Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (August 2019)
46 slides from Capital Power's investor presentation, August 2019
Slide 1: Investor Presentation | August 2019
Please note that this power point is for visual approvals only and has not been setup to be used as a full template. [Master slides not yet created, included photos are stock] Investor Presentation | August 2019 Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 6,300 MWs of owned capacity including projects under construction • Strong pipeline of contracted growth opportunities • Highly-contracted portfolio • Committed to investment grade credit rating • History of dividend growth with 7% annual growth guidan
Slide 3: Our business
Our business Today Tomorrow Investing in emission free • Building new facilities • Integration of renewables in Canada and U.S. storage technologies Investing in critical natural • Acquiring key • Reduce emissions gas generation facilities in Canada profile through Replace Image and U.S. carbon util
Slide 4: Our assets
Our assets 2014 2019F 2024F U.S. 2% Alberta Other Merchant Alberta Geographical split Canada U.S. 25% 21% U.S. 24% Merchant 22% Alberta 29% Diversifying growth Merchant 40% outside of Alberta Alberta and reducing Alberta Other Contracted Other Alberta Canada Canada Contracted merchant exposure Contr
Slide 5: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) New Frontier Wind Bloom Wind Beaufort Solar Shepard Energy Centre of current generation Port Dover & Nanticoke Halkirk 2% portfolio expected to retire in the next decade Quality Wind York Energy Macho Springs Keephills 3 East Windsor Average
Slide 6: Growth capex since 2012 averages ~$650M per annum
Adjusted EBITDA growth from new assets(1-5) ($M) $600 Arlington Valley 2019 toll Goreway Arlington Valley $500 Whitla New Frontier $400 Decatur EnPower Waste Heat East Windsor $300 York Energy Bloom $200 Beaufort Macho K2 $100 Shepard PDN Halkirk $0 2012 2013 2014 2015 2016 2017 2018 2019T Quality G
Slide 7: Acquired 5 contracted natural gas assets totalling 2,534 MWs since 2016
Adjusted EBITDA growth from new assets(1-3) ($M) $600 $500 $400 $300 $200 $100 $- 2012 2013 2014 2015 2016 2017 2018 2019T Renewables Natural gas Acquired 5 contracted natural gas assets totalling 2,534 MWs since 2016 1) Margins have been averaged over the periods except in the year of commissioning
Slide 8: Growing AFFO per share
Growing AFFO(1,3) per share 5-year CAGR of 12%(4) since 2014 $4.84 $4.46 $3.85 $3.58 $3.21 $3.02 $2.51 2014 2015 2016 2017 2018 2019T AFFO/share normalized² AFFO/share 1) Represents Adjusted FFO (2018 method), less the portion allocated to the non-controlling interest (calculated consistent with the
Slide 9: Dividend growth guidance to 2021
Dividend growth guidance to 2021 Annualized dividend $2.19 per share(1,2) $2.05 $1.92 $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019 Y/E 2020T 2021T Delivering consistent annual dividend growth supports EBITDA multiple expansion 1) Subject to market co
Slide 10: Re-contracting of near term PPAs
Re-contracting of near term PPAs PPA Expiry & Counterparty Re-contracting Outlook 2022 with Tennessee Valley Strong history of re-contracting Authority (TVA) Need for capacity due to supply retirements and load growth Decatur (Alabama) 795 MW 2022 with BC Hydro Provides critical back-up and re
Slide 11: Ontario Portfolio and Ontario power market
Ontario Portfolio Ontario 1,159 Ontario power market Natural Gas Portfolio MW In July 2019, Ontario IESO announced they were cancelling further work on a capacity market • Decision took into account stakeholder feedback and concerns Ontario IESO reviewed their long-term planning outlook and over
Slide 12: Alberta Power Market
Alberta Power Market • Positive outlook for power prices • Demand growth outlook of 1-2% • Decline in baseload supply • Energy-only market has successfully attracted investments into Alberta 12
Slide 13: New Alberta Government (UCP) elected Apr/19
New Alberta Government (UCP) elected Apr/19 Short Term Medium Term Long Term (2019-20) (2021-22) (2023+) Carbon Tax (TIER)(1) • Compliance price reduced • Neutral • Neutral • Positive from $30 to $20/tonne Renewables • Eliminate subsidies • Positive • Positive • Positive Power Market Design • Energy
Slide 14: Positive outlook in Alberta power prices
Positive outlook in Alberta power prices $/MWh Positive outlook with 2019-2021 80 Average power price Q2/19 average power forward prices averaging $60/MWh in first half of the price consistent with year up 37% 70 Q2/18 $63 60 $56 $57 50 $46 40 30 20 10 0 (1) (1) (1) (1) Q2/18 Q2/19 Q2/18 YTD Q2/19 Y
Slide 15: Positive Alberta power market fundamentals
Positive Alberta power market fundamentals Alberta Load Growth(1) • Alberta load growth is temporarily levelling off with the government imposed oil curtailments • PPA termination and mothballing of coal units has led to sustainable power prices • Forward gas prices remain low Alberta Energy Prices
Slide 16: Portfolio optimization
Portfolio optimization Alberta commercial portfolio positions 2020 2021 2022 % sold forward(1) 41% 4% 9% Contracted prices(1) ($/MWh) Mid-$50 Low-$60 Low-$50 Current average forward prices(2) ($/MWh) $58 $60 $55 2020-22 forward prices have trended upwards since the end of Q1/19; up $7 to $12 in 20
Slide 17: Genesee dual-fuel capability
Genesee dual-fuel capability • $50M capital costs to completely Optimizing fuel mix between natural gas and coal to transform Genesee 1 & 2 to dual-fuel maximize economic returns and further reduce and 40% gas capability for Genesee 3 greenhouse gas emissions • Financial benefits highly dependant on
Slide 18: Capital Power is well-positioned in Alberta
Capital Power is well-positioned in Alberta Continuation of energy-only market supports market-driven power prices Young Assets High Availability Advantaged Conversion Market Locations Optionality Knowledge • Competitive fixed and variable costs • High capture prices due to high availability and str
Slide 19: Growth Strategy
Growth Strategy • Strong renewable pipeline including 1,200 MW of U.S. wind development • Potential natural gas plant acquisitions • Growth target of $500M committed capital per year for contracted opportunities 19
Slide 20: Goreway Power Station
Goreway Power Station Young, high-quality natural gas facility with excellent operating history • Capacity: 875 MW • Location: Brampton, Ontario within the GTA load centre on 21 hectares of land • Commercial Operations: June 2009 (~10 years old) • Equipment: Best in class gas-fired generation equipm
Slide 21: Strategic acquisition of Goreway Power in Ontario
Strategic acquisition of Goreway Power in Ontario $1B acquisition materially increases contracted adjusted EBITDA and accretive to AFFO per share • Transaction: Acquired Goreway Power Station from JERA Financial Projections Co. Inc. and Toyota Tsusho Corporation for $410M cash Full year 2020 conside
Slide 22: Two wind projects under construction
Two wind projects under construction 350 MW of long-term contracted wind facilities to be added by Q1/20 Whitla Wind Cardinal Point Wind (Alberta) (Illinois) • 201.6 MW (Phase 1) • 150 MW • 20-year PPA • 12-year PPA • $315 - $325M(1) • $289 - $301M • COD in Q4/19 • COD in Mar/20 1) Total project cos
Slide 23: Visible pipeline of growth opportunities in targeted markets
Visible pipeline of growth opportunities in targeted markets >2,000 MW Potential wind developments Genesee Expansion Terrace Thermal CBEC Expansion Klo Wind Frederickson 2 Halkirk 2 Whitla 2 >3,500 MW Whitla 1 KWCG Nolin Hills Madoc Solar Potential gas developments Garrison Butte Tisch Mills YEC Exp
Slide 24: Financial
Financial • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year without accessing equity markets • Maintain investment grade credit rating 24
Slide 25: AFFO growth & conservative payout supports dividend growth
AFFO(1,2) growth & conservative payout supports dividend growth Expect to generate ~$320M(3) in discretionary cash flow in 2019 ($M) $600 $500 $400 37% 44% Gross common dividends(4) $300 44% Discretionary cash flow 41% $200 49% 51% $100 $- 2014 2015 2016 2017 2018 2019T Long-term AFFO payout ratio t
Slide 26: AFFO for 2019
AFFO(1) for 2019 18% normalized increase driven by development and acquisitions ($M) $550 $25 $510 $500 $25 $17 $470 $65 ($20) ($40) $450 $397 $400 $350 $300 (2) 2018 AFFO New Facilities AB Uplift K2 Divestiture Current tax & Goreway 2019T AFFO Arlington - 2019 2019T AFFO other Acquisition toll (3)
Slide 27: Cash flow and financing outlook
Cash flow and financing outlook Sufficient funding for current growth projects 2019T Sources of cash flow ($M) Funds from operations(1) + off-coal compensation $645 Proceeds from disposal of K2 Wind $215 January Canadian MTN issuance $300 Subscription Receipts for common shares $150 Preferred Shares
Slide 28: 6-month performance versus 2019 annual targets
6-month performance versus 2019 annual targets 2019 AFFO expected to be at the top end of the range Facility availability Sustaining capex Adjusted EBITDA AFFO $485 to $535M $80 to $90M $870 to $920M 95% 94% $40 $393 $202 Q2/19 YTD Revised Q2/19 YTD Revised Q2/19 YTD Revised Q2/19 YTD Revised Target
Slide 29: Sustainability and Investment Opportunity
Sustainability and Investment Opportunity 29
Slide 30: Sustainability – creating responsible energy for tomorrow
Sustainability – creating responsible energy for tomorrow • 2/3 of generation capacity from natural gas and renewables with focused growth in these areas • Implementation of dual-fuel capability at coal facilities with eventual 100% coal to gas conversion • World leading carbon reduction program (ta
Slide 31: Sustainability reporting
Sustainability reporting 2018 Corporate Sustainability Report (CSR) released July 29/19 • CSR continues to be fully compliant with the internationally recognized Global Reporting Initiative (GRI) Standards Outlines our sustainability targets • Constructing all new natural gas generation units to
Slide 32: Strategically evolving our portfolio
Strategically evolving our portfolio Generation Contracted North American AFFO per share(2) technology(1,2) capacity(1,2) footprint(1,2) 2014 33% Gas and renewables 58% Contracted 76% Alberta $2.51 Gas and 2019 67% renewables 79% Contracted 51% Alberta $4.84(3) Renewables and gas Greater visibility
Slide 33: Investment opportunity
Investment opportunity Delivering on or exceeding 2019 Targets • Goreway Power acquisition • Guiding to the top end of AFFO financial target Proven track record and guidance for sustainable dividend growth • AFFO per share growth of 12% • 2013 to 2021 annualized dividend growth of 7% Excellent long
Slide 34: Appendices
Appendices • Alberta portfolio optimization • Alberta’s coal fleet • DCF supports dividend growth • Credit rating metrics • Debt maturity schedule • Summary of assets • Projects under development/construction 34
Slide 35: 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 $125 by 20% since the Company’s inception 10 years ago $100 $75 $50 $25 $0 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/
Slide 36: Alberta's coal fleet
Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas Age in End of AESO max 2019 coal life Coal to gas conversion Facility capacity (MW) (yrs) (CLP)(1) Current Status Expectation PPA status Battle River 3 149 50 2019 Online Co-firing with gas Merchant Sundanc
Slide 37: Discretionary cash flow supports dividend growth target
Discretionary cash flow supports dividend growth target(1) $500M $50M $36M(2) 8.1% 7% Capital EBITDA AFFO AFFO/share Dividend Growth Growth AFFO growth from discretionary cash flow covers 7% annual dividend growth without dilution to existing shareholders 1) Assumes a 10x EBITDA multiple and a capit
Slide 38: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook Within S&P financial criteria for current rating S&P BBB- / P-3 Stable DBRS BBB(low) / Pfd-3 (low) Stable Adj. FFO/Debt(1-3) Adj. Debt/EBITDA(1-3) 20% 5.0 15% 4.0 3.0 10% • Strong liquidi
Slide 39: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 USD 65 $400 $160 $300 $450 $200 $300 $300 USD 230 $100 $210 $65 $50 $0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Capital Markets CAD Private Placement USD Private P
Slide 40: Summary of assets
Summary of assets Alberta Alberta Commercial Contracted Clover Bar Clover Bar Shepard Energy Genesee 1 Genesee 2 Genesee 3 Keephills 3 Joffre Energy Centre Landfill Halkirk Centre 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 / 0 40 /
Slide 41: Summary of assets
Summary of assets Ontario & British Columbia Contracted Island Quality 150 Mile Port Dover & Generation Wind Savona House Nanticoke Kingsbridge 1 York Energy East Windsor Goreway Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 400 MW 84 MW 875 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0 100 / 100
Slide 42: Summary of assets
Summary of assets U.S. Contracted New Frontier Roxboro Southport Macho Springs Beaufort Solar Decatur Bloom Wind Arlington Valley Wind Capacity 46 MW 88 MW 50 MW 15 MW 795 MW 178 MW 580 MW 99 MW % owned / 100 / 100 100 / 100 100 / 100 100 (sale & 100 / 100 100 / 100 100 / 100 100 / 100 operated leas
Slide 43: Projects under development / construction
Projects under development / construction Alberta Commercial Alberta Contracted U.S. Contracted Genesee 4&5 Whitla Wind Cardinal Point Wind Capacity Up to 1,060 MW 201.6 MW 150 MW % owned / operated 50 / 100 100 / 100 100 / 100 Location Warburg Medicine Hat McDonough / Warren Counties, Illinois Fuel
Slide 44: 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 45: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to These statements are based on certain assumptions and analyses made by the Company in light of its inform the Company’s shareholders and potential investors about management’s experien
Slide 46: Investor Relations
Investor Relations Randy Mah Director, Investor Relations (780) 392-5305 rmah@capitalpower.com 10423 101 Street NW 11th Floor Edmonton, Alberta Canada T5H 0E9 46