Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (January 2022)
35 slides from Capital Power's investor presentation, January 2022
Slide 1: Investor Presentation
Investor Presentation Brian Vaasjo, President & CEO Sandra Haskins, SVP Finance & CFO January 2022 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer x3 • Highly-contracted, young and diversified portfolio • Targeting 10-12% total shareholder return • Off coal in 2023 and targeting net carbon neutral before 2050 Operational facilities ~6,600 MW 26 facilities Projects under development 985 MW 6 renewab
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 in Canada and the storage technologies U.S. Reduce emissions profile Investing in critical Acquiring key facilities through decarbonization natural gas generati
Slide 4: 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/or owner of renewables in the province • Leading efforts to decarbonize thermal Repowering Sola
Slide 5: Natural gas – necessary long-term role in power
Natural gas – necessary long-term role in power • Natural gas essential to maintain system reliability and integrate renewables • Decarbonization will be essential to long term resiliency • Role of natural gas will transition from serving baseload energy requirements to serving capacity • Well posit
Slide 6: Renewable and storage acceleration
Renewable and storage acceleration Whitla Wind phases Halkirk Wind phase 2 Secured 1,298 MW of U.S. solar 2 and 3 completed in Dec/21 commencing sites with battery potential Strathmore and Enchant North Carolina solar projects Long-term contracting of renewables Solar projects underway commencing co
Slide 7: Advancing CCUS initiatives
Advancing CCUS initiatives Developing plans to apply CCUS technology at Genesee 1&2 • Pre-FEED almost complete, FEED study in 2022 • Set to reduce emissions by 3 million tonnes annually • Significant federal and provincial Government support for CCUS applications • $1.8 to $2.0B capex direct excludi
Slide 8: 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 8
Slide 9: Growth pipeline
Growth pipeline 3,800 MW generation Wind (900 MW) Solar (2100 MW) Gas (800 MW) 3,350 MWh battery storage Battery Storage Targeting $500M of committed capital for growth 9
Slide 10: Recontracting of natural gas assets
Recontracting of natural gas assets Securing long term PPAs provide stable cash flows Decatur (Alabama) Arlington (Arizona) Island Generation (BC) Goreway (ON) Extended enhanced Extended tolling agreement Recontracting Island Developments in Ontario Decatur contract by 10 by 6 years to 2031 with Gen
Slide 11: Alberta power market
Alberta power market • Demand in 2021 shows full recovery from impacts of COVID-19 and low oil prices • Significant reductions in supply (retirements of Sundance 3, Keephills 1, Sundance 4 in Apr/22; Sundance 5 repowering suspended, and delays on some cogen and renewable projects) • Demand expected
Slide 12: Alberta power market
Alberta power market Demand has recovered from COVID-19 pandemic and low oil prices Alberta Internal Load (30-day rolling average) • Largest 2020 vs. 2019 yoy decline in (MW) power demand was 7.2% due to 2019 2020 2021 COVID-19 pandemic and low crude 11,000 4.5% oil prices increase 10,500 6.8% • Dem
Slide 13: Alberta power market
Alberta power market Need for reliable, flexible natural gas capacity AESO capacity by technology • Today there is still 4,000 MW of inefficient Gas Coal Wind Converted Gas Hydro Other coal, converted coal, or dual fuel capacity 7% • Peak winter and summer load hours in 2021 5% saw ~85% of load bein
Slide 14: Portfolio optimization
Portfolio optimization AB commercial portfolio positions (Hedge positions as of Nov 24/21) 2022 2023 2024 Power % of power position sold forward(1) 64% 41% 26% Contracted power prices(2) ($/MWh) High-$60s High-$50s Mid-$50s Forward power prices ($/MWh) (as of Jan 11/22) $88 (Feb-Dec) $70 $61 EBITDA
Slide 15: 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 $1.5B in growth capex without the need for additional common equity • Resilient cashflows supported by risk mitigation
Slide 16: 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 17: Executing on ~$1.5 billion of growth capex
Executing on ~$1.5 billion of growth capex Proceeding with phase 2 of Halkirk Wind and Genesee battery storage $M $700 $600 $178 $500 $18 $49 $38 $400 $45 $101 $236 $300 $200 $379 $312 $150 $100 $53 - 2022E 2023E 2024E Genesee 1&2 Repower Genesee battery storage 1 Alberta renewable assets 2 Halkirk
Slide 18: 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 560 MW net capacity increase (total 1,360 MW) Best-in-class NGCC t
Slide 19: Strong repowering economics
Strong repowering economics Retired Capacity Least Asset (MW) Competitive Battle River 3 149 Sundance 1 280 Sundance 2 280 Sundance 3 368 Sundance 5* 406 Sundance 4 406 Keephills 1 395 Sundance 6** 401 Battle River 4** 155 Battle River 5** 385 Sheerness 1** 400 Sheerness 2** 400 Most *Suspended Comp
Slide 20: 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 21: 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 asse
Slide 22: Dividend growth outlook
Dividend growth outlook Annualized dividend per share (1,2) 5% increase per year ~7% CAGR $2.19 $1.26 42% 50% 45% 45% 35% 40% ~40% Average payout of ~46% payout 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E Forecast to be within AFFO payout ratio target range of 45% to 55% thr
Slide 23: 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 23
Slide 24: Our (R)Evolution
Our (R)Evolution 2009–Today Today–2024 2024–2030 2030–2050 2050–2070 • Genesee efficiency • Complete repowering • Genesee CCS • Net carbon neutral • Physical program - 12% and off coal project via physical decarbonization decrease in GHG by • Genesee Battery • Expand CCU solutions on natural 2021 En
Slide 25: 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 carbon capture and/or hydrogen • Enhanced reduction at sustainable sou
Slide 26: Accelerating “S” and “G” initiatives
Accelerating “S” and “G” initiatives Working together, turning ambition into action • Diversity, Equity and Inclusion - Implemented leadership and workforce diversity - Committed to "Equal by 30" and "30 by 30“ - Inclusive and equitable programs that foster an inclusive workplace culture • Diverse B
Slide 27: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth & accelerates net carbon neutral by 2050 Success in renewables Strong long term cashflow from contracted • Contracts for renewable projects affirm assets including natural gas assets competitiveness • Strategy of recontracting natura
Slide 28: Appendices
Appendices • Alberta portfolio optimization • Credit rating metrics • Debt maturity schedule • 2022 Targets 28
Slide 29: 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 15% since the Company’s inception ~12 years ago $125 $100 $75 $50 $25 $0 Average AB spot power price Capital Power captured
Slide 30: 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 Minimum Maximum S&P BBB- / P-3 Stable 15% threshold 4.0 range DBRS BBB(low) / Pfd-3 (low) Stable 3.0 1
Slide 31: 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 600 500 USD 65 400 $160 $M 300 $450 200 $350 $300 $27
Slide 32: 2022 targets
2022 targets Sustaining capex ($M) Adjusted EBITDA ($M) $80 to $90 $105 to $115 $975 to $1,025 $1,090 to $1,140 $1,110 to $1,160 2021 Target 2022 Target Original 2021 Target Revised Guidance 2022 Target Facility availability AFFO ($M) $500 to $550 $570 to $620 $580 to $630 93% 93% 2021 Target 2022 T
Slide 33: 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 34: Forward-looking information
Forward-looking information Forward-looking information or statements included in the 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 other
Slide 35: 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 35