Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (September 2012)
34 slides from Capital Power's roadshow presentation, September 2012
Slide 1: Investor Meetings
CAPITAL POWER Investor Meetings Brian Vaasjo, President & CEO Stuart Lee, SVP & CFO September, 2012 Quality Wind, BC, July/12
Slide 2: Capital Power overview
Capital Power overview Growth-oriented independent power producer (IPP) • Trading on the TSX (CPX); ~$2.1B market cap (diluted); EV ~$3.8B • Spin-off of power generation assets from EPCOR/IPO in mid-2009 • Growth through acquisitions / robust development pipeline Straight-forward business model • Ba
Slide 3: Balanced portfolio of merchant and contracted generation
Balanced portfolio of merchant and contracted generation(1) Contracted capacity to increase to 45% by 2014 Today - 2012 Year-end 2014E 13 facilities (3,311 MW) 17 facilities (3,798 MW(2)) • 40% capacity contracted • 45% capacity contracted 4% 4% 10% 17% 32% 28% 26% 24% 28% 27% AB commercial US North
Slide 4: Technology focus
Technology focus(1) CPC’s operations and growth are focused on four fuel sources: natural gas, coal, wind and solar Current By 2014 year-end 13 facilities (3,311 MW) 17 facilities (3,798 MW(2)) 1% 14% 45% 54% 47% 39% Gas Wind Coal & solid fuels Projects in development will increase owned wind capaci
Slide 5: Modern fleet
Modern fleet Average weighted facility age of the current fleet is 12.8 years(1) 4 new wind projects (487 MW) begin commercial operations in 2012 - 2014 CBEC 3 Facility age CBEC 2 Remaining life CBEC 1 Island Generation Gas Joffre (~24 years remaining life) Tiverton Rumford Bridgeport Kingsbridg
Slide 6: GHG emission regulations for coal plants
GHG emission regulations for coal plants New coal-fired electricity generating units and those that have reached the end of their useful lives required to meet a CO2 emissions performance standard of 420 tonnes CO2 / GWh (ie. intensity level of NGCC technology) End of useful life for existing co
Slide 7: Proven operating excellence
Proven operating excellence Capital Power has maintained high operating availability over a growing fleet and production volumes Operating performance 12,000 92% 96% 90% 92% 91% Generation (GWh) 10,000 8,000 6,000 4,000 2,000 - 2008 2009 2010 2011 2012E Generation (actual) Average plant availability
Slide 8: Enhanced reliability at Clover Bar
Enhanced reliability at Clover Bar Participation in GE lease-pool minimizes outage periods and provides prudent risk management LMS 100 units can be replaced by a leased unit from GE in 2 - 4 days Clover Bar (243 MW) provides significant ability to manage our portfolio • Can power up to full loa
Slide 9: North American footprint & target markets
North American footprint & target markets Ownership interest in 13 facilities with more than 3,300 MW Ontario • Target market for contracted assets • 40 MW contracted wind facility Western Canada • 55% of MW contracted • 1,793 MW of owned generation in AB including 243 MW of peaking generation US No
Slide 10: Framework for disciplined growth
Framework for disciplined growth Capital Power’s strategy drives opportunity evaluation Merchant Geography Technology Flexibility Develop within Target Acquire Zone Financial (after-tax, unlevered minimum IRR) • 11% for merchant assets (theoretical financing: 60% equity, 40% debt) • 8% for contracte
Slide 11: Significant accretion from wind projects
Significant accretion from 4 wind projects Quality Wind • 142 MW, 25-year PPA • 94% of turbines fully K2 Wind Ontario erected • 270 MW • 12% fully commissioned • Equal partnership between • Project tracking well CPC, Samsung and Pattern in terms of budget and • 20-year PPA, COD 2014 target COD of Q4
Slide 12: Capital Power's growth
Capital Power’s growth(1) 487 MW from new wind projects will increase contracted cash flows in 2012-2014 4,000 Wind project 3,500 developments 3,000 Acquisitions 2,500 MW 2,000 1,500 Completed construction and 1,000 developments 500 CPC base at IPO 0 2009 2010 2011 2012E 2013E 2014E (1) Based on MW
Slide 13: Alberta power market
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 ~13,000 MW No capacity market – power generators must recover all costs through revenue earne
Slide 14: AB reserve margin forecast
AB reserve margin forecast Supply-demand balance (reserve margin) is expected to be looser in 2013-14 due to the return of TransAlta’s Sundance 1 & 2 units Shepard facility (800 MW) with a COD of 2015, causes the supply-demand balance to loosen After 2015, supply-demand balance will gradually
Slide 15: Capturing upside from AB power prices
Capturing upside from AB power prices Hedging positions based primarily on generation from Genesee 3 and Keephills 3 baseload coal plants and output from the Sundance PPA Actively trading (portfolio optimization) throughout various time periods to minimize portfolio risks and create incremental
Slide 16: AB commercial portfolio positions
AB commercial portfolio positions Alberta portfolio hedged positions for AB baseload plants and Sundance PPA (% sold forward) Jul-Dec 2012 2013 2014 Hedged positions (% hedged) 91% 28% 5% Average hedged prices ($/MWh) High-$60 Mid-$60 Low-$60 Sensitivity analysis(1) to +/- $5/MWh change in Alber
Slide 17: Financial strength and access to capital
Financial strength and access to capital BBB investment grade credit rating from S&P and DBRS ~$1.2B in debt issues since IPO ~$1.3B raised in equity markets since IPO; public float now 71% of ownership 120 90 Fully diluted 28% 40% 46% 51% 61% 71% shares 60 (M) 30 72% 60% 54% 49% 39% 29% 0 IPO
Slide 18: Public float growth has enhanced liquidity
Public float growth has enhanced liquidity Added to S&P/TSX Composite Index in June 2011 Average daily trading volume has doubled compared to 2010 160,000 ~151K ~146K 140,000 120,000 Average daily 100,000 trading volume 80,000 ~71K 60,000 40,000 20,000 - 2010 2011 2012 YTD(1) (1) As of Aug 31/12
Slide 19: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities are supported by long asset lives $350 $315 $305 $300 $255 $250 $230 $200 $179 ($M) $144 $150 $100 $65 $50 $17 $13 $39 $0.3 $0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2026 Debt payable to EPCOR Debt payable to non-related parties (1
Slide 20: Continued strong cash flow generation
Continued strong cash flow generation FFO (excluding CPILP) Discretionary cash flow(1) represented 37% of Funds from $350 operations in 2011 $300 Additional cash flows in 2012 35% from: $250 • Full year operations from 35% Keephills 3 (COD Sep/11) $200 • Halkirk and Quality Wind ($M) 26% expecte
Slide 21: 2012 Outlook
2012 Outlook 2012 Normalized earnings per share expected to be slightly under the low end of the target range ($1.50 - $1.70) based on revised AB forward power prices which have decreased by ~$10/MWh and revised full year spark spreads for the NE U.S. region which have decreased by ~US$4/MWh Alb
Slide 22: 2012 Financial targets
2012 Financial targets Deliver on growth in cash flow and normalized EPS Normalized EPS (NEPS) Funds from operations $2.00 $500 $1.50 $1.50 – $1.70 $400 $380 – $420M $300 $1.00 $170 $200 $0.50 $0.50 $100 $0.00 $0 Q2 YTD 2012 T Q2 YTD 2012 T Cash flow per share Dividend coverage ratio $5.00 3.0 $4.00
Slide 23: Summary
Summary Straight forward business model with long-term contracted assets and merchant position that provides stable cash flows and upside opportunities Large, high quality generation portfolio Young and modern fleet with proven operating history Diversified portfolio in attractive North American mar
Slide 24: AB system heat rate forecast
Appendix AB system heat rate forecast Portfolio bidding is keeping prices high and lowering natural gas prices driving system heat rates high in the near term Return of Sundance 1 & 2 in late 2013 and the expected addition of Shepard in 2015 have put downside pressure on heat rates AB expected
Slide 25: AB power market (new builds/retirements)
Appendix AB power market (new builds/retirements)(1) New builds/retirements (major projects of 100+ MW) over the next 5 years based on internal assumptions Project Capacity Developer Type COD year (MW) Halkirk 150 Capital Power Wind Fall 2012 Shepard Energy 800 Enmax Combined 2015 Centre cycle Fac
Slide 26: Projected useful life of AB coal-fired units
Appendix Projected useful life of AB coal-fired units Facility Generation In-Service End of Life Operating Years Capacity (MW) Date (Final Regulations) (Final Regulations) Battle River 3 149 1969 2019 50 Sundance 1 288 1970 2019 49 H.R. Milner 144 1972 2019 47 Sundance 2 288 1973 2019 46 Battle Rive
Slide 27: Impairment of North East U.S. Assets
Appendix Impairment of North East U.S. Assets Under IFRS, impairment charges and On-peak Spark Spreads reversals will be more frequent than in (MassHub) Forwards the past 19 Recognized a pre-tax impairment Spark Spread ($/MWh) 18 charge of $74M in Q2/12 primarily due to lower current and forecas
Slide 28: Summary of assets
Appendix Summary of assets Clover Bar Energy Clover Bar Genesee 1 Genesee 2 Genesee 3 Keephills 3 Joffre Centre Landfill Alberta Contracted Alberta Commercial Electric 422 MW 430 MW 516 MW 495 MW 480 MW 243 MW 4.8 MW Capacity % owned / 100 / 100 100 / 100 50 / 100 50 / 0 40 / 0 100 / 100 100 / 100 o
Slide 29: Summary of assets (cont'd)
Appendix Summary of assets (cont’d) Island Kingsbridge 1 Generation Roxboro Southport Tiverton Rumford Bridgeport Ontario & British Columbia Mid-Atlantic Contracted US Northeast Commercial Contracted Electric 40 MW 275 MW 88 MW 46 MW 279 MW(1) 270 MW(1) 540 MW(1) Capacity % owned / 100 / 100 100 / 1
Slide 30: Summary of projects under development
Appendix Summary of projects under development Halkirk K2 Wind Ontario Quality Wind Port Dover & Nanticoke Alberta Commercial & Ontario & British Columbia Contracted Contracted Electric 150 MW 270 MW 142 MW 105 MW Capacity % owned / 100 / 100 33.3% owned 100 / 100 100 / 100 operated Location Halkirk
Slide 31: 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 32: 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 losses, and gains on acquisitions and disposals (EBITDA), (ii) funds from operations, (iii) funds from operations excluding non-controlli
Slide 33: Discretionary cash flow
Discretionary cash flow The Company uses discretionary cash flow as a measure of the Company’s available cash to reinvest into the business after paying sustaining capital expenditures and declared dividends and distributions to common and preferred shares. Discretionary cash flow is not a defined f
Slide 34: Investor Relations Contacts
Investor Relations Contacts Randy Mah Chris Williams Senior Manager Senior Analyst (780) 392-5305 (780) 392-5105 rmah@capitalpower.com cwilliams@capitalpower.com 34