EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) (“Capital Power” or the “Company”), a growth-oriented North American power producer with a strategic focus on reliable, affordable and decarbonized power, today released their financial and operational results for the third quarter ended September 30, 2023.
- Generated adjusted funds from operations (AFFO) of $296 million and net cash flows from operating activities of $480 million
- Generated adjusted EBITDA of $410 million and net income of $272 million
- 2023 full year adjusted EBITDA and AFFO are currently trending below the midpoint of the annual guidance ranges
- Entered into an agreement to acquire 50.15% interest in the 265 megawatts (MW) Frederickson 1 Generating Station in Pierce County, Washington that strategically diversifies our geographic presence in North America
- Completed a $350 million medium term note offering at a coupon rate of 5.816% that will mature on September 15, 2028
- Expanded Executive Team to drive strategic growth of reliable, affordable and decarbonized power
“During the quarter, we once again saw strong fleetwide performance. Solid contributions from our U.S. and Ontario contracted assets – including the Midland Cogeneration Venture in Michigan that we acquired just over a year ago – partially offset the impact of lower realized power prices in the Alberta commercial portfolio and underscore the benefit of a diversified fleet,” said Sandra Haskins, SVP Finance and CFO of Capital Power. Ms. Haskins added that “based on year-to-date results and our outlook for the fourth quarter, 2023 full year results are currently trending below the midpoint of the guidance range for AFFO and adjusted EBITDA.”
“As we work towards achieving net zero in our power supply by 2045, we continue to capitalize on opportunities to diversify our footprint and deliver reliable, affordable and decarbonized power for communities across North America,” said Avik Dey, President and CEO of Capital Power. “Consistent with our mid-life natural gas strategy, we’ve entered into an agreement to acquire the high-quality Frederickson 1 Generating Station that will diversify our presence into the Pacific Northwest. This fully contracted, flexible power generation asset is well-positioned to provide reliable, long-term energy security in the region,” stated Mr. Dey.
Capital Power has expanded its Executive Team and optimized their portfolios to lead the Company to net zero by 2045. “With decades of industry experience, this dynamic group is the propelling force behind the development of critical solutions that will meet the growing long-term demand for power across North America. I am happy to extend a warm welcome to Pauline McLean, May Wong, Jason Comandante and Steve Wollin to our leadership team,” said Mr. Dey. “Lastly, Capital Power will host our Investor Day in Edmonton, Alberta on May 7 and 8, 2024. Further details and our 2024 full-year guidance will be announced in Q4 2023.”
Operational and Financial Highlights1
|(unaudited, $ millions, except per share amounts)||Three months ended
|Nine months ended
|Electricity generation (Gigawatt hours)||8,521||6,993||23,795||20,524|
|Generation facility availability||96%||96%||95%||94%|
|Revenues and other income||1,150||786||3,298||2,000|
|Adjusted EBITDA 2||410||383||1,138||1,050|
|Net income 3||272||31||642||227|
|Net income attributable to shareholders of the Company||274||34||647||236|
|Basic earnings per share ($)||2.27||0.21||5.33||1.76|
|Diluted earnings per share ($)||2.26||0.20||5.31||1.75|
|Net cash flows from operating activities||480||370||840||893|
|Adjusted funds from operations 2||296||328||657||708|
|Adjusted funds from operations per share ($) 2||2.53||2.81||5.62||6.08|
|Purchase of property, plant and equipment and other assets, net||262||224||479||503|
|Dividends per common share, declared ($)||0.6150||0.5800||1.7750||1.6750|
- The operational and financial highlights in this press release should be read in conjunction with the Management’s Discussion and Analysis and the unaudited condensed interim financial statements for the nine months ended September 30, 2023.
- 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 changes in fair value of commodity derivatives and emissions credits (adjusted EBITDA) and adjusted funds from operations (AFFO) are used as non-GAAP financial measures by the Company. The Company also uses AFFO per share which is a non-GAAP ratio. These measures and ratios do not have standardized meanings under GAAP and are, therefore, unlikely to be comparable to similar measures used by other enterprises. See Non-GAAP Financial Measures and Ratios.
- Includes depreciation and amortization for the three months ended September 30, 2023 and 2022 of $148 million and $133 million, respectively, and for the nine months ended September 30, 2023 and 2022 of $432 million and $414 million, respectively. Forecasted depreciation and amortization for the remainder of 2023 is $145 million for the fourth quarter.
$350 million medium term note offering
On September 15, 2023, the Company closed a public offering of unsecured medium term notes in the aggregate principal amount of $350 million (the Offering). These notes have a coupon rate of 5.816% and mature on September 15, 2028. The net proceeds of the Offering will be used to repay, redeem or refinance existing indebtedness, including indebtedness under Capital Power’s credit facilities, or for general corporate purposes.
Capital Power has expanded its Executive Team through internal promotions and an external hire to lead the Company to net zero by 2045. With decades of industry experience, they share a joint commitment to drive the energy transition through the delivery of reliable, affordable and decarbonized power generation solutions. The Executive Team’s portfolios have been optimized to enhance and accelerate the delivery of its strategy through corporate services, commercial business and asset management activities.
New members and portfolio changes
May Wong, Senior Vice President, Strategy, Planning and Sustainability
May leads the development and execution of Capital Power’s corporate strategy and sustainability direction and is accountable for the long-term planning process. With 20 years of service with the Company, May previously held the role of Vice President of Strategy, Forecasting and Sustainability, where she oversaw strategy, sustainability priorities, and the corporate analytics and commodity risk management function responsible for developing market assessment analytics across North American power markets.
Pauline McLean, Senior Vice President, External Relations and Chief Legal Officer
Pauline leads the legal, regulatory, corporate compliance and external relations functions of Capital Power. She also provides support, risk management, and strategic insights to senior management and the Board of Directors. Prior to joining Capital Power in September 2023, Pauline spent 14 years working for the Alberta Electric System Operator (AESO) in senior legal and commercial roles, and, prior to that, practiced corporate and commercial law.
Steve Wollin, Senior Vice President, Operations
Steve oversees the safe operation of approximately 7,500 megawatts of power generation capacity across North America, including Capital Power’s operations, supply chain and health, safety, security, and environment functions. He is responsible for reliability and plant efficiency programs that provide industry-leading plant availability and emission reductions. Steve also brings knowledge and hands on experience in pre-combustion and post-combustion Carbon Capture technologies. With 22 years of service with the Company, Steve previously held the positions of Vice President, Thermal Operations East and Renewables, where he oversaw the addition and integration of over 3,000 megawatts of assets to Capital Power’s portfolio, and Vice President, Engineering, where he established the Capital Power Reliability Program for the fleet.
Jason Comandante, Senior Vice President, Head of Canada
Jason oversees the physical and financial optimization of Capital Power’s Canadian fleet, the successful execution of Canadian development and acquisition opportunities, and the assessment and investment in decarbonization technologies in Canada. With 22 years of service with the Company, Jason has held senior leadership roles focused on commodity trading, corporate strategy, regulatory and commercial management including capital deployment into energy transition.
Bryan DeNeve, Senior Vice President, Chief Commercial Officer
Moving into a new portfolio, Bryan now oversees commercial business initiatives across North America, including the physical and financial optimization and decarbonization of Capital Power’s fleet. With 27 years of service with the Company, Bryan has previously served as Senior Vice President, Operations, where he was responsible for the safe operation of approximately 7,500 megawatts of power generation capacity across North America, as well as Senior Vice President, Business Development and Commercial Services and Senior Vice President, Finance and Chief Financial Officer.
Sandra Haskins, Jacquie Pylypiuk and Steve Owens continue to serve in their current roles as Senior Vice President, Finance and Chief Financial Officer; Senior Vice President, Technology and Chief People and Culture Officer; and Senior Vice President, Construction and Engineering, respectively. Chris Kopecky, former Senior Vice President and Chief Legal, Development & Commercial Officer remained in an advisor role with the Company until September 15, 2023.
Board of Director changes
On August 1, 2023, the Company announced the appointment of Carolyn Graham to Capital Power’s Board of Directors (the Board) effective August 2, 2023. The appointment follows the retirement of Katharine Stevenson from the Board. With this appointment and retirement, the Board consists of 10 directors, with 44% of the independent directors being women; and 33% of the independent directors representing diverse groups beyond gender.
Reinstatement of Dividend Reinvestment Plan
On August 1, 2023, the Company reinstated its Dividend Reinvestment Plan (the Plan), which was previously suspended during the fourth quarter of 2021. Eligible shareholders may elect to participate in the Plan commencing with the Company’s third quarter 2023 cash dividend. The reinstated Plan will provide eligible shareholders with an alternative to receiving their quarterly cash dividends. Under the Plan, eligible shareholders may elect to efficiently and cost-effectively accumulate additional shares in the Company by reinvesting their quarterly cash dividends on the applicable dividend payment date in new shares issued from treasury. The new shares will be issued at a discount of 1% to the average closing price on the Toronto Stock Exchange for the ten trading days immediately preceding the applicable Dividend Payment Date. Participation in the Plan is optional. Those shareholders who do not enroll in the Plan will still be entitled to receive their quarterly cash dividends. Shareholders that were enrolled in the Plan upon suspension, and remain enrolled with the Plan administrator, will automatically resume participation in the Plan.
On August 1, 2023, the Company’s Board of Directors approved an increase of 6% in the annual dividend for holders of its common shares, from $2.32 per common share to $2.46 per common share. This increased common share dividend will commence with the third quarter 2023 quarterly dividend payment on October 31, 2023 to shareholders of record at the close of business on September 29, 2023.
Secured 1 GW supply of responsibly produced, ultra-low carbon First Solar modules
On July 5, 2023, the Company announced it has secured its first order of responsibly produced, ultra-low carbon thin film solar modules for approximately 1 gigawatt direct current (GWdc) from First Solar, Inc. The solar modules, which will be delivered between 2026 and 2028, will support Capital Power’s growing development portfolio and qualify our projects for domestic content under the Inflation Reduction Act (IRA).
Updates to Genesee Repowering project schedule and costs and Battery Energy Storage System project no longer required
On June 29, 2023, the Company announced modifications to the commissioning timelines for the repowered units as a result of construction delays on the Repowering Project. Simple cycle commissioning of Unit 1 is expected to commence in December 2023, approximately 60 days later than initially anticipated. Simple cycle commissioning for Unit 2 is expected to be further delayed and will begin in March 2024. Combined cycle commissioning is expected to begin in April 2024 (Unit 1) and June 2024 (Unit 2). The total capital costs for the Repowering Project have increased to $1.35 billion as a result of cost escalations and increased labour costs.
Subsequently, the AESO completed its review process and provided conditional approval to Capital Power’s alternate solution to utilize unique operational characteristics of the repowered units to meet the Most Severe Single Contingency (MSSC) limit of 466 MW. The 210 MW Genesee BESS which was added to the repowering project to meet the MSSC limit will not be needed. As a result, the Company is cancelling that portion of the project.
Maple Leaf Solar project awarded 25-year contract
On June 29, 2023, the Company announced it executed a 25-year, fixed price renewable power purchase agreement (PPA) for 100% of the output from its Maple Leaf Solar project (Maple Leaf) with Duke Energy Progress (DEP) as part of the 2022 Duke Energy Solar Procurement Program. Maple Leaf is a 73 MWac (92 MWdc) solar development project in Selma, North Carolina. The construction of Maple Leaf is planned to begin in 2025 at a total cost of approximately US$165 million with an expected commercial operations date in the fourth quarter of 2026, pending completion of the Duke interconnection upgrades. Local zoning approvals were obtained in May 2023 and detailed design and permitting are underway.
Contracts executed for Natural Gas and Batteries from Ontario IESO’s bids
Capital Power’s active participation in the Ontario Independent Electric System Operator’s (IESO) expedited call for new power generation and capacity in high priority areas to help address the IESO’s forecasted shortfall, resulted in five successful bids.
On June 29, 2023, the Company announced that it has:
- Executed two long-term contracts for the East Windsor Expansion (81 MW summer and 100 MW winter contracted capacities) and the York BESS project as part of the IESO’s Expedited Long-Term request for proposals (RFP) process. Both projects are expected to begin commercial operations in 2025. Capital Power holds 100% interest in the York Energy BESS project.
- Been selected as a successful proponent for the Goreway BESS project as part of Category 2 of the Ontario IESO’s Expedited Long-Term request for proposals. The contract was subsequently executed in July 2023 and the project is expected to enter service in 2025.
|East Windsor Expansion||81 to 100 MW||to 2040 (approximately 15 years)|
|York Energy BESS||114 MW||to 2047 (approximately 22 years)|
|Goreway BESS||48 MW||to 2047 (approximately 22 years)|
Capital Power also executed a 3-year contract extension for the York Energy Centre associated with its successful bid in the Same Technology Upgrade Solicitation. The upgrade will increase York Energy’s contracted capacity from 393 MW to 431 MW. The contract extension applies to the new contracted capacity of 431 MW (from the commercial operation date of the upgrades expected in 2025) and extends the current contract from 2032 to 2035.
In addition, on April 25, 2023, Capital Power and the Ontario IESO executed a 6-year contract extension for Goreway associated with its successful efficiency upgrade bid of approximately 40 MW in IESO’s competitive capacity procurement process. The efficiency upgrade will increase Goreway’s current combined contracted capacity from 840 MW to 880 MW. The IESO contract extension applies to the new combined contracted capacity of 880 MW and extends the current Clean Energy Supply Contract from 2029 to 2035. The upgrade is expected to be completed in 2025.
|Goreway upgrade||840 MW||40 MW||880 MW||2035|
|York Energy upgrade1||393 MW||38 MW||431 MW||2035|
- 50% interest in joint venture
Avik Dey appointed as President and Chief Executive Officer, Brian Vaasjo to Retire
On April 19, 2023, the Company’s Board of Directors announced that it unanimously selected Avik Dey to be the next President and Chief Executive Officer and become a member of the Board of Directors, effective May 8, 2023. The appointment follows the planned retirement of Brian Vaasjo who will support Mr. Dey in an advisory role for six months to ensure a seamless transition.
Retirement announced for Kate Chisholm, Senior Vice President and Chief Strategy and Sustainability Officer
On April 13, 2023, the Company announced internally that Kate Chisholm, our Senior Vice President and Chief Strategy and Sustainability Officer has advised of her intention to retire effective July 4, 2023. Kate has been an integral part of the Executive Team with outstanding service and valuable contributions since the inception of Capital Power.
Approval of Normal Course Issuer Bid
During the first quarter of 2023, the Toronto Stock Exchange approved Capital Power’s Normal Course Issuer Bid to purchase and cancel up to 5.8 million of its outstanding common shares during the one-year period from March 3, 2023 to March 2, 2024.
Executed 23-year clean electricity supply agreement for Halkirk 2 Wind
On February 3, 2023, we announced a 23-year clean electricity supply agreement with Public Services and Procurement Canada. The Agreement will provide approximately 250,000 MWh of clean electricity per year initially through Canada-sourced renewable energy credits until Capital Power’s Alberta-based Halkirk 2 Wind project is completed, which is expected to be operational by January 1, 2025. The 151 MW Halkirk 2 Wind project will provide renewable energy for the remainder of the term – representing approximately 49% of the facility’s output. As part of the transaction, Capital Power committed to securing an equity partnership with local Indigenous communities related to the proposed project. On July 27, 2023, the Alberta Utilities Commission approved the Halkirk 2 Wind project and included conditions that Capital Power will review and incorporate as part of our final project design.
Acquisition of Frederickson 1 Generating Station
On October 10, 2023, the Company announced that it has executed an agreement to acquire a 50.15% ownership interest in the Frederickson 1 Generating Station (Frederickson 1) from Atlantic Power & Utilities for $137 million (US$100 million). The other 49.85% is owned by Puget Sound Energy (PSE). Capital Power will finance the transaction using cash on hand and its credit facilities. The transaction is expected to close in the fourth quarter of 2023, subject to customary regulatory approvals and other closing adjustments and conditions.
Frederickson 1 is a 265 MW natural gas-fired combined-cycle generating facility located in Pierce County, Washington. It has tolling agreements for 100% of its capacity out to October 2030 with credit-worthy counterparties. Frederickson 1 is expected to generate average contracted adjusted EBITDA of $21 million (US$15 million) per year during the 5-year period of 2024-2029.
Frederickson 1 is well-positioned as a flexible and dispatchable resource that provides reliable power in support of the continuing energy transition to renewables in the region. Capital Power will operate and maintain the facility with its knowledge and experience in plant operations and optimization and will receive an annual management fee under the operating arrangement with PSE. Located southeast of Tacoma in the Puget Sound Region load centre, Frederickson sits on approximately 7 acres of land that is adjacent to additional lands owned by Capital Power. Current layout and additional space allow for future development such as battery installation or a hybrid opportunity.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on November 1, 2023 at 9:00 am (MT) to discuss the third quarter financial results. The webcast can be accessed at:
An archive of the webcast will be available on the Company’s website at www.capitalpower.com following the conclusion of the analyst conference call.
Non-GAAP Financial Measures and Ratios
Capital Power 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 our joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), and (ii) AFFO as financial performance measures.
Capital Power also uses AFFO per share as a performance measure. This measure is a non-GAAP ratio determined by applying AFFO to the weighted average number of common shares used in the calculation of basic and diluted earnings per share.
These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP and, therefore, are unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, net income attributable to shareholders of Capital Power, 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 our results of operations from management’s perspective.
Forward-looking information or statements included in this press release 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 press 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 in this press release includes disclosures regarding (i) status of the Company’s 2023 AFFO and adjusted EBITDA guidance, (ii) forecasted 2023 depreciation, (iii) our plans to transition off-coal, (iv) the impacts of the IRA on our projects, (v) the timing of, funding of, generation capacity of, costs of technologies selected for, environmental benefits or commercial and partnership arrangements regarding existing, planned and potential development projects and acquisitions (including phase 2 of Halkirk Wind, the repowering of Genesee 1 and 2 (including being hydrogen ready, carbon conversion ready, and battery storage), the Genesee carbon capture and storage (CCS) project, the uprate at Goreway and York Energy, Goreway BESS, York Energy BESS, East Windsor expansion, and the Maple Leaf Solar project, and (vi) the financing plans, transaction close timing, financial impacts including expected adjusted EBITDA contributions, receipt of required regulatory approvals, and future development opportunities of Frederickson 1 Generating Station.
These statements are based on certain assumptions and analyses made by the Company considering its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate including its review of purchased businesses and assets. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity, other energy and carbon prices, (ii) performance, (iii) business prospects (including potential re-contracting of facilities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations and (v) effective tax rates.
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 material risks and uncertainties are: (i) changes in electricity, natural gas and carbon prices in markets in which the Company operates and the use of derivatives, (ii) regulatory and political environments including changes to environmental, climate, financial reporting, market structure and tax legislation, (iii) generation facility availability, wind capacity factor and performance including maintenance expenditures, (iv) ability to fund current and future capital and working capital needs, (v) acquisitions and developments including timing and costs of regulatory approvals and construction, (vi) changes in the availability of fuel, (vii) ability to realize the anticipated benefits of acquisitions, (viii) limitations inherent in the Company’s review of acquired assets, (ix) changes in general economic and competitive conditions and (x) changes in the performance and cost of technologies and the development of new technologies, new energy efficient products, services and programs. See Risks and Risk Management in the Company’s Integrated Annual Report for the year ended December 31, 2022, prepared as of February 28, 2023, for further discussion of these and other risks.
Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the specified approval date. 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.
In the spirit of reconciliation, Capital Power respectfully acknowledges that we operate within the ancestral homelands, traditional and treaty territories of the Indigenous Peoples of Turtle Island, or North America. Capital Power’s head office is located within the traditional and contemporary home of many Indigenous Peoples of the Treaty 6 region and Métis Nation of Alberta Region 4. We acknowledge the diverse Indigenous communities that are located in these areas and whose presence continues to enrich the community.
About Capital Power
Capital Power is a growth-oriented power producer committed to net zero by 2045. Our balanced approach to the energy transition prioritizes reliable, affordable and decarbonized power that communities across North America can depend on.
Capital Power owns approximately 7,500 megawatts (MW) of power generation capacity at 29 facilities across North America. Projects in advanced development include approximately 213 MW of renewable generation capacity in Alberta and North Carolina, 512 MW of incremental natural gas combined cycle capacity from the repowering of Genesee 1 and 2 in Alberta, and approximately 350 MW of natural gas and battery energy storage systems in Ontario.