Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (January 2021)
41 slides from Capital Power's investor presentation, January 2021
Slide 1: Investor Presentation January 2021
Investor Presentation January 2021 Brian Vaasjo, President & CEO Sandra Haskins, SVP Finance & CFO Competitiveness of wind through innovation has translated to solar 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • Highly-contracted, young and diversified 3x portfolio • Targeting 10-12% total shareholder return • Targeting net carbon neutral before 2050 Operational facilities 6,490 MW 28 facilities Projects under development 985 MW 7 renewable projects and In Ope
Slide 3: Resiliency and innovation through COVID-19
Resiliency and innovation through COVID-19 Priority to keep our employees and families healthy Operations • Comprehensive health and safety protocols at plants successful • Managed 7 major planned outages successfully in 2020 Corporate • Ongoing remote work arrangements • No change in efficiency or
Slide 4: Growing our business to net carbon neutral
Growing our business to net carbon neutral Strategy Today 2024 and beyond Building and acquiring Investing in emissions Integration of wind and solar in free renewables storage technologies Canada and the U.S. Reduce emissions Investing in Acquiring key profile through carbon critical natural facili
Slide 5: Strategic path to a low-carbon future
Strategic path to a low-carbon future Off-coal in 2023 • Retirement of Roxboro and Southport power plants in 2021 • Genesee site 100% natural gas in 2023 Accelerated growth in renewables • 7 development projects totaling 425 MW; 100 MW Buckthorn Wind acquisition Natural gas critical to net carbon ne
Slide 6: Canadian Federal Government GHG Plan
Canadian Federal Government GHG Plan Plan includes a proposed increase in carbon Initial Assessment pricing to $170/tonne by 2030, among range of Alberta measures and programs for Canada to exceed • Near/medium term: 2030 GHG commitments positive • Long-term: continue to • Plan is expected to increa
Slide 7: Alberta power market
Alberta power market • Market showing strong recovery from impacts of COVID-19 and low oil prices • Supply has responded to lower demand with other market participants announcing the retirement of Sundance 3 and delays on some cogen and renewable projects • Starting in 2021, all output controlled by
Slide 8: Alberta power market
Alberta power market COVID-19 and crude oil impact • Based on actual 30-day rolling averages, largest (MWh) Alberta Internal Load (30-day rolling average) (1) year-over-year (yoy) 11,000 decline in power demand 2019 2020 1.1% decline was ~7.2% due to COVID- 10,500 19 pandemic and low 10,000 crude oi
Slide 9: Portfolio optimization
Portfolio optimization AB commercial portfolio positions (Hedge position as of Nov 27/20) 2021 2022 2023 % sold forward(1) 21% 25% 17% Contracted prices(2) ($/MWh) High-$50 Mid-$50 Low-$50 Balance of 2022 2023 2021 Current forward prices ($/MWh) $66 $62 $53 (as of Jan 13/21) Strong track record of v
Slide 10: 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 – $997M capital cost, 20%+ levered returns, ~$0.70 average accretion to AFFO/share 560 MW net capacity increase (total 1,360 MW) Best-in-class NGCC tech
Slide 11: Genesee more competitive after repowering
Genesee more competitive after repowering Estimated variable cost merit order in 2025 $/MWh Older CTG units not competitive (retire?) 80 Older CTG Units 70 60 GN1&2 Dual Fuel 50 GN3 Dual Fuel 40 Older CTG Units 30 GN 1&2 become 20 very efficient GN3 CTG GN 3 remains in 10 middle of stack GN1&2 Repow
Slide 12: Growth strategy
Growth strategy • Growth strategy aligns with our sustainability goals • Target markets support $500M annual capital investment • Strong renewable growth pipeline in Alberta and the U.S. • Potential acquisition of mid-life natural gas assets • Targeting 10-12% total shareholder return over the long
Slide 13: Dynamic pipeline supports resilient & responsible growth
Dynamic pipeline supports resilient & responsible growth Solar 8 sites 6 sites Potential: 360 MW 8 sites Committed: 276 MW Fuel Total: 636 MW Development Sites Wind 3 sites 9 sites Potential: 1,129 MW 9 sites Committed: 151 MW Total: 1,280 MW Storage 2021 Growth Target: 3 sites Invest $500M Potentia
Slide 14: Securing long term PPAs delivers stable cash flows
Securing long term PPAs delivers stable cash flows Strathmore Solar 3 North Carolina solar projects • Long Term 25-year PPA • Long Term 20-year PPA • 40.5 MW, 100% output • 160 MW, 100% output • Bundled energy and environmental attributes • Bundled energy and environmental attributes • Investment gr
Slide 15: Gas generation vital for reliability and flexibility
Gas generation vital for reliability and flexibility Forecasted natural gas generation in the US(1) Growth drivers 2020 2040 • Coal & nuclear retirements • Renewables proliferation Coal • Low gas prices Gas 717 GW +205 GW Gas 719 GW Value of incumbent assets Coal -202 GW Coal Gas • High barrier to e
Slide 16: Natural Gas: necessary long-term role in power
Natural Gas: necessary long-term role in power • Sustainable – enables the penetration of more renewables • Flexible – dispatchable when you need it (availability >90%); offline when you don’t • Power Dense – can provide 80 MW/acre • Decarbonizable – with carbon conversion and hydrogen • Affordable
Slide 17: Diversification, Resiliency and Sustainability
Diversification, Resiliency and Sustainability 2014 2020F 2023F 2025F Natural EBITDA by fuel type gas 13% Natural gas / coal Focusing on renewables dual-fuel Renewables Natural 29% 34% and hydrogen/CCUS-ready Renewables Coal gas 44% 21% natural gas 66% Natural gas 66% Renewables Off-coal 27% US 2% E
Slide 18: Financial strategy
Financial strategy • Deploying capital for the repowering of Genesee 1&2 and growing renewables portfolio • Disciplined growth with focus on contracted cash flows and sustainability goals • Dividend growth of 7% in 2021 and 5% in 2022 • Maintain investment grade credit rating 18
Slide 19: Overview of financial strategy
Overview of financial strategy Fund growth • Fund growth in a cost-effective manner towards low carbon future • Access various sources of capital and seek innovative ways to fund growth Maintain • Maintain competitive cost of capital investment grade credit • Ensure access to capital markets through
Slide 20: Capital allocation balance
Capital allocation balance • Balanced focus between dividend Dividend Growth growth and growth opportunities growth opportunities • Growth focused on a lower-carbon fleet • Existing asset • Allocating capital strategically to improvements develop, commercialize and • Development projects implement t
Slide 21: History of stable dividend growth
History of stable dividend growth Annualized dividend $2.30 $2.19 per share(1,2) $2.05 5% $1.92 7% $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 42% 50% 45% 45% 35% 40% Payout(3) Payout Payout Payout Payout Payout 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019 Y/E 2020 Y/E 2021T 2022T Long-term AF
Slide 22: 5-year growth in key financial metrics
5-year growth in key financial metrics ($M) Adjusted EBITDA normalized 1100 AFFO Normalized $6.00 AFFO/share Normalized 1000 $5.00 900 800 $4.00 700 $3.00 600 500 $2.00 400 $1.00 300 200 $0.00 2016 2017 2018 2019 2020T 2021T 5-year growth supported by average growth capex of $750M(3) per annum 1) No
Slide 23: Cash flow and financing outlook
Cash flow and financing outlook Positive cash position and credit facilities to fund growth projects in 2021 Sources ($M) FFO(1) + off-coal compensation $650 Capital markets/debt refinancing/ asset recycling $510 DRIP reinvestment $70 $1,230 Uses Committed growth/enhancement capex $740 Dividends(3)
Slide 24: Capital program
Capital program ($M) Capital deployed to renewables and 350 repowering provide significant financial contributions in 2022+ 370 360 180 245 25 5 30 30 - 10 95 110 85 90 60 2021 2022 2023 2024 2025 (1) Sustaining capex Enhancement & GPS capex Other committed capital Genesee repower 1) Includes net ca
Slide 25: EBITDA growth from renewable projects
EBITDA growth from 7 renewable projects Annualized EBITDA of ~$70M Enchant Solar Whitla 2 Average annualized EBITDA ~$70M Hornet Solar and AFFO of ~$55M Hunter’s Cove after completion in late 2021 Solar Bear Branch Whitla 3 and 2022 Solar Strathmore Solar Full-year financial contributions starting i
Slide 26: Managing Alberta carbon exposure
Managing Alberta carbon exposure CPC Alberta Emissions Expense Carbon Offset Savings ($M) 41 52 20 160 102 87 3 17 14 2021 2022 2023 2024 2025 Low-cost offsets and transition to gas protect and enhance asset value 1) Based on current Alberta TIER regulation and assumes carbon prices increase to $40/
Slide 27: Sustainability / investment opportunity
Sustainability / investment opportunity • 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 27
Slide 28: Capital Power's (R)Evolution
Capital Power’s (R)Evolution 2009 to Today Today to 2024 2024 – 2030 2030 – 2050 2050 – 2070 • Genesee efficiency • Complete repowering • Expand CCU • Carbon Neutrality • Physical program - 12% GHG and off coal • Pilot/Demo via physical Decarbonization by 2021 • Invest in Renewables, Hydrogen projec
Slide 29: Pathway to net carbon neutral
Pathway to net carbon neutral Renewables with storage Deploying carbon conversion and hydrogen blending at thermal facilities Limited offsets used 29
Slide 30: Genesee Carbon Conversion Centre
Genesee Carbon Conversion Centre World’s largest carbon nanotube production facility Stronger cement Enhanced battery products More durable tires Tougher anti-corrosion products 30
Slide 31: Accelerating ESG initiatives
Accelerating ESG initiatives Environmental Social Governance • Net carbon neutral before 2050 • Optimal workplace of the future to • 25% of Executive short-term incentive • Genesee repowering reflect key learnings and benefits pay linked to meeting ESG targets from COVID-19 • 44% of Board and 43% of
Slide 32: On track to meet our sustainability targets
On track to meet our sustainability targets • Achieve net carbon neutral by 2050 • Construct all new natural gas generation units to be carbon capture and/or hydrogen-ready Reduce CO2 emissions at Genesee by 50% by 2030 from 2005 levels • Reduce CO2 emissions by 10% and our emission intensity by 6
Slide 33: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth and accelerates net carbon neutral before 2050 Success in renewables from innovation and optimization We create value • Recent success in solar more than doubles our growth opportunities through resiliency, • Long-term contracts for
Slide 34: Appendices
Appendices • Ops 2030 program • Alberta portfolio optimization • Credit rating metrics • Debt maturity schedule 34
Slide 35: Ops 2030 generates $50M in annual EBITDA by 2030
Ops 2030 generates $50M in annual EBITDA by 2030 Creating the sustainable plant of the future through technology and innovation Continuous Data Automation Digital Tools Flexible and Improvement Analytics • Mobility in • 3D printing and Remote Operation • Wind turbine • Deployment of operator rounds
Slide 36: Actual and forecasted Alberta power prices
$/MWh 0 20 40 60 80 100 120 140 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12 Q1/13 Q2/13 Higher captured prices 3rd Party Forecast Range Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Portfolio optimization Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Actual and foreca
Slide 37: 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 S&P BBB- / P-3 Stable 15% 4.0 DBRS BBB(low) / Pfd-3 (low) Stable 3.0 10% 2.0 5% 1.0 • Both credit rati
Slide 38: Debt maturity profile
Debt maturity profile(1) Well spread-out debt maturities supported by long asset lives • Longer term debt reflects increased confidence in Capital Power’s business profile • Strong liquidity from cash flow from operations and ~$800M(1) available capacity on $1.0B of committed credit facilities that
Slide 39: 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 joint venture interests, gains or losses on disposals and unrealized c
Slide 40: Forward-looking information
Forward-looking information Forward-looking information or statements included in the 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 other
Slide 41: Investor Relations
Q1/20 Analyst Conference Call [Insert picture of Cardinal Point or Buckthorn for title page; other visual images in presentation to be added] Investor Relations Randy Mah 10423 101 Street NW Director, Investor Relations 11th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada T5H 0E9