Capital Power Corporation · TSX:CPX
Capital Power — Investor Day (December 2011)
126 slides from Capital Power's investor day presentation, Dec 8, 2011
Slide 1: Investor Day
J CAPITA ROWER “INVESTOR DAY DECEMBER 8, 2011
Slide 2: Forward-looking information
Forward-looking information Cautionary statement Certain information in today’s presentations and in responses to questions contain forward-looking information. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking information, and certain material
Slide 3: Today's Presenters
BRIAN VAASJO PRESIDENT AND CEO JIM OOSTERBAAN SVP, OPERATIONS AND COMMODITY PORTFOLIO MANAGEMENT DARCY TRUFYN SVP, CONSTRUCTION AND ENGINEERING BRYAN DENEVE SVP, COMMERCIAL SERVICES STUART LEE SVP, FINANCE AND CFO Capital Power © Corporation TODAY’S PRESENTERS
Slide 4: Investor Day agenda
Investor Day agenda 8:30 – 8:35 Introduction Randy Mah 8:35 – 8:55 Delivering on our strategy Brian Vaasjo 8:55 – 9:25 Enhancing operations Jim Oosterbaan 9:25 – 9:45 Managing development projects Darcy Trufyn 9:45 – 10:15 Business development update and Bryan DeNeve industry trends 10:15 – 10:30 Br
Slide 5: Operations
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Slide 6: Delivering on Capital Power's strategy
Delivering on Capital Power’s strategy In 30 months, we’ve built a business Operational Financial stability based on the strategy set out at the excellence and strength IPO in June 2009 Generally delivered or exceeded Strategy targets set out for the business in 2010 and on our expectations for 20
Slide 7: Enhancing corporate strengths
Enhancing corporate strengths Achievements since mid-2009 IPO include… Financial strength with access to BBB credit rating, successful capital capital market financings • Investment grade credit rating Proven operating and construction Average plant availability history ≥90%. Completion of • High pl
Slide 8: Large, high quality generation portfolio
Large, high quality generation portfolio Interests in 15 facilities, more than 3,300 MW(1) Segmented owned capacity by MW(1) The evolution in Capital Power’s generation fleet is consistent with 4% the business strategy 11% Increased average plant size from 28% 60 MW to 220 MW following the CPILP d
Slide 9: Disciplined evolution and growth
Disciplined evolution and growth(1) Capital Power is moving to its goal of balancing merchant and contracted generation, while maintaining exposure to Alberta’s merchant market Prior to sale of CPILP Today - 2011 Year-end 2014E 34 facilities (3,386 MW) 15 facilities (3,308 MW) 17 facilities (3,755 M
Slide 10: Sharpening fuel and technology focus
Sharpening fuel and technology focus(1) Capital Power’s operations and growth are focused on four fuel sources: natural gas, coal, wind and solar IPO Current By 2014 year-end 31 facilities (1,867 MW) 15 facilities (3,308 MW) 17 facilities (3,755 MW(2)) 4% 2% 1% 2% each 14% 32% 43% 37% 49% 55% 60% Ga
Slide 11: Modern fleet
Modern fleet In the 2.5 years since the IPO, Capital Power’s average fleet age has become younger due to development and acquisition Average weighted facility age of the current fleet is 11.9 years(1) 4 new projects (487 MW) begin commercial operations in 2012 - 2014 CBEC 3 Facility age CBEC 2 C
Slide 12: Proven operating excellence
Proven operating excellence Capital Power has maintained high operating availability over a growing fleet and production volumes Historical and Estimated Operating Performance 16,000 92% 96% 90% 92% 14,000 Generation (GWh) 12,000 10,000 8,000 Q3 6,000 YTD 4,000 2,000 - 2008 2009 2010 2011E Generatio
Slide 13: Financial strength and access to capital
Financial strength and access to capital Capital Power’s investment grade BBB credit rating and strong balance sheet has facilitated ongoing access to debt markets Current BBB credit rating from S&P and DBRS is a significant differentiator from many U.S. IPPs $900M in debt issues since IPO; at ~
Slide 14: Capital Power's growth
Capital Power’s growth(1) 487 MW of committed projects will increase contracted cash flows in 2012-2014 4,000 K2 Wind Ontario 3,500 Port Dover & Nanticoke Halkirk Wind 3,000 Quality Wind Roxboro & Southport 2,500 Keephills 3 MW 2,000 New England Island Generation 1,500 CBEC 2 & 3 CPC base at IPO 1,0
Slide 15: Substantial and growing cash flows
Substantial and growing cash flows Cash flow per share is visible, substantial and growing Cash flow per share(1, 2) $4.50 Estimate Keephills 3 will start $4.00 $3.90 -$4.30 generating full year cash flows in 2012 $3.50 Wind projects will add substantial cash flows $3.00 through 2012-14 when com
Slide 16: 2011 accomplishments
2011 accomplishments Strong operations safety and production performance Safety performance on-track to exceed award-winning 2010 performance Estimate year-end availability at 92% with several units at or near 100% availability Commissioned and delivered Keephills 3 Canada’s most technological
Slide 17: 2011 accomplishments (cont'd)
2011 accomplishments (cont’d) Aligned Capital Power’s fleet with the business strategy Divestiture of CPILP rationalized the fleet and sharpened focus Launched presence in US Northeast market with the acquisition and integration of 3 natural gas plants (1,069 MW total) in New England Committed
Slide 18: Delivering on strategy
Delivering on strategy Capital Power has delivered on the strategy set out at IPO, and is well positioned for the future Operational Financial stability Continued operational excellence excellence and strength • High plant availability averaging 93% in past 4 Strategy years and top-quartile safety
Slide 19: Jim Oosterbaan
JIM OOSTERBAAN SENIOR VICE PRESIDENT, OPERATIONS AND COMMODITY PORTFOLIO MANAGEMENT
Slide 20: Plants in Operation in Target Markets
Plants in Operation in Target Markets CPILP Divesture • Focuses technology base. Western Canada Eliminates smaller, older plants Ontario • Reduces cost to manage US Northeast Keephills 3 • Supercritical coal • Synergy with G3 Mid-Atlantic US New England • Efficient, young US Southwest assets
Slide 21: Priority - Focus on continuous improvement
ENHANCING OPERATIONS Priority - Focus on continuous improvement Focus on delivering sustained high-performance Safer operations • ‘World-class safety’ initiative Enhance/Maintain • Fleet-wide reliability program availability • Application of technology and analytics Competitive • Internal expertise
Slide 22: Fleet performance
Fleet performance Focus on safe, low-cost, high-availability operations from Capital Power’s modern, young fleet TRIF(1) Maintenance Availability Costs(2) 3 Year 2012 2013 2011 2012 2013 2011 2012 2013 Rolling Target Target Average CDN Plants 1.95 1.76 1.58 $ 66 $ 78 $ 81 92% 93% 95% US Plants 2.25
Slide 23: Capital Power's reliable AB coal assets
Capital Power’s reliable AB coal assets CPC’s AB coal facilities outperform other AB coal facilities Coal unit Last outage Days since last outage Unit 1 Nov 23/11 1 Unit 2 Nov 15/11 9 Unit 3 Aug 7/11 108 G1 Apr 19/11 218 G2 May 29/11 177 G3 Nov 11/11 - Unit 4 Oct 25/11 30 Unit 5 Oct 9/11 46 Unit 6 O
Slide 24: Contracted Alberta operations
ENHANCING OPERATIONS Contracted Alberta operations Genesee 1 (390 MW net, COD 1994) Exceptional availability in Year Availability Production Major Outage Comment non-outage years (GWh) Maintenance Costs ($M) Outage durations and cost 2012 97.4% 3,289 0 amongst the best in the 2011 to 91.1% 2,272
Slide 25: Merchant Alberta operations
ENHANCING OPERATIONS Merchant Alberta operations Genesee 3 (466 MW net, COD 2005) Operated by CPC Year Availability Production Major Outage Comment JV with TAU (GWh) Maintenance Costs ($M) 2010 outage duration 2012 89.6% 1,783 $8.5M Planned outage (28 days) longer due to unexpected Costs are C
Slide 26: Recent acquisitions
ENHANCING OPERATIONS Recent acquisitions Island Generation (272 MW net, COD 2002) Outstanding reliability Year Availability Production (GWh) Major Outage Maintenance Costs Comment Superb safety record, one ($M) incident in 10 years 2012 95.6% 341 $2.09M Long term availability 2011 to 99.7% 107
Slide 27: Recent acquisitions (cont'd)
ENHANCING OPERATIONS Recent acquisitions (cont’d) Tiverton (279 MW net, COD 2000) Well managed plants Year Availability Production Major Outage Comment (GWh) Maintenance Costs ($M) Located in local pockets, good nodes 2012 82.1% 1,591 Spring $3.5M Planned Outage (36 days) May 97.1% 712 N/A Exc
Slide 28: Recent acquisitions (cont'd)
ENHANCING OPERATIONS Recent acquisitions (cont’d) Roxboro (56 MW net, COD 1987) Managed as part of the Year Availability Production Major Outage Comment fleet of LP assets (GWh) Maintenance Costs ($M) 10 years PPA with 2012 86.1% 224 $1.98M Cdn$ Progress Energy 2011 to Q3 94.5% 123 $2.23M Actual
Slide 29: Overview of planned major outages
Overview of planned major outages Regular maintenance is key to delivering long-term high availability. Focus on trade-off between outage frequency/timing and impact on availability Plant 2012 2013 Genesee Unit 2 – 25 days Unit 1 – 23 days $14.6M $15.2M Unit 3 – 28 days $8.5M (CPC portion) Roxboro 2
Slide 30: Value creation
Value creation With the transition to an IPP, doing business in a different way so as to deliver incremental bottom value to the shareholder Identify and implement actions to derive additional contribution from CPC’s fleet of generation assets Targets at the plant level Increase revenue throug
Slide 31: Genesee fuel blending optimization
Genesee fuel blending optimization Optimization activities are increasing facility efficiency and lowering fuel costs Today, G1 and G2 burn the same amount of coal to produce 390 MW as it took to produce 381 MW in the past • This results in significant savings on fuel costs as well as reduced wear
Slide 32: Genesee Mine peak shaving
Genesee Mine peak shaving Peak shaving optimizes the timing of dragline maintenance to reduce facility operating costs Peak shaving is the reduction of electricity consumption in the Genesee Mine during periods of high pool prices Draglines typically run 24X7, except for planned maintenance and
Slide 33: Increased generation at Genesee
Increased generation at Genesee Up to 16 MW of excess energy available and approved for use at G3, with similar capabilities coming at G1 and G2 G1 and G2 have increased production of excess nnergy, typically running at 390 MW net to grid on each unit compared to 381 MW historically G3 recently
Slide 34: G3 outage update
G3 outage update Unit tripped on Nov 11/11, likely due to a loss of power to key subsystems Nature of the trip resulted in damage to turbine/generator bearings Other components may have been affected Root cause analysis continuing Repairs proceeding on schedule, return to service expected
Slide 35: Successful asset integration
Successful asset integration Successful integration of the Island Generation facility Key learnings from Island Generation integration identified and applied to the integration of CPC’s New England facilities Bridgeport, Rumford and Tiverton were acquired on April 27 & 28, 2011. Acquisition cl
Slide 36: Drive to value
Drive to value A traditional strength of CPC; track record as a consistent operator as the fleet grows and ages Fleet-wide reliability program Maintain availability of AB fleet, increase the availability of US plants Targeting top decile cost performance and availability Zero lost-time injur
Slide 37: Darcy Trufyn
* aa Capital Power © Corporation DARCY.TRUFYN SENIOR VICE PRESIDENT, CONSTRUCTION, ENGINEERING AND PROJECT MANAGEMENT
Slide 38: Construction milestones
Construction milestones Completion of Keephills 3 Creating the competitive advantage Quality Wind construction update Halkirk Wind construction update 38
Slide 39: Keephills
KEEPHILLS 3
Slide 40: Keephills reaches commercial operation
Keephills 3 reaches commercial operation Capital Power completed construction of the most technologically- advanced coal-fired plant in Canada. 450 MW (net) plant located near Edmonton 50% owned by Capital Power Power island matches Genesee 3 COD achieved Sep 1/11 40
Slide 41: Cost and safety leadership in a challenging market
Cost and safety leadership in a challenging market Capital Power’s final Keephills 3 construction costs on budget, in a challenging Alberta labour market Capital Power responsible for construction Final costs to budget (revised 2009) Managed through a challenging period in the overheated Alber
Slide 42: Commissioning set the stage for reliable performance
Commissioning set the stage for a lifetime of reliable performance OEM is the commissioning lead and provides warranty/performance guarantees Plant performance and reliability testing has met and /or exceeded all requirements 42
Slide 43: Successful handover to operating partner
Successful handover to operating partner Capital Power’s comprehensive handover process is complete, and lessons-learned documented for current and future projects Handover completed Partner (TransAlta Corp) responsible for O&M Formal close-out process 43
Slide 44: Creating the competitive advantage
Creating the competitive advantage Capital Power has demonstrated in Wind that Construction is a competitive advantage Construction and Engineering has extensive power plant construction experience Our focus has been on wind projects since the formation of Capital Power and over the past 2 years
Slide 45: Improving processes at each stage of construction
Improving processes at each stage of construction The construction and engineering teams perform several work processes that will continue to create our competitive advantage (better and different) Pre-construction Construction Risk Management • Estimating • Contracting • Three layers of oversight •
Slide 46: Capital Power's approach to wind development
Capital Power’s approach to wind development Specialists seek to optimize projects at each stage of their development Extensive Selection Proactive Landowner Construction front-end and permitting engagement optimization analysis refinement 46
Slide 47: Quality Wind Project
QUALITY WIND PROJECT
Slide 48: Quality Wind
Quality Wind The first of two construction seasons is complete at the Quality site Work is fully contracted on a lump sum basis Risk management process in place Commitment to the local community Season 1 complete: On schedule PROJECT SCOPE 142 MW wind farm near Tumbler Ridge B.C. 25-year
Slide 49: Construction status update
Construction status update Construction is on-track, with the sites ready to receive turbine towers and nacelles beginning spring 2012 77 of 79 foundations complete Crane pads ready and prepared to receive towers 49
Slide 50: Construction status update (cont'd)
Construction status update (cont’d) Roads are substantially complete and the transmission line is progressing to plan Roads 92% complete and fully drivable Transmission 30% complete: 87 of 99 poles installed 50
Slide 51: Project ahead of schedule and under budget
Project ahead of schedule and under budget Expect to reach COD Nov 1/12, with costs below original budget 51
Slide 52: Halkirk Wind Project
HALKIRK WIND PROJECT
Slide 53: Halkirk Wind
Halkirk Wind All major contracts in place, and the site has excellent access for construction COD Dec 2012 (planned) All major contracts awarded on a fixed price basis Low risk profile Good understanding of ground conditions Value engineering PROJECT SCOPE 150 MW wind project near Halkir
Slide 54: Construction now underway
Construction now underway Potential to advance COD by ~2 months Construction mobilized – winter program in progress Proactive engagement on transmission to accelerate critical activity 54
Slide 55: Halkirk towers arriving on site
Halkirk towers arriving on site The first 17 towers arrived in Nov/11; erection begins Q2/12 55
Slide 56: 2011 construction highlights
2011 construction highlights Delivering on the competitive advantage Construction Quality-built Keephills 3 facility added to fleet Safety Exceptional safety performance Cost management Quality Wind and Halkirk trending under-budget Schedule Schedule improvements on Quality and Halkirk Risk manageme
Slide 57: Commercial Services
1OR VICE PRESIDENT, ** MMERCIAL SERVICES
Slide 58: Business development overview
Business development overview Business development overview Industry trends in target markets Opportunities and future activity 2010/2011 Business development activity 58
Slide 59: Business development in North American footprint
Business development in Capital Power’s North American footprint Experienced teams are Western Canada dedicated to opportunities in each target market Ontario US Northeast Mid-Atlantic US US Southwest Plants in operation Plants under construction or development Principal offices 59
Slide 60: Framework for disciplined growth
Framework for disciplined growth Capital Power’s strategy drives opportunity evaluation Merchant Geography Technology Financial Flexibility Develop within Target Acquire Zone Contracted 60
Slide 61: Solar joins technology focus
Solar joins technology focus Announced in Jun/11 that Capital Power will now explore solar opportunities in target markets Solar has been added to the technologies that Capital Power is pursuing • Costs declining • Efficiencies increasing • Adapt wind competency to solar Significant solar opport
Slide 62: Industry trends
Industry trends Evolving expectations for near term wind and solar opportunities Wind opportunities are expected to decline in short term • Concern about electricity rates in ON and BC • Merchant wind is not economic in AB absent subsidies or REC contracts • Limited remaining wind sites in US SW a
Slide 63: Industry trends (cont'd)
Industry trends (cont’d) Increasing competition for contracted acquisitions Increasing competition for contracted acquisitions • Competition from Asian companies • Private equity focusing on contracted assets • Companies such as Enbridge continue to be aggressive Recent acquisition activity • EC
Slide 64: Industry trends (cont'd)
Industry trends (cont’d) Market opportunities Tightening supply-demand balance in Alberta will create merchant development opportunities Continued renewable opportunities in Ontario but at lower FIT prices Contracted thermal opportunities to supply LNG development in northwestern BC Solar an
Slide 65: Implications of industry trends
Implications of industry trends More focus on development opportunities than acquisitions Contracted assets will primarily come through greenfield development Development focus will start to shift to natural gas and solar • Increased need for peaking resources due to renewables • Increase compet
Slide 66: Capital Energy Center
BUSINESS DEVELOPMENT PIPELINE Capital Energy Center Located on Long Island, NY Natural gas combined cycle facility Opportunity for 20 year PPA with LIPA Early development work underway Expected capital cost of $600M to $800M RFP awards Q2 /12 – PPA signed Q4 / 12 2016 COD 66
Slide 67: Sun Valley Energy Center
BUSINESS DEVELOPMENT PIPELINE Sun Valley Energy Center 300 MW – 450 MW solar photovoltaic project • Target long term PPAs through 2012 RFPs • Projected COD in 2014 for first phase • Projected capital cost of $0.9B to $1.1B 300 MW to 400 MW gas fired opportunity • Resource Plans are showing the n
Slide 68: Southern California development opportunity
BUSINESS DEVELOPMENT PIPELINE Southern California development opportunity Up to 800 MW combined cycle opportunity targeting long term PPA with SDG&E RFP is expected in Q1/13 with 2018 COD Projected capital cost of $500M to $1B 68
Slide 69: Other areas of focus
BUSINESS DEVELOPMENT PIPELINE Other areas of focus Location Description Timeframe BC Wind development 2016 to 2021 Combined cycle development 2015 to 2017 Alberta Combined cycle / peaking development 2015 to 2021 Sask Wind development 2014 Ontario Wind development 2017 to 2021 Combined cycle / peaki
Slide 70: 2010 Business Development activity
2010 Business Development activity Acquisition Development Island Quality Wind Port Dover & Generation Nanticoke Location Campbell River, Tumbler Ridge, BC Norfolk/Haldimand, ON BC Fuel Type Natural Gas CC Wind Wind Size 275 MW 142 MW 105 MW Costs $207M $455M $340M COD 2002 Nov/12 Q4/13 Contract & 1
Slide 71: Port Dover & Nanticoke update
Port Dover & Nanticoke update Prepared to begin construction once REA approval received REA submitted Jun/11 - decision expected Q1/12 Project is ready to commence construction • Connection agreement with Hydro One • Turbine supply agreement finalized with Vestas • EPC contract finalized Proje
Slide 72: Port Dover & Nanticoke land swap (before)
Port Dover & Nanticoke land swap (before) Swap simplified site layout and leads to lower construction and operating costs Capital Power NextEra 72
Slide 73: Port Dover & Nanticoke land swap (after)
Port Dover & Nanticoke land swap (after) NextEra Capital Power 73
Slide 74: 2011 Growth
2011 Growth Rumford Tiverton Bridgeport Location Rumford, Maine Tiverton, Rhode Bridgeport, Island Connecticut Fuel Type Natural Gas Natural Gas Natural Gas Size 270 MW (Winter 279 MW (Winter 520 MW Capacity) Capacity) Costs ~US$315M ~US$355M COD 2000 2000 1999 74
Slide 75: Acquisition of Halkirk Wind
Acquisition of Halkirk Wind Announced 100% acquisition of the Halkirk Wind LP from Greengate Power Corporation in Jun/11 150 MW wind development project located east of Red Deer, AB 20-year fixed-price agreement with Pacific Gas & Electric Company for the purchase of Renewable Energy Certifica
Slide 76: Development of K2 Wind Ontario
Development of K2 Wind Ontario Capital Power, Samsung and Pattern have finalized a limited partnership agreement for the development, construction and operation of K2 Wind Ontario 270 MW wind development project located in southwestern Ontario near Capital Power’s Kingsbridge I facility 20-yea
Slide 77: Expected performance of US NE assets
Expected performance of US NE assets Projected unlevered returns remain above Capital Power’s target returns for merchant assets Projected EBITDA for 2012 is $51M, which is $19M less than original expectations • $8M reduction due to Connecticut Tax • $4M reduction due to higher O&M costs • $7M red
Slide 78: Creating value through disciplined growth
Creating value through disciplined growth Development and acquisition activity has been in-line with strategy Contracted assets account for 65% of growth on committed capital basis; established hub in US NE with 1,050 MW of generation assets Projected unlevered returns range from 9% to 11% with
Slide 79: 79
79
Slide 80: Market observations
Market observations Alberta economy expected to remain strong despite macroeconomic uncertainty and mixed public policy signals Low and stable gas prices Macroeconomic uncertainty • Recovery slower and less robust than previously expected • Slow, steady economic and power demand growth • Global
Slide 81: New England market
New England market Attractive long term supply dynamics Energy prices track natural gas Capacity prices expected to remain soft until market balance is restored Demand continuing to recover Capacity surplus could disappear as early as 2016 but more likely by 2019 Planned closures and environment
Slide 82: New York market
New York market Environmental issues creating opportunities Energy prices track natural gas Capacity prices expected to remain weak in near term Supply growth outpacing demand Capacity surplus due to weak demand, new in-region capacity and recent growth in demand resources that will take time to b
Slide 83: PJM (Mid-Atlantic) market
PJM (Mid-Atlantic) market Coal-heavy market vulnerable to EPA regulations Energy prices tied to coal and gas prices Capacity prices volatile Capacity surplus due to weak demand, new in-region Coal closures will erode excess supply capacity and recent growth in demand resources. EPA regulations c
Slide 84: California market
California market Transmission builds key to meeting the 33% RPS Energy impacted by carbon pricing in 2013 Renewable builds to meet 33% RPS Renewable Portfolio Standards (RPS) will be the key driver of new builds in California • Expected to move to 33% by 2020 • Transmission constraints may cause
Slide 85: Alberta market
Alberta market Positive long term supply dynamics Forward prices have risen to mid-$70s System rates declining but above historical levels Declining coal generation starts 2018 Portfolio bidding keeping prices and system heat rates high Alberta expected to grow at above-national average rates du
Slide 86: Portfolio optimization
Portfolio optimization Northeast ISONE market position update 2012 2013 2014 Relatively young and highly efficient combined cycle Hedged Energy Positions - % Contracted generation allows for favorable generation profile ~50% ~50% 0% Market liquidity allows for 2012 Northeast Portfolio Production
Slide 87: Portfolio optimization
Portfolio optimization Successful integration and asset operations During Q3/11: Seamless Takeover of Energy Management and Operations Forward Power, Capacity, Fuel and Emissions Optimization Strategies and Front Execution / Energy and Ancillary Market Generation Offers / Fuel Procurement and Offi
Slide 88: Market commentary
Market commentary Spark spread values to maintain a premium 2005 - 2012 ISONE Mass Hub & NYISO Zone G Peak Prices and Spark Spreads On a weather $110.00 $30.00 normalized basis, $101 Northeast regional $100.00 natural gas prices to $93 $25.00 $91 remain at a discount $89 $86 $90.00 due to increased
Slide 89: Managing Alberta market exposures
Managing Alberta market exposures Portfolio positioned to continue to capture upside in the AB power market Baseload generation 2011 2012 2013 decreasingly offset by Hedged Positions - % contracted on total AB portfolio supply obligations ~90% ~40% ~15% Prior to the 2008 recession Contracted Pri
Slide 90: Alberta market updates
Alberta market updates Stronger 2011 prices reflect tighter reserve margins, growing demand and a market structure that is working Market changes include: Sundance 1 & 2 have now been offline close to 1-year; expectation is that they will remain off Keephills 3 came online in Q3/11, adding 450 M
Slide 91: Clover Bar and Capital Power's portfolio
MANAGING THE PORTFOLIO – ILLUSTRATIVE EXAMPLE Clover Bar and Capital Power’s portfolio Capital Power’s Clover Bar units can be used to back outages and derates to the Company’s coal-fired fleet Illustrative example In this example, Coal Unit 1 (175 MW) experiences two instances of derates of 50 MW a
Slide 92: Approach and governance
COMMODITY RISK MANAGEMENT Approach and governance Capital Power centrally manages commodity risk on a portfolio approach CPC’s commodity risk is comprised of expected positions from generation assets, customer transactions and wholesale trades Trade-offs and impacts exist between Commodity Risk,
Slide 93: Framework, Limits, Measurement & Reporting
COMMODITY RISK MANAGEMENT Framework, Limits, Measurement & Reporting Policy establishes framework for determining Commodity Risk Limits (CRL) based on ability and willingness to take risk • Ability – pro-forma financial projections quantify total cash flows available for risk • Willingness - % of
Slide 94: Additional information
COMMODITY RISK MANAGEMENT Additional information Policy based limits supplemented by Management Limits in Procedures and Guidelines that address Concentration and Stop Loss levels New commodities, markets, instruments and other changes within Front, Middle or Back Office areas are subject to rev
Slide 95: Processes, systems and analytics
Processes, systems and analytics New ETRM system expected to go live Q3/12, providing a platform for more sophisticated portfolio optimization Robust processes, systems and analytics are critical infrastructure components that support the management and optimization of CPC’s commodity portfolio
Slide 96: Growing Cash Flows and Shareholder Value
r tie car v7 ™= \ GROWING CASH FLOWS STUART LEE AND SHAREHOLDER VALUE SENIOR VICE PRESIDENT AND CFO % Finance Overview
Slide 97: Financial strategy
Financial strategy Maintain ongoing access to cost competitive capital to fund sustainable growth throughout business cycle Investment grade BBB rating Manage Well forex and spread interest debt risk maturities FINANCIAL STRATEGY Economic Financial discipline flexibility in growth Stable dividend wi
Slide 98: Financial strength and access to capital
Financial strength and access to capital Strong balance sheet: debt ratios remains below long-term target zone • Assets of ~$4.7B with ~$1.6B of long-term debt • CPLP has $1.2B in credit facilities, of which ~$1.0B available Debt to Total Capitalization(1) 50% Long-term target 40% 40% - 50% 30% 20%
Slide 99: Credit rating agency metrics
Credit rating agency metrics(1) Expect to meet DBRS financial criteria in 2012 Cash flow/Debt EBITDA/Interest coverage 30% 5.0 4.0 20% 3.0 2.0 10% 1.0 0% 0.0 2010 2011E 2012E 2010 2011E 2012E On track to meet S&P financial criteria by 2012 - 2013 AFFO/Adj. Debt AFFO/ Adj. interest 30% 5.0 (2) 4.0 20
Slide 100: Successful capital markets financings
Successful capital markets financings ~$1.9B raised from capital markets since Nov/10 36.9 million common shares added to public float Two primary equity offerings of $463M • Mar/11, 9.3 M shares, ~$232M gross proceeds to CPC • July/11, 9.2 M shares, ~$231M gross proceeds to CPC Two secondary of
Slide 101: Increased public float & improved liquidity
INCREASING OPPORTUNITIES FOR INVESTOR PARTICIPATION Increased public float & improved liquidity 120 2.7x increase in volume of public Fully diluted shares (millions) float shares since IPO 90 Fully diluted market cap ~$2.4B(1) Public float rises from 28% to 61% 21.8 58.9 of fully diluted shares
Slide 102: Debt maturity schedule
Debt maturity schedule(1) Well spread-out debt maturities are supported by long asset lives Successfully extended term on credit facilities debt from 3 to 4 years rolling Debt maturity schedule(1) $450 $428 $400 $113 $350 $305 $300 (Millions) $250 US$230 $200 $179 $145 $150 $100 US$65 $50 $25 $1
Slide 103: Strong cash flow generation
Strong cash flow generation Generating significant discretionary cash flow net of dividends and maintenance capex Discretionary cash flow represents 47% of Funds from operations(1) Wind projects will add $140-$160M of EBITDA in 2014 12 month trailing FFO of $322M(1) Discretionary cash flow(1) $1
Slide 104: Development project capital expenditures
CAPITAL PLAN OVERVIEW Development project capital expenditures Prior to ($M) 2011 2011E 2012E 2013E Project Total Keephills 3 $892 $63 - - $955 Halkirk - $187 $170 - $357 Quality Wind $23 $133 $299 - $455 Port Dover Nanticoke $23 $46 $52 $219 $340 K2 Wind Ontario - - $46 - $46(1) Total growth capex
Slide 105: Sustaining capital expenditures
CAPITAL PLAN OVERVIEW Sustaining capital expenditures ($M) 2011E 2012E Plant maintenance capex • Genesee $34 $50 • Other plants $11 $36 Other $27 $22 Total sustaining capex $72 $108 Genesee land expense $15 $18 2012 Genesee turnarounds include units 2 and 3 Other Canadian plants $19M, US plants
Slide 106: Cash flow and financing outlook
Cash flow and financing outlook In 2012, no primary common share equity issuance expected other than DRIP, absent an acquisition Development project financing expected to be funded through MTN and preferred share issues Sources of cash flow ($M) 2010 2011E 2012E Funds from operations(2) $257 $337
Slide 107: Alberta portfolio hedges and sensitivity
Alberta portfolio hedges and sensitivity Well positioned to capture upside from rising power prices Alberta (baseload plants & PPA) hedged positions as of Nov 30/11 2012 2013 2014 Hedged positions (% hedged) ~50% ~20% ~5% Average hedged prices Mid-$60/MWh Mid-$60/MWh Low-$60/MWh Sensitivity anal
Slide 108: New England power price sensitivities
New England power price sensitivities Sensitivity analysis to +$2.50 and -$2.50 MWh change in New England spark spreads • 2012: +$7M and -$6M to EBITDA • 2013: +$7M and -$6M to EBITDA • 2014: +$15M and -$13M to EBITDA Capacity payments represent ~40% to 45% of expected EBITDA until 2014 Althou
Slide 109: Financial outlook – 2012 vs. 2011
Financial outlook – 2012 vs. 2011 Expect year-over-year increase in capacity and production from existing assets Full year of operations from Keephills 3 facility versus 4 months in 2011 Full year operations from three US Northeast facilities versus 8 months in 2011 Full year of the North Caro
Slide 110: Financial targets reflect organic growth
Financial targets reflect organic growth(1) At an Alberta power price of $74/MWh, targeting normalized EPS to rise to $1.50 - $1.70, and CFPS to rise to $3.90 - $4.30 Normalized EPS targets Funds from operations targets ($M) $2.00 $500 $1.50 Est. $1.50–$1.70 $400 Est. $380–$420 $1.25 $337 $300 $1.00
Slide 111: Financial performance and outlook
Financial performance and outlook Cash flow per share is visible, substantial and growing Normalized EPS(1) Cash flow per share(1) $1.75 $4.50 Estimate Estimate $1.50 - $4.00 $3.90 - $1.70 $4.30 $1.50 $3.50 $3.00 $1.25 $2.50 $1.00 $2.00 (3) 2009 2010 2011E 2012E 2009(3) 2010 2011E 2012E (1) See Non-
Slide 112: Delivering on financial strategy
Delivering on financial strategy Capital Power remains committed to the financial strategy established at the IPO Maintained strong balance sheet with relatively conservative long term debt to total capitalization ratio of 40-50% Committed to maintaining investment grade credit rating Strengthen
Slide 113: Focused on the Future
FOCUSED ON BRIAN VAAsJO |. THE FUTURE apes 2012 Corporate Priorities
Slide 114: Delivering on Capital Power's strategy
Delivering on Capital Power’s strategy We’ve built Capital Power’s Financial Operational business based on the strategy set stability and excellence strength out at the IPO Capital Power’s strategy positions Strategy us to deliver superior relative total return for shareholders Shareholder Disciplin
Slide 115: 2012 Corporate priorities
2012 Corporate priorities Priority: Deliver strong operational performance from a young, well- maintained generation fleet Operational Targets ≥ 91% CPC capacity-weighted plant availability (reflects two planned turnarounds at Genesee in 2012) ≤ $108M Maintenance capital (plant maintenance capex and
Slide 116: 2012 Corporate priorities (cont'd)
2012 Corporate priorities (cont’d) Priority: Enhance value for shareholders by delivering accretive growth from current developments and identifying and committing to new opportunities that meet CPC’s investment criteria Development and Construction Targets On-time, on- Halkirk Wind (COD Q4/12 @ $35
Slide 117: 2012 Corporate priorities (cont'd)
2012 Corporate priorities (cont’d) Priority: Deliver substantial growth in cash flow and normalized earnings per share Normalized EPS targets Funds from operations targets ($M) $2.00 $500 $1.50 Est. $1.50–$1.70 $400 Est. $380–$420 $1.25 $337 $300 $1.00 $200 $0.50 $100 $0.00 $0 2011E 2012 2011E 2012
Slide 118: Responding to Investor Observations
Responding to Investor Observations Doubled liquidity • Liquidity at IPO a challenge. Liquidity • Reduced EPCOR interest to 39% • “Seasoning“ Growth Investor Growth Observations • Misinterpretation of growth estimates • Concern over rapid growth execution Results Results • Complexity of results with
Slide 119: Summary
Summary Capital Power seeks to deliver Total Shareholder Return that exceeds the median of peer group, by executing on its disciplined strategy Capital Power is delivering on its strategy Aligned Capital Power’s fleet with the strategy through CPILP divestiture, committed to accretive opportunitie
Slide 120: Questions
QUESTIONS
Slide 121: Non-IFRS financial measures
Non-IFRS financial measures The Company uses (i) funds from operations, (ii) funds from operations excluding non-controlling interests in CPILP, (iii) cash flow per share, (iv) dividend coverage ratio as financial performance measures, (v) normalized earnings attributable to common shareholders, and
Slide 122: Non-IFRS financial measures (cont'd)
Non-IFRS financial measures (cont’d) A reconciliation of (i) funds from operations and (ii) funds from operations excluding non-controlling interests in CPILP, to cash flows from operating activities is as follows: (unaudited, $millions) Nine months Year Six months ended ended ended Sept 30, 2011 De
Slide 123: Non-IFRS financial measures (cont'd)
Non-IFRS financial measures (cont’d) Dividend Coverage Ratio Capital Power uses the dividend coverage ratio as a measure of the Company’s ability to pay dividends and distributions to its shareholders and CPLP’s exchangeable common limited partnership unitholders from funds it generates from operati
Slide 124: Non-IFRS financial measures (cont'd)
Non-IFRS financial measures (cont’d) Nine months Year Six months (unaudited, $millions except earnings (loss) per share) ended ended ended Sept 30, 2011 Dec 31, 2010 Dec 31, 2009 (1) Earnings (loss) per share $ (0.27) $ 0.77 $ 0.97 Net income (loss) attributable to shareholders (7) 17 21 Preferred s
Slide 125: Forward-looking information (cont'd)
Forward-looking information (cont’d) Forward-looking information Certain information in the Investor Day presentations is forward-looking within the meaning of Canadian securities laws as it relates to anticipated financial and operating performance, events or strategies. When used in this context,
Slide 126: Forward-looking information (cont'd)
Forward-looking information (cont’d) assumptions used to develop these forward-looking statements include, but are not limited to: (i) the operation of Capital Power's facilities; (ii) power plant availability and dispatch; (iii) Capital Power's financial position and credit facilities and sources o