Capital Power Corporation · TSX:CPX

Capital Power — Investor Day (December 2009)

69 slides from Capital Power's investor day presentation, Dec 3, 2009

1. Slide 1: Investor Day

   Investor Day December 3, 2009 Toronto

2. Slide 2: Cautionary statement regarding forward-looking information

   Cautionary statement regarding forward-looking information Certain information in this presentation and in oral answers to questions contains forward-looking information. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking information, and certain

3. Slide 3: Today’s presenters

   Today’s presenters Brian Vaasjo Jim Oosterbaan Graham Brown Darcy Trufyn Stuart Lee President & CEO SVP, Commercial SVP, Operations SVP, SVP, Finance & Services Construction, CFO Engineering & Project Mgmt. 3

4. Slide 4: Agenda

   Agenda 9:00 – 9:05 Introduction Randy Mah 9:05 – 9:25 Overview / Strategy Brian Vaasjo 9:25 – 10:05 Commercial position Jim Oosterbaan Development & acquisition opportunities Carbon management 10:05 – 10:30 Operating performance Graham Brown Maintenance programs 10:30 – 10:40 Break 10:40 – 10:55 Con

5. Slide 5: Brian Vaasjo – Overview / Strategy

   Brian Vaasjo President & CEO Overview / Strategy 5

6. Slide 6: Overview of Capital Power

   Overview of Capital Power  New company formed in July/09 from EPCOR Utilities Inc.’s spin-off of its power generation business  Canadian-based independent power producer (IPP) operating in North America  cash flow profile consists of stable cash flows to support dividends through long- term power

7. Slide 7: Corporate strategy

   Corporate strategy  Corporate strategy is to generate a growing stream of cash flow supporting secure dividends and disciplined growth  Business model involves cash flow generation from both a balance of long- term contracts and merchant components, supported by an investment grade credit rating 

8. Slide 8: Corporate strengths

   Corporate strengths One of Canada’s largest IPPs with interests in 31 Large, high quality facilities totaling ~3,400 MW of owned and/or operated generation portfolio generation capacity; geographic, fuel source and counterparty diversification Modern fleet with very Q3/09 average plant availability

9. Slide 9: Large, high quality generation portfolio

   Large, high quality generation portfolio Directly Owned 30.6% LP Interest Alberta Contracted ON/BC Contracted Capital Power Income L.P. Two Facilities Alberta Three Facilities 20 Facilities 820 MW(1) Commercial 80 MW(1) 1,668 MW(1) (820 MW)(2) (80 MW)(2) (472 MW)(2) Six Facilities Two PPAs 743 MW(1)

10. Slide 10: Modern fleet with strong operating history

    Modern fleet with strong operating history  Very good operating performance history with high plant availability in 94% - 95% range  Modern fleet with average facility age of only 12 years; three new units on line in late 2009 and 2011 Facility age 10

11. Slide 11: Financial strength and access to capital

    Financial strength and access to capital  Strong balance sheet with investment grade credit rating of BBB (S&P / DBRS)  $1.2 billion in credit facilities  consolidated assets of ~$4.9 billion with only ~$1.8 billion in long-term debt  non-consolidated basis ~$3.5 billion of assets with only $950

12. Slide 12: Strategic North American platform

    Strategic North American platform Capital Power facilities Capital Power Income L.P. facilities 12

13. Slide 13: Outstanding platform for growth

    Outstanding platform for growth  Pursue selected target markets  Numerous development opportunities at various stages Development  Near term opportunities for contracted cash flows  MW additions: 200 MW in 2009 and 248 MW in Q2/11  Very disciplined and patient approach Acquisitions  Focus on l

14. Slide 14: Capital Power Income L.P.

    Capital Power Income L.P.  Capital Power Income L.P. (the Partnership) provides:  contracted cash flows  fuel source diversification  geographic footprint in the US  market knowledge  Capital Power’s ~31% ownership interest in the Partnership aligns Capital Power’s interest with Partnership’s

15. Slide 15: 2009 Highlights

    2009 Highlights  Completion of ~$0.5B IPO in July/09, the first significant IPO in Canadian market in 18 months  Majority of transition activities completed with remaining activities expected to be completed by Q2/10  Financial and operating performance in line with management’s expectations  Ge

16. Slide 16: Jim Oosterbaan – Commercial position

    Jim Oosterbaan SVP, Commercial Services Commercial position Development & acquisition opportunities Carbon management

17. Slide 17: Alberta electricity market

    Alberta electricity market  Electricity demand growth will continue, driven, in part by oil sands investment activity  Continuing pressure on reserve margins in the province will impact prices and demand for new generation capacity AB electrical demand by sector Reserve Margins Industrial Commerci

18. Slide 18: Alberta electricity market

    Alberta electricity market  Current forward prices reflect current market weakness, heat rates below historical norms  Long-term fundamentals (reserve margin, load growth) remain positive  Power price increases necessary to incent the development of new generation, $80 - $100 MWh required  Natur

19. Slide 19: Portfolio optimization

    Portfolio optimization  Capital Power’s merchant production is > 90% hedged for 2010 at prices above the current forward curve Current Forward Forecast % Contracted Contract Price Prices Oct 26, Price 2009 2010 >90 % ~$65 $45 – $50 $60 - $65 2011 45 - 50 % ~$70 $50 – $55 $60 – $75 2012 15 - 20 % $7

20. Slide 20: Commodity risk management

    Commodity risk management  CPC has revised its Commodity Risk Management (CRM) policies  Change to the commodity limit structure and the calculation of limits  Important changes include  establish three annual risk limits relating to positions expiring in the prompt year and future periods  bas

21. Slide 21: Environment action/carbon regime

    Environment action/carbon regime  Our emissions management objectives  cost effective compliance  influence and lead policy development  Meet the carbon challenge by implementing technology  Pursue renewable development when it makes financial sense  Alberta has charged LFEs for carbon emitted

22. Slide 22: Carbon exposure

    Carbon exposure  Alberta SGER tax is $15/tonne  Offsets have to conform to SGER regulations  Contracted facilities (G1, G2) recover carbon costs through change in law provisions in the PPA  Commercial facilities partially recover carbon costs through market prices  CPC expects to pay about $6.5

23. Slide 23: Diversified approach to mitigation

    Diversified approach to mitigation  Active in Canada and U.S. markets; dedicated focused team  Portfolio of existing projects in Canada; landfill gas, low-tillage agriculture, acid gas injection, nitrous oxide abatement - $19 million spend in 2010 to acquire offsets for 2010 and beyond  Pipeline

24. Slide 24: GHG policy & legislative development

    GHG policy & legislative development  Copenhagen will be a transition step to Mexico City  Significant risk that U.S. legislation will be caught up in the next U.S. election cycle, with further delay  Recent polling data shows that issue losing traction with Americans  The role of EPA in regulat

25. Slide 25: Growth development opportunities

    Growth development opportunities Stage Project Size (MW) $ Fuel Timing Most PDN (1) 100 $260 Wind Q3, 2010 Advanced Quality 140 $500 Wind Q2, 2010 Kingsbridge II 260 $800 Wind Q3, 2010 Pioneer TBD Amine Scrubbing Q4, 2010 Moderately BC Wind 500 $1,100 Wind Q4, 2010 Advanced BC Biomass 50 - 70 $250 B

26. Slide 26: Growth – disciplined approach

    Growth – disciplined approach  Disciplined, rigorous approach  Financial hurdles – unleveraged IRR, cash flow accretive  Natural gas, coal  Level of contracted output – consistent risk profile  Location – target markets  Equipment type – proven technology or manufacturer  Reputation – importa

27. Slide 27: Growth – acquisitions

    Growth – acquisitions  50+ projects reviewed  7 advanced to next stage  Chicago-based team  Assets for sale – natural gas and coal  Value gap and hope premium  Reviewed approach with 3rd party  Financial owners 27

28. Slide 28: Graham Brown – Operating performance

    Graham Brown SVP, Operations Operating performance Maintenance programs

29. Slide 29: Fleet map

    Fleet map Capital Power Facilities Capital Power Income LP Facilities 29

30. Slide 30: Fleet overview

    Fleet overview  Average age is 12 years  Use of latest generation of technology  Geographic disbursement  Range of technologies 30

31. Slide 31: Operations management

    Operations management SVP Operations US Operations Canadian Operations Genesee Complex 1085 MW 833 MW 1315 MW 12 Plants 15 Plants 3 Units 194 Staff 121 Staff 186 Staff 31

32. Slide 32: Fleet availability

    Fleet availability Total Generation (GWh) Availability (%) 95% 95% 95% 94% 91% 100% 75% 50% 25% 0% Capital Power Generation Pro Rata CPILP Generation Availability 32

33. Slide 33: Maintenance philosophy

    Maintenance philosophy  Diverse fleet – base maintenance practice are tailored to operational conditions  Peak based against cycles and starts  Mid merit uses a combination of starts and base hours  Base load more a function of operational hours  Use of technology to drive condition based maint

34. Slide 34: Genesee outage schedule

    Genesee outage schedule 2008 2009 2010 2011 2012 2013 2014 G1 MAJOR MINOR MAJOR MAJOR G2 MAJOR MAJOR MAJOR MAJOR G3 MAJOR MAJOR TG MINOR MAJOR BOILER Major – boiler & turbine Minor – boiler only Prudent, optimized, economical approach to extending intervals 34

35. Slide 35: Continuous improvement

    Continuous improvement Genesee  Controllable parameter monitoring to reduce emissions  Increase output on G1 and G2 by 5 - 10 MWs  Improved start times on G3 Williams Lake expansion of wood pile 35

36. Slide 36: Frederickson 2009 turnaround

    Frederickson 2009 turnaround Fredrickson HRSG NH3 salt pluggage  HRSG LP preheater CO2 bead blast cleaning  ammonium salts and iron oxide deposits in the LP preheater and evaporator bundles causing higher combustion turbine discharge pressure to a point of reducing CT output away from maximum allo

37. Slide 37: Plant updates – Genesee 3

    Plant updates – Genesee 3  Genesee blade failure in October 2008  Contingency plans in place  Continue to work with insurance and vendor to determine long term requirements 27.5 inches 37

38. Slide 38: Plant updates – Clover Bar

    Plant updates — Clover Bar a ©) Corporation

39. Slide 39: Plant updates – Kingsbridge

    Plant updates – Kingsbridge  2009 availability of 99%  Slightly lower wind regime in 2009  Remains fleet leader in Ontario 39

40. Slide 40: Plant updates – California Re-power

    Plant updates – California Re-power Diffuser installation VBV exhaust view 40

41. Slide 41: Plant updates – California Re-power

    Plant updates – California Re-power Top view of GT enclosure package LM6000 PD ready to be installed in package 41

42. Slide 42: Plant updates – North Carolina Project

    Plant updates – North Carolina Project Southport yard Roxboro transfer tower 42

43. Slide 43: Break

    Capital Power © Corporation

44. Slide 44: Darcy Trufyn – Construction projects update

    Darcy Trufyn SVP, Construction, Engineering & Project Mgmt. Construction projects update

45. Slide 45: Keephills 3 update

    Keephills 3 update Project background  495 MW coal fired plant  Supercritical boiler technology (as per Genesee 3)  Partnership with TransAlta  Forecast cost of $1.9B  Forecast commercial operation Q2/11 45

46. Slide 46: Keephills 3 update

    Keephills 3 update Status (to end of Oct/09)  Site manning: 1,600 (near peak)  Power island engineering and procurement: 99% complete  Construction: 63% complete  Overall project: 75.2% complete  Main buildings fully enclosed for winter work  Actions taken to improve construction productivity

47. Slide 47: Clover Bar Energy Centre update

    Clover Bar Energy Centre update Project background  ~245 MW gas fired peaking plant  One LM 6000 and two LMS 100 turbines Status  LM 6000 and first LMS 100 (Unit 2) in operation (Sep/09)  Second LMS 100 (Unit 3) turbine near end of commissioning; expected in operation before end of 2009  Final

48. Slide 48: Construction and engineering

    Construction and engineering  In-house engineering and project management team  Manage major projects  Design and manage asset improvement projects  Support project development  Experience in various fuel types  Simple cycle gas turbine  Combined cycle gas turbine  Cogeneration  Coal-fired/

49. Slide 49: Construction and engineering

    Construction and engineering  Organization  Restructured – effective and efficient  Managed asset portfolio – single contact/accountability  Engineering support on major projects – technical and management  Total project delivery capability – concept to operations handover  Front end support 

50. Slide 50: Construction and engineering

    Construction and engineering  Near term projects – wind farm developments  Lower execution risk  Defined scope  Historical costs/market verified  Execution strategy – minimize risk/cost certainty 50

51. Slide 51: Stuart Lee – Financial review & update

    Stuart Lee SVP, Finance & CFO Financial review & update

52. Slide 52: Financial strategy

    Financial strategy Maintain ongoing access to cost competitive capital  Investment grade credit rating for access to debt  Well spread out debt maturities that are supported by asset lives  Strong liquidity  Stable dividend  Effectively manage commodity, foreign exchange and interest rate risks

53. Slide 53: Strong financial base

    Strong financial base  Investment grade BBB credit ratings (S&P, DBRS)  35% debt/cap ratio - lowest of the peer group  Capacity to take on developments and moderate-sized acquisitions without issuing additional equity  Will be filing base shelf prospectus Significant financial flexibility from c

54. Slide 54: Liquidity and debt maturities

    Liquidity and debt maturities  $1.2 billion in credit facilities, only $0.2 billion utilized currently  Debt maturity profile very manageable  Asset base will support new issues of longer term debt Debt maturity profile(1) (1) As of Sept/09 Good access to capital 54

55. Slide 55: Capital discipline

    Capital discipline  Risk based IRR targets  9%+ contracted, low risk opportunities  11%+ uncontracted opportunities  EPS accretion within first two years for development and acquisitions  Balanced capital allocation  Specific market focus  Strong financial base won’t be compromised 55

56. Slide 56: Financial ratio targets

    Financial ratio targets  Dividend  Consistent with peers in the 60-70% payout ratio over the long term  Debt-to-total capitalization ratio  40-50%  Funds from operations to total debt ratio  Minimum 20%  Contracted versus merchant operating margin  Minimum 50% contracted 56

57. Slide 57: Operating & financial performance

    Operating & financial performance  Strong operating performance supports strong predictable financial results and reduces market surprises  Our 2010 forecasted high plant availability is consistent with our operating history Plant Availability Sept 2009 2010 YTD Forecast Alberta commercial plants

58. Slide 58: Contracted operating margin

    Contracted operating margin  2010 forecasted operating margin AB Commercial Sold Forward AB Commercial Open AB Contracted Capital Power Income L.P. Ontario & British Columbia Contracted Based on Capital Power Income L.P. on a 30.6% ownership basis Less than 5% of 2010 forecasted plant operating mar

59. Slide 59: Capital expenditures

    Capital expenditures 2010E growth capex(1) 2010E sustaining capex  ~250M (Keephills 3, Clover Bar)  Plant maintenance capex $17  Mine capex $13  Emission credits $20  Other $10  Total sustaining capex $60 Keephills 3 Clover Bar Energy Centre (1) Excluding Capital Power Income L.P. 59

60. Slide 60: Financial outlook

    Financial outlook 2010 versus 2009  Sale of remaining 15% interest of Battle River PPA in January, 2010  Scheduled maintenance outages for Genesee 2 and 3 (total operating expenses of $18M to $22M) versus one scheduled outage in 2009  Lower operating margin at G3 from scheduled outage  No signif

61. Slide 61: Alberta power price sensitivity

    Alberta power price sensitivity  Sensitivity analysis to +/- $10/MWh change in Alberta power prices  2010: +/- $5M to operating margin  2011: +/- $40M to operating margin  2012: +/- $60M to operating margin 61

62. Slide 62: Significant upside

    Significant upside  At Sep/09, $750 million invested in construction projects, 25% of enterprise value of Capital Power  significant cash flow upside particularly in 2011 when Keephills 3 comes on line  Capital Power most highly levered to Alberta power prices  prices in Alberta are expected to

63. Slide 63: 2010 Corporate Priorities Summary

    Brian Vaasjo President & CEO 2010 Corporate Priorities Summary

64. Slide 64: 2010 corporate priorities

    2010 corporate priorities  Operational targets  Plant availability of ≥ 94%  Sustaining capex of $60M  Construction / development objectives  CPC’s share of final costs for Keephills 3 project at ≤ $955M with completion by Q2/11  Commit at least $500M to capital opportunities that meet or exce

65. Slide 65: Investment thesis

    Investment thesis  Growth in North American power industry will continue over the long term  Positive long-term fundamentals for the Alberta power market  Capital Power well positioned as economy recovers  current low power price environment expected to improve  ~50% of operating margins genera

66. Slide 66: Questions?

    Capital Power © Corporation

67. Slide 67: Forward-looking statement

    Forward-looking statement Certain information in this presentation and in oral answers to questions is forward-looking within the meaning of Canadian securities laws as it relates to anticipated financial performance, events or strategies. When used in this context, words such as will, anticipate, b

68. Slide 68: Forward-looking statement (cont’d)

    Forward-looking statement (cont’d) These statements are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. The material factor

69. Slide 69: Additional information

    Additional information Investor Relations 5th Floor, TD Tower 10088 - 102 Ave. Edmonton, Alberta T5J 2Z1 (780) 392-5305 (866) 896-4636 (toll-free) investor@capitalpower.com www.capitalpower.com 69

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