Company’s New England power hub grows to more than 1,000 megawatts
EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) (Capital Power or the Company), through a subsidiary, has entered into an agreement to acquire Bridgeport Energy, LLC, which owns the Bridgeport Energy facility (Bridgeport Energy), from affiliates of LS Power Equity Advisors, LLC (LS Power) for U.S. $355 million, subject to working capital and other closing adjustments. Bridgeport Energy is a natural gas-fired combined cycle power generation plant located in Bridgeport, Connecticut, with a nominal capacity of 520 megawatts (MW).
“The acquisition of Bridgeport Energy is consistent with Capital Power’s commitment to growth in our target markets, and builds on the recently announced acquisitions of power plants in Tiverton, Rhode Island and Rumford, Maine” said Capital Power’s President and CEO, Brian Vaasjo. “On closing of these transactions, Capital Power will have invested U.S. $670 million in the New England region in 2011, adding more than 1,000 MW of combined cycle natural gas fired generation to our fleet.”
“Bridgeport Energy is a strong fit with our technology and operating focus,” Mr. Vaasjo continued. “It’s an efficient, young, mid-merit generation plant that can maximize energy and ancillary services revenue through operational flexibility. We expect the acquisition to exceed the rate of return Capital Power seeks from merchant assets, and to be accretive to earnings over both the first five-years and the expected 30-year remaining life of the facility. With three facilities in the region, we also expect to begin realizing synergies in operations, maintenance, energy and asset management, and power marketing.”
Capital Power expects the acquisition to add an average of $0.03 in earnings per share per year during the first five full years, with a neutral EPS impact in the first two full years. Capital Power will provide additional guidance, including earnings before interest, taxes, depreciation and amortization projections, upon closing.
The Company expects to permanently finance both New England acquisitions using a combination of debt and equity. The Company has entered into an agreement to sell 8,100,000 common shares of Capital Power on a bought deal basis at a price of $24.90 per share to a syndicate of underwriters, co-led by TD Securities Inc. and CIBC World Markets Inc., for gross proceeds of $201,690,000. In addition, Capital Power has granted the syndicate an over-allotment option, exercisable for a period of 30 days following closing, to purchase up to an additional 1,215,000 shares which, if exercised, would increase the gross offering size to $231,943,500. The offering is scheduled to close on or about March 17, 2011, and is subject to TSX approval and other customary conditions.
As with the Rumford and Tiverton acquisition, earnings from Bridgeport Energy are expected to increase significantly following the expected recovery of power prices in the New England market as the U.S. economy strengthens. Additional value creation is possible through the development of a peaking facility on the existing Bridgeport Energy site, when market conditions warrant.
Under the Purchase and Sale Agreement, a subsidiary of Capital Power L.P., the legal entity that directly and indirectly holds Capital Power’s assets, is acquiring one hundred per cent of the equity interests in Bridgeport Energy, LLC. The transaction is expected to close in May 2011, subject to regulatory approvals and satisfaction of other customary closing conditions.
Following the acquisition of Bridgeport Energy, and completion of the previously announced acquisitions of the Tiverton and Rumford facilities, Capital Power will have added or placed into development approximately 2,000 MW of generating capacity since the Company’s July 2009 Initial Public Offering.
Bridgeport Energy is a natural gas-fired combined cycle plant with a nominal capacity of 520 MW. Part of the New England Power Pool System, Bridgeport Energy dispatches into the premium Southwest Connecticut Zone of the ISO New England (“ISO-NE”) market, and has historically received payments for energy, capacity and ancillary services. Bridgeport Energy is a modern, efficient plant that has among the lowest heat rates in ISO-NE. The site has adequate space to develop a peaking facility when market conditions warrant.
Bridgeport Energy entered commercial operation in July 1999. It is equipped with two Siemens V84.3A gas turbines, which are the same design as those used at Capital Power Income LP’s facility in Colorado, and produces additional output from two Heat Recovery Steam Generators and one single-reheat condensing steam turbine. Electrical interconnection into the United Illuminating system is made via the Singer 345kV substation, and natural gas is supplied through a lateral to the Iroquois Gas pipeline system. The facility was designed to minimize environmental impacts and utilizes advanced emission control technologies, including selective catalytic reduction nitrogen oxide controls.
This press release does not constitute an offer to sell of a solicitation of an offer to buy any securities of the Corporation in any jurisdiction in which such offer, solicitation or sale would be unlawful. These securities have not been and will not be registered under the U.S. Securities Act or any U.S. state securities laws and may not be offered or sold in the United States except in compliance with the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws or pursuant to an exemption therefrom.
Release of 2010 Year End Financial Results
Capital Power will announce fourth quarter 2010 financial results by news release immediately following this announcement. The Financial Statements and Management’s Discussion and Analysis will be available at www.capitalpower.com shortly following issue of the Q4 news release.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on March 9, 2011, following release of fourth quarter 2010 results on March 8, 2011. Details of the webcast can be found in the Q4 news release. Management’s presentation at that time will include information on the Bridgeport Energy acquisition, and planned financing.
Certain information in this news release is forward-looking within the meaning of Canadian and U.S. securities laws as it relates to anticipated financial and operating performance, events or strategies. When used in this context, words such as will, anticipate, believe, plan, intend, target, and expect or similar words suggest future outcomes.
Forward-looking information includes, among other things, information relating to: (i) expectations that the acquisition of all of the equity interests in Bridgeport Energy, LLC (Acquisition) will exceed the targeted rate of return Capital Power seeks from merchant assets, (ii) the expected accretion to earnings from the Acquisition, (iii) the expected timing of the closing of the purchase transaction for the Acquisition, (iv) expectations that Bridgeport Energy will be able to maximize energy and ancillary services revenue through operational flexibility, (v) expectations that the Acquisition, with previously announced acquisitions in New England, will allow Capital Power to begin realizing synergies in operations, maintenance, energy and asset management, and power marketing, (vi) expectations that power prices will recover in the New England market, (vii) expectations that earnings from Bridgeport Energy will increase as power prices increase, (viii) expectations that a peaking facility will or can be developed on the existing Bridgeport Energy site; (ix) expectations regarding the addition on average of $0.03 in earnings per share (EPS) per year during the first five full years, with neutral EPS impact in the first two full years; and (x) expectations related to the manner in which the Acquisition will be financed.
These statements are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements include, but are not limited to: (i) the operation of Bridgeport Energy; (ii) Bridgeport Energy’s availability; (iii) the Company’s financial position and credit facilities and sources of financing; (iv) the Company’s assessment of commodity and power markets; (v) the Company’s assessment of the markets and regulatory environments in which Bridgeport Energy operates; (vi) expected recovery of power prices in the New England market as the U.S. economy strengthens, (vii) weather; (viii) availability and cost of labour and management resources; (ix) performance of contractors and suppliers; (x) availability and cost of financing; (xi) management’s analysis of applicable tax legislation; (xii) the currently applicable and proposed tax laws will not change and will be implemented; (xiii) currently applicable and proposed environmental regulations will be implemented; (xiv) counterparties will perform their obligations; (xv) the Company’s ability to successfully integrate and realize benefits of the Acquisition; (xvi) the Company’s ability to implement strategic initiatives which will yield the expected benefit; and (xvii) the Company’s assessment of capital markets and ability to complete future securities offerings.
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results and experience to differ materially from the Company’s expectations. Such risks and uncertainties include, but are not limited to, risks and uncertainties relating to: (i) operation of Bridgeport Energy; (ii) Bridgeport Energy’s availability and performance; (iii) unanticipated maintenance and other expenditures; (iv) availability and price of energy commodities; (v) electricity load settlement; (vi) regulatory and government decisions including changes to environmental, financial reporting, and tax legislation; (vii) weather and economic conditions; (viii) competitive pressures; (ix) availability and cost of financing; (x) availability and cost of labour, equipment and management resources; (xi) performance of counterparties, partners, contractors and suppliers in fulfilling their obligations to the Company; (xii) developments in North American capital markets; (xiii) compliance with financial covenants; (xiv) ability to successfully realize the benefits of the Acquisition; (xv) the tax attributes of the Acquisition; and (xvi) the outcome of the review of Capital Power Income L.P.’s strategic alternatives jointly announced by Capital Power and Capital Power Income L.P. on October 25, 2010 and any transaction that may result therefrom.
If any such risks actually occur, they could materially adversely affect the Company’s business, financial condition or results of operations. In that case the trading price of the Company’s common shares could decline, perhaps materially. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Forward-looking statements are provided for the purpose of providing information about management’s current expectations, and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.
About Capital Power Corporation
Capital Power is a growth-oriented North American independent power producer, building on more than a century of innovation and reliable performance. The Company’s vision is to be recognized as one of North America’s most respected, reliable and competitive power generators. Headquartered in Edmonton, Alberta, Capital Power has interests in 32 facilities in Canada and the U.S. totaling nearly 3,800 megawatts of generation capacity. Capital Power and its subsidiaries develop, acquire and optimize power generation from a wide range of energy sources.