Capital Power Corporation · TSX:CPX

Capital Power — Non-Deal Roadshow (March 2014)

54 slides from Capital Power's roadshow presentation, March 2014

  1. Slide 1: Investor Meetings

    CAPITAL POWER Investor Meetings Brian Vaasjo, President & CEO Stuart Lee, SVP Finance & CFO March, 2014

  2. Slide 2: Capital Power

    Capital Power  Independent power producer with ownership interest in 13 facilities in Canada and the US totaling more than 2,600 MW(1)  Capital Power builds, owns and operates power plants  Significant contracted cash flow base and merchant investments in Alberta - the most attractive power marke

  3. Slide 3: Capital Power value proposition

    Capital Power value proposition 3

  4. Slide 4: Operational excellence

    Operational excellence  Modern fleet  High fleet availability  Favourable cost trend  Alberta power market trading  Construction expertise 4

  5. Slide 5: Modern fleet

    Modern fleet Helps keep availability high and reduces risk of unplanned outages  Average weighted facility age of the current fleet is 12.3 years(1)  Shepard Energy Centre expected COD in early 2015 and K2 Wind in 2015 Port Dover & Nanticoke Halkirk Wind Quality Wind Kingsbridge I Facility age Clo

  6. Slide 6: High fleet availability

    High fleet availability Operating availability averaging 92% since IPO in 2009 Generation (GWh) 96% 90% 92% 91% 93% 95% 18,000 15,000 12,000 9,000 6,000 3,000 - 2009 2010 2011 2012 2013 2014T Generation Average plant availability 6

  7. Slide 7: Favourable cost trend

    Favourable cost trend  In 2013, reduced annual G&A by $22 million  Significant cost improvements made in 2013 without negatively impacting high operating & maintenance (O&M) standards Total non-fuel O&M and CAPEX spending excluding planned outages(1) 100% 80% 60% 40% 20% 0% 2012 2013T 2014T Adjust

  8. Slide 8: Alberta power market trading

    Alberta power market trading  Hedging positions based primarily on generation from Genesee 3 and Keephills 3 baseload coal plants and output from the Sundance PPA  Actively trading throughout various time periods to minimize portfolio risks, create incremental value, and reduce volatility CPX’s av

  9. Slide 9: Construction expertise

    Construction expertise Solid track record on completing 7 construction projects (supercritical coal, natural gas, wind) totaling 1,669 MW Asset Capacity / fuel On-time On-budget In-Service Genesee 3 516 MW / coal  + 2005 Kingsbridge 1 40 MW / wind   2006 Clover Bar Energy 200 MW / gas +  2009 Ce

  10. Slide 10: Strong financial base

    Strong financial base  Solid 2013 results  Strong balance sheet and access to capital  Investment grade credit rating  No near-term financings  Strong cash flow generation 10

  11. Slide 11: Financial performance – 2013

    Financial performance – 2013 $M, except per share amounts 2013 2012 Change Revenues $1,393 $1,296 7% Adjusted EBITDA (before mark-to-market)(1) $483 $456 6% Basic earnings per share $2.13 $0.84 154% Normalized earnings per share $1.69 $1.29 31% Funds from operations $419 $381 10% Cash flow per share

  12. Slide 12: Financial strength

    Financial strength Strong balance sheet and investment grade credit rating  Investment grade credit ratings Agency Ratings Outlook  Debt-to-capital ratio of ~33% at 2014 S&P BBB- / P-3 Stable year-end remains below long-term DBRS BBB / Pfd-3 (low) Stable target of 40% - 50% Debt to total capitaliz

  13. Slide 13: Credit metrics

    Credit metrics(1) Above DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt EBITDA/Adj. Interest 25% 6.0 20% 5.0 15% 4.0 3.0 10% 2.0 5% 1.0 0% 0.0 2014T 2014T Above S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(2) Adj. Debt/Adj. EBITDA(2) 25% 4.5 4.0 20% 3.5 3

  14. Slide 14: Development projects – CAPEX

    Development projects – CAPEX ($M) Prior to 2014 2014E Project total Port Dover & Nanticoke $276 $24 $300 K2 Wind(1) $16 $31 $291 Shepard Energy Centre(2) $684 $137 $821 $976 $192 $1,412 Continue strong execution of CAPEX program Port Dover & Nanticoke Shepard Energy Centre (1) Represents Capital Pow

  15. Slide 15: Cash flow and financing outlook

    Cash flow and financing outlook Sufficient FFO to meet dividends, development projects and sustaining CAPEX Sources of cash flow ($M) 2014E Funds from operations(1) ~$380 Uses of cash flow Dividends (net of DRIP) & distributions to NCI $100 Dividends (Preferred shares) $22 Development projects $192

  16. Slide 16: Continued strong cash flow generation

    Continued strong cash flow generation Funds from operations (FFO) $450  2014 FFO target range of $360M- $400M is lower than 2013 due to $400 35% lower average AB power price $350 34% ~39% forecast 35% $300  Generating significant discretionary cash flow(2) with 3-year average of $250 19% ($M) 39%

  17. Slide 17: Improving contracted cash flow

    Improving contracted cash flow(1,2) $450 $400 $350 $300 $M $250 $200 $150 $100 $50 $0 2012 2013 2014T 2015T 2016T 2017T Genesee 1&2 Kingsbridge 1 North Carolina Island Generation Quality Wind Halkirk PD&N Shepard K2 Wind Substantial expansion of contracted operating margin from ~$225M to $375M from

  18. Slide 18: Dividends

    Dividends  Contracted cash flow base Contracted operating margin to supplemented with hedge position financial obligations(1) and dividends provide downside protection in lower 120% price environment 110%  >90% hedged in 2014. Minimum AB 100% power price of ~$11/MW for free cash flow to meet divid

  19. Slide 19: Capital allocation

    Capital allocation  Well positioned to fund or partially fund any new significant growth opportunities in the near term with discretionary cash flow  Debt reduction  Consider dividend increases or share buyback given improvements in trading liquidity and public float Diluted shares breakdown (M)

  20. Slide 20: Alberta power market upside

    Alberta power market upside  Strong market demand fundamentals  Attractive pricing outlook  Retirement of coal units  Capital Power’s attractive fleet  Alberta upside 20

  21. Slide 21: Alberta market

    Alberta market Alberta demand and Alberta GDP(1) Real GDP ($M) AIL (GWh) 450,000 AB GDP 400,000 120,000 Alberta Demand 350,000 100,000 300,000 80,000 250,000 200,000 60,000 150,000 40,000 100,000 20,000 50,000 - - 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Real GDP – All Alberta ind

  22. Slide 22: Alberta market

    Alberta market Alberta energy prices(1) 125 15 Power Price NG Price 100 10 $/GJ $/MWh 75 50 5 25 Historical Forecast 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Alberta market design expected to continue to provide timely pricing signals for the addition of new sup

  23. Slide 23: Expected coal unit retirements - CST

    Expected coal unit retirements - CST Retirements under the federal Capital Stock Turnover (CST) regulations Alberta coal generation (MW) Generation End of Life 7,000 Capacity (Final Facility (MW) Regulations) 6,000 Battle River 3 149 2019 Sundance 1 288 2019 H.R. Milner 144 2019 5,000 Sundance 2 288

  24. Slide 24: Best fleet in the fastest growing power market in North America

    Best fleet in the fastest growing power market in North America With investments in Shepard and Genesee 4&5 facilities, Capital Power will own high-quality baseload, mid-merit, renewable and peaking generation in Alberta providing more flexibility than any other power portfolio in the province. 3,00

  25. Slide 25: Diverse generation fleet in Alberta

    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, backstops position Gas

  26. Slide 26: AB commercial portfolio positions

    AB commercial portfolio positions  Alberta portfolio hedged positions for AB baseload plants and acquired Sundance PPA (% sold forward) 2014 2015 2016 Percentage sold forward 100% 78% 30% Average contracted Mid-$50 Mid-$50 Mid-$50 prices(1) ($/MWh) Forward prices ($/MWh) $53 $49 $50 (as of Dec 31/1

  27. Slide 27: Merchant position in AB provides upside

    Merchant position in AB provides upside Operating margin(1) to financial obligations(2) and dividends 225%  Expansion of contracted 200% cash flows provide strong coverage of 175% financial obligations and 150% dividends as Shepard and K2 begin COD 125%  Increasing open 100% merchant position in 7

  28. Slide 28: Growth

    Growth  Existing projects – Shepard Energy Centre, K2 Wind, Genesee 4&5  Developing contracted opportunities in North America  Competitiveness of contracted acquisitions a challenge  Fuel type and financial discipline 28

  29. Slide 29: Shepard Energy Centre

    Shepard Energy Centre  Shepard is a natural gas combined cycle facility located on the southeast edge of Calgary, with COD targeted in early 2015  50% joint venture agreement with ENMAX for the 800 MW facility 2014 2015 2016 2017 2018-35 Shepard - total capacity (MW) - 800 800 800 800 Capital Powe

  30. Slide 30: K2 Wind

    K2 Wind  20-year PPA with Ontario Power Authority  270 MW (Siemens turbines); located in southern Ontario  Equal one-third partnerships with Samsung and Pattern Renewable Kingsbridge 1 Holdings  REA received July/13; COD targeted for 2015  $291M capex budget (Capital Power’s portion)  Project

  31. Slide 31: Genesee 4&5

    Genesee 4&5  Capital Power will develop Genesee 4&5 in a 50/50 joint venture with ENMAX  Capital Power to lead construction and will be the operator  Definitive agreements expected in Q1, 2014  Genesee provides significant advantages for the development of a new combined cycle unit given the acc

  32. Slide 32: Growth opportunities

    Growth opportunities All contracted opportunities outside of Alberta Development Sites Natural Gas Wind Solar 32

  33. Slide 33: 2014 Corporate priorities

    2014 Corporate priorities Operational targets Plant availability (reflects planned turnarounds at Genesee 2 & 3) 95% Maintenance capital (plant maintenance capital and other capex) $85M Plant operating and maintenance expense $165M to $185M Financial target Funds from operations(1) $500 $400 $360 to

  34. Slide 34: 2014 Corporate priorities

    2014 Corporate priorities Development and construction targets On-time, on-budget and • Shepard Energy Centre project (complete safe development of construction with COD in early 2015) committed projects • Genesee 4 & 5 (continue on track for Q1/15 permitting approval) • K2 Wind project (commence co

  35. Slide 35: Why invest in Capital Power

    Why invest in Capital Power Excellent assets in good markets Operational Very good operating and trading performance excellence Recent reductions in risk, financial volatility & operating cost base Near term growth funded from internal cash flow & DRIP Strong financial Well-positioned for discipline

  36. Slide 36: Alberta power market

    Appendix Alberta power market  Alberta (AB) has a competitive wholesale energy and ancillary services market operated by the Alberta Electric System Operator (AESO); market has an installed generation capacity of ~14,000 MW  No capacity market – power generators must recover all costs through reve

  37. Slide 37: Alberta demand outlook

    Appendix Alberta demand outlook Growth in total electricity sales (%) “Alberta’s future power 2013 to 2020(1) 25% demand outlook is also fairly robust, especially compared 20% with that of most other jurisdictions in North 15% America, because of a strong provincial economy; 10% a growing population

  38. Slide 38: Alberta generation and load mix

    Appendix Alberta generation and load mix Current installed generation(1) 2012 Demand by end use(1) (MW and % of installed capacity) Wind Biomass/Other Farm 1,088 MW 404 MW 2% Hydro 7% 3% 894 MW 6% Residential 13% Gas-Fired Coal 1,529 MW 6,271 MW Commercial Industrial 11% 43% 20% 46% Cogen 4,363 MW O

  39. Slide 39: Alberta load factor

    Appendix Alberta load factor  High load factor enables a higher realized pool price for peaking units  Load factor is about 80% to 85% Average Alberta load (MW)(1) By hours ended (Jan 2012 – Dec 2013) 9400 9200 9000 8800 8600 8400 8200 8000 7800 7600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

  40. Slide 40: Historical Alberta prices

    Appendix Historical Alberta prices Daily average power prices 800 600 $/MWh 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual average power prices and AECO 100 89.95 10.00 70.36 80.79 76.22 80.19 80 71.29 66.95 8.00 62.99 54.59 64.32 47.81 50.88 43.93 7.74 60 8.27 6.0

  41. Slide 41: Alberta pool price evolution

    Appendix Alberta pool price evolution  About 10% of hours have prices greater than $100  Market provides favourable pricing for peaking generation Pool price in top 15% of hours by year(1) 1000 900 2009 800 2010 700 2011 600 2012 $/MWh 500 2013 400 300 200 100 0 0% 2% 3% 5% 7% 9% 10% 12% 14% Perce

  42. Slide 42: Alberta market design

    Appendix Alberta market design Stable market design has signalled the addition of 6 GW of new generation 1,000 30% 900 25% 800 700 20% 600 Capacity Reserve 500 15% (MW) Margin 400 10% 300 200 5% 100 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 New Capacity AESO Historical Re

  43. Slide 43: 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

  44. Slide 44: Alberta emissions regulations

    Appendix Alberta emissions regulations  GHG emissions  SO2 emissions  NOx emissions  Mercury  Particulate matter Certainty in air emissions regulations will provide for orderly retirements, development of replacement generation, and improving environmental outcomes 44

  45. Slide 45: Proven ability to manage environmental commodity exposure

    Appendix Proven ability to manage environmental commodity exposure  Dedicated team of five focused on transforming environmental commodity risk into an opportunity – success in doing this has created a competitive advantage through lower compliance costs in Alberta  This competitive advantage will

  46. Slide 46: Renewables and emissions portfolio

    Appendix Renewables and emissions portfolio Unhedged vs. hedged Capital Power Alberta SGER compliance costs 2013-2017 $50 $45 $40 $35 $30 Compliance Costs ($M) $25 Annual AB SGER cost savings for $20 Capital Power $15 $10 $5 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Unhedged Hedged 4

  47. Slide 47: Expected coal unit retirements - CASA

    Appendix Expected coal unit retirements - CASA Clean Air Strategic Alliance (CASA) regulations may result in coal units retiring sooner Total coal capacity (MW) CASA Financial Compliance 7,000 2019: Sundance 1&2 (576 MW); Battle River Capital Stock Turnover 3 (149 MW); H.R. Milner 6,000 (144 MW) 5,0

  48. Slide 48: Debt maturity schedule

    Appendix Debt maturity schedule(1)  $1.2B in credit facilities with 5-year tenor maturing 2018, of which $1.1B available $400 $350 $314 $305 $300 $255 $250 US$230 ($M) (2) $200 $179 (2) $144 $150 $100 US$65 $50 $13 $15 $0 2014 2015 2016 2017 2018 2019 2020 2021 2026 EPCOR Debt Capital Markets Debt

  49. Slide 49: Summary of assets

    Appendix Summary of assets Clover Bar Keephills Energy Clover Bar Genesee 1 Genesee 2 Genesee 3 3 Joffre Centre Landfill Halkirk Alberta Contracted Alberta Commercial Capacity 430 MW 430 MW 516 MW 495 MW 480 MW 243 MW 4.8 MW 150 MW % owned / 100 / 100 100 / 100 50 / 100 50 / 0 40 / 0 100 / 100 100 /

  50. Slide 50: Summary of assets

    Appendix Summary of assets Island Quality Port Dover & Kingsbridge 1 Generation Wind Nanticoke Roxboro Southport Ontario & British Columbia Contracted Mid-Atlantic Contracted Capacity 40 MW 275 MW 142 MW 105 MW 46 MW 88 MW % owned / 100 / 100 100 / 100 100 / 100 100 / 100 100 / 100 100 / 100 operate

  51. Slide 51: Development projects

    Appendix Development projects Shepard Energy Centre Genesee 4 & 5 K2 Wind Ontario Alberta Commercial Ontario Contracted Capacity 800 MW Up to 1,050 MW 270 MW % owned / 50 / 0 50 / 100 33.3% owned operated Location Calgary, Alberta Warburg, Alberta Ashfield-Colborne- Wawanosh, Ontario Fuel & Combined

  52. Slide 52: 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, (iii) cash flow per share, (iv) discretionary cash

  53. Slide 53: 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

  54. Slide 54: Investor Relations Contact

    Investor Relations Contact Randy Mah 10th Floor Senior Manager 10423 – 101 Street NW (780) 392-5305 Edmonton, Alberta T5H 0E9 rmah@capitalpower.com www.capitalpower.com

Capital Power — Non-Deal Roadshow (March 2014) on 6ix