medium-term commodity price risk
Alberta portfolio optimization of short- and medium-term commodity price risk (All data as of Dec 31/21) 2022 2023 2024 Power % Sold forward(1) 72% 47% 32% Contracted power prices(2) ($/MWh) High-$60s Low-$60s High-$50s Forward power prices ($/MWh) $94 $72 $61 Natural gas % Bought forward(3) 100% 99
Slide 17: Financial strategy
Financial strategy • Deploying capital to advance progress towards our sustainability targets including the repowering of Genesee 1&2 and growing renewables portfolio • Executing on $1.5B in growth capex without the need for additional common equity • Resilient cashflows supported by risk mitigation
Slide 18: Overview of financial strategy
Overview of financial strategy Maintain Funding a low Maintain Deliver annual financial stability carbon future investment grade dividend growth and strength • Cost-effective credit rating • Dividend stability • Strong liquidity funding of growth • Access to capital through contracted markets throug
Slide 19: Executing on ~$1.5 billion of growth capex
Executing on ~$1.5 billion of growth capex Proceeding with phase 2 of Halkirk Wind and Genesee battery storage ($M) $700 $600 $178 $500 $18 $49 $38 $400 $45 $101 $236 $300 $200 $379 $312 $150 $100 $53 - 2022E 2023E 2024E Genesee 1&2 Repower Genesee battery storage 1 Alberta renewable assets 2 Halkir
Slide 20: Dividend growth outlook
Dividend growth outlook Annualized dividend per share (1,2) 5% increase per year ~7% CAGR $2.19 $1.26 42% 50% 45% 45% 35% 40% ~40% Average payout of ~46% payout 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E Forecast to be within AFFO payout ratio target range of 45% to 55% thr
Slide 21: Sustainability / investment opportunity
Sustainability / investment opportunity • Corporate purpose – to power a sustainable future for people and planet • Advancing a low carbon future with a clear path to net carbon neutral before 2050 • Natural gas generation has a necessary long-term role in power • Accelerating ESG initiatives 21
Slide 22: Sustainability commitments – integral to Capital Power
Sustainability commitments – integral to Capital Power • Broad compensation linked to ESG targets • Diversity targets • 30% carbon reduction by 2024 • Employee well being • Successful implementation of sustainable sourcing plan and water management strategy • On track to be off coal in 2023 • Sustai
Slide 23: Path to net neutral by 2025
Path to net neutral by 2025 2009–Today Today–2024 2024–2030 2030–2050 2050–2070 • Genesee efficiency • Complete repowering • Genesee CCS • Net carbon neutral • Physical program - 12% and off coal project via physical decarbonization decrease in GHG by • Genesee Battery • Expand CCU solutions on natu
Slide 24: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth & accelerates net carbon neutral by 2050 Success in renewables Strong long term cashflow from contracted • Contracts for renewable projects affirm assets including natural gas assets competitiveness • Strategy of recontracting natura
Slide 25: Appendices
Appendices • Alberta TIER program • Managing Alberta carbon exposure • Credit rating metrics • Debt maturity schedule • 2022 Targets 25
Slide 26: Alberta TIER program
Alberta TIER(1) program Significantly reducing carbon emissions AB electricity sector emissions (MT)(2) • TIER program driving down carbon emissions in a meaningful way 60 Avoided • Alberta government supportive of 47.7 Emissions TIER program 50 Current TIER @ • Carbon prices per tonne will rise 40
Slide 27: Managing Alberta carbon exposure
Managing Alberta carbon exposure ($/tonne) ($M) $250 $100 CPC Alberta Emissions Expense1 Carbon Offset Savings Carbon Price 2 $200 69 $80 $150 $60 40 $100 $40 164 116 $50 $20 4 3 24 17 $0 $0 2022E 2023E 2024E 2025E Physically reducing emissions supplemented with low-cost offsets protect and enhance
Slide 28: Financial stability and strength
Financial stability and strength Strong balance sheet and commitment to investment grade credit ratings S&P financial metrics Agency Ratings Outlook Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) 20% 5.0 Minimum Metric S&P BBB- / P-3 Stable 15% threshold 4.0 range DBRS BBB(low) / Pfd-3 (low) Stable 3.0 10
Slide 29: Debt maturity profile
Debt maturity profile(1) Well spread-out debt maturities supported by long asset lives • Longer term debt reflects increased confidence in our business profile • Strong liquidity from cash flow from operations, cash-on-hand, and credit facilities 600 500 USD 65 400 $160 $M 300 $450 200 $350 $300 $27
Slide 30: 2022 targets – guidance reaffirmed
2022 targets – guidance reaffirmed Sustaining capex ($M) Adjusted EBITDA ($M) 2022 sensitivities $1,090 to $1,110 to Inflationary pressure $105 to $120 $1,140 $1,160 • Modest unmitigated exposure on $80 to $115 $1,124 $975 to operating results $90 $1,025 • Managing construction exposure Interest rat
Slide 31: Non-GAAP financial measures and ratios
Non-GAAP financial measures and ratios 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 a
Slide 32: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform the Company’s shareholders These statements are based on certain assumptions and analyses made by the Company considering its and potential investors about management’s assessme
Slide 33: Investor Relations
Investor Relations Randy Mah 10423 101 Street NW Director, Investor Relations 11th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada T5H 0E9 33