Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (April 2015)
49 slides from Capital Power's roadshow presentation, April 2015
Slide 1: Capital Power Investor Meetings April 2015
CAPITAL POWER Investor Meetings April 2015 Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO
Slide 2: Capital Power overview
Capital Power overview Independent power producer with ownership interest in 16 facilities in Canada and the US totaling more than 3,100 MW(1) with 90 MW coming on-line in 2015 Capital Power builds, owns and operates power plants Significant contracted cash flow base and merchant investments i
Slide 3: Capital Power's value proposition
Capital Power’s value proposition 3
Slide 4: Modern fleet
Operational excellence Modern fleet Helps keep availability high and reduces risk of unplanned outages Average weighted facility age of the current fleet is 11.7 years(1) Adding 90 MW from K2 Wind in mid-2015 Average Age Port Dover & Nanticoke Facility age Halkirk Remaining life Quality Wind Win
Slide 5: Proven track record of high fleet availability
Operational excellence Proven track record of high fleet availability Plant availability consistently 90%+ in past 6 years 18,000 100% 16,000 96% 14,000 95% 94% 95% 93% 12,000 92% 91% Generation 10,000 90% (GWh) 90% 8,000 6,000 85% 4,000 2,000 - 80% 2009 2010 2011 2012 2013 2014 2015T Generation Ave
Slide 6: Excellent track record of development
Operational excellence Excellent track record of development Outstanding track record of completing 7 construction projects (supercritical coal, natural gas, wind) totaling 1,691 MW Asset Capacity / fuel On-time On-budget In-Service Genesee 3(1) (AB) 516 MW / coal + 2005 Kingsbridge 1 (ON) 40 MW /
Slide 7: Capital Power is the leading developer in the AB market
Operational excellence Capital Power is the leading developer in the AB market Generation built in Alberta since 2004(1) 1800 Genesee 4&5 Renewables Thermal 1600 Proposed Genesee 4&5 1400 1200 1000 (MW) Proposed Genesee 4&5 800 600 400 200 0 Capital Power ENMAX TransAlta ATCO Other 1) Includes Shepa
Slide 8: Financial strength
Strong financial base Financial strength Strong balance sheet and investment grade credit rating Investment grade credit ratings Agency Ratings Outlook Debt-to-capital ratio remains below S&P BBB- / P-3 Stable long-term target of 40% - 50% DBRS BBB / Pfd-3 (low) Stable Debt to total capitalizati
Slide 9: Credit metrics
Strong financial base Credit metrics(1) Above DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt EBITDA/Adj. Interest 30% 6.0 25% 5.0 20% 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2015T 2015T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(2) Adj. Debt/Adj. EBIT
Slide 10: Continued strong cash flow generation
Strong financial base Continued strong cash flow generation Funds from operations (FFO) $450 Cash flow expected to increase $400 48% ~8% in 2015 $350 36% 40% ~40% of 2015 FFO is 37% discretionary cash flow (DCF) $300 At the mid-point of guidance $250 range, generating ~$200M in ($M) 33% cash f
Slide 11: Improving contracted cash flow
Strong financial base Improving contracted cash flow(1,2) Substantial expansion in contracted operating margin from 2012 to 2016 $400 } $350 Shepard & K2 Wind K2 Wind $300 } Shepard 3 wind Macho Springs $250 projects PD&N ($M) $200 Halkirk Quality Wind $150 Island Generation North Carolina $100 King
Slide 12: Dividends
Strong financial base Dividends Contracted operating margin to financial obligations(1) and dividends(2) With addition of Shepard and 120% K2 Wind in 2015, substantial 110% expansion in our contracted operating margin 100% 7.9% dividend increase in 90% 2014 was supported by 80% growing contracte
Slide 13: Consistent dividend growth is core to Capital Power's story
Strong financial base Consistent dividend growth is core to Capital Power’s story One of the lowest payout ratios of Canadian IPPs At the mid-point of guidance range, generating ~$200M in free cash flow before growth capex at the bottom of the cycle Significant expansion of contracted cash flo
Slide 14: EPCOR ownership reduced
Strong financial base EPCOR ownership reduced Recent $225M Secondary Offering by EPCOR has reduced their ownership position in Capital Power L.P. (CPLP) to 9% from 18%. On Apr 2/15 closing date, EPCOR exchanged their remaining CPLP units to common shares. Registration Rights Agreement terminated
Slide 15: Capital allocation
Strong financial base Capital allocation (1) Growing contracted cash flow base supports Dividend dividend growth Growth Capital Growth (2) Well positioned to fund or partially fund Allocation Opportunities any new significant growth opportunities in the near term with discretionary cash flow Repurch
Slide 16: Alberta demand relative to oil prices
AB power market upside Alberta demand relative to oil prices Oil and gas development drives load growth in Alberta Long lead time of oil sands projects reduces sensitivity to short term oil price volatility Downside risk to load growth from pullback in light oil development Alberta Internal Load
Slide 17: Expected coal unit retirements - CST
AB power market upside 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 20
Slide 18: Alberta market
AB power market upside Alberta market Alberta Energy Prices(1) 125 Power Prices NG Prices 15 100 10 75 $/MWh $/GJ 50 5 25 Historical Forecast 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Alberta market design expected to continue to provide timely pricing signals fo
Slide 19: Diverse generation fleet in Alberta
AB power market upside Diverse generation fleet in Alberta Well positioned to capture value in Alberta’s merchant market Expected AB power generation stack for 2015(1) 100% Other Clover Bar Energy Centre Gas peaking 30% • Most responsive peaking facility in the AB market 90% • Captures peak pricing,
Slide 20: AB commercial portfolio positions
AB power market upside AB commercial portfolio positions Alberta portfolio hedged positions (% sold forward) As of Mar 31/15 2016 2017 Percentage sold forward(1) 49% 12% Average contracted prices(2) ($/MWh) Mid-$50 High-$60 Well positioned to weather the bottom of the power market cycle with a signi
Slide 21: Alberta power market trading
AB power market upside Alberta power market trading Portfolio optimization activities focused on managing exposure to commodity risks, reducing volatility and creating incremental value Average realized power price has exceeded spot power prices ($/MWh) by 21% on average over the past 5.25 years $
Slide 22: Financial obligations and dividends fully covered by contracted cash flow
AB power market upside Financial obligations and dividends fully covered by contracted cash flow Operating margin(1) to financial obligations(2) and dividends(3) 200% Contracted + merchant ($70/MWh) 150% Contracted + merchant ($40/MWh) 100% Contracted margin 50% 2013 2014 2015F 2016F 2017F 1) Mercha
Slide 23: Shepard Energy Centre
Growth Shepard Energy Centre Shepard, a 50% joint venture with ENMAX, reached COD in Mar/15 Final construction costs not expected to exceed $854M, which includes an accrued performance bonus to the turbine manufacturer based on final facility performance measurements related to electrical output
Slide 24: K2 Wind
Growth K2 Wind 270 MW (Siemens turbines) wind project located in southern Ontario with 20-year PPA with the Ontario Power Authority Equal 1/3 partnerships with Samsung and Pattern Renewable Holdings $850M project financing completed in Mar/14 Total estimated project cost revised to $930M fro
Slide 25: Genesee 4&5
Growth Genesee 4&5 Joint venture partners with ENMAX to develop, construct, own, and operate the 1,060 MW natural gas-fired combined cycle facilities 8-year tolling agreement with ENMAX for 50% of CP’s share of the output All major regulatory approvals received to proceed with construction; Ca
Slide 26: Element Power US
Growth Element Power US In Dec/14, completed the acquisition of Element Power US for ~US$69M (includes US$52M of project financing) Primary driver for the acquisition was to build a portfolio of development projects in strategic locations in the U.S. • 10 wind development sites • 4 solar develop
Slide 27: Element Power US – strategic fit
Growth Element Power US – strategic fit Market Strategy Element Sites SPP • Strong wind regime • 200 MW wind project in Kansas • Adjacent to transmission build-out • Affordable land positions • Low construction cost Upper • Coal dependency • 99 MW wind project in North Dakota Midwest • Strong wind r
Slide 28: Beaufort Solar
Growth Beaufort Solar Board has approved the 15 MW solar project in North Carolina, U.S. Fully contracted facility with a 15- year PPA with Duke Energy Commercial operations date (COD) targeted for Dec/15 Sale leaseback structure; sell to tax equity investor at COD in exchange for lease paym
Slide 29: Growth opportunities in Canada
Growth Growth opportunities in Canada Natural gas and wind development sites Wind Natural Gas 29
Slide 30: Growth opportunities in the U.S.
Growth Growth opportunities in the U.S. Natural gas and renewable development sites 1 Wind Natural Gas Solar 30
Slide 31: Financial outlook
Outlook Financial outlook 2015 Alberta power forwards are currently in the low-$30/MWh range, which is lower than our original forecast assumption of $44/MWh At the beginning of the year, Alberta baseload position for 2015 was significantly hedged in the mid-$50/MWh No change to revised FFO gu
Slide 32: Q1/15 Performance and 2015 targets
Outlook Q1/15 Performance and 2015 targets Operational and financial targets ($M) 100% Plant availability Sustaining capex $100 95% 98% $75 94% 90% $50 $65 85% $25 80% $6 $0 Q1/15 2015 Target Q1/15 2015 Target Plant operating & maintenance expenses Funds from operations ($M) $200 $180 - $200 ($M) $3
Slide 33: 2015 Development & construction targets
Outlook 2015 Development & construction targets On-time, on-budget and safe development of committed projects K2 Wind (Ontario) Genesee 4&5 (Alberta) Complete construction for Transition from development COD in mid-2015 to construction 33
Slide 34: Why invest in Capital Power
Summary Why invest in Capital Power Strong contracted cash flow growth supports annual dividend growth • Excellent assets in good markets with solid operating Operational performance • On-going improvements to operating cost base, fleet excellence availability and risks • Substantial growth in contr
Slide 35: Alberta power market
Appendix Alberta power market Competitive wholesale and retail energy market Installed generation capacity of 16 GW Entire province is a single zone where power prices are determined by the bid price of the incremental power generator – no capacity market Well functioning and stable market d
Slide 36: Alberta generation and load mix
Appendix Alberta generation and load mix Current installed generation(1) Generation mix outlook in 2034(2) (MW and % of installed capacity) Wind Biomass/Other Wind Biomass/Other 1,434 3% 2,679 MW 864 MW 9% 11% 3% Hydro 894 Hydro Coal 6% 894 MW 2,509 MW 4% 10% Coal 6,271 39% Cogen Gas-Fired 6,737 MW
Slide 37: Alberta demand by end use
Appendix Alberta demand by end use 2013 Demand by end use(1) 2034 Demand by end use(1) Farm Farm 3% 1% Commercial Commercial 20% 19% Industrial 40% Industrial 45% Residential 11% Residential 13% Oilsands Oilsands 19% 29% Demand from Industrial and Oilsands account for 64% of current demand, that is
Slide 38: Historical Alberta prices
Appendix Historical Alberta prices Daily average power prices 800 700 600 500 ($/MWh) 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Annual average power prices and AECO (Annual power prices have averaged $65/MWh in the past 14 years) 100 89.95 10 8.27 8
Slide 39: Alberta market design
Appendix Alberta market design Stable market design has signalled the addition of 6 GW of new generation 1000 45% 900 40% 800 35% 700 30% 600 25% Capacity Reserve 500 Margin (MW) 20% 400 15% 300 10% 200 100 5% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 New Capacity AE
Slide 40: AB power market - capacity additions
Appendix (1) AB power market - capacity additions Committed projects Owner Capacity (MW) Generation type COD Shepard Energy Centre Capital Power / ENMAX 800 Combined Cycle Q1/15 Cold Lake (Nabiye) 2 Imperial Oil 170 Cogeneration Q1/15 Kearl Imperial Oil 100 Cogeneration Q1/15 Proposed projects Owner
Slide 41: 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
Slide 42: CST and CASA framework
Appendix CST and CASA framework Capital Stock Turnover (CST) Clean Air Strategic Alliance (CO2) (CASA) (NOx and SO2) Limits unscrubbed coal-fired plant Compliance through meeting life to 45-50 years physical BATEA(1) or use of credits to financially comply 41st to 50th years Unit Commercial Op
Slide 43: Debt maturity schedule
Appendix Debt maturity schedule(1) $1.2B in credit facilities with 3-year tenor maturing 2018, of which $1.1B is available $350 $300 $300 $250 $250 $234 US $230 ($M) $200 $191 $150 $139 $100 US $65 $50 $10 $0 2015 2016 2017 2018 2019 2020 2021 2026 (2) EPCOR Debt Capital Markets Debt Bank Debt Well
Slide 44: Summary of assets
Appendix Summary of assets Clover Bar Clover Shepard Genesee Genesee Genesee Keephills Energy Bar Energy 1 2 3 3 Joffre Centre Landfill Halkirk Centre Alberta Contracted Alberta Commercial 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
Slide 45: Summary of assets
Appendix Summary of assets Kingsbridge Island Quality Port Dover & Macho 1 Generation Wind Nanticoke Roxboro Southport Springs Ontario & British Columbia Contracted U.S. Contracted Capacity 40 MW 275 MW 142 MW 105 MW 46 MW 88 MW 50 MW % owned / 100 / 100 100 / 100 100 / 100 100 / 100 100 / 100 100 /
Slide 46: Projects under development/construction
Appendix Projects under development/construction K2 Wind Beaufort Solar Genesee 4&5 Ontario Contracted U.S. Contracted Alberta Commercial Capacity 270 MW 15 MW Up to 1,060 MW % owned / 33.3% owned 100 / 100 50 / 100 operated Location Ashfield-Colborne-Wawanosh, Beaufort County, North Carolina Warbur
Slide 47: 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 (FFO), (iii) normalized earnings attributable to co
Slide 48: 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 49: Investor Relations Contact
Investor Relations Contact Randy Mah 10th Floor Senior Manager 10423 – 101 Street NW (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com