Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (June 2021)
39 slides from Capital Power's investor presentation, June 2021
Slide 1: Investor Presentation
Investor Presentation June 2021 Brian Vaasjo, President & CEO Sandra Haskins, SVP Finance & CFO 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer x3 • Highly-contracted, young and diversified portfolio x2 • Targeting 10-12% total shareholder return • Targeting net carbon neutral before 2050 Operational facilities ~6,400 MW 26 facilities Projects under development 985 MW 7 renewable projects and Ge
Slide 3: Increasing growth and getting to net carbon neutral by 2050
Increasing growth and getting to net carbon neutral by 2050 Decarbonization Strategies 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 through CCS
Slide 4: Strategic path to a low-carbon future
Strategic path to a low-carbon future Accelerated growth in renewables • 7 development projects totaling 425 MW; 100 MW Buckthorn Wind acquisition Off-coal in 2023 • Roxboro and Southport power plants retired at end of Q1/21 • Genesee site 100% natural gas in 2023 Natural gas critical to net carbon
Slide 5: Advancing CO2 reduction initiatives
Advancing CO2 reduction initiatives Carbon Corp (C2CNT) won the NRG COSIA Carbon X-Factor award – technology to be applied at Genesee Carbon Conversion Centre (GC3) • 1 of 2 Canadian companies honoured for “creating excellent products” Development and marketing of GC3 underway; expected to be op
Slide 6: 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 7: 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 8: Continued growth in renewable assets
Continued growth in renewable assets Adjusted EBITDA from renewables expected to increase from 27% to 34% 2020 2023F 2025F Repowering (+560 MW) 5 projects (276 MW) 2 projects (151 MW) 30% 34% Renewables 43% Natural gas 66% Natural gas/coal dual-fuel 27% Off-coal Renewable projects and repowering wil
Slide 9: Gas generation vital for reliability and flexibility
Gas generation vital for reliability and flexibility Growth drivers Forecasted natural gas generation in the US(1) • Coal & nuclear retirements • Renewables proliferation 2020 2040 • Low gas prices Coal Value of incumbent assets Gas 717 GW +205 GW Gas 719 GW • High barrier to entry Coal -202 GW Coal
Slide 10: Natural gas is critical to power reliability
Natural gas is critical to power reliability (1) 1) 2019/20 data 10
Slide 11: Securing long term PPAs delivers stable cash flows
Securing long term PPAs delivers stable cash flows Decatur Strathmore Solar Enchant Solar 3 solar projects (Alabama) (AB) (AB) (North Carolina) Under construction Under construction Under construction • 10-year tolling agreement • 25-year PPA with investment • 15-year renewable energy • 20-year PPA
Slide 12: 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 13: Robustness of Alberta power market
Robustness of Alberta power market Extreme cold temperatures in February set new daily record for demand and contributed to high average power price of $95/MWh in Q1/21 Milder temperatures in January & March resulted in lower demand and lower generation 2021 forward prices have steadily increa
Slide 14: Alberta power market
Alberta power market COVID-19 and crude oil impact (1) (MWh) Alberta Internal Load (30-day rolling average) • Largest 2020 vs. 2019 yoy decline in power demand was 7.2% due to 11,000 COVID-19 pandemic and low 2019 2020 2021 crude oil prices 10,500 2.0% increase • Demand started to recover as the 10,
Slide 15: Financial strategy
Financial strategy • Deploying capital for the repowering of Genesee 1&2 and growing renewables portfolio • Disciplined growth with focus on predictable cash flows and sustainability goals • Dividend growth of 7% in 2021 and 5% in 2022 • Maintain investment grade credit rating 15
Slide 16: Overview of financial strategy
Overview of financial strategy Fund growth • Fund growth in a cost-effective manner towards low carbon future • Access various sources of capital and seek innovative ways to fund growth Maintain • Maintain competitive cost of capital investment grade credit • Ensure access to capital markets through
Slide 17: 5-year growth in key financial metrics
5-year growth in key financial metrics(1,2,3) ($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 2020 2021T 5-year growth supported by average growth capex of $750M(4) per annum
Slide 18: 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 19: Capital allocation balance
Capital allocation balance • Balanced focus between dividend Dividend Growth growth and growth opportunities growth opportunities • Allocating capital strategically to develop, commercialize and • Existing asset implement technologies to support improvements sustainability targets • Development proj
Slide 20: 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 21: Genesee more competitive after repowering
Genesee more competitive after repowering Estimated variable cost merit order in 2025 $/MWh Older CTG units not competitive (retire?) 80 Older CTG Units 70 60 GN1&2 Dual Fuel 50 GN3 Dual Fuel 40 Older CTG Units 30 GN 1&2 become 20 very efficient GN3 CTG GN 3 remains in 10 middle of stack GN1&2 Repow
Slide 22: Managing Alberta carbon exposure
Managing Alberta carbon exposure CPC Alberta Emissions Expense Carbon Offset Savings ($M) 41 52 160 27 97 53 2 2 25 19 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 follow the anno
Slide 23: 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 ~$55M Hunter’s Cove after completion in late 2021 Solar Bear Branch Whitla 3 and 2022 Solar Strathmore Solar Full-year financial contributions starting i
Slide 24: Capital program
Capital program ($M) Capital deployed to renewables and repowering provide significant 263 financial contributions in 2022+ 340 306 210 367 50 34 100 5 27 120 85 50 55 2021 2022 2023 2024 2025 Sustaining capex Enhancement & GPS capex Other committed capital Genesee repower 1) Includes net capex afte
Slide 25: Cash flow and financing outlook
Cash flow and financing outlook Positive cash position and credit facilities to fund growth projects in 2021 Expected Sources Expected Uses DRIP Sustaining & reinvestment maint. capex $70 M $85 M Cash / credit Debt facilities (2) repayments $325 M (1) $430 M FFO & off-coal Committed $1.6 B compensat
Slide 26: Q1/21 performance versus 2021 annual targets
Q1/21 performance versus 2021 annual targets Facility availability Sustaining capex ($M) Adjusted EBITDA ($M) AFFO ($M) $500 to $550(1) $80 to $90 $975 to $1,025 96% 93% $303 $159 $18 Q1/21 Target Q1/21 Target Q1/21 Target Q1/21 Target Annual adjusted EBITDA and AFFO expected to be modestly above to
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–Today Today–2024 2024–2030 2030–2050 2050–2070 • Genesee efficiency • Complete repowering • Expand CCU • Net carbon neutral • Physical program - 12% and off coal • Develop CCUS via physical decarbonization decrease in GHG by • Invest in renewables, and/or hydrogen s
Slide 29: Sustainability targets and highlights
Sustainability targets and highlights Target: Achieve net carbon neutrality by 2050 Sustainability Highlights Scope 1 Emissions(1) Strategic Investments Leadership & Governance Construct all natural gas 50% generation units to be • Enhanced reduction at carbon capture and/or sustainable sourcing Gen
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: 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 • Long-term contracts for solar projects in No
Slide 33: Appendices
Appendices • Alberta portfolio optimization • Credit rating metrics • Debt maturity schedule 33
Slide 34: 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 19% since the Company’s inception ~12 years ago $125 $100 $75 $50 $25 $0 Average AB spot power price Capital Power captured
Slide 35: 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 • DBRS affirmed in
Slide 36: 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, cash-on-hand, and $1B of credit facilities committed to 2024(1) 600 500 USD 6
Slide 37: 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, gains or losses on disposals and unrealiz
Slide 38: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform the • business prospects (including potential re-contracting of facilities) and opportunities including Company’s shareholders and potential investors about management’s assessm
Slide 39: Investor Relations
Investor Relations Randy Mah 10423 101 Street NW Director, Investor Relations 11th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada T5H 0E9 39