Capital Power Corporation · TSX:CPX
Capital Power — Non-Deal Roadshow (June 2017)
42 slides from Capital Power's roadshow presentation, June 2017
Slide 1: Investor Meetings June 2017
CAPITAL POWER Investor Meetings June 2017 Brian Brian Vaasjo, Vaasjo, President President & & CEO CEO Bryan Bryan DeNeve, DeNeve, SVP SVP Finance Finance & & CFO CFO Bloom Wind, Kansas
Slide 2: Capital Power overview
Overview Capital Power overview Growth-oriented North American IPP with ownership interest in 24 facilities in Canada and the U.S. totaling ~4,500 MW Young fleet with an average facility age of 12.8 years(1) Strong balance sheet and financial flexibility to fund growth Annual dividend growth
Slide 3: Proven track record of high fleet availability
Operational performance Proven track record of high fleet availability Average facility availability of 94% in the past 5 years 18,000 100% 16,000 98% 14,000 12,000 96% Generation 10,000 95% 95% 95% (GWh) 8,000 94% 94% 93% 6,000 4,000 92% 91% 2,000 0 90% 2012 2013 2014 2015 2016 2017T Generation Ave
Slide 4: Acquisition of Decatur Energy Center
Acquisitions Acquisition of Decatur Energy Center Highlights of transaction Acquired Decatur Energy Center from LS Power in June 2017 for US$448M 795 MW natural gas facility fully contracted until December 2022 with high probability of re-contracting based on its history and need for capacity in
Slide 5: Executing on growth
Acquisitions Executing on growth Recent acquisitions of 3 contracted natural gas and 2 waste heat assets totaling 1,089 MWs of capacity Acquired York Energy and East Windsor facilities in Ontario and two BC waste heat assets • Purchase price of ~$515M including York Energy (50% of 400 MW) ~$270M o
Slide 6: Geographical profile
Diversification Geographical profile Recent acquisitions and completion of Bloom Wind has increased geographical diversification Geographical breakdown based on owned capacity U.S. ON 6% 7% U.S. BC 26% 13% AB AB ON 53% 74% 12% BC 9% 2016 year-end Current (18 facilities with 3,217 MW) (24 facilities
Slide 7: Updates on growth in Alberta
AB updates Updates on growth in Alberta Alberta power market Environmental regulations Coal facilities Renewables opportunities Transition to a capacity market design 7
Slide 8: Alberta demand
AB power market Alberta demand Alberta demand showing recovery Seven consecutive months (Nov 2016 – May 2017) of positive normalized load growth; continues to show signs of recovery Normalized growth in May 2017 is the highest since Q4/14 (1) 1) Alberta Internal Load normalized for weather and i
Slide 9: Alberta market forecasts
AB power market Alberta market forecasts Current low power price environment Oversupply in the market Lower demand from weak AB economy Low natural gas prices Expected uplift in power prices Announced early retirements and mothballing of coal-fired units Demand growth recovering Moderate
Slide 10: Carbon competitiveness regulation
AB carbon tax Carbon competitiveness regulation Specified Gas Emitters Regulation (SGER) effective to the end of 2017. Levy under Carbon Competitiveness Regulation (CCR) effective starting in 2018 2017 2018 2019 2020 Compliance regulation SGER CCR Compliance requirement 20% 55% to 65% (Down to bes
Slide 11: Alberta opportunity set
AB growth Alberta opportunity set Significant investment required over the next 13 years Up to $20 billion Phase-out of coal facilities by end of 2030 or earlier 5,000 MWs in renewables to replace retirement of coal units with balance in natural gas and other to meet demand Capital Power wel
Slide 12: All-in cost assumptions
Coal to gas conversion All-in cost assumptions Components of variable, fixed costs and capital costs for various technologies (1) 1) Subcritical Old is pre-1980 12
Slide 13: Alberta's coal fleet
AB coal fleet Alberta’s coal fleet Retirements under federal & provincial regulations and conversion to gas AESO max Age in 2017 End of coal life Expected Life (coal to gas Facility capacity (MW) (years) (CST & CLP)(1) conversion) Battle River 3 149 48 2019 Decommissioned Sundance 1 288 47 Jan 1/18
Slide 14: Renewables in Alberta
AB renewables Renewables in Alberta Targeting 30% of AB’s electricity generation from renewables by 2030 5,000 MW of renewable energy, equivalent to ~2,000 MW of capacity Will still need 4,000 MW of thermal to replace retiring coal generation First call under Renewable Electricity Program (REP
Slide 15: Wind development in Alberta
AB growth Wind development in Alberta Capital Power has two wind projects ready to be bid in Whitla Wind Halkirk 2 300 MW on 33,000 acres in south 150 MW on 18,000 acres in central eastern Alberta Alberta next to existing Halkirk facility 38-41% capacity factor 37-39% capacity factor Available trans
Slide 16: Alberta power market design change
Capacity market Alberta power market design change Transition to a capacity market from energy-only market Government committed to ensuring that existing investments would be treated fairly, and the new market framework would continue to promote a level playing field between existing and potential
Slide 17: Capacity market
Capacity market Capacity market Baseload revenue – Alberta vs. PJM Capacity market creates a more stable revenue stream relative to selling into the Alberta market Revenue under the Alberta energy only market for the period of 2009 through 2021 is $57/MWh for Capital Power’s baseload assets (inc
Slide 18: Growth opportunities
Growth pipeline Growth opportunities Genesee 4&5 Halkirk 2 Development of wind and Whitla Wind thermal in Alberta New Frontier Wind Nolin Hills Wind Garrison Butte Wind Tisch Mills Wind Development of U.S. wind Willow Creek Wind Black Fork Wind • Preserved full Production Tax Salt Springs Cardin
Slide 19: Bloom Wind
U.S. growth Bloom Wind Bloom Wind completed ahead of schedule (COD June 1, 2017) with construction costs below budget 178 MW wind farm consisting of 54 Vestas V117-3.3 MW turbines 10-year fixed price contract covering 100% of the output, with Allianz Risk Transfer (rated AA- (stable) by S&P’s)
Slide 20: Financial strategy
Finance overview Financial strategy Maintain investment grade credit rating Maintain ongoing Ensure Ensure access to cost economic Financial stable competitive capital discipline in Strategy dividend to fund growth growth growth throughout business cycle Manage financing risk 20
Slide 21: Capital allocation
Finance overview Capital allocation Dividend 1) Maintain growing dividend backed by Growth sufficient contracted cash flow base Capital Growth Allocation Opportunities 2) Fund growth opportunities in the near term with discretionary cash flow Share Buybacks & Debt 3) Consider debt reduction and shar
Slide 22: Continued strong cash flow generation
Cash flows Continued strong cash flow generation ~43% of cash flow in 2017 expected to be discretionary cash flow ($M) $500 $475 $400 Annual cash flow $400 $384 $362 expected to increase 43% ~24% in 2017 $300 37% 45% 42% Including off-coal compensation, $200 34% generating ~$205M in 36% 34% 38%
Slide 23: Improving contracted adjusted EBITDA
Contracted EBITDA Improving contracted adjusted EBITDA(1,2,3,4) $600 Savona & 150 Mile House Decatur $500 East Windsor York Energy $400 Off-coal compensation Bloom Macho Springs and Beaufort ($M) $300 K2 Wind Shepard $200 PD&N Halkirk Quality Wind $100 Island Generation North Carolina $0 Kingsbridge
Slide 24: Target annual dividend increases
Dividend growth Target annual dividend increases Annualized dividend Annual 7% dividend growth per common share(1,2) guidance for 2017 and 2018 $1.67 $1.79 Expect to generate ~$363M $1.56 in Adjusted funds from $1.46 $1.36 operations (AFFO) in 2017 $1.26 AFFO payout ratio averages ~50% from 20
Slide 25: Attractive yields relative to peers
Relative comparisons Attractive yields relative to peers Capital Power’s AFFO payout ratio is below peer average 2018E Dividend & AFFO Yield(1,2) 2018E AFFO Payout Ratio(1,2) 5.5% 6.1% 94% 5.9% 6.3% 89% Dividend Yield 4.7% 7.9% 76% AFFO Yield 6.3% 8.5% 74% 4.0% 8.6% 64% 3.6% 8.6% 59% 4.6% 8.7% 53% 4
Slide 26: Financial obligations & dividends covered by contracted cash flow
Financial coverage Financial obligations & dividends covered by contracted cash flow Operating margin(1,6) to financial obligations(2) and dividends(3) 140% Contracted(5) + merchant ($60/MWh) 130% 120% Contracted(5) + merchant ($40/MWh) Contracted(5) + merchant (forwards(4)) 110% Contracted(5) margi
Slide 27: Cash flow and financing outlook
Cash flow Cash flow and financing outlook Utilizing cash available for growth with recent acquisitions 2017E Sources of cash flow ($M) Funds from operations + off-coal compensation $475 Proceeds from tax-equity debt $235 Issuance of common shares $175 $885 Uses of cash flow Dividends (common shares)
Slide 28: Financial strength
Strong financial base Financial strength Strong balance sheet and investment grade credit rating Investment grade credit ratings by Agency Ratings Outlook S&P and DBRS S&P BBB- / P-3 Stable Continued to be well capitalized DBRS BBB(low) / Pfd-3 (low) Stable with capacity for leverage Debt to tot
Slide 29: Credit metrics
Strong financial base Credit metrics Within DBRS financial criteria for current rating Adj. Cash flow/Adj. Debt(1) EBITDA/Adj. Interest 30% 7.0 25% 6.0 20% 5.0 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2016A 2017T 2016A 2017T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(1,2)
Slide 30: Financial outlook
Outlook Financial outlook Partial year AFFO and Adjusted EBITDA contributions from the acquisitions of York Energy, East Windsor and Decatur in 2017 Alberta Commercial baseload positions: 2018 2019 2020 % sold forward(1,2) 61% 40% 33% Contracted prices(1,3) High-$40 Low-$50 High-$40 ($/MWh) Avg.
Slide 31: Alberta power market trading
AB power trading Alberta power market trading Portfolio optimization activities focused on managing exposure to commodity risks, reducing volatility and creating incremental value Average realized power prices(1) have exceeded spot power ($/MWh) prices by 19% since the Company’s inception 8 years
Slide 32: Q1/17 performance vs. annual targets
2017 Targets Q1/17 performance vs. annual targets Facility availability Sustaining capex ($M) 97% $75 $80 95% $4 Q1/17 Original Current Q1/17 Target Target Target Facility O&M expenses ($M) AFFO ($M) $215 to $240 $195 to $215 $340 to $385 $305 to $345 $49 $91 Q1/17 Original Current Q1/17 Original Cu
Slide 33: Attractive investment opportunity
Summary Attractive investment opportunity Leverage to Alberta power market – ownership interest in the most competitive fleet of assets with a solid track record of value- added portfolio optimization trading Executing on growth – well-positioned for success in the renewables opportunities in Al
Slide 34: Appendices
Appendices
Slide 35: Debt maturity schedule
Appendix Debt maturity schedule(1) $1B in committed credit facilities renewed with 5-year tenor maturing 2021, of which ~$526M available in 2017(1) $400 $350 $300 $300 $250 ($M) $200 $250 US $230 US $65 $150 $174 $160 $100 $50 $10 $0 2017 2018 2019 2020 2021 2026 (2) EPCOR Capital Markets CAD Privat
Slide 36: Summary of assets
Appendix Summary of assets Alberta Alberta Commercial Contracted Clover Bar Clover Shepard Genesee Genesee Genesee Keephills Energy Bar Energy 1 2 3 3 Joffre 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
Slide 37: Summary of assets
Appendix Summary of assets Ontario & British Columbia Contracted 150 Port Dover Island Quality Mile & Kingsbridge York East Generation Wind Savona House Nanticoke 1 K2 Wind Energy Windsor Capacity 275 MW 142 MW 5 MW 5 MW 105 MW 40 MW 270 MW 400 MW 84 MW % owned / 100 / 100 100 / 100 100 / 0 100 / 0
Slide 38: Summary of assets
Appendix Summary of assets U.S. Contracted Macho Beaufort Roxboro Southport Springs Solar Decatur Bloom Wind Capacity 46 MW 88 MW 50 MW 15 MW 795 MW 178 MW % owned / 100 / 100 100 / 100 100 / 100 100 (sale & 100 / 100 100 / 100 operated leaseback) / 100 Location Roxboro, Southport, Luna County, Beau
Slide 39: Projects under development/construction
Appendix Projects under development/construction Alberta Commercial Alberta Contracted Genesee 4&5 Halkirk 2 Whitla Wind Capacity Up to 1,060 MW 150 MW 300 MW % owned / operated 50 / 100 100 / 100 100 / 100 Location Warburg Halkirk Medicine Hat Fuel & equipment Combined-cycle natural gas Wind Wind (
Slide 40: 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 from joint venture interest, and gains or losses on disposals (adjusted EBITDA), (ii) adjusted funds
Slide 41: 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 42: Investor Relations Contact
Investor Relations Contact Randy Mah 10423 101 Street NW Senior Manager 10th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com