Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (August 2022)
36 slides from Capital Power's investor presentation, August 2022
Slide 1: Investor Presentation
Investor Presentation August 2022 Brian Vaasjo President & CEO Sandra Haskins SVP Finance & CFO 1
Slide 2: Growth-oriented North American energy transition company
Growth-oriented North American energy transition company x3 • Highly-contracted, young and diversified portfolio • Well-positioned assets and trading expertise in the attractive Alberta power market • Recently announced acquisition of 50% interest in Midland Cogen facility; closing in Q3/22 • Off co
Slide 3: Our strategy and path to net carbon neutral by 2050
Our strategy and path to net carbon neutral by 2050 Investing in emissions Building and acquiring Integration of free renewables facilities storage technologies Reduce emissions profile Investing in critical Acquiring / evolving key through decarbonization natural gas generation facilities including
Slide 4: Our roadmap to 2050
Our roadmap to 2050 2009–TODAY TODAY–2024 • Genesee efficiency program – • Complete repowering and off coal 12% decrease in greenhouse gas (GHG) by 2021 • Genesee Battery Energy Storage System • Over $3B invested in/committed to renewables • CCUS FEED study at Genesee • C2CNT interest increased to 4
Slide 5: Business mix overview
Business mix overview Fuel Type(1) Contracted versus Merchant(1) 20% 22% U.S. Contracted Renewables 45% 43% Natural gas/coal Canada Contracted dual-fuel 33% 37% Natural gas Alberta Merchant Clean natural gas and renewable Average PPA term projects in development will remaining of ~9.7 years(2) repla
Slide 6: Growth strategy
Growth strategy • Growth strategy aligns with our sustainability goals • Decarbonization is an immense opportunity for gas and renewables technologies • Strong renewable growth pipeline in Alberta and the U.S. • Demonstrating success in recontracting natural gas assets • Ontario represents significa
Slide 7: Renewable and storage acceleration
Renewable and storage acceleration Developing 5 renewables projects with positive outlook for growth Enchant Solar (75 MW) COD Halkirk Wind phase 2 (151 MW) 3 North Carolina solar projects expected in Q4/22 COD expected in Q4/24 (160 MW) COD expected in Q4/24 ~400 MWs of new renewable capacity Secur
Slide 8: Consistent substantial growth in renewables
Consistent substantial growth in renewables (MW) 2000 Halkirk 2 Bear Branch Hunter's Cove Hornet 1500 Enchant Strathmore Whitla 2&3 Buckthorn 1000 Cardinal Whitla New Frontier Bloom 500 Beaufort Macho Springs PDN Halkirk 0 Quality 2016 2017 2018 2019 2020 2021 2022 2023 2024 8
Slide 9: Development pipeline supports sustainable growth
Development pipeline supports sustainable growth 3,650 MW generation Wind (~1100 MW) Solar (~2600 MW) 3,350 MWh battery storage Battery Storage Targeting $500M of committed capital for growth 9
Slide 10: Continued execution of midlife natural gas strategy
Continued execution of midlife natural gas strategy Acquisition of Midland Cogeneration Venture (Midland Cogen) • 1,633 MW natural gas combined-cycle cogen facility located in Midland, Michigan • Partnered with Manulife Investment Management to acquire Midland Cogen for a total of US$894M, including
Slide 11: 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 – $1.2B capital cost including $195M for 210 MW battery storage. 20%+ levered returns 512 MW net capacity increase (total 1,372 MW) Best-in-class NGCC t
Slide 12: Solid track record of recontracted natural gas assets
Solid track record of recontracted natural gas assets Securing long term PPAs provide stable cash flows Securing long term PPAs provide stable cash flows Decatur (Alabama) Arlington (Arizona) Island Generation (BC) Goreway (ON) Acquired: Jun/17 Acquired: Nov/18 Acquired: Oct/10 Acquired: Jun/19 Orig
Slide 13: Alberta power market
Alberta power market • Demand fully recovered from COVID-19 and low oil prices • All-time summer and winter record demand set in 2021 • Demand expected to increase modestly year-over-year • Robust market with average power price of $102/MWh in 2021 and $121/MWh in 2022 (based on July YTD actuals & f
Slide 14: A market leader in the Alberta power market
A market leader in the Alberta power market • Continue to reposition and optimize assets to maintain leadership position • Largest provider of new generation over the last 20 years • Leading developer and owner of renewables in the province • Leading efforts to decarbonize Repowering Solar thermal g
Slide 15: Repositioning Genesee 1&2
Repositioning Genesee 1&2 Retired Capacity Asset (MW) Battle River 3 149 Keephills 1 395 Sundance 1 280 Sundance 2 280 Sundance 3 368 Variable costs Sundance 4 406 Sundance 5* 406 Sundance 6** 401 Battle River 4** 155 Battle River 5** 385 Sheerness 1** 400 Sheerness 2** 400 Keephills 2** 395 *Suspen
Slide 16: Clean Electricity Standard (CES) update
Clean Electricity Standard (CES) update March 2022 Notable impacts to Capital Power • Federal consultations on CES design principles and considerations • Our Canadian thermal fleet, • Government commitment to manage transition to maintain reliability including Genesee repowering, and affordability w
Slide 17: Alberta TIER program
Alberta TIER(1) program Significantly reducing carbon emissions AB electricity sector emissions (MT)(2) • TIER program driving down carbon emissions in a meaningful way 60 Avoided • Alberta government supportive of 47.7 Emissions TIER program 50 Current TIER @ • Carbon prices per tonne will rise 40
Slide 18: Alberta portfolio optimization of commodity price risk
Alberta portfolio optimization of commodity price risk (All data as of Jun 30/22) 2023 2024 2025 Power % Sold forward(1) 70% 45% 27% Contracted power prices(2) ($/MWh) High-$60s Low-$60s Low-$60s Forward power prices ($/MWh) $95 $69 $65 Natural gas % Bought forward(3) Over 80% Over 80% Over 50% Weig
Slide 19: Managing Alberta carbon exposure
Managing Alberta carbon exposure ($/tonne) ($M) $250 $100 CPC Alberta Emissions Expense1 Carbon Offset Savings Carbon Price 2 $200 69 $80 $150 $60 40 $100 $40 164 116 $50 $20 4 3 24 17 $0 $0 2022E 2023E 2024E 2025E Physically reducing emissions supplemented with low-cost offsets protect and enhance
Slide 20: Financial strategy
Financial strategy • Deploying capital to advance progress towards our sustainability targets including the repowering of Genesee 1&2 and growing renewables portfolio • Executing on $1.8B in growth capex without the need for additional common equity • Resilient cashflows supported by risk mitigation
Slide 21: Overview of financial strategy
Overview of financial strategy Maintain Funding a low Maintain Deliver annual financial stability carbon future investment grade dividend growth and strength • Cost-effective credit rating • Dividend stability • Strong liquidity funding of growth • Access to capital through contracted markets throug
Slide 22: 2022 targets
2022 targets Higher financial guidance reflects YTD results and positive outlook Facility availability(1) Sustaining capex(1) ($M) Higher revised financial guidance 93% 93% $105 to $115 • 11% and 19% increases to the midpoints of guidance ranges for adjusted EBITDA and AFFO, respectively $55 • Drive
Slide 23: Delivering 9 consecutive years of dividend growth
Delivering 9 consecutive years of dividend growth Increased annual dividend guidance to 2025 from 5% to 6% 6% increase per year ~7% CAGR $2.32 $2.19 $1.26 42% 50% 45% 45% 35% 40% 39% Average payout of ~40% payout 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023E 2024E 2025E Forecast to be belo
Slide 24: Executing on ~$1.8 billion of growth capex
Executing on ~$1.8 billion of growth capex Additional common equity not required to fund current growth projects $697M Total $640M Total $235 $178 $457M Total $49 $38 $18 $45 $101 $236 $379 $312 $150 $53 2022E 2023E 2024E Genesee 1&2 repowering Genesee battery storage Alberta renewable assets US ren
Slide 25: Sustainability / investment opportunity
Sustainability / investment opportunity • Corporate purpose – to power a sustainable future for people and planet • 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 25
Slide 26: Sustainability commitments and progress
Sustainability commitments and progress • Executive and Leadership compensation linked to environment and social targets including • 10% growth in women leaders by 2024 • 30% reduction in fleet emission intensity by 2024 • 9% increase in workforce diversity by 2024 • Successful implementation of sus
Slide 27: Significant progress on Genesee CCS Project
Significant progress on Genesee CCS Project Increasing policy certainty to proceed Alberta CCUS hub CCS financial support Carbon policy de-risking Government of Alberta • $1.8 - $2.0B project cost • Required for Genesee CCS to selected Enbridge’s “Open 2022 Federal Budget proposed advance Access
Slide 28: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth and accelerates net carbon neutral by 2050 • Successful track record in developing renewable projects and contracting • Executing on resilient natural gas strategy • Leading position in the robust Alberta power market • Generating st
Slide 29: Appendices
Appendices • Natural gas critical to North American reliability • Managing inflationary and supply chain cost pressures • Credit rating metrics • Debt maturity schedule 29
Slide 30: Natural gas critical to North American reliability
Natural gas critical to North American reliability 30
Slide 31: Managing inflationary & supply chain cost pressures
Managing inflationary & supply chain cost pressures Operating costs • Expect modest increase of ~$2 million on operations in 2022 from LTSA and PPAs (largely escalate with CPI) Genesee 1&2 repowering project • ~90% of $997M repowering project cost locked in; no major commitment on $195M for 210 MW b
Slide 32: Financial stability and strength
Financial stability and strength Strong balance sheet and commitment to investment grade credit ratings • Both rating agencies affirmed BBB- / Stable ratings in April 2022 • Target FFO to Debt > 20% • 2022 forecast to be another • Target Debt to EBITDA < 4x strong year with credit metrics well above
Slide 33: Debt maturity profile
Debt maturity profile(1) Well spread-out debt maturities supported by long asset lives • Longer term debt reflects increased confidence in our business profile • Strong liquidity from cash flow from operations, cash-on-hand, and credit facilities • Hedged underlying on refinancings out to 2026 600 5
Slide 34: Non-GAAP financial measures and ratios
Non-GAAP financial measures and ratios 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 a
Slide 35: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform the Company’s status of and impact of policy, legislation and regulations; shareholders and potential investors about management’s assessment of Capital Power’s future plans a
Slide 36: Investor Relations
Capital Power Common Shares • Listed on the Toronto Stock Exchange (symbol: CPX) • 52-week low/high share price ($36.65 / $49.87) • Shares outstanding: 116 million • Market cap: ~$5.7 billion • Avg daily trading volume (trailing 12 months): 496,000 shares • Dividend yield: ~4.4% Investor Relations R