Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (November 2013)
44 slides from Capital Power's roadshow presentation, November 2013
Slide 1: Investor Meetings
CAPITAL POWER Investor Meetings Brian Vaasjo, President & CEO November, 2013
Slide 2: Corporate updates
Corporate updates Agreement reached on the sale of US Northeast plants to Emera Announced agreement on Aug 28 for the sale of three US Northeast plants to Emera for US$541M Transaction expected to close before year-end subject to regulatory approvals Proceeds used to fund our investment in the
Slide 3: Organizational focus and streamlining
Organizational focus and streamlining Refocusing of merchant business and implementation of an Enterprise Resource Planning (ERP) system has resulted in an expected reduction of ~160 full-time employee positions in 2013, excluding 60 employees associated with the sale of the New England assets O
Slide 4: Secondary offering of common shares
Secondary offering of common shares EPCOR completed a secondary offering of 9.6M common shares on Diluted shares (M) Oct 10/13 100 EPCOR’s indirect ownership reduced to 19% from 29% and they 75 may only elect two of Capital 59.0 Power’s directors compared to four 31.0 70.0 80.6 previously 50 Pub
Slide 5: Overview of Capital Power
Overview of Capital Power Independent power producer Straight-forward business High-quality generation (IPP) model portfolio • Trading on TSX (CPX); ~$2.1B • Contracted cash flow base • Young and modern fleet with diluted market cap; attractive • Significant contracted and current generation of more
Slide 6: North American footprint
North American footprint Ownership interest in 12 facilities with more than 2,500 MW(1) Ontario • Two contracted wind facilities Alberta under development/construction 1,943 MW of owned • 40 MW contracted wind facility generation; future addition of Shepard and Genesee 4 & 5 BC 417 MW contracted US
Slide 7: Alberta market
Alberta market AB market design expected to continue to provide timely pricing signals for the addition of new supply Forecast spark spreads above Projected reserve margin signals the need historical average(1) for new capacity in the 2017-2020 timeframe(1) “Alberta’s future power demand outlook is
Slide 8: Capital Power's Alberta fleet
Capital Power’s Alberta fleet 2,355 MWs in 2015(1) Genesee 1 & 2 Joffre Cogen Genesee 3 & Clover Bar Energy Halkirk Wind Shepard Energy •860 MW low cost •192 MW capacity Keephills 3 Centre •Largest wind farm Centre baseload coal under from jointly-owned •505 MW merchant •Most responsive in Alberta •
Slide 9: 2015 Alberta power generation stack
2015 Alberta power generation stack(1) 100% Other Capital Power Gas peaking 90% (30%) 80% Gas mid-merit Capital Power 70% (10%) 60% 50% 40% Coal Capital Power 30% (20%) 20% 10% Hydro Wind Capital Power 0% (11%) (1) Capital Power’s percentages reflect ownership interest. 9
Slide 10: The best fleet in the fastest growing power market in North America
The best fleet in the fastest growing power market in North America With investments in Shepard and Genesee 4 & 5 facilities, Capital Power will own high-quality baseload, mid-merit, renewable and peaking generation in Alberta providing more flexibility than any other power portfolio in the province
Slide 11: Focus on contracted margins
Focus on contracted margins Sale of the US North East assets improves the Contracted operating margin relative to merchant operating margin A focus on merchant operations in Alberta will provide upside as the Alberta supply-demand balance tightens over the longer term Contracted vs. Merchant mix
Slide 12: Modern fleet
Modern fleet Helps keep availability high and reduces risk of unplanned outages Average weighted facility age of the current fleet is 12.5 years(1) 2 new wind projects (195 MW) begin commercial operations in 2013 & 2015 Shepard Energy Centre expected COD Q1/15 CBEC 3 Facility age CBEC 2 Remain
Slide 13: Q3/13 Operating performance
Q3/13 Operating performance Plant availability Q3/13 Q3/12 Alberta Genesee 3 99% 100% commercial plants 98%+ average availability Keephills 3 100% 100% from all three contracted Clover Bar Energy Centre 93% 97% plant segments in AB, ON Joffre 100% 98% & BC, and North Carolina Halkirk 89% N/A AB
Slide 14: Proven operating excellence
Proven operating excellence Operating availability consistently 90%+ over a growing fleet and production volumes Operating performance 96% 90% 92% 91% 93% 18,000 15,000 Generation (GWh) 12,000 9,000 6,000 3,000 - 2009 2010 2011 2012 2013E Generation Average plant availability 14
Slide 15: Capturing upside from AB power prices
Capturing upside from AB power prices Hedging positions based primarily on generation from Genesee 3 and Keephills 3 baseload coal plants and output from the Sundance PPA Actively trading throughout various time periods to minimize portfolio risks, create incremental value, and reduce volatility
Slide 16: Contracted Ontario wind projects
Contracted Ontario wind projects Port Dover & Nanticoke 105 MW (Vestas turbines); near Port Dover & Nanticoke, Ontario 58 of 58 turbines fully erected, all access roads completed, 100% of foundations completed, currently in pre-commissioning On target for COD in Q4/13; $340M budget Port Dover
Slide 17: Shepard Energy Centre
Shepard Energy Centre Excellent fit with our strategy, strengthens our position in Alberta, provides stable cash flows 20-year tolling agreement on 50% of owned capacity with ENMAX Additional 25% contracted for 2015-17 which increases cash flow certainty during an expected period of low pool pri
Slide 18: Genesee 4 & 5
Genesee 4 & 5 Actively following process to build a large (up to 900 MW) gas-fired power generation facility in the 2018-2020 timeframe to meet AB’s power needs Expect to finalize and announce a partnership agreement for the project in Q4/13 and file an application with Alberta Utilities Commissio
Slide 19: Financial strength and access to capital
Financial strength and access to capital Strong balance sheet(1) Assets of ~$5.1B with ~$1.6B of third party debt $1.2B in credit facilities, of which ~$0.9B available • In 2012 added $300M accordion feature Debt to total capitalization 50% Long-term target 40% - 50% 40% 30% 20% 36% 38% 34% 10%
Slide 20: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities are supported by long asset lives Term on credit facilities extended to 5 years ($M) $350 $314 $305 $300 $255 $250 US$230 $200 $179 $150 $144 $148 $100 US$65 $50 $19 $13 $0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2026 EPCOR Debt Capita
Slide 21: Investments in contracted wind will generate significant incremental cash flow
Investments in contracted wind will generate significant incremental cash flow 487 MW of owned generation in four wind projects forecast to provide $150M - $155M in annual cash flow before financing Strong accretion of ~$0.90 - $0.95 in cash flow per share, and ~$0.35 - $0.40 in earnings per sha
Slide 22: Continued strong cash flow generation
Continued strong cash flow generation Funds From Operations (FFO) Expect to exceed target of $385M- $400 $415M in FFO in 2013 $350 35-40% of 2010-12 FFO is ~ 37% discretionary cash flow(1) $300 34% 35% Additional cash flows in 2013 from: $250 • Full year operations from Halkirk ($M) 35% and Qu
Slide 23: Development projects - capex
Development projects - capex Prior to ($M) 2013 2013E Project Total Port Dover & Nanticoke $68 $272 $340 K2 Wind Ontario $3 $30 $291(1) Shepard Centre $50 $650 $860 $121 $952 $1,491 Continue strong execution of capex program Port Dover & Nanticoke Shepard Energy Centre (1) Represents Capital Power’s
Slide 24: Cash flow and financing outlook
Cash flow and financing outlook No primary common share equity required in 2013 other than via DRIP Sources of cash flow ($M) 2013E Funds from operations $400(1) Preferred share offering (Closed Mar/13) $200 Net proceeds from sale of US Northeast assets ~$560 Uses of cash flow Dividends (net of DRIP
Slide 25: Financial performance – Q3 YTD
Financial performance – Q3 YTD YTD YTD $M, except per share amounts % Change 2013 2012 Revenues and other income $1,066 $1,031 3% Adjusted EBITDA(1) $381 $356 7% Basic earnings per share $1.19 $0.65 83% Normalized earnings per share $1.35 $1.06 27% Funds from operations $310 $298 4% Cash flow per sh
Slide 26: AB commercial portfolio positions
AB commercial portfolio positions Alberta portfolio hedged positions for AB baseload plants and acquired Sundance PPA (% sold forward) Oct-Dec, 2013 2014 2015 Percentage sold forward 81% 92% 77% Average contracted Mid-$60 High-$50 Mid-$50 prices(1) ($/MWh) Forward prices ($/MWh) $62 $58 $50 (as of
Slide 27: Financial outlook
Financial outlook Company expects to exceed 2013 financial guidance Expect full year 2013 financial results to exceed our annual guidance of $1.20 to $1.40 for normalized earnings per share and $3.80 to $4.20 for cash flow per share • Based on our positive YTD results with AB power prices averagin
Slide 28: Corporate priorities
Corporate priorities Operational targets Performance measure 2013 Target Q3/13 YTD Results Plant availability average ≥ 93% 93% Sustaining capex ≤ $105M $68M Maintenance and operating $225M - $245M $143M expenses 28
Slide 29: Corporate priorities (cont'd)
Corporate priorities (cont’d) Development and construction targets Performance measure 2013 Target Status Port Dover & Continue on On track Nanticoke Wind budget $340M, Q4/13 target COD K2 Ontario Environmental √ Wind approvals received in 2013 Shepard Energy Continue on On track Centre budget of $8
Slide 30: Corporate priorities (cont'd)
Corporate priorities (cont’d) Financial targets Normalized EPS (NEPS) Funds from operations $1.50 $1.35 $500 $1.20 – $1.40 $400 $385 – $415M $1.00 $310 $300 $0.50 $200 $100 $0.00 $0 Q3 YTD 2013T Q3 YTD 2013T Cash flow per share $5.00 $4.00 $3.80 – $4.20 $3.13 $3.00 $2.00 $1.00 $0.00 Q3 YTD 2013T Exp
Slide 31: Summary
Summary Straight forward business model – strong base of contracted cash flows and merchant upside from the Alberta power market High quality, young and modern generation portfolio Near-term growth of 595 MW of owned capacity from wind projects and natural gas facility Substantial Alberta power prod
Slide 32: Alberta power market
Appendix Alberta power market Alberta (AB) has a competitive wholesale energy and ancillary services market operated by the Alberta Electric System Operator (AESO); market has an installed generation capacity of ~13,000 MW No capacity market – power generators must recover all costs through reve
Slide 33: Alberta generation and load mix
Appendix Alberta generation and load mix 2011 AB fuel mix by capacity (MW) Estimated 2011 customer electricity usage including oil sands Farm Hydro Bio/Wood/ 3% Other 6% Waste/LDF 2% Wind Gas 6% 2% NG CT Residential 6% 13% Coal Industrial 45% Commercial 46% 20% NG Cogen 28% Oilsands 18% Source: AESO
Slide 34: Historical Alberta prices
Appendix Historical Alberta prices Daily average power prices 800 600 ($/MWh) 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Annual average power prices and AECO 100 89.95 10.00 8.27 80.79 76.22 80 71.29 66.95 8.00 ($/MWh) 62.99 6.19 64.32 ($/GJ) 7.73 60 43.93 70.36 47.81
Slide 35: Alberta market design
Appendix Alberta market design Current market design has been successful in signaling when new capacity is required Alberta reserve margin and new capacity 1,200 30% 1,000 25% Capacity (MW) Reserve Margin 800 20% 600 15% 400 10% 200 5% - 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 36: Expected coal unit retirements - CST
Appendix Expected coal unit retirements - CST Retirements under the federal Capital Stock Turnover (CST) regulations Alberta coal generation (MW) Generation End of Life 7,000 Capacity (Final Facility (MW) Regulations) Battle River 3 149 2019 6,000 Sundance 1 288 2019 H.R. Milner 144 2019 5,000 Sunda
Slide 37: Expected coal unit retirements - CASA
Appendix Expected coal unit retirements - CASA Clean Air Strategic Alliance (CASA) regulations may result in coal units retiring sooner 2019: Sundance 1&2 (576 MW); Battle River 3 (149 MW) 2025-29: Sundance 3-6 (1,575 MW); Battle River 4&5 (540 MW) NOTE: CASA Financial Compliance assumes coal-fired
Slide 38: Alberta power market summary
Appendix Alberta power market summary Alberta’s market design framework Has attracted continued investment by various parties for different fuel types Ensures investment risk is borne by investors and not ratepayers/taxpayers Provides participants with options and choices for managing their co
Slide 39: Summary of assets
Appendix Summary of assets Clover Bar Energy Clover Bar Genesee 1 Genesee 2 Genesee 3 Keephills 3 Joffre Centre Landfill Halkirk Alberta Contracted Alberta Commercial Capacity 430 MW 430 MW 516 MW 495 MW 480 MW 243 MW 4.8 MW 150 MW % owned / 100 / 100 100 / 100 50 / 100 50 / 0 40 / 0 100 / 100 100 /
Slide 40: Summary of assets (cont'd)
Appendix Summary of assets (cont’d) Kingsbridge Island Quality 1 Generation Wind Roxboro Southport Tiverton Rumford Bridgeport Ontario & British Columbia Contracted Mid-Atlantic Contracted US Northeast Commercial Capacity 40 MW 275 MW 142 MW 88 MW 46 MW 279 MW(1) 270 MW(1) 540 MW(1) % owned / 100 /
Slide 41: Development projects
Appendix Development projects Port Dover & Shepard Energy Centre Genesee 4 & 5 K2 Wind Ontario Nanticoke Alberta Commercial Ontario Contracted Capacity 800 MW Up to 900 MW 270 MW 105 MW % owned / 50 / 0 100 / 100, looking for 3rd 33.3% owned 100 / 100 operated party in development Location Calgary,
Slide 42: 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 losses, and gains on disposals (adjusted EBITDA), (ii) funds from operations, (iii) cash flow per share, (iv) discretionary cash flow, (v
Slide 43: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation 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 may not be appropriate for othe
Slide 44: Investor Relations Contact
Investor Relations Contact Randy Mah Senior Manager (780) 392-5305 rmah@capitalpower.com Head Office 12th Floor 10423 – 101 Street NW Edmonton, AB T5H 0E9 www.capitalpower.com