EDMONTON, Alberta – At its 13th annual Investor Day event being held virtually today, Capital Power Corporation (TSX: CPX) (“Capital Power” or “the Company”) will review its financial outlook and highlight progress on its decarbonization plans, including acquisition of a portfolio of renewable development sites, construction plans for phase 2 of Halkirk Wind, addition of battery storage to its Genesee 1 and 2 repowering project, and evaluation of carbon capture and storage solutions.
“Capital Power continues its leadership position in the Alberta power market with the announcements we are making today at our Investor Day,” said Brian Vaasjo, President and CEO of Capital Power. “The recent completion of phases 2 and 3 of the Whitla Wind project makes it the largest wind facility in Alberta at 353 megawatts (MW). To add to our growing renewables portfolio, we plan to proceed with the second phase of Halkirk Wind, adding an additional 151 MW of renewable power to the Alberta grid when completed in 2024. We continue to pursue carbon capture at Genesee 1 and 2 and collaborating with Enbridge for carbon capture and storage solutions in the Wabamun area. Capital Power is on track to meet or exceed our sustainability goals and build a carbon-neutral future.”
“We continue delivering on our renewables growth strategy across North America with the acquisition of a 1,300 MW portfolio of 20 large-scale solar development sites with battery potential in the United States. The projects are well-positioned to meet the rapidly growing demand for solar generation in the United States.
We’re investing an additional $469 million in growth with phase 2 of Halkirk Wind and the addition of battery storage to the Genesee repowering project, moving us closer to meeting our 2021 $500 million committed capital growth target. Incremental cash flows from our renewable projects and the Genesee 1 and 2 repowering, along with a robust Alberta power market outlook supports the extension of our 5% annual dividend growth guidance to 2025,” said Mr. Vaasjo.
Completion of phase 2 and 3 of Whitla Wind
On December 1, 2021, an additional 151 MW from Whitla Wind, located in the County of Forty Mile, Alberta, began commercial operations following the completion of phases 2 and 3 of the project. The $257 million project was completed on-schedule and on-budget. In September 2021, Capital Power announced a 15-year renewable power purchase agreement with Dow Chemical Canada ULC, a subsidiary of Dow, for 25 MW of capacity and the associated environmental attributes from the project. The Company is in active discussions with commercial and industrial customers for renewable offtake contracts for the uncontracted generation from the project.
Acquisition of solar development sites in the United States
On November 24, 2021, Capital Power signed a Membership Interest Purchase and Sale Agreement to acquire 100% of a portfolio of 20 solar development sites (“portfolio”) in the United States from BW Solar Holding Inc., a U.S. solar and energy storage developer. The closing of the transaction is subject to customary conditions. The acquisition provides Capital Power with an attractive solar and storage platform for continued growth in the rapidly growing United States solar market.
The portfolio has a total generation capacity of 1,298 MW ranging in size from 15 MW to 340 MW, with the potential to co-locate over 1,200 megawatt hours of energy storage. The majority of the projects are in the MISO, PJM, and SERC electricity markets and are already in the interconnection queue in the respective regional transmission organization. The portfolio has attractive development and construction characteristics, and it is anticipated that sites will be construction-ready by 2024 with commercial operation dates in the 2025 to 2026 timeframe.
Phase 2 of Halkirk Wind proceeding
Subject to successful permitting and regulatory approvals, Capital Power is moving forward with phase 2 of Halkirk Wind located in the County of Paintearth, Alberta. The capital cost for the 151 MW phase 2 is expected to be approximately $274 million. After completion of phase 2, Halkirk Wind will deliver approximately 300 MW of generation capacity.
Phase 2 of Halkirk Wind was fully permitted in 2018 based on available technology at that time. Since then, the project has been redesigned to incorporate the most advanced turbine technology, requiring a permit amendment. An amended AUC permit is anticipated to be issued in the first quarter of 2023, allowing construction to start in the third quarter of 2023 with commercial operations targeted in the fourth quarter of 2024. The Company will leverage its strong local development advantage in Alberta, specifically in the Halkirk region to complete phase 2 of the project.
Phase 2 of Halkirk Wind is expected to generate $27 million in adjusted funds from operations (AFFO) per year on average in the first 5 years of operation.
Addition of battery storage to the Genesee 1 and 2 repowering project
Capital Power has finalized its configuration for the Genesee 1 and 2 repowering project, adding 210 MW of battery storage. The addition of battery storage will address the Alberta Interconnected Electric System most severe single contingency (or MSSC) limit, allowing the repowered Genesee 1 and 2 units to operate up to their baseload capacity. The revised repowering project cost is approximately $1.2 billion, including $195 million for battery storage.
Collaboration with Enbridge to reduce CO2 emissions in Alberta
In a November 29, 2021, joint press release, Capital Power and Enbridge Inc. announced a memorandum of understanding to collaborate on carbon capture and storage (CCS) solutions in the Wabamun area west of Edmonton, near Capital Power’s Genesee Generating Station.
Enbridge and Capital Power have agreed to jointly evaluate and advance a CCS project, with Enbridge as the transportation and storage service provider and Capital Power as the CO2 provider, subject to the Government of Alberta’s competitive carbon hub selection process and a future final investment decision. Enbridge, with the support of Capital Power, is applying to develop an open access carbon hub in the Wabamun area through the Government of Alberta’s Request for Full Project Proposals process, which is expected to open as early as December 2021.
The proposed project would serve Capital Power’s Genesee Generating Station, which currently provides over 1,200 MW of baseload electricity generation to Albertans. Capital Power is repowering the Genesee 1 and 2 units to create North America’s most efficient natural gas combined cycle power generation units, positioning them to deliver reliable and affordable electricity for generations to come. The Genesee CCS Project is expected to capture up to 3 million tonnes of CO2 annually from the repowered units, which would be transported and stored through Enbridge’s open access carbon hub, that could also serve several other local industrial companies. Subject to the final award of carbon sequestration rights and regulatory approvals, the proposed project could be in service as early as 2026.
In October 2021, with Capital Power’s support, Enbridge responded to the Government of Alberta’s call for Expressions of Interest to construct and operate carbon storage hubs. Within its proposal, Enbridge outlined its plans to develop an open access carbon storage hub with cost-effective, customer-focused CCS solutions in the Wabamun area while minimizing any infrastructure footprint to protect land, water and the environment.
For 2021, the financial outlook remains on track with the financial guidance provided in the third quarter 2021 report.
- Capacity-weighted average facility availability of 93%, reflecting planned outages at Genesee 1 and 3, Clover Bar Energy Centre, and Goreway, and
- Sustaining capital expenditures of $105 million to $115 million.
Financial and dividend targets
The 2022 financial targets are based on various assumptions including: 64% of the Alberta commercial baseload generation portfolio sold forward at an average contracted price in the high-$60 per megawatt hour range (MWh), average Alberta spot power price of approximately $90/MWh, and AECO natural gas price of approximately $4.25/GJ.
- Adjusted EBITDA of $1,110 million to $1,160 million,
- AFFO of $580 million to $630 million, and
- Annual dividend growth guidance of 5% from 2022 to 2025 with an expected AFFO payout ratio within its target range of 45% to 55% through 2025.
- Complete construction of the Strathmore Solar and Enchant Solar projects in Alberta for commercial operations starting in early 2022 and fourth quarter of 2022, respectively,
- Begin construction of three North Carolina solar projects (Hornet Solar, Hunter’s Cove Solar, and Bear Branch Solar) for commercial operations targeted in the fourth quarter of 2023 or first quarter of 2024,
- Continue progress on the Genesee 1 and 2 repowering project with targeted completion dates in late 2023 (Genesee 1) and 2024 (Genesee 2),
- Continue advancing carbon capture and utilization (CCUS) technology and the Genesee Carbon Conversion Centre, and
- Target $500 million committed capital for growth.
Investor Day event webcast
Today’s virtual morning event is scheduled to start at 9:30 am (ET) and can be accessed here. The webcast will be archived and accessible for replay.
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 changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), (ii) AFFO, and (iii) AFFO 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, are unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, 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.
Additional disclosure around the Company’s non-GAAP financial measures, including reconciliations of these non-GAAP financial measures to their nearest GAAP financial measures are disclosed in the Company’s Management’s Discussion and Analysis prepared each quarter, most recently prepared as of October 26, 2021 for the third quarter of 2021, which is available under the Company’s profile on SEDAR at SEDAR.com and on the Company’s website at capitalpower.com.
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 expectations around: (i) the timing of construction readiness and commencement of commercial operations for the acquired wind development sites, (ii) the timing of permitting, construction and commencement of commercial operations for phase 2 of Halkirk Wind, (iii) the capital cost and AFFO contributions of phase 2 of Halkirk Wind, (iv) the capital cost of the addition of battery storage to the Genesee 1 and 2 repowering project, as well as the total capital cost of the Genesee 1 and 2 repowering project, (v) the impacts of battery storage on the project economics of Genesee 1 and 2 repowering, (vi) in-service timing for the Genesee CCS project and the volume of CO2 to be captured annually from the repowered Genesee 1 and 2 units, (vii) the current 2021 financial outlook, (viii) 2022 targets including those for capacity-weighted average facility availability, sustaining capital expenditures, adjusted EBITDA, AFFO and committed capital for growth, (ix) dividend growth and AFFO payout ratios and (x) the timing of commencement of commercial operations for Strathmore Solar, Enchant Solar and the North Carolina solar projects as well as the completion dates of the Genesee 1 and 2 repowered units.
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, 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) operating and asset development performance, (iii) business prospects (including potential re-contracting opportunities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations, (v) effective tax rates and (vi) foreign exchange 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 prices in markets in which the Company operates, (ii) changes in energy commodity market prices and use of derivatives, (iii) regulatory and political environments including changes to environmental, financial reporting, market structure and tax legislation, (iv) generation facility availability, wind capacity factor and performance including maintenance expenditures, (v) ability to fund current and future capital and working capital needs, (vi) timing and costs of regulatory approvals and construction in relation to development projects, (vii) changes in market prices and availability of fuel, and (viii) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis for both the nine months ended September 30, 2021, prepared as of October 26, 2021 and for the year ended December 31, 2020, prepared as of February 18, 2021, 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 news release 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.
About Capital Power
Capital Power is a growth-oriented North American wholesale power producer with a strategic focus on sustainable energy headquartered in Edmonton, Alberta. We build, own and operate high-quality, utility-scale generation facilities that include renewables and thermal. We have also made significant investments in carbon capture and utilization to reduce carbon impacts and are committed to be off coal in 2023. Capital Power owns approximately 6,600 MW of power generation capacity at 26 facilities across North America. Projects in advanced development include approximately 425 MW of owned renewable generation capacity in North Carolina and Alberta and 560 MW of incremental natural gas combined cycle capacity, from the repowering of Genesee 1 and 2 in Alberta.