Plans to develop new Capital Power Energy Centre with commercial operation targeted in 2017 to 2020 timeframe
EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) (“Capital Power” or the “Company”) is hosting its annual Investor Day event in Toronto today at the St. Andrew’s Club and Conference Centre (150 King Street West, 16th floor). Registration starts at 8:00 a.m. followed by Company presentations beginning at 8:30 a.m. Members of the executive leadership team will provide updates on Capital Power’s corporate developments, operations and construction projects, the outlook for its target markets and its corporate priorities for 2013.
“Alberta remains one of the fastest growing economies and power markets in North America and continues to be an attractive market in which to invest,” said Brian Vaasjo, President and CEO of Capital Power. “Today, we are announcing the first step of our expansion plans in Alberta with our joint venture agreement with ENMAX Corporation (“ENMAX”) to build, own and operate the Shepard Energy Centre (“Shepard”) with scheduled completion in early 2015. I’m pleased to announce further expansion in Alberta with our intention to develop the Capital Power Energy Centre (“CPEC”), a large natural gas facility that will utilize General Electric’s (“GE”) latest gas turbine technology. The CPEC is scheduled for completion in the 2017 to 2020 timeframe when additional generation in the province is required to meet growing demand and replace generation from the retirement of coal-fired units.”
“Our investment in the Shepard facility provides a unique opportunity for contracted investment in Alberta,” Mr. Vaasjo continued. “The 20-year tolling agreement with ENMAX for a large portion of our output from the Shepard facility allows us to reposition our Alberta portfolio and significantly reduce our business risk by increasing our overall contracted position. In the 2017 to 2020 timeframe, we will be well positioned to meet the province’s need for new generation with our investment in the CPEC.”
“With the addition of these two large, efficient natural gas facilities, Capital Power will own the best fleet of power generation assets in Alberta with approximately 3,100 megawatts (“MW”) of owned capacity in the fastest growing power market in North America,” added Mr. Vaasjo.
Partnership with ENMAX Corporation on the Shepard Energy Centre facility
On December 6, 2012, Capital Power and ENMAX Corporation announced the signing of a joint venture agreement to build, own and operate the 800 MW Shepard facility. Shepard is a natural gas combined cycle facility located on the southeast edge of Calgary, Alberta. The facility is currently under construction and is approximately half completed with an expected commercial operation date (“COD”) in the first quarter, 2015. Once completed, ENMAX will operate the facility and Capital Power will dispatch the electrical output.
Both parties have also entered into various commercial agreements including a 20-year tolling agreement. Under the terms of the tolling agreement, ENMAX will pay Capital Power a fixed capacity charge for 75% of Capital Power’s share of the output from the Shepard facility for the 2015 to 2017 period, and decreasing to 50% of Capital Power’s output for 2018 to 2035. The tolling agreement has operating and maintenance cost flow-through provisions to ENMAX. Commercial arrangements also include contracts for differences for 100 MW in 2013, 300 MW in 2014, and 100 MW in 2015 at current Alberta forward power prices.
The project is expected to be moderately accretive to Capital Power’s cash flow and earnings over each of the first five years of operations and significantly more accretive thereafter; after-tax unlevered returns are expected to exceed a 10% hurdle rate over the project life. Capital Power plans to finance its 50% share of the approximate $1.6 billion construction budget (includes interest during construction) for Shepard with: proceeds from a planned divestiture of its Halkirk Wind (“Halkirk”) facility in 2013; cash from operations; proceeds from dividend reinvestment programs; proceeds from the issuance of preferred shares; and a modest amount of debt.
Planning underway to develop the Capital Power Energy Centre
Capital Power plans to develop the new CPEC, a large natural gas combined cycle power generation facility, in Alberta to meet provincial power needs. Capital Power plans to work with GE and potentially other partners in the development of the project utilizing GE’s latest gas turbine technology which offers the highest efficiency and most flexibility in the gas turbine market today. This fast start technology is ideally suited for the Alberta market. Generation capacity for the CPEC facility is expected to be up to 900 MW, which can be constructed in phases beginning with initial capacity at 400 MW.
Capital Power has identified two attractive brownfield sites for the CPEC facility. The Company controls one site exclusively and is in the advanced stages of evaluation for the second site. Both of the sites have existing infrastructure and utilities, and are in close proximity to gas pipelines and high-voltage transmission lines.
Capital Power and GE are targeting to have the project achieve commercial operations in the 2017 to 2020 timeframe when additional generation in Alberta is projected to be required to meet growing demand and replace generation from the retirement of coal-fired units.
Capital Power has extensive experience in successfully constructing large-scale projects in the Alberta market including the Genesee 3 and Keephills 3 coal-fired facilities, the Clover Bar Energy Center gas-fired peaking plant and the recently completed Halkirk facility.
Halkirk Wind facility begins commercial operations
Capital Power has completed the construction of its 150 MW Halkirk facility located in central Alberta. The Alberta Electric System Operator (“AESO”) declared Halkirk’s COD on December 1, 2012. The facility was completed slightly ahead of schedule and final cost is expected to be approximately 3% below its $357 million budget, including acquisition costs.
Halkirk will earn revenues from the sale of energy into the Alberta spot market, and from the sale of Renewable Energy Credits (“RECs”) to Pacific Gas and Electric under a 20-year fixed-price agreement. Approximately 40% to 45% of Halkirk’s revenue is expected to come from the sale of RECs.
Outlook for 2013
At its Investor Day, the Company will discuss its financial targets and corporate priorities for 2013 including:
- Operational targets of 93% capacity-weighted average plant availability, reflecting planned turnarounds at the Genesee 1 and Keephills 3 facilities, plant maintenance capital and other expenditures of up to $105 million, and maintenance and operating expenses of $225 million to $245 million;
- On-time, on-budget and safe construction of current development projects, including commissioning of the Port Dover and Nanticoke wind project in fourth quarter 2013;
- 2013 financial targets based on an average Alberta spot price of $58 per megawatt hour:
- Normalized earnings per share of $1.20 to $1.40;
- Cash flow per share of $3.80 to $4.20; and
- Funds from operations of $385 to $415 million.
A live audio webcast of the Investor Day event will be available on the Company’s website at www.capitalpower.com beginning on December 6, 2012. The presentation slides and webcast will be archived and accessible for replay.
About Capital Power Corporation
Capital Power (TSX: CPX) is a growth-oriented North American power producer headquartered in Edmonton, Alberta. The company develops, acquires, operates and optimizes power generation from a variety of energy sources. Capital Power owns more than 3,600 megawatts of power generation capacity at 16 facilities across North America. An additional 595 megawatts of owned generation (including the Shepard Energy Centre) is under construction or in advanced development.
Non-GAAP Financial Measures
The Company uses (i) EBITDA, (ii) funds from operations, (iii) funds from operations excluding non-controlling interests in CPILP, (iv) cash flow per share, (v) dividend coverage ratio, (vi) normalized earnings attributable to common shareholders, and (vii) normalized earnings per share as financial performance measures. These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP, and therefore may not be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to gross income, net income, net income attributable to Shareholders of the Company, net cash flows from operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to complement GAAP measures in the analysis of the Company’s results of operations from management’s perspective.
Certain information in this news release is forward-looking within the meaning of Canadian securities laws as it relates to anticipated financial and operating performance, events or strategies. The forward-looking information or statements 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 purposes. The forward-looking information in this news release is generally identified by words such as will, anticipate, believe, plan, intend, target, and expect or similar words that suggest future outcomes. Material forward-looking information includes, among other things, information relating to: (i) expectations regarding Capital Power’s sources of funding; (ii) expectations regarding future growth and emerging opportunities in the Alberta market including the focus on certain technologies; (iii) expectations regarding the timing of, funding of, and costs for existing and planned development projects and acquisitions; (iv) expectations regarding plant availability; and (v) expectations regarding future earnings and funds from operations.
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. All forward-looking information or statements reflect Capital Power’s 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. Readers are cautioned not to place undue reliance on this forward-looking information. Capital Power undertakes no obligation to update or revise any forward-looking information except as required by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from the anticipated results, refer to Capital Power’s Management’s Discussion and Analysis dated and filed March 13, 2012 under Capital Power’s profile on SEDAR at www.sedar.com and other reports filed by Capital Power with Canadian securities regulators.