Capital Power Corporation · TSX:CPX
Capital Power — Investor Presentation (June 2022)
36 slides from Capital Power's investor presentation, June 2022
Slide 1: Investor Presentation June 2022
Investor Presentation June 2022 Brian Vaasjo President & CEO Sandra Haskins SVP Finance & CFO 1
Slide 2: Growth-oriented North American energy transition company
Growth-oriented North American energy transition company x3 • Highly-contracted, young and diversified portfolio • Well-positioned assets and trading expertise in the attractive Alberta power market • Off coal in 2023 and targeting net carbon neutral before 2050 • Annual dividend growth with 5% guid
Slide 3: Business mix overview
Business mix overview Fuel Type(1) Contracted versus Merchant(1) 20% 27% U.S. Contracted 38% Renewables Natural gas/coal 44% dual-fuel Canada Contracted 36% 35% Alberta Merchant Natural gas Clean natural gas and renewable Average PPA term projects in development will remaining of ~9.7 years(2) repla
Slide 4: Our strategy and path to net carbon neutral by 2050
Our strategy and path to net carbon neutral by 2050 Investing in emissions Building and acquiring Integration of free renewables facilities in Canada and the storage technologies U.S. Reduce emissions profile Investing in critical Acquiring key facilities through decarbonization natural gas generati
Slide 5: A market leader in the Alberta power market
A market leader in the Alberta power market • Continue to reposition and optimize assets to maintain leadership position • Largest provider of new generation over the last 20 years • Leading developer and owner of renewables in the province • Leading efforts to decarbonize Repowering Solar thermal g
Slide 6: Renewable and storage acceleration
Renewable and storage acceleration COD of Whitla Wind 2 in Dec/21 and Halkirk Wind phase 2 (151 MW) Secured 1,298 MW of U.S. solar 100% contracted as of Apr/22 commencing sites with battery potential COD of Strathmore Solar in Q1/22, North Carolina solar projects COD Long-term contracting of renewab
Slide 7: Natural gas – necessary long-term role in power
Natural gas – necessary long-term role in power • Natural gas essential to maintain system reliability and integrate renewables • Decarbonization will be essential to long term resiliency • Role of natural gas will transition from serving baseload energy requirements to serving capacity • Well posit
Slide 8: Significant progress on Genesee CCS Project
Significant progress on Genesee CCS Project Increasing policy certainty to proceed Alberta CCUS hub CCS financial support Carbon policy de-risking Government of Alberta • $1.8 - $2.0B project cost • Required for Genesee CCS to selected Enbridge’s “Open 2022 Federal Budget proposed advance Access
Slide 9: Growth strategy
Growth strategy • Growth strategy aligns with our sustainability goals • Decarbonization is an immense opportunity for gas and renewables technologies • Strong renewable growth pipeline in Alberta and the U.S. • Demonstrating success in recontracting natural gas assets 9
Slide 10: Positive growth outlook
Positive growth outlook Ontario thermal assets well-positioned • IESO Annual Acquisition Report identifies incremental capacity needs of 2,500 MW by 2027 and an additional 1,500 MW by 2030 • Creates significant opportunities for either expansion of existing assets or addition of batteries • Assets w
Slide 11: Managing inflationary & supply chain cost pressures
Managing inflationary & supply chain cost pressures Operating costs • Expect modest increase of ~$2 million on operations in 2022 from LTSA and PPAs (largely escalate with CPI) Genesee 1&2 repowering project • ~90% of $1.2 billion project cost are locked in • Balance of costs forecast to be on budge
Slide 12: Consistent substantial growth in renewables
Consistent substantial growth in renewables (MW) 2000 Halkirk 2 Bear Branch Hunter's Cove Hornet 1500 Enchant Strathmore Whitla 2&3 Buckthorn 1000 Cardinal Whitla New Frontier Bloom 500 Beaufort Macho Springs PDN Halkirk 0 Quality 2016 2017 2018 2019 2020 2021 2022 2023 2024 12
Slide 13: Development pipeline supports sustainable growth
Development pipeline supports sustainable growth 3,300+ MW generation Wind (~1000 MW) Solar (~2300 MW) 3,350 MWh battery storage Battery Storage Targeting $500M of committed capital for growth 13
Slide 14: Recontracting of natural gas assets
Recontracting of natural gas assets Securing long term PPAs provide stable cash flows + Decatur (Alabama) Arlington (Arizona) Island Generation (BC) Goreway (ON) Extended enhanced Extended tolling agreement Executed 4.5-year contract Developments in Ontario Decatur contract by 10 by 6 years to 2031
Slide 15: Alberta power market
Alberta power market • Demand fully recovered from COVID-19 and low oil prices • All-time summer and winter record demand set in 2021 • Demand expected to increase modestly year-over-year • Robust market with average power price of $102/MWh in 2021 and ~$117/MWh in 2022 (based on May YTD actuals & f
Slide 16: Alberta power market
Alberta power market Need for reliable, flexible natural gas capacity AESO capacity by technology • Today there is still 4,000 MW of inefficient Gas Coal Wind Converted Gas Hydro Other coal, converted coal, or dual fuel capacity 7% • Peak winter and summer load hours in 2021 5% saw ~85% of load bein
Slide 17: Repositioning Genesee 1&2
Repositioning Genesee 1&2 Retired Capacity Asset (MW) Battle River 3 149 Keephills 1 395 Sundance 1 280 Sundance 2 280 Sundance 3 368 Sundance 4 406 Sundance 5* 406 Sundance 6** 401 Battle River 4** 155 Battle River 5** 385 Sheerness 1** 400 Sheerness 2** 400 Keephills 2** 395 *Suspended **Projected
Slide 18: 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 – $1.2B capital cost including $195M for 210 MW battery storage. 20%+ levered returns 512 MW net capacity increase (total 1,372 MW) Best-in-class NGCC t
Slide 19: Alberta TIER program
Alberta TIER(1) program Significantly reducing carbon emissions AB electricity sector emissions (MT)(2) • TIER program driving down carbon emissions in a meaningful way 60 Avoided • Alberta government supportive of 47.7 Emissions TIER program 50 Current TIER @ • Carbon prices per tonne will rise 40
Slide 20: Managing Alberta carbon exposure
Managing Alberta carbon exposure ($/tonne) ($M) $250 $100 CPC Alberta Emissions Expense1 Carbon Offset Savings Carbon Price 2 $200 69 $80 $150 $60 40 $100 $40 164 116 $50 $20 4 3 24 17 $0 $0 2022E 2023E 2024E 2025E Physically reducing emissions supplemented with low-cost offsets protect and enhance
Slide 21: Alberta portfolio optimization of commodity price risk
Alberta portfolio optimization of commodity price risk (All data as of Mar 31/22) 2023 2024 2025 Alberta power market • Average spot price of Power $90/MWh in Q1/22 reflecting high % Sold forward(1) 58% 37% 24% availability of generation in the province, mild Contracted power prices(2) ($/MWh) Low-$
Slide 22: Financial strategy
Financial strategy • Deploying capital to advance progress towards our sustainability targets including the repowering of Genesee 1&2 and growing renewables portfolio • Executing on $1.5B in growth capex without the need for additional common equity • Resilient cashflows supported by risk mitigation
Slide 23: Overview of financial strategy
Overview of financial strategy Maintain Funding a low Maintain Deliver annual financial stability carbon future investment grade dividend growth and strength • Cost-effective credit rating • Dividend stability • Strong liquidity funding of growth • Access to capital through contracted markets throug
Slide 24: Executing on ~$1.5 billion of growth capex
Executing on ~$1.5 billion of growth capex Additional common equity not required to fund current growth projects ($M) $700 $640M Total $600 $457M Total $178 $500 $462M Total $18 $49 $38 $400 $45 $101 $236 $300 $200 $379 $312 $150 $100 $53 - 2022E 2023E 2024E Genesee 1&2 Repower Genesee battery stora
Slide 25: Dividend growth outlook
Dividend growth outlook Annualized dividend per share (1,2) 5% increase per year ~7% CAGR $2.19 $1.26 42% 50% 45% 45% 35% 40% 39% Average payout of ~40% payout 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2024E 2025E Forecast to be below AFFO payout ratio target range of 45% to 55% throu
Slide 26: Sustainability / investment opportunity
Sustainability / investment opportunity • Corporate purpose – to power a sustainable future for people and planet • 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 26
Slide 27: Sustainability commitments – integral to Capital Power
Sustainability commitments – integral to Capital Power • Broad compensation linked to ESG targets • Diversity targets • 30% carbon reduction by 2024 • Employee well being • Successful implementation of sustainable sourcing plan and water management strategy • On track to be off coal in 2023 • Sustai
Slide 28: Path to net carbon neutral by 2050
Path to net carbon neutral by 2050 2009–Today Today–2024 2024–2030 2030–2050 2050–2070 • Genesee efficiency • Complete repowering • Genesee CCS • Net carbon neutral • Physical program - 12% and off coal project via physical decarbonization decrease in GHG by • Genesee Battery • Expand CCU solutions
Slide 29: Attractive investment opportunity
Attractive investment opportunity Resilient strategy drives growth and accelerates net carbon neutral by 2050 Successful track record in developing renewable projects and contracting Leading position in the robust Alberta power market Strong long term cashflow from contracted assets including natura
Slide 30: Appendices
Appendices • Credit rating metrics • Debt maturity schedule • 2022 Targets 30
Slide 31: Financial stability and strength
Financial stability and strength Strong balance sheet and commitment to investment grade credit ratings • Both rating agencies re-affirmed BBB- / Stable ratings in April 2022 • Target FFO to Debt > 20% • 2022 forecast to be another • Target Debt to EBITDA < 4x strong year with credit metrics well ab
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 our business profile • Strong liquidity from cash flow from operations, cash-on-hand, and credit facilities • Hedged underlying on refinancings out to 2026 600 5
Slide 33: 2022 targets
2022 targets Financial results expected to meet or exceed upper ends of guidance range Facility availability Sustaining capex ($M) 95% 93% $105 to $115 Sustaining capex • Expected to be above target range due to increased work planned for remainder of the year and timing of work $25 Inflationary pre
Slide 34: Non-GAAP financial measures and ratios
Non-GAAP financial measures and ratios 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 a
Slide 35: Forward-looking information
Forward-looking information Forward-looking information or statements included in this presentation are provided to inform the Company’s Whether actual results, performance or achievements will conform to the Company’s expectations and shareholders and potential investors about management’s assessme
Slide 36: Investor Relations
Capital Power Common Shares • Listed on the Toronto Stock Exchange (symbol: CPX) • 52-week low/high share price ($36.65 / $45.95) • Shares outstanding: 116 million • Market cap: ~$5.3 billion • Avg daily trading volume (trailing 12 months): 458,000 shares • Dividend yield: ~4.8% Investor Relations R