Slide 1: Investor Meetings June 2016
CAPITAL POWER Investor Meetings June, 2016 Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO
Slide 2: Corporate updates
Corporate updates Alberta Climate Leadership Plan • Coal phase-out facilitator and compensation • Financial impacts from Carbon Competitiveness Regulation • Renewables acceleration to replace retiring coal generation Alberta Power Market Growth Opportunities Finance Overview and 2016 Guidanc
Slide 3: Phase-out of coal: Alberta Climate Leadership Plan updates
Phase-out of coal Alberta Climate Leadership Plan Updates AB government appointed Terry Boston as the coal phase-out facilitator to oversee the transition away from coal-fired generation by 2030 Facilitator tasked with presenting options that will strive to maintain the reliability of Alberta’s
Slide 4: Phase-out of coal: compensation
Phase-out of coal Alberta Climate Leadership Plan Compensation A component of compensation for early retirement could be the ratio of reduced asset life to the current remaining life multiplied by Net Book Value (NBV) NBV of our coal assets is ~$2 billion at end of 2015 Remaining life of our c
Slide 5: Estimated incremental impacts of CCR
Financial impacts Estimated incremental impacts of CCR(1) Contracted revenue under Genesee 1 & 2 PPA is expected to be $37/MWh in 2020 Expected revenue will be $60 to $70/MWh when the output is sold into the AB merchant market in 2021, which will now be partially eroded by the higher carbon tax
Slide 6: Renewables: RFP process and maintenance of AB market design
Renewables Alberta Climate Leadership Plan Renewables RFP process & maintenance of AB market design Mar 3/16 – AB Government has tasked the Alberta Electric System Operator (AESO) to develop and implement a renewable electricity incentive program (REIP) to add additional renewable generation capac
Slide 7: Alberta market forecasts
AB power market Alberta market forecasts ($/MWh) Alberta Energy Prices(1) ($/GJ) 100 15 80 10 60 40 5 20 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Power Forwards May 24, 2016 Gas 1) Power and gas forecasts represent the average forecasts of three leading 3rd part
Slide 8: Sundance PPA early termination
AB power market Sundance PPA early termination Expected incremental impacts On March 24, Capital Power announced that it has given notice to terminate the Sundance C PPA under the Change in Law provision of the PPA Decision to terminate has no impact on Capital Power’s other generation interest
Slide 9: Impacts from Sundance PPA termination
AB power market Impacts from Sundance PPA termination Alberta commercial hedging profile Termination of our Buyer role in Sundance C PPA has significantly increased our baseload hedging profile from 2015 year-end Significant forward sales resulting from increased marketing liquidity due to the P
Slide 10: Alberta power market trading
AB power market Alberta power market trading Portfolio optimization activities focused on managing exposure to commodity risks, reducing volatility and creating incremental value Average realized power price(1) has exceeded spot power prices ($/MWh) by 56% over the last 2 years $125 $100 $75 $50 $
Slide 11: Growth opportunities – Canada & US
Growth Growth opportunities – Canada & US 1 Wind Natural Gas Solar 11
Slide 12: Genesee 4&5
Alberta growth Genesee 4&5 Joint venture partners with ENMAX to develop, construct, own, and operate the 1,060 MW natural gas-fired combined cycle facilities 8-year tolling agreement with ENMAX for 50% of CP’s share of the output All major regulatory approvals received to proceed with construc
Slide 13: Halkirk 2
Alberta growth Halkirk 2 150 MW wind facility next to the existing Halkirk facility Investment of ~$300M AESO interconnection application filed Application for permits and supporting studies underway Operational and construction cost savings with experience from Halkirk 1 Locational adva
Slide 14: Bloom Wind
U.S. growth Bloom Wind 178 MW wind farm consisting of 54 Vestas V117-3.3 MW turbines 10-year fixed price contract covering 100% of the output, with Allianz Risk Transfer (rated AA- (stable) by S&P’s), a subsidiary of Allianz SE, a worldwide insurance and asset management group Under the contra
Slide 15: Capital allocation
Finance overview Capital allocation (1) Maintain growing dividend backed by Dividend sufficient contracted cash flow base Growth Capital Growth (2) Fund growth opportunities in the near term with discretionary cash flow Allocation Opportunities Share Buybacks & (3) Active in debt reduction and share
Slide 16: Continued strong cash flow generation
Finance overview Continued strong cash flow generation Funds from operations (FFO)(1) $450 ~42% of 2016 FFO is $400 discretionary cash flow(2) 45% 42% $350 At the mid-point of 2016 37% guidance range, generating $300 ~$170M in DCF before growth $250 capex to reinvest in ($M) renewables and natur
Slide 17: Improving contracted cash flow
Contracted cash flows Improving contracted cash flow(1,2,3) Substantial expansion in contracted operating margin from 2012 to 2016 $400 $350 $300 } Shepard & K2 Wind } Beaufort 3 wind $250 projects Macho Springs ($M) K2 Wind $200 Shepard PD&N $150 Halkirk Quality Wind $100 Island Generation North Ca
Slide 18: Target annual dividend increase
Contracted cash flows Target annual dividend increase (dividend/share) $1.80 Generating $340M in free cash flow(2) in 2016 before growth capex at the bottom of the cycle $1.60 Dividend payout ratio to FFO averages 39% from 2016 to $1.40 2018 Pipeline of opportunities to expand contracted footp
Slide 19: Strong financial coverage
Contracted cash flows Strong financial coverage Operating margin(1) to financial obligations(2) and dividends(3) 150% Contracted + merchant ($70/MWh) 140% 130% 120% Contracted + merchant (Forwards(4)) 110% Contracted + merchant ($40/MWh) 100% Contracted margin 90% Minimum AB power prices required to
Slide 20: Financial strength
Strong financial base Financial strength Strong balance sheet and investment grade credit rating Investment grade credit ratings by Agency Ratings Outlook S&P and DBRS S&P BBB- / P-3 Stable Debt-to-capital ratio remains below DBRS BBB / Pfd-3 (low) Negative long-term target of 40% - 50% Debt to
Slide 21: Credit metrics
Strong financial base Credit metrics(1) In line with DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt EBITDA/Adj. Interest 30% 6.0 25% 5.0 20% 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2015A 2016T 2015A 2016T In line with S&P’s financial criteria for current rating Adj. FFO/Adj. Debt(2) A
Slide 22: Q1/16 performance versus annual targets
2016 Guidance Q1/16 performance versus annual targets Operational and financial targets Plant availability Sustaining capex ($M) 97% $65 94% $8 Q1/16 2016T Q1/16 2016T Plant operating & Funds from operations ($M) maintenance expenses ($M) $380 - $430 $200 - $220 $52 $109 Q1/16 2016T Q1/16 2016T On-t
Slide 23: Attractive value proposition
Summary Attractive value proposition Excellent existing operations Continued growth in funds from operations • Able to increase the annual dividend through 2018 at 7% Significant growth opportunities • Genesee 4&5 best positioned to be the next large natural gas-fired generation project to be
Slide 24: Historical Alberta prices
Appendix Historical Alberta prices Daily average power prices 800 700 600 500 $/MWh 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Annual average power prices and AECO (Annual power prices have averaged $63/MWh in the past 15 years) 100 89.95 10.00 8.27
Slide 25: Alberta market design
Appendix Alberta market design Stable market design has signalled the addition of 7 GW of new generation 1600 45% 1400 40% 35% 1200 30% 1000 25% Capacity 800 Reserve (MW) 20% Margin 600 15% 400 10% 200 5% 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 New Capacity AE
Slide 26: Illustrative view of new supply
Appendix Illustrative view of new supply Alberta supply and demand (Gigawatts) 25 Generic Renewables Generic Gas Other Wind Hyrdo Natural Gas Coal (1) Demand (2) 20 15 10 5 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Slide 27: Debt maturity schedule
Appendix Debt maturity schedule(1) $1B(1) in committed credit facilities with 5-year tenor maturing 2020, of which $690M is available $700 $610 $600 $500 ($Millions) $400 $300 $250 US $230 $200 $174 $100 US $65 $9 $10 $0 2016 2017 2018 2019 2020 2021 2026 (2) EPCOR Debt Capital Markets Debt Bank Deb
Slide 28: Summary of assets
Appendix Summary of assets Clover Bar Clover Shepard Genesee Genesee Genesee Keephills Energy Bar Energy 1 2 3 3 Joffre Centre Landfill Halkirk Centre Alberta Contracted Alberta Commercial 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
Slide 29: Summary of assets
Appendix Summary of assets Kingsbridge Island Quality Port Dover & Macho Beaufort 1 Generation Wind Nanticoke K2 Wind Roxboro Southport Springs Solar Ontario & British Columbia Contracted U.S. Contracted Capacity 40 MW 275 MW 142 MW 105 MW 270 MW 46 MW 88 MW 50 MW 15 MW % owned / 100 / 100 100 / 100
Slide 30: Projects under development/construction
Appendix Projects under development/construction Genesee 4&5 Halkirk 2 Bloom Wind Alberta Commercial U.S. Contracted Capacity Up to 1,060 MW 150 MW 178 MW % owned / 50 / 100 100 / 100 100 / 100 operated Location Warburg Halkirk Ford and Clark Counties, Kansas Fuel & equipment Combined-cycle natural
Slide 31: 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 gains or losses, finance expense from joint venture, and gains or losses on disposals (adjusted EBITDA), (ii) funds from operations, (iii
Slide 32: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation and in responses to questions 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 m
Slide 33: Investor Relations Contact
Investor Relations Contact Randy Mah Head Office Senior Manager 10th Floor (780) 392-5305 10423 – 101 Street NW rmah@capitalpower.com Edmonton, AB T5H 0E9 www.capitalpower.com