Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (June 2020)
44 slides from Capital Power's investor presentation, June 2020
Slide 1: Investor Presentation June 2020
Investor Presentation June 2020 Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO 1
Slide 2: Growth-oriented North American power producer
Growth-oriented North American power producer • 6,500 MWs of owned capacity including one wind project in advanced development • Strong pipeline of contracted growth opportunities • Highly-contracted, young and diversified portfolio • Committed to investment grade credit rating • History of 7% annua
Slide 3: Managing effectively during COVID-19
Managing effectively during COVID-19 Implemented business continuity and risk management plans Commitment to health and safety of our employees • Working from home for office and all non-essential plant employees • Numerous hygiene and social distancing protocols adopted in the plants • Company
Slide 4: Our business is evolving to cleaner energy
Our business is evolving to cleaner energy Today Tomorrow Investing in emission • Building new facilities • Integration of storage free renewables in Canada and U.S. technologies Investing in critical • Acquiring key facilities • Reduce emissions natural gas generation in Canada and U.S. profile thr
Slide 5: 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 2020T 71% renewables 79% Contracted 50% Alberta $4.98(3) Renewables and gas Greater visibility
Slide 6: Continued EBITDA growth from new assets
Continued EBITDA growth from new assets(1-5) ($M) $700 Buckthorn Cardinal Point Whitla $600 Goreway Arlington Valley 2019 toll $500 Arlington Valley New Frontier Decatur Energy Centre $400 EnPower East Windsor $300 York Energy Centre Bloom $200 Beaufort Macho Springs Kingsbridge 2 $100 Shepard Port
Slide 7: Young fleet with long asset lives
Young fleet with long asset lives Average age 14 years(1) Cardinal Point Wind Whitla Wind 1 Buckthorn Wind of current generation New Frontier Wind Bloom Wind 2% portfolio expected to retire this decade Beaufort Solar Shepard Energy Centre Port Dover & Nanticoke Halkirk Quality Wind York Energy Avera
Slide 8: Recent growth and renewable highlights
Recent growth and renewable highlights Added 251 MWs in renewables Completed 150 MW Cardinal Point Wind project on-schedule and on- budget (USD) Acquired 101 MW Buckthorn Wind in Texas with 15-year weighted average contract life remaining Signed agreement with Vestas for 10-year extension of LTS
Slide 9: Growing AFFO per share
Growing AFFO(1,3) per share Forecasting 5-year CAGR of ~9% for 2015-2020 $5.32 $4.98 $4.94 $3.85 $3.58 $3.20 $3.02 2015 2016 2017 2018 2019 2020T AFFO/share normalized² AFFO/share 1) Represents Adjusted FFO (2018 method), less the portion allocated to the non-controlling interest (calculated consist
Slide 10: Dividend growth guidance to 2022
Dividend growth guidance to 2022 Annualized dividend $2.30 $2.19 per share(1,2) $2.05 5% $1.92 7% 7% $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019 Y/E 2020T 2021T 2022T Delivering consistent annual dividend growth with 5% dividend guidance for 2022 1)
Slide 11: Optimistic outlook for the re-contracting of near term PPAs
Optimistic outlook for the re-contracting of near term PPAs Facility PPA Re-contracting Outlook PPA Expiries Expiry / Island Generation Re-contracting Credit Decatur discussions underway Rating Arlington Valley Kingsbridge 1 Island Generation 2022 • Provides critical back-up Bloom Wind (BC) (A-rated
Slide 12: Alberta Power Market
Alberta Power Market • COVID-19 pandemic and low oil prices has impacted economy and demand for electricity • Starting in 2021, all output controlled by commercial market participants • Positive medium term outlook for power prices with 2-year deferral of Suncor’s 800 MW oil sands cogen project to 2
Slide 13: Alberta power market fundamentals
Alberta power market fundamentals Alberta Load Growth(1,2) Electricity demand has declined ~5% due to COVID-19 pandemic and low crude oil prices Demand expected to recover within the next 18 months Near term power prices expected to soften due to lower demand and addition of renewables to the
Slide 14: Portfolio optimization
Portfolio optimization Alberta commercial portfolio positions Q2-Q4/20 2021 2022 2023 % sold forward(1) 91% 7% 15% 9% Contracted prices(1) ($/MWh) Mid-$50 Low-$60 Low-$50 Low-$50 Current average forward $51 $51 $53 $51 prices(2) ($/MWh) 1) As of March 31, 2020. Based on the Alberta baseload faciliti
Slide 15: Transformation of Genesee
Transformation of Genesee Genesee Performance Standard (industry-leading carbon reduction program) • CO2 intensity reduced 12% by 2021 • Intensity levels of subcritical Genesee1&2 below that of supercritical units • Includes supercritical Genesee 3 turbine upgrade • Heat rate/CO2 improvements flow
Slide 16: Capital Power is well-positioned in Alberta
Capital Power is well-positioned in Alberta Energy-only market supports market-driven power prices Young Assets High Availability Advantaged Conversion Market Locations Optionality Knowledge Very high availability Competitive fixed and variable costs High capture prices due to high availabilit
Slide 17: Growth Strategy
Growth Strategy • Strong renewable pipeline including 1,200 MW of wind development in Alberta and in the U.S. • Potential natural gas plant acquisitions 17
Slide 18: Growth opportunities
Growth opportunities Strong renewable pipeline with over 1,200 MW of wind and solar development Near-Term or In-Construction In development 2020 growth targets $500 million committed capital for growth Terrace Thermal Expect one renewable CBEC Expansion Klo Wind development project Halkirk 2 SK
Slide 19: Financial
Financial • Disciplined growth with focus on contracted cash flows • AFFO growth supports dividend growth • Ability to fund targeted $500M growth per year • Maintain investment grade credit rating 19
Slide 20: Strong financial position and liquidity
Strong financial position and liquidity Strong cash flow generation with majority contracted • Expect to generate $300M+ in discretionary cash flow(1) in 2020 • Majority of cash flows contracted with an average PPA life remaining of 10 years • Contracts with largely investment grade counterparties
Slide 21: Prudent capital allocation
Prudent capital allocation Balanced focus between Dividend Growth dividend growth and growth growth opportunities opportunities Existing asset Dividend growth provides improvements certainty in returns for investors Development projects Share buybacks are considered Acquisitions during p
Slide 22: AFFO continues to support dividend growth
AFFO(1) continues to support dividend growth Discretionary cash flow is forecast to be $315M in 2020 $555 $525 $510 $397 $361 $324 $292 Discretionary cash flow Gross common dividends(2) 41% 49% 44% 44% 34% 40% (3) 2015 2016 2017 2018 2019 2020T Long-term AFFO payout ratio target is 45-55% 1) Histori
Slide 23: AFFO for 2020
AFFO for 2020 ($M) AFFO from Goreway and development projects offsets Arlington toll decrease 12% year-over-year AFFO growth after normalizing for 2019 Arlington toll (1) 2020 AFFO represents midpoint of $500 - $550M guidance range 23
Slide 24: Cash flow and financing outlook
Cash flow and financing outlook Sufficient funding for current growth projects 2020T Sources of cash flow ($M) Funds from operations(1) + off-coal compensation $670 TEI debt issuance $221 Bond issuances $250 $1,141 Uses of cash flow Dividends (common & preferred shares) ($260) Debt repayment(2) ($42
Slide 25: Q1/20 performance versus 2020 annual targets
Q1/20 performance versus 2020 annual targets Facility availability Sustaining capex ($M) Adjusted EBITDA ($M) AFFO ($M) $90 to $100 $500 to $550 $935 to $985 93% 91% $234 $118 $16 Q1/20 Target Q1/20 Target Q1/20 Target Q1/20 Target No changes to 2020 financial guidance, AFFO expected to be near the
Slide 26: 2020 development and construction targets
2020 development and construction targets Targets Status Cardinal Point Wind (Illinois, 150 Total USD project cost expected near low end of budget MW) Complete construction range within $289-$301M (CAD), $236- Completed on-schedule with COD on Mar 16/20 $246M (USD) budget for COD in Received n
Slide 27: Sustainability and Investment Opportunity
Sustainability and Investment Opportunity 27
Slide 28: Sustainability Reporting
Sustainability Reporting Our inaugural Integrated Annual Report, combining our financial and environmental, social and governance (ESG) reporting –––––––––––––––––––––––––––––––––––––––––––––––– Our 2019 Climate Change Disclosure Report (1) –––––––––––––––––––––––––––––––––––––––––––––––– Strong sco
Slide 29: Sustainability Targets
Sustainability Targets Constructing all new natural gas generation units to be carbon capture and/or hydrogen-ready Reducing carbon emissions at Genesee by 50% by 2030 from 2005 levels Reducing carbon emissions by 10% and our emission intensity by 65%, in 2030 from 2005 levels Invest in carb
Slide 30: Sustainability: Creating Responsible Energy for Tomorrow
Sustainability: Creating Responsible Energy for Tomorrow Environmental Social Governance ––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––– One of Canada’s 50 Best Corporate Board mandate includes sustainability as a 100% dua
Slide 31: Attractive investment opportunity
Attractive investment opportunity Long-term drivers of our business prove resilient Young fleet with long asset lives with a focus on strong operational performance and optimizing assets Highly contracted and diversified portfolio by geography and fuel mix Strong cash flow generation including
Slide 32: Appendices
Appendices • Dividend Yield • Alberta portfolio optimization • Alberta’s coal fleet • Credit rating metrics • Debt maturity schedule • Summary of assets / projects under construction 32
Slide 33: Attractive dividend yield
Attractive dividend yield Dividend yield has averaged 6% since first dividend in 2009 10.0% 9.0% 8.0% World Health Organization 7.0% declares COVID-19 a pandemic Long-term 6.0% average dividend yield of 6% 5.0% 4.0% 31-Dec-18 28-Feb-19 30-Apr-19 30-Jun-19 31-Aug-19 31-Oct-19 31-Dec-19 29-Feb-20 30-A
Slide 34: 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 19% since the Company’s inception 10 years ago $125 $100 $75 $50 $25 $0 Q3/09Q4/09Q1/10Q2/10Q3/10Q4/10Q1/11Q2/11Q3/11Q4/11Q
Slide 35: Alberta's coal fleet
Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in capacity 2020 End of Facility (MW) (yrs) coal life(1) Current Status Coal to gas conversion expectation PPA status Battle River 3 149 51 2019 Retired Jan 2020 Merchant Sundance 1 288 - 2019
Slide 36: Financial strength
Financial strength Strong balance sheet and commitment to investment grade credit ratings Agency Ratings Outlook S&P financial metrics S&P BBB- / P-3 Stable DBRS BBB(low) / Pfd-3 (low) Stable 20% Adj. FFO/Debt(1-3) 5.0 Adj. Debt/EBITDA(1-3) 15% 4.0 3.0 Strong liquidity from cash 10% 2.0 5% flow fr
Slide 37: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities supported by long asset lives ($M) $600 $500 USD 65 $400 Longer term debt reflects $160 increased confidence $300 $450 $200 $300 $275 $251 USD 230 $100 $210 $65 $50 $0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034
Slide 38: Summary of assets (Alberta)
Summary of assets (Alberta) Alberta Contracted Alberta Commercial Clover Bar Joffre Energy Clover Bar Shepard Energy Genesee 1 Genesee 2 Whitla Wind 1 Genesee 3 Centre Landfill Halkirk Centre Capacity 430 MW 430 MW 202 MW 516 MW 480 MW 243 MW 5 MW 150 MW 860 MW % owned / 100 / 100 100 / 100 100 / 10
Slide 39: Summary of assets (Ontario & B.C. Contracted)
Summary of assets (Ontario & B.C. 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 / 100 100 / 100
Slide 40: Summary of assets (U.S. Contracted)
Summary of assets (U.S. Contracted) Macho Beaufort Arlington New Frontier Cardinal Buckthorn Roxboro Southport Springs Solar Decatur Bloom Wind Valley Wind Point Wind Wind Capacity 46 MW 88 MW 50 MW 15 MW 825 MW 178 MW 580 MW 99 MW 150 MW 101.5 MW Location Roxboro, Southport, Luna Beaufort Decatur,
Slide 41: Project under construction
Project under construction Alberta Contracted Whitla Wind 2 Capacity 97 MW % owned / operated 100 / 100 Location Medicine Hat Fuel & equipment Wind (Vestas) Expected Commercial Operations Q4, 2021 PPA Term and Counterparty TBD Expected Capital Cost $165M 41
Slide 42: 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 43: Forward-looking information
Forward-looking information These statements are based on certain assumptions and analyses made by the Company in light of Forward-looking information or statements included in this presentation are provided to inform the Company’s shareholders and potential investors about management’s assessment o
Slide 44: Investor Relations
Q1/20 Analyst Conference Call [Insert picture of Cardinal Point or Buckthorn for title page; other visual images in presentation to be added] Investor Relations Randy Mah 10423 101 Street NW Director, Investor Relations 11th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada T5H 0E9