Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (August 2021)
37 slides from Capital Power's investor presentation, August 2021
Slide 1: Investor Presentation | August 2021
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 2021 Sandra Haskins, SVP Finance and CFO 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer x3 • Highly-contracted, young and diversified portfolio x2 • Targeting 10-12% total shareholder return • Targeting net carbon neutral before 2050 Operational facilities ~6,400 MW 26 facilities Projects under development 985 MW 7 renewable projects and Ge
Slide 3: Increasing growth and getting to net carbon neutral by 2050
Increasing growth and getting to net carbon neutral by 2050 Decarbonization Strategies Today 2024 and beyond Building and acquiring Investing in emissions Integration of wind and solar in free renewables storage technologies Canada and the U.S. Reduce emissions Investing in Acquiring key through CCS
Slide 4: Gas generation vital for reliability and flexibility
Gas generation vital for reliability and flexibility Growth drivers Forecasted natural gas generation in the US(1) • Coal & nuclear retirements • Renewables proliferation 2020 2040 • Low gas prices Coal Value of incumbent assets Gas 717 GW +205 GW Gas 719 GW • High barrier to entry Coal -202 GW Coal
Slide 5: Natural gas is critical to power reliability
Natural gas is critical to power reliability (1) 1) 2019/20 data 5
Slide 6: Advancing CO2 reduction initiatives
Advancing CO2 reduction initiatives Developing plans to apply CCUS technology at Genesee 1&2 • Significant government support for CCUS applications • Development going very well • Set to reduce emissions by 3 million tonnes annually Genesee Carbon Conversion Centre • Creates carbon nanotubes fro
Slide 7: Growth strategy
Growth strategy • Growth strategy aligns with our sustainability goals • Target markets support $500M annual capital investment • Strong renewable growth pipeline in Alberta and the U.S. • Potential acquisition of mid-life natural gas assets • Targeting 10-12% total shareholder return over the long
Slide 8: Dynamic pipeline supports resilient & responsible growth
Dynamic pipeline supports resilient & responsible growth Solar 8 sites 6 sites Potential: 360 MW 8 sites Committed: 276 MW Fuel Total: 636 MW Development Sites Wind 3 sites 9 sites Potential: 1,129 MW 9 sites Committed: 151 MW Total: 1,280 MW Storage 2021 Growth Target: 3 sites Invest $500M Potentia
Slide 9: Securing long term PPAs delivers stable cash flows
Securing long term PPAs delivers stable cash flows Decatur Strathmore Solar Enchant Solar 3 solar projects (Alabama) (AB) (AB) (North Carolina) Under construction Under construction Under construction • 10-year tolling agreement • 25-year PPA with TELUS • 15-year renewable energy • 20-year PPA with
Slide 10: Continued growth in renewable assets
Continued growth in renewable assets Adjusted EBITDA from renewables expected to increase from 27% to 34% 2020 2023F 2025F Repowering (+560 MW) 5 projects (276 MW) 2 projects (151 MW) 30% 34% Renewables 43% Natural gas 66% Natural gas/coal dual-fuel 27% Off-coal Renewable projects and repowering wil
Slide 11: Alberta power market
Alberta power market • Market showing strong recovery from impacts of COVID-19 and low oil prices • Supply has responded to lower demand with other market participants announcing the retirement of Sundance 3 and delays on some cogen and renewable projects • All output controlled by commercial market
Slide 12: Robustness of Alberta power market
Robustness of Alberta power market Above average temperatures in June contributed to average power price of $105/MWh in Q2/21 Average power price of $100/MWh in H1/21 with $94/MWh forward prices for H2/21 $105 $/MWh AB hedged positions 2022 2023 2024 $75 % sold forward(1) 42% 30% 15% $53 Contrac
Slide 13: Alberta power market
Alberta power market COVID-19 and crude oil impact (1) • Largest 2020 vs. 2019 yoy decline (MWh) Alberta Internal Load (30-day rolling average) in power demand was 7.2% due to 11,000 2019 2020 2021 COVID-19 pandemic and low crude oil prices 10,500 2.0% • Demand started to recover as the increase 10,
Slide 14: Financial strategy
Financial strategy • Deploying capital for the repowering of Genesee 1&2 and growing renewables portfolio • Disciplined growth with focus on predictable cash flows and sustainability goals • Dividend growth of 7% in 2021 and 5% in 2022 • Maintain investment grade credit rating 14
Slide 15: Overview of financial strategy
Overview of financial strategy Fund growth • Fund growth in a cost-effective manner towards low carbon future • Access various sources of capital and seek innovative ways to fund growth Maintain • Maintain competitive cost of capital investment grade credit • Ensure access to capital markets through
Slide 16: Successful financings to fund growth initiatives
Successful financings to fund growth initiatives Completed successful equity offering of ~7.5 million common shares (including exercise of over-allotment option) in June for total gross proceeds of $288M • Share price has rebounded from the $38.45 issue price following closing of offering Execut
Slide 17: Solid track record with 8th year of stable dividend growth
Solid track record with 8th year of stable dividend growth Annualized dividend $2.30 per share(1,2) $2.05 $2.19 5% $1.92 ~7% $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 42% 50% 45% 45% 35% 40% ~40% Payout(3) Payout Payout Payout Payout Payout Payout 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019
Slide 18: Capital allocation balance
Capital allocation balance • Balanced focus between dividend Dividend Growth growth and growth opportunities growth opportunities • Allocating capital strategically to develop, commercialize and • Existing asset implement technologies to support improvements sustainability targets • Development proj
Slide 19: 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 – $997M capital cost, 20%+ levered returns, ~$0.70 average accretion to AFFO/share 560 MW net capacity increase (total 1,360 MW) Best-in-class NGCC tech
Slide 20: Genesee more competitive after repowering
Genesee more competitive after repowering Estimated variable cost merit order in 2025 $/MWh Older CTG units not competitive (retire?) 80 Older CTG Units 70 60 GN1&2 Dual Fuel 50 GN3 Dual Fuel 40 Older CTG Units 30 GN 1&2 become 20 very efficient GN3 CTG GN 3 remains in 10 middle of stack GN1&2 Repow
Slide 21: Managing Alberta carbon exposure
Managing Alberta carbon exposure CPC Alberta Emissions Expense Carbon Offset Savings ($M) 41 52 160 27 97 53 2 2 25 19 2021 2022 2023 2024 2025 Low-cost offsets and transition to gas protect and enhance asset value 1) Based on current Alberta TIER regulation and assumes carbon prices follow the anno
Slide 22: EBITDA growth from renewable projects
EBITDA growth from 7 renewable projects Annualized EBITDA of ~$70M Enchant Solar Whitla 2 Average annualized EBITDA ~$70M Hornet Solar and AFFO of ~$55M Hunter’s Cove after completion in late 2021 Solar Bear Branch Whitla 3 and 2022 Solar Strathmore Solar Full-year financial contributions starting i
Slide 23: H1/21 performance versus 2021 annual targets
H1/21 performance versus 2021 annual targets Facility availability Sustaining capex ($M) Adjusted EBITDA ($M) AFFO ($M) $570 to $500 to $620 $1,090 to $80 to $90 $975 to $1,140 $550(1) $1,025 93% $47 $544 $250 90% Q2/21 YTD Target Q2/21 YTD Target Q2/21 YTD Target Revised Q2/21 YTD Target Revised Ta
Slide 24: Sustainability / investment opportunity
Sustainability / investment opportunity • 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 24
Slide 25: Capital Power's (R)Evolution
Capital Power’s (R)Evolution 2009–Today Today–2024 2024–2030 2030–2050 2050–2070 • Genesee efficiency • Complete repowering • Expand CCU • Net carbon neutral • Physical program - 12% and off coal • Develop CCUS via physical decarbonization decrease in GHG by • Invest in renewables, and/or hydrogen s
Slide 26: 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 • Enhanced reduction at carbon capture and/or sustainable sourcing Gen
Slide 27: Accelerating ESG initiatives
Accelerating ESG initiatives Environmental Social Governance • Net carbon neutral before 2050 • Optimal workplace of the future to • 25% of Executive short-term incentive • Genesee repowering reflect key learnings and benefits pay linked to meeting ESG targets from COVID-19 • 44% of Board and 43% of
Slide 28: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth and accelerates net carbon neutral before 2050 Success in renewables from innovation and optimization We create value • Recent success in solar more than doubles our growth opportunities • Long-term contracts for solar projects in No
Slide 29: Appendices
Appendices • Alberta portfolio optimization • Credit rating metrics • Debt maturity schedule • Capital program • Cash flow & financing outlook 29
Slide 30: 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 17% since the Company’s inception 12 years ago $125 $100 $75 $50 $25 $0 Average AB spot power price Capital Power captured
Slide 31: 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 S&P BBB- / P-3 Stable 15% 4.0 DBRS BBB(low) / Pfd-3 (low) Stable 3.0 10% 2.0 5% 1.0 • Both DBRS and S&
Slide 32: Debt maturity profile
Debt maturity profile(1) Well spread-out debt maturities supported by long asset lives • Longer term debt reflects increased confidence in Capital Power’s business profile • Strong liquidity from cash flow from operations, cash-on-hand, and $1B of sustainability-linked credit facilities committed to
Slide 33: Capital program
Capital program ($M) Capital deployed to renewables and repowering provide significant 263 financial contributions in 2022+ 340 306 210 367 50 34 100 5 27 120 85 50 55 2021 2022 2023 2024 2025 Sustaining capex Enhancement & GPS capex Other committed capital Genesee repower 1) Includes net capex afte
Slide 34: Cash flow and financing outlook
Cash flow and financing outlook Positive cash position and credit facilities to fund growth projects in 2021 Expected Sources Expected Uses DRIP Sustaining & reinvestment maint. capex $70 M $85 M Cash / credit Debt facilities (2) repayments $325 M (1) $430 M FFO & off-coal Committed $1.6 B compensat
Slide 35: 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 36: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform the • electricity and other energy prices and carbon prices; Company’s shareholders and potential investors about management’s assessment of Capital Power’s future • performance
Slide 37: 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 37