Capital Power Corporation · TSX:CPX

Capital Power — Investor Presentation (February 2018)

47 slides from Capital Power's investor presentation, February 2018

1. Slide 1: Driving a Sustainable Future

   Driving a Sustainable Future Brian Vaasjo, President & CEO Bryan DeNeve, SVP Finance & CFO Investor Presentation February 2018 capitalpower.com

2. Slide 2: Capital Power well-positioned for yield improvement

   Capital Power well-positioned for yield improvement Solid performance  Operational excellence  Asset optimization  Commodity management Strong growth  Achieved though 2017  Positioned for additional growth Dividend guidance  7% annual guidance through 2020  Based on existing growth Declining

3. Slide 3: Alberta power market upside

   Alberta power market upside Step-change increase in AB power prices starting in 2018  Current forward prices in $55-$60/MWh range for 2018 and 2019 compared to $22/MWh average in 2017 • Decommissioning and mothballing of older coal units • Higher carbon taxes • Demand growth from improving AB econo

4. Slide 4: Alberta market forecasts

   Alberta market forecasts Uplift in power prices starting in 2018  Announced early retirements and mothballing of coal-fired units reduce supply in the market  Balancing Pool returning PPAs to owners  Demand growth recovering  Pass-through of higher environmental compliance costs  Mandated coal

5. Slide 5: Alberta load growth

   Alberta load growth(1) Fundamentals improving Fort McMurray Wildfires capitalpower.com 5

6. Slide 6: Alberta power market outlook

   Alberta power market outlook AB commercial portfolio positions (as of Dec 31/17) Forward prices ($/MWh) $65 2018 2019 2020 $60 % baseload $55 generation sold 87% 37% 20% forward(1) $50 Contracted prices(2) High- Low- Low- $45 ($/MWh) $40 $50 $50 $40 Sep 30/17 Dec 7/17 Feb 13/18 2018 Forwards 2019 Fo

7. Slide 7: Maximizing the commodity portfolio

   Maximizing the commodity portfolio Creating incremental value through market expertise Average realized power prices(1) have exceeded spot power prices ($/MWh) by 24% since the Company’s inception 8 years ago $125 $100 $75 $50 $25 $0 (1) Average AB spot power price Capital Power captured AB price 1)

8. Slide 8: Capacity market design

   Capacity market design Key components of Draft 1  AESO released Draft 1 of the Comprehensive Market Design on Jan 26/18  Overall, design appears constructive and resembles a market structure where existing and future assets have the opportunity to earn a return on/of capital without putting undue

9. Slide 9: Capacity market design

   Capacity market design AESO’s forecast revenue for baseload facilities commencing in 2021 based on proposed design $/MWh $70 Start of capacity market Under the capacity $60 market, AESO’s forecast $50 of $55-$65/MWh for the $40 combined capacity and $30 energy payments will $20 allow existing and fu

10. Slide 10: Alberta power market design change

    Alberta power market design change Transition to a capacity market from energy-only market by 2021 Alberta Government Objectives System Reliability Investor Confidence Investment Signals System stability as renewables Opportunity for new and To strike a balance between are brought on under the exist

11. Slide 11: Alberta growth opportunities

    Alberta growth opportunities $20B+ opportunity Halkirk 2  Coal phase-out  Junior developer consolidation • 148 MW • >2,500 MW of capacity • Next to existing facility  Renewable Electricity Program • 37%+ capacity factor • 5,000 MW opportunity • Available transmission  Gas-fired opportunities • L

12. Slide 12: Alberta strategic position

    Alberta strategic position Siksika Nation Siksika Nation • Exclusive agreement to jointly develop new generation • 172,000 acres of land • Solar, wind, and gas project potential • Attractive location • Existing transmission and distribution infrastructure • Ample water • Potential for renewable attr

13. Slide 13: Whitla Wind (phase I) awarded 20-year contract

    Whitla Wind (phase I) awarded 20-year contract Successful bidder in 1st round of REP  1 of 3 successful proponents selected by AESO under the Renewable Electricity Program (REP) that attracted global participation  Awarded a 20-year contract for 201.6 MW • Specific price guaranteed subject to perf

14. Slide 14: Alberta power market

    Alberta power market Renewable Electricity Program (REP) – Rounds 2 & 3  Next two rounds of the REP target 700 MW of new renewable capacity  Key requirements under both rounds REP-2 (300 MW) Minimum Indigenous • new or expanded renewable electricity generation equity component (i.e. projects owner

15. Slide 15: Canadian opportunity set

    Canadian opportunity set Saskatchewan Significant investment required by 2030 Targeting 50% renewable generation capacity by 2030 • 1,600 MW of new wind British Columbia Site C uncertainty Ontario Development sites: Nuclear retirements • 2x wind Market renewal • 1x gas • Incremental capacity auction

16. Slide 16: US wind development opportunities

    US wind development opportunities Tisch Mills Our approach New Frontier • • 100 MW >7 m/s wind speed • 99 MW • MISO Nolin Hills • >8 m/s wind speed • WI RPS • MISO • Advanced DPP • 350 MW • Executed GIA • >6 m/s wind speed • Contracted Black Fork • 100-180 MW • >6 m/s wind speed Garrison Butte • PJM

17. Slide 17: U.S. tax reform

    U.S. tax reform  Investment Tax Credits (ITC) and Production Tax Credits (PTC) eligibility rules remain unchanged  Base Erosion and Anti-Abuse (BEAT) provision • Impacts on investors appetite = modest yield pressure • No material impact on US windfarm model  Corporate tax rate reduced from 35% to

18. Slide 18: Executing on strategies to reduce GHG costs/risks

    Executing on strategies to reduce GHG costs/risks Carbon price  Alberta carbon price of $30/tonne in place January 1, 2018  Government model shifts the profile of existing carbon credit value realization but maintains overall value to Capital Power Management of risks and opportunities  First yea

19. Slide 19: Genesee generation station

    Genesee generation station Industry leader through the carbon transition Advantages  Highest availability for Alberta coal plants (96% over last 3 years)  Lowest fuel cost from mine mouth operation  Youngest units (21 years average) in Alberta  Excellent maintenance history and focused reliabili

20. Slide 20: GPS program savings

    GPS program savings Program reduces fuel & carbon compliance costs(1) GPS Program - carbon & fuel costs annual savings  Program targets an 11% $40,000 reduction in GHG $35,000 emissions Avoided Costs ($000) $30,000  $50M forecasted capital $25,000 investment accelerated $20,000 resulting in greate

21. Slide 21: Mitigating carbon costs

    Mitigating carbon costs Savings Agreement with Balancing Pool  Agreement in place with Balancing Pool to share savings from reduction in GHG emissions at Genesee 1 & 2. Absent this Agreement, Balancing Pool as the buyer of the PPA would receive 100% of the savings  Under Agreement, Capital Power r

22. Slide 22: Coal-to-gas conversion transition plan

    Coal-to-gas conversion transition plan Optimal operational flexibility for Genesee units  Anticipate decision point in 2020 due to carbon & natural gas pricing  Timing of conversion flexible with conversion period of 9 months or less  Outage of 2 months per unit; capital cost of $25M-$50M per uni

23. Slide 23: Alberta's coal fleet

    Alberta’s coal fleet Retirements under federal / provincial regulations and conversion to gas AESO max Age in End of capacity 2018 coal life Coal to gas conversion Facility (MW) (yrs) (CLP)(1) Current Status Expectation PPA status Battle River 3 149 49 2019 Online ATCO announced CtG by 2020 Merchant

24. Slide 24: Strategically evolving profile

    Strategically evolving profile Decreasing risk and growing cash flows Generation Contracted North American technology capacity footprint 2015 42% gas and 66% Contracted 74% Alberta renewables 54% gas and 2017 renewables 79% Contracted 63% Alberta Fuel Greater Geographic diversification visibility di

25. Slide 25: Overview of financial strategy

    Overview of financial strategy  Annual 7% dividend growth within AFFO payout ratio of 45- 55%  Provide stability through contracted cash flow profile  Maintain and improve competitive cost of capital  Ensure strong access to capital markets  Provides stability to the dividend  Properly laddere

26. Slide 26: Capital allocation

    Capital allocation Dividend 1) Maintain growing dividend backed by sufficient Growth contracted cash flow base Capital 2) Fund growth opportunities in the near Growth term with discretionary cash flow Allocation Opportunities Share 3) Consider debt reduction and share buybacks Buybacks absent growth

27. Slide 27: AFFO continues to support dividend growth

    AFFO(1,2) continues to support dividend growth Cash available for common share dividends and growth $400 $380 $361  CAGR of ~10% since 2014 $350 $324 $300 $292 44% 46% $256 $250 41% ($M) 49% $200 51% $150 Gross common dividends(3) Discretionary cash flow $100 $50 $- 2014 2015 2016 2017 2018T Averag

28. Slide 28: Common share dividend guidance

    Common share dividend guidance Targeting 7% annual increase Annualized dividend per share(1,2) $2.05 $1.92 $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 2018T 2019T 2020T  AFFO payout ratio of 44% in 2017 was slightly below the target annual payout ratio of 45-55%

29. Slide 29: Contracted EBITDA growth

    Contracted EBITDA growth(1-6) $700 Savona and 150 Mile House $600 Decatur East Windsor $500 York Energy Off-coal compensation Bloom $400 Macho Springs and Beaufort ($M) K2 Wind $300 Shepard PD&N Halkirk $200 Quality Wind Island Generation North Carolina $100 Kingsbridge 1 Genesee 1&2 $0 2014 2015 20

30. Slide 30: Financial obligations covered by contracted cash flow

    Financial obligations covered by contracted cash flow Operating margin(1,6) to financial obligations(2) and dividends(3) 140% 130% Contracted(5) + merchant ($60/MWh) 120% Contracted(5) + merchant (forwards(4)) 110% Contracted(5) + merchant ($40/MWh) Contracted(5) margin 100% Minimum Alberta power pr

31. Slide 31: Cash flow and financing outlook

    Cash flow and financing outlook Sufficient funding for current growth projects 2018T Sources of cash flow ($M) Funds from operations(3) + coal compensation $505 Estimated proceeds from tax-equity debt (New Frontier Wind) $125 $630 Uses of cash flow Dividends (common & preferred shares) ($215) New Fr

32. Slide 32: Financial strength

    Financial strength Strong balance sheet and investment grade credit rating  Investment grade credit ratings Agency Ratings Outlook by 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 Corporate Liquidity(1) Debt to to

33. Slide 33: Credit metrics

    Credit metrics Within DBRS financial criteria for current rating Cash flow/Debt(1) EBITDA/Interest(1) 30% 7.0 6.0 25% 5.0 20% 4.0 15% 3.0 10% 2.0 5% 1.0 0% 0.0 2017 2018T 2017 2018T Within S&P financial criteria for investment grade rating Adj. FFO/Adj. Debt(1,2) Adj. Debt/Adj. EBITDA(1,2) 20% 5.0 1

34. Slide 34: Financial outlook

    Financial outlook  Growing dividend supported by AFFO growth  Financial obligations and dividends covered by contracted cash flow  Financial capacity to fund growth  Access to capital remains strong  In addition to hedges on 700 MW of baseload generation, have ability to capture upside from hig

35. Slide 35: 2018 Financial target

    2018 Financial target Adjusted funds from operations(1) AFFO(3) per share ($M) $4.00 $3.59 $3.65 $360 to $400(2) $400 $363 $3.21 $3.04 $300 $3.00 $2.51 $200 $2.00 $100 $0 $1.00 2017 2018T $0.00 2014 2015 2016 2017 2018T 2018 AFFO expected to be above Expect ~10% CAGR for the mid-point of the guidanc

36. Slide 36: 2018 Development & construction targets

    2018 Development & construction targets Disciplined growth  Complete New Frontier Wind within $182M budget for COD in Dec 2018  Complete Whitla Wind within $315-$325M budget for COD in Q4 2019  Execute contracts for the output of 1-3 new wind developments • Alberta REP – rounds 2 & 3 • US develop

37. Slide 37: Attractive investment opportunity

    Attractive investment opportunity 2018  Growth in AFFO partially offset by carbon tax  Alberta market Reduced risk / strong • Other coal plants coming off line and significant demand diversification growth – higher prices reflected in forward curve  Increasing contracted cashflow • Greater clarit

38. Slide 38: Appendices

    Appendices capitalpower.com

39. Slide 39: Debt maturity schedule

    Debt maturity schedule(1) ~$1B in committed credit facilities renewed with 5-year tenor maturing 2022, of which virtually all is available(1) $400 $450 $350 $300 $300 ($M) $250 $250 US $230 $200 US $65 $150 $160 $100 $50 $11 $0 2018 2019 2020 2021 2022 2023 2024 2025 2026 EPCOR Capital Markets CAD P

40. Slide 40: Summary of assets

    Summary of assets Alberta Alberta Commercial Contracted Clover Genesee Genesee Genesee Clover Bar Bar Shepard Energy 1 2 3 Keephills 3 Joffre Energy 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 / 0 40 /

41. Slide 41: Summary of assets

    Summary of assets Ontario & British Columbia Contracted Island Quality 150 Mile Port Dover & East Generation Wind Savona House Nanticoke Kingsbridge 1 K2 Wind York 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 / 0 100 / 100

42. Slide 42: Summary of assets

    Summary of assets U.S. Contracted Roxboro Southport Macho Springs Beaufort 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, North Southport, North Luna County, N

43. Slide 43: Projects under development/construction

    Projects under development/construction Alberta Commercial Alberta Contracted U.S. Contracted Genesee 4&5 Halkirk 2 Whitla Wind (Phase I) New Frontier Wind Capacity Up to 1,060 MW 150 MW 201.6 MW 99 MW % owned / operated 50 / 100 100 / 100 100 / 100 100 / 100 Location Warburg Halkirk Medicine Hat Mc

44. Slide 44: 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 its joint venture interests, and gains or losses on disposals (adjusted EBITDA), (ii) adjusted

45. Slide 45: Non-GAAP financial measures (cont'd)

    Non-GAAP financial measures (cont’d) • Historically, the impacts of tax equity financing structures on adjusted funds from operations have been insignificant. With the commencement of commercial operations of Bloom Wind in 2017, management has revisited the flow of these operations through the adjus

46. Slide 46: 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

47. Slide 47: Investor Relations

    Investor Relations Randy Mah 10423 101 Street NW Senior Manager 10th Floor (780) 392-5305 Edmonton, Alberta rmah@capitalpower.com Canada, T5H 0E9 www.capitalpower.com capitalpower.com

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