Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (November 2014)
54 slides from Capital Power's roadshow presentation, November 2014
Slide 1: Investor Meetings November 2014
CAPITAL POWER Investor Meetings November 2014 Brian Vaasjo, President & CEO Stuart Lee, SVP Finance & CFO
Slide 2: Capital Power overview
Capital Power overview Independent power producer with ownership interest in 13 facilities in Canada and the US totaling more than 2,600 MW(1) with 490 MW coming on-line in 2015 Capital Power builds, owns and operates power plants Significant contracted cash flow base and merchant investments
Slide 3: Capital Power value proposition
Capital Power value proposition 3
Slide 4: Modern fleet
Operational excellence Modern fleet Helps keep availability high and reduces risk of unplanned outages Average weighted facility age of the current fleet is 13.2 years(1) Adding two new projects in 2015 (Shepard - early 2015; K2 Wind - latter half) Average Age Port Dover & Nanticoke Facility age
Slide 5: High fleet availability
Operational excellence High fleet availability Operating availability averaging 92% since IPO in 2009 Generation (GWh) 96% 90% 92% 91% 93% 95% 18,000 15,000 12,000 9,000 6,000 3,000 - 2009 2010 2011 2012 2013 2014T Generation Average plant availability 5
Slide 6: Favourable cost trend
Operational excellence Favourable cost trend In 2013, reduced annual G&A by $22 million Significant cost improvements made in 2013 without negatively impacting high operating & maintenance (O&M) standards Total non-fuel O&M and CAPEX spending excluding planned outages(1) 100% 80% 60% 40% 20% 0%
Slide 7: Alberta power market trading
Operational excellence Alberta power market trading 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 red
Slide 8: Excellent track record of development
Operational excellence Excellent track record of development Outstanding track record of completing 7 construction projects (supercritical coal, natural gas, wind) totaling 1,691 MW Asset Capacity / fuel On-time On-budget In-Service Genesee 3(1) (AB) 516 MW / coal + 2005 Kingsbridge 1 (ON) 40 MW /
Slide 9: Financial performance – Q3/14 YTD
Financial review Financial performance – Q3/14 YTD Q3/14 Q3/13 $M, except per share amounts Change YTD YTD Revenues $796 $1,066 (25%) Adjusted EBITDA (before mark-to-market)(1) $283 $381 (26%) Basic earnings (loss) per share $(0.12) $1.19 (110%) Normalized earnings per share $0.51 $1.35 (62%) Funds
Slide 10: Alberta Commercial
Financial review Alberta Commercial Average Alberta power Q3/14 generation below expectations due to lower prices ($/MWh) availability at the Sundance 5 & 6 units from planned $84 and unplanned outages, Keephills 3 derate, and lower wind generation at Halkirk $64 Alberta power prices averaged $6
Slide 11: AB power market in Q3/14
Financial review AB power market in Q3/14 Daily settled prices and plant outages $500 Daily Settled Price Average Forward Price $400 $300 ($/MWh) $200 Legend: SD5 = Sundance 5 SD6 = Sundance 6 K3 = Keephills 3 G3 = Genesee 3 $100 $0 1-Jul 8-Jul 15-Jul 22-Jul 29-Jul 5-Aug 12-Aug 19-Aug 26-Aug 2-Sep 9
Slide 12: AB Commercial – Q3/14 YTD variances
Financial review AB Commercial – Q3/14 YTD variances $15 $13.7 $10 Total Plants (unhedged) -$35.7 $5 $4.0 $M $0 Keephills 3 Sundance Clover Bar Halkirk Other Value of Trading PPA hedges -$5 -$4.9 -$6.8 -$7.7 -$10 -$15 -$13.3 -$14.7 AB Commercial segment variance of -$29.7M YTD largely attributed to
Slide 13: Financial strength
Strong financial base Financial strength Strong balance sheet and investment grade credit rating Investment grade credit ratings Agency Ratings Outlook Debt-to-capital ratio of ~33% expected S&P BBB- / P-3 Stable at 2014 year-end remains below long- DBRS BBB / Pfd-3 (low) Stable term target of 4
Slide 14: Credit metrics
Strong financial base Credit metrics(1) Above DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt EBITDA/Adj. Interest 25% 6.0 20% 5.0 15% 4.0 3.0 10% 2.0 5% 1.0 0% 0.0 2014T 2014T Above S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(2) Adj. Debt/Adj. EBITDA(2)
Slide 15: Development projects – CAPEX
Strong financial base Development projects – CAPEX ($M) Prior to 2014 2014E Project total Port Dover & Nanticoke $276 $24 $300 K2 Wind(1) $16 $30 $310 Shepard Energy Centre(2) $684 $130 $821 $976 $184 $1,431 Continue strong execution of CAPEX program Port Dover & Nanticoke Shepard Energy Centre (1)
Slide 16: Cash flow and financing outlook
Strong financial base Cash flow and financing outlook Sufficient FFO to meet dividends, development projects and sustaining CAPEX Sources of cash flow ($M) 2014E Funds from operations(1) ~$360 Uses of cash flow Dividends (net of DRIP) & distributions to NCI $103 Dividends (Preferred shares) $22 Deve
Slide 17: Continued strong cash flow generation
Strong financial base Continued strong cash flow generation Funds from operations (FFO) $450 Expect 2014 FFO to be at the low end of $360M-$400M annual target $400 35% Generating significant discretionary $350 34% cash flow(2) with 3-year average of 35% ~42% $300 39% from 2011-2013 $250 19% Ex
Slide 18: Improving contracted cash flow
Contracted cash flows Improving contracted cash flow(1,2) $M $450 $400 $350 $300 } Shepard & K2 Wind K2 Wind Shepard $250 } 3 wind projects PD&N Halkirk Quality Wind $200 Island Generation $150 North Carolina $100 Kingsbridge 1 Genesee 1&2 $50 $0 2012 2013 2014T 2015T 2016T 2017T Substantial expansi
Slide 19: Dividends
Contracted cash flows Dividends With addition of Shepard and K2 Contracted operating margin to Wind in 2015, forecasting financial obligations(1) and dividends substantial expansion in our 120% contracted operating margin 110% Dividend increased 7.9% (annual 100% dividend from $1.26 to $1.36/sha
Slide 20: Capital allocation
Strong financial base Capital allocation Well positioned to fund or partially fund any new significant growth opportunities in the near term with discretionary cash flow Growing contracted cash flow base supports dividend growth Consider debt reduction or share buyback given improvements in tr
Slide 21: AB power market upside
AB power market upside Alberta market Alberta Demand and Alberta GDP(1) Real GDP ($M) AIL (GWh) 400,000 AB GDP 120,000 350,000 Alberta Demand 100,000 300,000 80,000 250,000 200,000 60,000 150,000 40,000 100,000 20,000 50,000 - - 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Real GDP –
Slide 22: Alberta demand relative to oil prices
AB power market upside Alberta demand relative to oil prices Oil & gas development drives load growth in Alberta Long lead time of oil sands projects reduces sensitivity to short term oil price volatility Downside risk to load growth from pullback in light oil development Alberta Internal Load &
Slide 23: Alberta energy prices
AB power market upside Alberta market Alberta energy prices(1) 125 Power Prices NG Prices 15 100 10 75 $/MWh $/GJ 50 5 25 Historical Forecast 0 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Alberta market design expected to continue to provide timely pricing signals fo
Slide 24: Expected coal unit retirements - CST
AB power market upside 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) 6,000 Battle River 3 149 2019 Sundance 1 288 2019 H.R. Milner 144 20
Slide 25: Best fleet in the best merchant market in North America
AB power market upside Best fleet in the best merchant 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
Slide 26: Diverse generation fleet in Alberta
AB power market upside Diverse generation fleet in Alberta Well positioned to capture value in Alberta’s merchant market Expected AB power generation stack for 2015(1) 100% Other Clover Bar Energy Centre Gas peaking 30% • Most responsive peaking facility in the AB market 90% • Captures peak pricing,
Slide 27: AB commercial portfolio positions
AB power market upside AB commercial portfolio positions Alberta portfolio hedged positions (% sold forward) Oct-Dec, 2014 2015 2016 Percentage sold forward(1) 100% 92% 49% Average contracted prices(2) High-$50 Mid-$50 Mid-$50 ($/MWh) Forward prices ($/MWh) $61 $51 $50 (as of Sep 30/14) Although
Slide 28: Merchant position in AB provides upside
AB power market upside Merchant position in AB provides upside Operating margin(1) to financial obligations(2) and dividends 250% 200% Contracted + merchant ($80/MWh) 150% Contracted + merchant ($50/MWh) Contracted margin 100% 50% 2013 2014T 2015T 2016T 2017T (1) Merchant margin is calculated using
Slide 29: Shepard Energy Centre
Growth Shepard Energy Centre Shepard is a natural gas combined cycle facility located on the southeast edge of Calgary, Alberta 50% joint venture agreement with ENMAX for the 800 MW facility Construction is 99% completed and expected to be completed on-budget with COD targeted in early 2015
Slide 30: K2 Wind
Growth K2 Wind 270 MW (Siemens turbines) wind project located in southern Ontario with 20-year PPA with the Ontario Power Authority Equal 1/3 partnerships with Samsung and Pattern Renewable Holdings $850M project financing completed in Mar/14 Total estimated project cost revised to $930M fro
Slide 31: Genesee 4&5
Growth Genesee 4&5 Joint arrangement agreements finalized with ENMAX in July 2014 to develop, construct, own, and operate the Genesee 4 & 5 facilities Capital Power will lead the development and construction of the project and will be the operator of the natural gas-fired facility Up to 1,050
Slide 32: Growth opportunities
Growth Growth opportunities All contracted opportunities outside of Alberta Development Sites Natural Gas Wind Solar 32
Slide 33: 2014 Corporate priorities
2014 Corporate priorities Operational and financial targets Plant availability ($M) Sustaining capex 100% $100 95% 95% $85 95% $75 90% $50 $42 85% $25 80% $0 Q3/14 YTD 2014T Q3/14 YTD 2014T Plant operating & Funds from operations ($M) ($M) maintenance expenses $200 $400 } $360 to } $165 to $400 $150
Slide 34: 2014 Corporate priorities
2014 Corporate priorities Development and construction targets 2014 Targets Status K2 Wind Commence construction Construction commenced & complete project following completion of financing $850M project financing in Q1/14 Shepard Energy Complete construction Construction nearly Centre with COD in ea
Slide 35: Why invest in Capital Power
Why invest in Capital Power Excellent assets in good markets Operational Very good operating and trading performance excellence Recent reductions in risk, financial volatility & operating cost base Strong Near term growth funded from internal cash flow & DRIP financial Decreasing EPCOR overhang and
Slide 36: 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 ~14,000 MW No capacity market – power generators must recover all costs through reve
Slide 37: Alberta demand outlook
Appendix Alberta demand outlook Growth in total electricity sales “Alberta’s future power 2013 to 2020(1) 25% demand outlook is also fairly robust, especially compared 20% with that of most other jurisdictions in North 15% America, because of a strong provincial economy; 10% a growing population fro
Slide 38: Alberta generation and load mix
Appendix Alberta generation and load mix Current installed generation(1) 2012 Demand by end use(1) (MW and % of installed capacity) Wind Biomass/Other Farm 1,088 MW 404 MW 2% Hydro 7% 3% 894 MW 6% Residential 13% Gas-Fired Coal 1,529 MW 6,271 MW Commercial Industrial 11% 43% 20% 46% Cogen 4,363 MW O
Slide 39: Alberta load factor
Appendix Alberta load factor High load factor enables a higher realized pool price for peaking units Load factor is about 80% to 85% Average Alberta load (MW)(1) By hours ended (Jan 2012 – Dec 2013) 9400 9200 9000 8800 8600 8400 8200 8000 7800 7600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Slide 40: 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 70.36 80.79 76.22 80.19 80 71.29 66.95 8.00 62.99 54.59 64.32 47.81 50.88 43.93 7.74 60 8.27 6.0
Slide 41: Alberta pool price evolution
Appendix Alberta pool price evolution About 10% of hours have prices greater than $100 Market provides favourable pricing for peaking generation Pool price in top 15% of hours by year(1) 1000 900 2009 800 2010 700 2011 600 2012 $/MWh 500 2013 400 300 200 100 0 0% 2% 3% 5% 7% 9% 10% 12% 14% Perce
Slide 42: Alberta market design
Appendix Alberta market design Stable market design has signalled the addition of 6 GW of new generation 1,000 30% 900 25% 800 700 20% 600 Capacity Reserve 500 15% (MW) Margin 400 10% 300 200 5% 100 0 0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 New Capacity AESO Historical Re
Slide 43: AB power market - capacity additions
Appendix AB power market - capacity additions (1) Committed projects Owner Capacity (MW) Generation type Expected COD Cold Lake (Nabiye) 2 Imperial Oil 170 Cogeneration 2015 Kearl Imperial Oil 100 Cogeneration 2015 Shepard Energy Centre Capital Power / Enmax 800 Combined Cycle 2015 Proposed projects
Slide 44: 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 45: Proven ability to manage environmental commodity exposure
Appendix Proven ability to manage environmental commodity exposure Dedicated team of five focused on transforming environmental commodity risk into an opportunity – success in doing this has created a competitive advantage through lower compliance costs in Alberta This competitive advantage will
Slide 46: CST and CASA framework
Appendix CST and CASA framework Capital Stock Turnover (CST) Clean Air Strategic Alliance (CO2) (CASA) (NOx and SO2) Limits unscrubbed coal-fired plant Compliance through meeting physical life to 45-50 years BATEA(1) or use of credits to financially comply 41st to 50th years Unit Commercial Op
Slide 47: Expected coal unit retirements - CASA
Appendix Expected coal unit retirements - CASA Clean Air Strategic Alliance (CASA) regulations may result in coal units retiring sooner Total coal capacity (MW) CASA Financial Compliance 7,000 2019: Sundance 1&2 (576 MW); Battle River Capital Stock Turnover 3 (149 MW); H.R. Milner 6,000 (144 MW) 5,0
Slide 48: Debt maturity schedule
Appendix Debt maturity schedule(1) $1.2B in credit facilities with 5-year tenor maturing 2018, of which $1.1B available $400 $350 $314 $305 $300 $255 $250 US$230 ($M) (2) $200 $179 (2) $144 $150 $100 US$65 $50 $15 $1 $0 Q4, 2015 2016 2017 2018 2019 2020 2021 2026 2014 EPCOR Debt Capital Markets De
Slide 49: Summary of assets
Appendix Summary of assets Clover Bar Keephills Energy Clover Bar Genesee 1 Genesee 2 Genesee 3 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 50: Summary of assets
Appendix Summary of assets Island Quality Port Dover & Kingsbridge 1 Generation Wind Nanticoke Roxboro Southport Ontario & British Columbia Contracted Mid-Atlantic Contracted Capacity 40 MW 275 MW 142 MW 105 MW 46 MW 88 MW % owned / 100 / 100 100 / 100 100 / 100 100 / 100 100 / 100 100 / 100 operate
Slide 51: Development projects
Appendix Development projects Shepard Energy Centre Genesee 4 & 5 K2 Wind Ontario Alberta Commercial Ontario Contracted Capacity 800 MW Up to 1,050 MW 270 MW % owned / 50 / 0 50 / 100 33.3% owned operated Location Calgary, Alberta Warburg, Alberta Ashfield-Colborne- Wawanosh, Ontario Fuel & Combined
Slide 52: 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, and gains on disposals (adjusted EBITDA), (ii) funds from operations (FFO), (iii) normalized earnings attributable to co
Slide 53: 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 54: Investor Relations Contact
Investor Relations Contact Randy Mah 10th Floor Senior Manager 10423 – 101 Street NW (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com