Capital Power Corporation · TSX:CPX
Capital Power — Q2 2010 Earnings Presentation
25 slides from Capital Power's earnings presentation, Aug 3, 2010
Slide 1: Analyst Conference Call
Analyst Conference Call August 3, 2010 - Q2, 2010 Review - Acquisition of Island Generation facility Brian Vaasjo, President & CEO Stuart Lee, CFO Jim Oosterbaan, SVP Commercial Services CONFIDENTIAL
Slide 2: Cautionary statement regarding forward-looking information
Cautionary statement regarding forward-looking information Certain information in this presentation and in responses to questions during this conference call contains forward-looking information. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking
Slide 3: Corporate updates
Corporate updates Financial Q2/10 performance below management’s expectations Commodity optimization strategies that led to strong contributions in Q1/10 underperformed in Q2 • Fewer trading opportunities in the import and export power markets due to lower price spreads between markets and less
Slide 4: Corporate updates (cont'd)
Corporate updates (cont’d) Proposed GHG emission regulations for coal-fired plants In June, Government of Canada announced their plan for new greenhouse gas (GHG) emission regulation for coal-fired electricity generation units Proposed plan will apply a new GHG emissions performance standard to
Slide 5: Q2/10 Operating performance
Q2/10 Operating performance Plant Generation Availability (GWh) Alberta commercial plants Genesee 2 Genesee 3 96% 432 G2 experienced 21-day Joffre 84% 93 Clover Bar Energy Centre 52% 102 outage Taylor Coulee Chute 90% 3 Clover Bar Energy Centre Clover Bar Landfill Gas 96% 10 Weather Dancer - - U
Slide 6: Keephills construction project update
Keephills 3 construction project update Construction remains on target to revised project cost forecast and on schedule to commence operations in Q2/11 Hydro tests on feed water and re-heater systems, and the boiler successfully completed in April achieving a major project milestone Commission
Slide 7: Q2/10 financial summary
Q2/10 financial summary All three units at Genesee affected by direction to curtail generation to accommodate transmission system upgrades that contributed to: • Spikes in AB power prices • Foregone availability incentive revenues at Genesee 1 and 2 • Trading activity undertaken to manage our AB p
Slide 8: Financial performance
Financial performance ($M, except earnings per share) Q2/10 Q1/10 Q4/09 Q3/09 Total Revenues $313 $499 $497 $511 $1,820 Gross margin(1,2) $174 $210 $182 $189 $755 Operating margin(1,2) $109 $161 $120 $140 $530 Net income (loss) $(8) $13 $7 $14 $26 Earnings (loss) per share $(0.37) $0.60 $0.33 $0.64
Slide 9: Alberta power prices
Alberta power prices Alberta spot power prices were volatile in Q2/10 and averaged $81/MWh, up 99% from Q1/10 and 151% from Q2/09 Increase due to generation curtailments at all 3 units at Genesee to accommodate transmission system upgrades, Genesee 2 scheduled outage, and other plant de-rates on
Slide 10: Financial updates
Financial updates Two base shelf prospectuses filed in April, positioning the Company to fund growth plans through the issuance of up to $1B in equity and $1B in debt Refinanced $245M in debt repayments to EPCOR in Jun/10 through drawdown on credit facilities At end of Q2/10, debt-to-total cap
Slide 11: 2010 financial outlook
11 2010 financial outlook Although Q2 results were below expectations, 2010 outlook unchanged from outlook disclosed at 2009 year-end due to strong Q1 results Genesee 3 outage scheduled in Q4 with an expected operating expense of ~$7M and lower operating margin for the facility For balance of
Slide 12: Review of 2010 corporate priorities
Review of 2010 corporate priorities Priority Status Operational targets Plant availability of ≥ 94% 90% expected due to issues with Clover Bar units Sustaining capex of $60M On track Construction / development objectives CPC’s share of final costs for Keephills 3 On track project at ≤ $955M wi
Slide 13: Execution of growth strategy
Execution of growth strategy Confirmed capacity growth 4,500 4,000 3,500 3,000 (MW) 2,500 2,000 1,500 1,000 500 0 2009 2010 2011 2012 Base at IPO CBEC 2 & 3 Island Generation Keephills Port Dover Wind Quality Wind Since Capital Power’s IPO launch a year ago, 970 MW of new capacity has been added or
Slide 14: Acquisition of Island Generation Facility
Acquisition of Island Generation Facility CONFIDENTIAL
Slide 15: Transaction overview
Transaction overview Capital Power LP signed a Purchase & Sale Agreement with Kelson Canada Inc. to acquire the Island Generation facility for $207M (plus closing costs and working capital adjustments) Island Generation is fully-contracted (tolling arrangement) with BC Hydro until 2022 Acquisi
Slide 16: Island Generation facility
Island Generation facility 275 MW natural gas-fired combined cycle power facility Located on Vancouver Island, BC; approximately 200 km NW of Vancouver Commenced commercial operation in Apr 2002 • 8-year old plant consistent with Capital Power’s fleet of young assets Facility operates an Als
Slide 17: Description of PPA and power market
Description of PPA and power market Strong investment grade counterparty (BC Hydro rated “AAA” by S&P) 12-year term Electricity Purchase Arrangement (Apr/10 - Apr/22) • Tolling arrangement - BC Hydro delivers all fuel required to operate the facility and obligated to pay for all power generated
Slide 18: Island Generation acquisition highlights
Island Generation acquisition highlights Transaction meets minimum 9% hurdle rate (unlevered, after-tax) for contracted assets Modestly and immediately accretive to earnings and more significantly accretive to cash flow 12-year long-term contract with strong investment grade counterparty, exte
Slide 19: Questions?
Questions? Investor Relations (780) 392-5305 (866) 896-4636 (toll-free) investor@capitalpower.com www.capitalpower.com CONFIDENTIAL 19
Slide 20: Non-GAAP financial measures
Non-GAAP financial measures The Company uses (i) gross margin, (ii) operating margin, (iii) funds from operations, (iv) funds from operations excluding non-controlling interests in CPILP and (v) normalized earnings per share as financial performance measures. These terms are not defined financial me
Slide 21: Non-GAAP financial measures (cont'd)
Non-GAAP financial measures (cont’d) Management considers operating margin to be representative of plant performance as it excludes corporate administration and business development expenses (indirect administration). The presentation of the pro forma consolidated information for the three and six m
Slide 22: Non-GAAP financial measures (cont'd)
Non-GAAP financial measures (cont’d) Normalized net income and normalized earnings per share The Company uses normalized earnings per share to measure performance by period on a comparable basis. Normalized earnings per share is based on net income according to Canadian GAAP adjusted for items that
Slide 23: Forward-looking information
Forward-looking information Certain information in this presentation 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, believe, plan, intend, target, a
Slide 24: Forward-looking information (cont'd)
Forward-looking information (cont’d) of the Acquisition; (xxx) expectations regarding peak demand, load and power generation growth on Vancouver Island and its impact on Island Generation’s future value; (xxxi) the expected timing of the closing of the purchase transaction for the Acquisition, and (
Slide 25: Forward-looking information (cont'd)
Forward-looking information (cont’d) This presentation includes the following updates to previously disclosed forward-looking statements: (i) expectations regarding capital expenditures in 2010 have been revised to reflect a change in the timing of spending on the Keephills 3 project; (ii) the timin