Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (August 2018)
31 slides from Capital Power's investor presentation, August 2018
Slide 1: Driving a Sustainable Future
Driving a Sustainable Future Brian Vaasjo, President & CEO Sandra Haskins, Treasurer Investor Presentation August 2018
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer 4,500 MWs of owned capacity transitioning to lower carbon intensity Highly-contracted portfolio History of dividend growth with 7% annual growth guidance out to 2020 Strong pipeline of contracted growth opportunities Committed to investment gra
Slide 3: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) Bloom Wind K2 Wind Beaufort Solar Shepard Energy Centre 95% Port Dover & Nanticoke 5-year average availability Halkirk (2018 target of 95%) Quality Wind York Energy Macho Springs 3% Keephills 3 of current generation East Windsor portfolio is
Slide 4: 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 ~$500M(5) per annum 1) Margins hav
Slide 5: AFFO growth supports annual dividend increases
AFFO(1,2) growth supports annual dividend increases ($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 2018 Y/E 2019T 2020T
Slide 6: Alberta power market
Alberta power market • Robust outlook for power prices • Demand growth of 3-4% • Reasonable capacity market design 6
Slide 7: Alberta power market has recovered
Alberta power market has recovered Alberta Load Growth(1) Alberta is experiencing strong demand growth New summer peak record of 11,099 MW on Jul 17/18 Older coal fired units have started to retire Alberta Energy Prices(2) Termination of 2000 MW of PPAs has facilitated commercial optimizatio
Slide 8: Capacity market design
Capacity market design AESO’s forecast revenue for baseload facilities AESO has finalized its proposed market design $/MWh Capacity market Design is constructive and provides an equal $70 commences in November 2021 opportunity for existing and new assets to earn $60 a return on and of capital $5
Slide 9: Opportunistic hedging strategy
Opportunistic hedging strategy Alberta commercial portfolio positions (As of June 30, 2018) 2019 2020 2021 % Sold forward(1) (700 MWs of 49% 25% 5% baseload) Contracted prices(2) Low-$50 Low-$50 Mid-$50 ($/MWh) Current average forward prices(3) $56 $52 $48 ($/MWh) Unhedged baseload position plus nea
Slide 10: Maximizing the commodity portfolio
Maximizing the commodity portfolio Creating incremental value and stability 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 captur
Slide 11: Growth strategy
Growth strategy • Strong renewable pipeline including 1,200 MW of U.S. wind development • Potential natural gas acquisitions • $500M - $1.0B average growth per year supporting dividend growth • Expect one additional wind project in 2018; two in 2019 capitalpower.com 11
Slide 12: 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 13: Canadian growth opportunities
Canadian growth opportunities Significant investment required by 2030 Saskatchewan Targeting 50% renewable generation capacity by 2030 British Columbia • 1,600 MW of new wind Development sites: Ontario • 2x wind • 1x gas Nuclear retirements Market renewal • Incremental capacity auctions • Enabling s
Slide 14: US wind development opportunities
US wind development New Frontier Tisch Mills opportunities • 99 MW • MISO • 100 MW • 12-year fixed price • >7 m/s wind speed contract for 87% of the • MISO Nolin Hills facility’s output • WI RPS • COD Dec/18 • Advanced DPP • 350 MW • Budget of $182M • >6 m/s wind speed Black Fork • 100-180 MW • >6 m
Slide 15: Sustainability strategy
Sustainability strategy • Focus on building renewables • Leveraging low natural gas prices by co-firing gas at coal facilities • Coal-to-gas conversion • World-leading carbon reduction program targeting 11% reduction in GHG emissions • Carbon capture investments (C2CNT) A leader in clean, low cost g
Slide 16: Coal-to-gas conversion transition plan
Coal-to-gas conversion transition plan Optimal operational flexibility for Genesee units Anticipate decision point On track to bring Federal coal in 2020 due to significant natural gas to to gas carbon & site by 2020 regulations natural gas extend facility pricing Co-firing provides greatest fuel fl
Slide 17: 6-month performance versus 2018 annual targets
6-month performance versus 2018 annual targets Facility availability Sustaining capex ($M) $85 95% 95% $41 Q2/18 YTD Target Q2/18 YTD Target Facility O&M expenses ($M) AFFO ($M) $230 to $250 $360 to $400 $121 $161 Q2/18 YTD Target Q2/18 YTD Target 2018 AFFO expected to be above the midpoint of the r
Slide 18: Sustainability and dividend growth
Sustainability and dividend growth Dividend yield 9.5% 9.0% 8.5% Alberta Government announces Climate 8.0% Leadership Plan Coal compensation announced 7.5% 7.0% 6.5% Dividend yield Long-term average of 6% 6.0% expected to return 5.5% to a 5% to 6% range with the 5.0% Alberta election removal of the
Slide 19: 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 DIVIDEND technology(1) capacity(1) footprint(1) GROWTH 7% 2015 42% gas and 66% Contracted 74% Alberta renewables PAYOUT RATIO TARGET 2018 58% gas and 82% Co
Slide 20: Appendices
Appendices capitalpower.com
Slide 21: 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 22: 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 23: 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 24: Debt maturity schedule
Debt maturity schedule(1) ~$1B in committed credit facilities renewed with 5-year tenor maturing 2023, of which approximately $775M is available(1) $450 $400 $450 $350 ($ Million) $300 $250 $300 $200 $250 US $230 US $65 $150 $160 $100 $50 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 Capital Marke
Slide 25: 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 26: 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 27: 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 28: 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 29: 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 30: 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 31: Investor Relations
Investor Relations Randy Mah Director, Investor Relations Common Shares (780) 392-5305 TSX Symbol: CPX rmah@capitalpower.com S&P/TSX Index Inclusions: Composite, SmallCap, Capped Utilities 10423 101 Street NW 10th Floor Shares Outstanding: 103 million Edmonton, Alberta Market Cap: $2.8 billi