Capital Power Corporation · TSX:CPX
Capital Power — Investor Day (December 2020)
78 slides from Capital Power's investor day presentation, Dec 3, 2020
Slide 1: Investor Day 2020
Investor Day 2020 Accelerating a low carbon future December 3, 2020 1
Slide 2: Forward-looking Information
Forward-looking Information Cautionary statement Certain information in today’s presentations and in responses to questions contains forward-looking information. Actual results could differ materially from conclusions, forecasts or projections in the forward-looking information, and certain material
Slide 3: Executive Leadership Team
Executive Leadership Team Brian Sandra Kate Bryan Chris Jacquie Darcy Vaasjo Haskins Chisholm DeNeve Kopecky Pylypiuk Trufyn President and Chief SVP, Finance SVP, Planning, SVP, Business SVP, Chief Legal SVP, People, Culture SVP, Operations, Executive Officer and Chief Financial Stakeholder Developm
Slide 4: Agenda
Agenda Introduction Randy Mah / Director, Investor Relations Accelerating a low carbon future Brian Vaasjo / President & CEO Advancing a low carbon future Kate Chisholm / SVP, Planning, Stakeholder Relations & Chief Sustainability Officer Maximizing asset value Darcy Trufyn / SVP, Operations, Engine
Slide 5: Accelerating a low-carbon future
Accelerating a low-carbon future • Resiliency • Optimization • Innovation Brian Vaasjo President & CEO 5
Slide 6: Accelerating our strategy to a low carbon future
Accelerating our strategy to a low carbon future • Capital Power has been following a strategy towards a low carbon future. • We set a target to be net carbon neutral by 2050 and we have a path to get there. Resiliency • With today's announcement we are accelerating to that low carbon future. • The
Slide 7: Resiliency and innovation through COVID-19
Resiliency and innovation through COVID-19 Priority is keeping our employees and families healthy Operations • Comprehensive health and safety protocols at plants successful • Managed 7 major planned outages successfully Corporate • Ongoing remote work arrangements • No change in efficiency or effec
Slide 8: Strategic path to a low-carbon future
Strategic path to a low-carbon future Off-coal in 2023 • Retirement of Roxboro and Southport power plants in 2021 • Genesee site 100% natural gas in 2023 Accelerated growth in renewables • 7 development projects totaling 420 MW; 100 MW Buckthorn Wind acquisition Natural gas critical to net carbon ne
Slide 9: Genesee repowering delivers long term value
Genesee repowering delivers long term value Project exceeds hurdle rates and contributes in the order of $0.70 AFFO per share Best-in-class NGCC technology - CCS ready and hydrogen capable 560 MW capacity increase Significant environmental benefits - intensity of 0.35t/MWh; under TIER Program would
Slide 10: Accelerated renewables growth
Accelerated renewables growth • 75MW Enchant solar project • 75 MW Enchant Solar project • 40.5 MW capacity of Strathmore Solar contracted for 25 years • 2 wind and 5 solar projects • 4 solar projects under long term contracts • Capacity of Strathmore solar contracted for 25 years • 2 wind and 5 sol
Slide 11: Natural gas critical to transition to carbon neutral
Natural gas critical to transition to carbon neutral Natural gas resiliency • Lower cost dispatchable energy required for grid support • Select markets require significant natural gas beyond 2050 • Carbon conversion and hydrogen technologies support longevity • Increased investment in C2CNT to 25%,
Slide 12: Financial
Financial 2020 at or better than targets set last December 2021 relatively flat • Strong power price offset Genesee off contract, carbon tax increase and North Carolina retirements • Dividend guidance for 2021 and 2022 unchanged Strategic growth • Current 2021 capital spend on development • 2021 tar
Slide 13: Responsible energy for generations to come
Responsible energy for generations to come Integrating ESG into our strategy Embedding ESG factors in our decision-making Advancing Social and Governance initiatives • Board and Executive diversity • Indigenous employment opportunities • Equal by 30 13
Slide 14: Advancing a low carbon future
Advancing a low carbon future • Strong performance in “E”, “S” and “G” • Articulating our path to net carbon neutral before 2050 • 25% of Executive compensation based on ESG performance Kate Chisholm Senior Vice President, Planning, Stakeholder Relations and Chief Sustainability Officer 14
Slide 15: Natural Gas: necessary long-term role in power
Natural Gas: necessary long-term role in power • Sustainable – enables the penetration of more renewables • Flexible – dispatchable when you need it (availability >90%); offline when you don’t • Power Dense – can provide 80 MW/acre • Decarbonizable – with carbon conversion and hydrogen • Affordable
Slide 16: Capital Power major carbon capture initiatives
Capital Power major carbon capture initiatives Participated with Canadian Clean Power Coalition (CCPC) studies on Carbon Capture Options Confidential Project for Hydrogen/Power production from coal feed stock with Carbon Capture Design, Engineering and Cost Estimate for Genesee 4; 200 MW coal-fired
Slide 17: Capital Power's (R)Evolution
Capital Power’s (R)Evolution 2009 to Today Today to 2024 2024 – 2030 2030 – 2050 2050 – 2070 • Genesee efficiency • Complete repowering • Expand CCU • Carbon Neutrality • Physical program - 12% GHG and off coal • Pilot/Demo via physical Decarbonization by 2021 • Invest in Renewables, Hydrogen projec
Slide 18: Pathway to net carbon neutral
Pathway to net carbon neutral Renewables with storage Deploying carbon conversion and hydrogen blending at thermal facilities Limited offsets used 18
Slide 19: Genesee off coal in 2023
Genesee off coal in 2023 – 6 years early 50% carbon reduction by 2030 from repowering Nearly 6M tonnes per year system-wide carbon reduction 19
Slide 20: 65% GHG emissions intensity reduction across the fleet by 2030
65% GHG emissions intensity reduction across the fleet by 2030 20
Slide 21: 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 22: On track to meet our sustainability targets
On track to meet our sustainability targets • Achieve net carbon neutral by 2050 • Construct all new natural gas generation units to be carbon capture and/or hydrogen-ready Reduce CO2 emissions at Genesee by 50% by 2030 from 2005 levels • Reduce CO2 emissions by 10% and our emission intensity by 6
Slide 23: Maximizing asset value
Maximizing asset value • Operational excellence and resiliency • Optimization and innovation • Building a low carbon future Darcy Trufyn Senior Vice President, Operations, Engineering and Construction 23
Slide 24: Operational facilities
Operational facilities 3x 6,491 megawatts 28 facilities 95% plant availability In Operation Natural Coal Solar Wind Waste Solid Landfill Gas Heat Fuel Gas Under construction and in Advanced Development Solar Wind 24
Slide 25: Sustained excellence and resiliency in operations
Sustained excellence and resiliency in operations Fleet performance • Strong 2020 availability: 94% forecast versus target of 93% • Target 2021 availability at 93% • Fleet availability has averaged 95% since 2014 Asset Improvement • Decatur hybrid rotor #2 installed, improving heat rate and adding 3
Slide 26: Sustained excellence and resiliency in operations
Sustained excellence and resiliency in operations Company COVID response • Implemented pandemic plan in March including protocols and PPE requirements • Essential plant staff routines/schedules altered, and non-essential staff work remote • Evolved COVID philosophy to a sustainable state Plant COVID
Slide 27: Genesee repowering of units 1 and 2
Genesee repowering of units 1 and 2 • Total cost $997 million • 2 X 680 MW = 1,360 MW (net) • No power interruption with staged construction • Heat rate at 6600 - 6700 kj/kWh; most efficient combined cycle plant in Canada • Utilizes latest MHI J AC Class technology • Includes upgraded steam turbines
Slide 28: Genesee repowering of units 1 and 2
Genesee repowering of units 1 and 2 Optimizing project cost through existing equipment and infrastructure 28
Slide 29: Genesee repowering of units 1 and 2
Genesee repowering of units 1 and 2 Optimizing project cost through existing equipment and infrastructure 29
Slide 30: Genesee repowering of units 1 and 2
Genesee repowering of units 1 and 2 Optimizing project cost through existing equipment and infrastructure 30
Slide 31: Genesee repowering of units 1 and 2
Genesee repowering of units 1 and 2 Existing G1/2 Powerhouse New G1/2 Combustion Turbines and HRSG 31
Slide 32: Genesee repowering schedule
Genesee repowering schedule Outage Simple Cycle NGCC Genesee 1 Outage Simple Cycle NGCC Genesee 2 Outage Off Coal Genesee 3 2021 2022 2023 2024 2025 • Following gas conversion and repowering projects, physical CO2 emissions at the Genesee facility will be approximately 3.4M tonnes per year lower tha
Slide 33: Building a low carbon future with renewables growth
Building a low carbon future with renewables growth Construction Expected Project Capacity Location Cost COD Whitla Wind Phase 97 MW Medicine Hat, Alberta $165M Q4 2021 2 Whitla Wind Phase Medicine Hat, Alberta 54 MW $92M Q4 2021 3 Strathmore Solar 40.5 MW Strathmore, Alberta $53M* Early 2022 Enchan
Slide 34: Building a low-carbon future
Building a low-carbon future Wind development: evolved from a commodity product to technological solution In-house construction and engineering expertise provides competitive advantage and facilitates continuous improvement Whitla 2 and 3 incorporate and further improve on the strategies used in Whi
Slide 35: Ops 2030 generates $50M in annual EBITDA by 2030
Ops 2030 generates $50M in annual EBITDA by 2030 Creating the sustainable plant of the future through technology and innovation Continuous Data Automation Digital Tools Flexible and Improvement Analytics • Mobility in • 3D printing and Remote Operation • Wind turbine • Deployment of operator rounds
Slide 36: Highlights
Highlights • Sustained operational excellence through challenging conditions • Leveraging existing infrastructure and equipment to optimize Genesee repowering • Significant renewables growth and expanding our technology mix • Innovation and optimization continues through Ops 2030 Capital Power is bu
Slide 37: Delivering growth
Delivering growth • Transparent path to 10-12% total shareholder return • Target markets support $500M annual capital investment • Growth strategy aligns with our sustainability goals Bryan DeNeve Senior Vice President, Business Development and Commercial Services 37
Slide 38: Accelerating our technology strategy
Accelerating our technology strategy Wind & Natural Solar Gas1 Carbon Conversion 1 As the technologies become economically feasible, emissions will be reduced or eliminated via CCUS or an increasing percentage of hydrogen blending. 2 Storage includes physical storage such as pumped hydro as well as
Slide 39: Growing our business to net carbon neutral
Growing our business to net carbon neutral Today 2024 and beyond Building and acquiring Investing in emissions Integration of facilities in Canada and the free renewables storage technologies U.S. Reduce emissions Investing in critical natural Acquiring key facilities in profile through carbon gas g
Slide 40: Dynamic pipeline supports resilient and responsible growth
Dynamic pipeline supports resilient and 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 Potent
Slide 41: U.S. on pace for 23 GW of wind installations in 2020
U.S. on pace for 23 GW of wind installations in 2020 smashing previous record by 10 GW 2020 2040 Growth Drivers: • Decline in cost • Increased efficiency • Demand from corporates • Government policies • Storage +296 GW Solar 176 GW +119 GW Wind 640 GW +49 GW Storage Success in solar more than double
Slide 42: ESG priorities drive surging corporate demand for renewables
ESG priorities drive surging corporate demand for renewables 100% renewable power targets >40 GW Before 2020: Apple, Google, Lego Group, Microsoft, Starbucks, TD Bank, VISA By 2020: Etsy, Facebook, Goldman Sachs, JPMorgan Chase, Mastercard By 2021: Lululemon athletica >500 MW By 2022: Morgan Stanley
Slide 43: Growth in U.S. renewables
Growth in U.S. renewables Increasing carbon free generation to reach net carbon neutral before 2050 Cardinal Point Buckthorn Bear Branch Hornet Hunter’s Cove Wind Wind Solar Solar Solar 150 MW 100.5 MW 35 MW 75 MW 50 MW 12 Year Power Contract 15 Year weighted 20 Year Contract 20 Year Contract 20 Yea
Slide 44: Growth in Alberta renewables
Growth in Alberta renewables Increasing carbon free generation to reach net carbon neutral before 2050 Whitla 2 Whitla 3 Strathmore Enchant Wind Wind Solar Solar 97 MW 54 MW 40.5 MW 75 MW Contracting available Contracting Available 25 Year Contract Contracting Available Q4 2021 COD Q4 2021 COD Q1 20
Slide 45: Securing long term PPAs delivers stable cash flows
Securing long term PPAs delivers stable cash flows Strathmore Duke Offtake • Long Term 25-year PPA • Long Term 20-year PPA • 40.5 MW, 100% output • 160 MW, 100% output • Bundled energy and environmental • Bundled energy and environmental attributes attributes • Investment grade counterparty • Invest
Slide 46: Gas generation vital for reliability and flexibility
Gas generation vital for reliability and flexibility Growth Drivers: 2020 2040 • Coal & nuclear retirements • Renewables proliferation • Low gas prices 717 GW +205 GW Gas 719 GW -202 GW Coal Value of incumbent assets: • High barrier to entry • Strategic placement • Optimization potential Coal Gas So
Slide 47: Repowering Genesee delivers long term value
Repowering Genesee delivers long term value Hydrogen Carbon conversion Resiliency to 20%+ levered utilization ready carbon policy returns 47
Slide 48: More competitive after repowering
More competitive after repowering Estimated variable cost merit order in 2025 $/MWh Older CTG units not competitive (retire?) 80 Older CTG Units 70 60 GN1&2 Dual Fuel 50 GN3 Dual Fuel 40 Older CTG Units 30 GN 1&2 become 20 very efficient GN3 CTG GN 3 remains in 10 middle of stack GN1&2 Repower 0 0 5
Slide 49: Repowered Genesee most competitive new gas
Repowered Genesee most competitive new gas Repowering is a game-changing investment 7.6 Sundance 5 Repower Least 7.4 Competitive 7.2 Heat Rate (GJ/MWh) Cascade 7 Genesee 1&2 Repower 6.8 6.6 Oil Sands Base Plant Cogen 6.4 Most 6.2 Competitive 6 - 0.50 1.00 1.50 2.00 2.50 Capex per Capacity ($/Watt) C
Slide 50: Sustainable advantages of the Genesee Site
Sustainable advantages of the Genesee Site Bulk electrical transmission Proximity to industrial heartland Trunkline and caverns for storage Hydrogen ready Potential to create hydrogen onsite Potential to extend Carbon conversion ready Genesee life beyond repowering and advance our 2050 Human capital
Slide 51: Genesee Carbon Conversion Centre
Genesee Carbon Conversion Centre World’s largest carbon nanotube production facility Stronger cement Enhanced battery products More durable tires Tougher anti-corrosion products 51
Slide 52: Optimizing Decatur: upgrades and re-contracting add value
Optimizing Decatur: upgrades and re-contracting add value Mid-life contracted gas assets acquisition strategy validated • 10-year tolling agreement extension to 2032 • 2 of 3 combustion turbine (CT) upgrades completed adding 60 MW of capacity • Third CT to be upgraded in 2021 adding 30 MW of capacit
Slide 53: Markets outlook
Ontario Markets outlook • Load recovering • Fully contracted portfolio • High value for location and flexibility • Supply shortfall in medium term • Electrification US SW • Expiring contracts • Strong load growth • Nuclear refurbishment/retirements • Coal retirements • New-build gas moratorium • Ren
Slide 54: Alberta power market – COVID and crude oil impact
Alberta power market – COVID and crude oil impact (1) (MWh) Alberta Internal Load (30-day rolling average) • Based on actual 30-day rolling 11,000 averages, largest year-over- 2019 2020 year (yoy) decline in power 10,500 demand was ~7.2% due to 1.7% COVID-19 pandemic and low increase 10,000 crude oi
Slide 55: Portfolio optimization
Portfolio optimization Actual and forecasted Alberta power prices 140 Since Average Lowest Highest Q3/09 Price Quarter Quarter 120 Captured $60 $38 $80 100 Spot $50 $15 $123 $/MWh 80 60 40 20 0 3rd Party Forecast Range Average AB spot power price Capital Power captured price Forwards (11/23/20) High
Slide 56: Diversification, Resiliency and Sustainability
Diversification, Resiliency and Sustainability 2014 2020F 2025F Natural EBITDA by fuel type gas 13% Natural gas / coal Focusing on renewables dual-fuel Renewables Natural 29% 34% and hydrogen/CCUS-ready Renewables Coal gas 44% 21% natural gas 66% Natural gas 66% Renewables 27% US 2% EBITDA by geogra
Slide 57: Shareholder value in a low carbon future
Shareholder value in a low carbon future • Deploying capital to grow renewables portfolio • Repowering Genesee provides shareholder value from environmental benefits and extended economic life • Extending economic life of natural gas assets through technical innovation to generate long-term cash flo
Slide 58: Delivering shareholder value
Delivering shareholder value Creating shareholder value from resiliency in assets and extension of life • Maintenance and improvements to assets • Operational excellence keeps costs low and reduces risk • Creating sources of revenues by expanding opportunities in low carbon future Competitive positi
Slide 59: 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 60: Capital allocation balance
Capital allocation balance • Balanced focus between Dividend Growth dividend growth and growth growth opportunities opportunities • Growth focused on a lower- • Existing asset carbon fleet improvements • Allocating capital strategically to • Development projects develop, commercialize and • Acquisit
Slide 61: History of stable dividend growth
History of stable dividend growth Annualized dividend $2.30 $2.19 per share(1,2) $2.05 5% $1.92 7% $1.79 $1.67 $1.56 $1.46 $1.36 $1.26 42% 50% 45% 45% 35% 40% Payout(3) Payout Payout Payout Payout Payout 2013 Y/E 2014 Y/E 2015 Y/E 2016 Y/E 2017 Y/E 2018 Y/E 2019 Y/E 2020 Y/E 2021T 2022T Long-term AF
Slide 62: 5-year growth in key financial metrics
5-year growth in key financial metrics ($M) Adjusted EBITDA normalized 1100 AFFO Normalized $6.00 AFFO/share Normalized 1000 $5.00 900 800 $4.00 700 $3.00 600 500 $2.00 400 $1.00 300 200 $0.00 2016 2017 2018 2019 2020T 2021T 5-year growth supported by average growth capex of $750M(3) per annum 1) No
Slide 63: AFFO for 2021
AFFO for 2021 Resilient AFFO absorbing carbon tax increase and asset retirements ($M) 1) 2021 AFFO represents midpoint of $500 - $550M guidance range excluding impact from Line Loss rule proceeding. 63
Slide 64: Cash flow and financing outlook
Cash flow and financing outlook Positive cash position and credit facilities to fund growth projects in 2021 Sources ($M) FFO(1) + off-coal compensation $650 Capital markets/debt refinancing/ asset recycling $510 DRIP reinvestment $70 $1,230 Uses Committed growth/enhancement capex $740 Dividends(3)
Slide 65: Capital program
Capital program ($M) Capital deployed to renewables and 350 repowering provide 370 significant financial contributions in 2022+ 360 180 245 25 5 30 30 - 10 95 110 85 90 60 2021 2022 2023 2024 2025 (1) Sustaining capex Enhancement & GPS capex Other committed capital Genesee repower 1) Includes net ca
Slide 66: Financial benefits from Genesee repowering
Financial benefits from Genesee repowering • Genesee 1& 2 repowered units will be most efficient natural gas combined cycle units in Alberta that solidifies its position in the merit curve • 0.35 intensity eliminates our exposure to carbon tax under the current policy • ~$140M net increase in Adjust
Slide 67: Managing Alberta carbon exposure
Managing Alberta carbon exposure CPC Alberta Emissions Expense Carbon Offset Savings ($M) 41 52 20 160 102 87 3 17 14 2021 2022 2023 2024 2025 Low-cost offsets and transition to gas protect and enhance asset value 1) Assumes carbon prices increase to $40/tonne in 2021 and $50/tonne in 2022. 67
Slide 68: EBITDA growth from renewable projects
EBITDA growth from renewable projects Annualized EBITDA of ~$70M Total committed capital $665M ($165M in 2019, $500M in 2020) Enchant Solar Whitla 2 Hornet Solar Hunter’s Cove Solar Whitla 3 Average annualized EBITDA ~$70M Bear Branch Solar and AFFO of ~$55M after completion in late 2021 and 2022 St
Slide 69: Portfolio optimization
Portfolio optimization AB commercial portfolio positions (All data as of Nov 27/20) 2021 2022 2023 % sold forward(1) 21% 25% 17% Contracted prices(2) ($/MWh) High-$50 Mid-$50 Low-$50 Forward prices ($/MWh) $59 $57 $54 EBITDA sensitivity to a $5/MWh change in spot $52 $50 $58 prices(3) ($M) Strong tr
Slide 70: 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 credit rati
Slide 71: Key takeaways
Key takeaways • Significant deployment of capital on renewables and Genesee repowering • Total spend of ~$665M for 7 renewables development projects that begin commercial operations in late 2021 to 2022 • Reduced/eliminated carbon tax risk by being off-coal • Securing strong position in Alberta powe
Slide 72: 2021 Corporate Priorities
2021 Corporate Priorities A responsible, future-focused and attractive investment Brian Vaasjo President & CEO 72
Slide 73: 2021 annual operational and financial targets
2021 annual operational and financial targets 2020 Target 2021 Target Facility availability 93% 93% Sustaining capex ($M) $90 to $100 $80 to $90 Adjusted EBITDA ($M) $935 to $985 $975 to $1,025 AFFO ($M) $500 to $550 $500 to $550(1) 1) Excluding the impact from the Line Loss Rule proceeding. 73
Slide 74: Growth targets from development and construction projects
Growth targets from development and construction projects • Repowering proceeds on-time and on-budget • Continue developing renewable projects on-time and on-budget • $500 million committed capital for growth Budget ($M) Target COD Whitla Wind 2 (AB) $165 Q4/21 Whitla Wind 3 (AB) $92 Q4/21 Strathmor
Slide 75: Why invest in Capital Power?
Why invest in Capital Power? Resilient strategy drives growth and accelerates net carbon neutral before 2050 Success in renewables from innovation and optimization We create value • Success in solar more than doubles our growth opportunities through resiliency, • Duke and Strathmore contracts affirm
Slide 76: 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 joint venture interests, gains or losses on disposals and unrealized c
Slide 77: Forward-looking information
Forward-looking information Forward-looking information or statements included in the presentation 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 may not be appropriate for other
Slide 78: Keep the conversation going
Keep the conversation going. Follow us at: @capitalpower @capital-power @capitalpowercommunity capitalpower.com