Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (April 2019)
37 slides from Capital Power's investor presentation, April 2019
Slide 1: Delivering a Sustainable Future
Delivering a Sustainable Future Brian Vaasjo, President and CEO Bryan DeNeve, SVP Finance and CFO Investor Presentation April 2019
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 5,100 MWs of owned capacity • Highly-contracted portfolio • History of dividend growth with 7% annual growth guidance out to 2021 • Strong pipeline of contracted growth opportunities • Committed to investment grade credit rating In operation In develop
Slide 3: Young fleet with long asset lives
Young fleet with long asset lives Average age 15 years(1) New Frontier Wind Bloom Wind Beaufort Solar Shepard Energy Centre Port Dover & Nanticoke Halkirk Quality Wind York Energy 95% 5-year average availability (2019 target of 95%) Macho Springs Keephills 3 East Windsor CBEC - Units 2&3 150 Mile Ho
Slide 4: High level of average contracted life
High level of average contracted life 0 5 10 15 20 Island Generation(3) Decatur Energy (3) Arlington Kingsbridge I Bloom Wind Savona 150 Mile House 11 Average PPA East Windsor Years(1,2) term remaining Coal compensation Beaufort Solar New Frontier Macho Springs Cardinal Point York Energy Halkirk Win
Slide 5: Adjusted EBITDA growth from new assets
Adjusted EBITDA growth from new assets(1-5) $500 Arlington Valley 2019 toll Arlington Valley Whitla $400 New Frontier Decatur EnPower Waste Heat $300 East Windsor York Energy Bloom $200 Beaufort Macho K2 $100 Shepard PDN Halkirk Quality $0 2012 2013 2014 2018 2019T 2015 2016 2017 Growth capex since
Slide 6: Dividend growth guidance extended to 2021
Dividend growth guidance extended to 2021 Annualized dividend $2.19 per share(1,2) $2.05 $1.92 $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019T 2020T 2021T Target long-term annual AFFO payout ratio of 45-55% Delivering consistent annual dividend growth
Slide 7: Alberta Power Market
Alberta Power Market • Robust outlook for power prices • Demand growth of 3-4% • Reasonable capacity market design capitalpower.com
Slide 8: Positive Alberta power market fundamentals
Positive Alberta power market fundamentals Alberta Load Growth(1) • Alberta continues to see strong demand growth • New summer peak record of 11,169 MW on August 10, 2018 • Older coal fired units have started to retire or mothball • Termination of 2,000 MW of PPAs have facilitated commercial Alberta
Slide 9: Stable outlook in Alberta power prices
Stable outlook in Alberta power prices Power prices averaging nearly $60/MWh in last 12 months Significant step change 70 in 2018 power prices Quarterly Annual • Coal plant retirements / 60 mothballing • Robust demand growth 50 • Higher carbon tax 40 $/MWh 30 20 10 0 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2
Slide 10: Capacity market design
Capacity market design Final design is consistent with our view of a properly designed capacity market for Alberta AESO’s forecast revenue for baseload facilities • AESO has finalized its proposed market design Capacity market • Design sets a level playing field for suppliers to ($/MWh) commences in
Slide 11: Portfolio optimization
Portfolio optimization AB commercial portfolio positions 2019 2020 2021 As of date Dec 31, 2018 Nearly 500 MW (gas peaking, wind) available % sold forward(1) 78% 34% 1% to capture the upside from low natural gas Contracted prices(2) ($/MWh) Mid-$50 Low-$50 Low-$80(3) prices, higher power prices, and
Slide 12: Maximizing the Alberta commodity portfolio
Maximizing the Alberta commodity portfolio Creating incremental value and stability through market expertise Average realized power prices(1) have exceeded spot power prices by 22% since the Company’s inception 10 years ago $125 $100 $75 $50 $25 $0 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/
Slide 13: Capital Power is well positioned in Alberta
Capital Power is well positioned in Alberta Market certainty is returning Young High Advantaged Conversion Market Assets Availability Locations Optionality Knowledge • Competitive fixed and variable costs • Maximal capacity volumes due to high availability and strategically located wind assets • Coa
Slide 14: Growth Strategy
Growth Strategy • Strong renewable pipeline including 1,200 MW of U.S. wind development • Potential natural gas plant acquisitions • Growth target of $500M committed capital per year for contracted opportunities capitalpower.com
Slide 15: Current projects under construction
Current projects under construction Additional 350 MWs of long-term contracted wind facilities to be added by Mar/20 2019 2020 2021 Whitla Wind Cardinal Point Wind (Alberta) (Illinois) • 201.6 MW (Phase 1) • 150 MW • 20-year PPA • 12-year PPA • $315-$325M • $289-$301M • COD in Q4/19 • COD in Mar/20
Slide 16: Visible pipeline of growth opportunities in targeted markets
Visible pipeline of growth opportunities in targeted markets >2,000 MW Potential wind developments Genesee Expansion Terrace Thermal CBEC Expansion Klo Wind Frederickson 2 Halkirk 2 Whitla 2 >3,500 MW Nolin Hills Whitla 1 KWCG Madoc Solar Potential gas developments Garrison Butte Tisch Mills YEC Exp
Slide 17: Sustainability
Sustainability • Focus on building renewables • Coal-to-gas conversion • World leading carbon reduction program targeting 10% reduction in GHG emissions • Carbon capture investments (C2CNT) • Creating value with transparent Climate- related financial disclosure (TCFD) • Released inaugural TCFD repor
Slide 18: Coal-to-gas conversion (dual-fuel capability)
Coal-to-gas conversion (dual-fuel capability) A staged approach to ensure maximal operational flexibility is maintained % of Genesee site capacity from natural gas Increase 2 other units to 100% capacity • Timing dependant on Increase market pricing & 1 unit to structure, carbon taxes, Increase 2 10
Slide 19: Financial
Financial • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year without accessing equity markets • Maintain investment grade credit rating capitalpower.com
Slide 20: AFFO growth and conservative payout supports dividend growth
AFFO(1,2) growth and conservative payout supports dividend growth Expect to generate $295M in discretionary cash flow in 2019 ($M) $600 $500 $400 39% Gross common dividends(3) $300 44% 44% Discretionary cash flow 41% $200 49% 51% $100 $- (4) 2014 2015 2016 2017 2018 2019T Long-term AFFO payout ratio
Slide 21: AFFO for 2019
AFFO(1) for 2019 Higher Alberta power prices and AFFO from Arlington and New Frontier offset K2 divestiture $500 $25 $17 $480 $40 $460 ($20) $440 ($40) $420 $400 $397 $25 $380 $360 $340 $320 $300 2018 AFFO New Facilities AB Uplift K2 Divestiture Current tax & 2019T AFFO Arlington - 2019 2019T AFFO (
Slide 22: Cash flow and financing outlook
Cash flow and financing outlook Sufficient funding for current growth projects 2019T Sources of cash flow ($M) Funds from operations(1) + off-coal compensation $615 Proceeds from disposal of K2 Wind $215 Debt issuances $650 $1,480 Uses of cash flow Dividends (common & preferred shares) ($235) Debt r
Slide 23: Financial targets
Financial targets Strong double-digit growth in AFFO and Adjusted EBITDA Adjusted funds from operations(1) Adjusted EBITDA(1) ($M) ($M) $600 $900 $800 to $850 $460 to $510 $800 $500 $713(2) $700 $400 $397 $600 $500 $300 $400 $200 $300 $200 $100 $100 $0 $0 2018 2019T 2018 2019T 1) AFFO and Adjusted E
Slide 24: Sustainability and dividend growth
Sustainability and dividend growth Dividend yield 9.5% 9.0% 8.5% Coal compensation Alberta Government announced announces Climate 8.0% Leadership Plan 7.5% 7.0% 6.5% Long-term average of 6% Dividend yield has returned 6.0% to historic 5-6% range with 5.5% recovery in Alberta power 5.0% Alberta price
Slide 25: Strategically evolving our portfolio
Strategically evolving our portfolio Generation Contracted North American AFFO per share(2) technology(1,2) capacity(1,2) footprint(1,2) 2014 33% Gas and renewables 58% Contracted 76% Alberta $2.51 2019 64% Gas and renewables 77% Contracted 55% Alberta $4.74(3) Renewables and Greater visibility Geog
Slide 26: Appendices
Appendices • Alberta’s coal fleet • DCF supports dividend growth • Credit rating metrics • Debt maturity schedule • Summary of assets • Projects under development/construction capitalpower.com
Slide 27: Alberta's coal fleet
Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in End of capacity 2019 coal life Coal to gas conversion Facility (MW) (yrs) (CLP)(1) Current Status Expectation PPA status Battle River 3 149 50 2019 Online Co-firing with gas Merchant Sundanc
Slide 28: Discretionary cash flow supports dividend growth target
Discretionary cash flow supports dividend growth target(1) $500M $50M $36M(2) 8.1% 7% AFFO/share Dividend Capital EBITDA AFFO Growth Growth AFFO growth from discretionary cash flow covers 7% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple and a capit
Slide 29: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook Within S&P financial criteria for current rating S&P BBB- / P-3 Stable Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) DBRS BBB(low) / Pfd-3 (low) Stable 20% 5.0 4.0 15% • Strong liquidity from
Slide 30: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 US $65 $450 $160 $400 $300 $300 $300 $200 US $230 $100 $0 2020 2021 2022 2023 2024 2025 2026 Capital Markets CAD Private Placement USD Private Placement 1) Debt amounts as of March 1, 2019 excludes
Slide 31: Summary of assets
Summary of assets Alberta Alberta Commercial Contracted Clover Bar Clover Bar Genesee 1 Genesee 2 Genesee 3 Keephills 3 Joffre Energy Centre Landfill Halkirk Shepard Energy 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 32: Summary of assets
Summary of assets Ontario & British Columbia Contracted Quality 150 Mile Port Dover & Island Generation Wind Savona House Nanticoke Kingsbridge 1 York Energy East Windsor Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 400 MW 84 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0 100 / 100 100 / 100 50 /
Slide 33: Summary of assets
Summary of assets U.S. Contracted Arlington New Frontier Roxboro Southport Macho Springs Beaufort Solar Decatur Bloom Wind Valley Wind Capacity 46 MW 88 MW 50 MW 15 MW 795 MW 178 MW 580 MW 99 MW % owned / 100 / 100 100 / 100 100 / 100 100 (sale & 100 / 100 100 / 100 100 / 100 100 / 100 operated leas
Slide 34: Projects under development / construction
Projects under development / construction Alberta Commercial Alberta Contracted U.S. Contracted Whitla Wind Genesee 4&5 (Phase I) Cardinal Point Wind Capacity Up to 1,060 MW 201.6 MW 150 MW % owned / operated 50 / 100 100 / 100 100 / 100 Location Warburg Medicine Hat McDonough / Warren Counties, Ill
Slide 35: 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 36: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to These statements are based on certain assumptions and analyses made by the Company in light of its inform the Company’s shareholders and potential investors about management’s experien
Slide 37: Common Shares Investor Relations
Common Shares Investor Relations • TSX Symbol: CPX Randy Mah • S&P/TSX Index Inclusions: Composite, Director, Investor Relations Canadian Dividend Aristocrats, Small Cap, (780) 392-5305 Capped Utilities rmah@capitalpower.com • Market Cap: $3.2 billion • Shares Outstanding: 102 million shares 10423 1