Capital Power provides 2016 and dividend growth guidance
Company also provides update on the impacts from Alberta’s Climate Leadership Plan
Edmonton, Alberta – At its Investor Day event to be held in Toronto today, Capital Power Corporation (TSX: CPX) (“Capital Power” or “the Company”) intends to highlight key corporate developments and provide financial and operational targets for 2016 and dividend guidance to 2018. The Company also intends to outline its analysis of the details announced to date by the province of Alberta with respect to its Climate Leadership Plan.
Outlook for 2016
“Capital Power continues to deliver on its strategy and our commitment to operational excellence,” said Brian Vaasjo, President and CEO of Capital Power. “Under challenging circumstances we are forecasting an 8 per cent growth in cash flow per share in 2016.”
“A significant part of Capital Power’s investment thesis is to enhance shareholder returns through a growing dividend,” continued Mr. Vaasjo. “I’m pleased with the successful completion of our 2015 growth projects, which include the opening of Alberta’s largest natural gas-fired facility, the completion of K2 Wind, and the upcoming opening of our first solar facility. Based on Capital Power’s projected cash flows over the next 3 years, the Company is well positioned to deliver on its 7 per cent annual dividend growth guidance through 2018.”
At its Investor Day, the Company will discuss its corporate priorities and financial targets for 2016 including:
- A capacity-weighted average plant availability of 94%, reflecting planned outages at Genesee 2 & 3, Clover Bar Energy Centre, Joffre, and Shepard Energy Centre,
- Plant maintenance capital and sustaining capital expenditures of up to $65 million, and plant operating and maintenance expenses of $200 million to $220 million,
- Progress on the Genesee 4&5 project and the execution of a power purchase agreement for new development,
- Funds from operations of $380 to $430 million, based on the Alberta commercial portfolio position 100% hedged at an average contracted hedge price in the high-$40 per megawatt hour,
- Dividend increase in-line with its annual dividend growth expectations.
Alberta Climate Leadership Plan
The Alberta government announced its Climate Leadership Plan on November 22, 2015, with details of the final strategy still to be developed. Three key areas impacting Capital Power include: (i) phasing out coal-generated electricity by 2030; (ii) developing more renewable energy through competitive procurement processes; and (iii) implementing a new Carbon Competitiveness Regulation (CCR) on greenhouse gas pollution that replaces the current emissions intensity-based carbon pricing program with one that is based on an emissions performance standard.
The Climate Leadership Plan incorporates numerous policy approaches that are consistent with Capital Power’s recommendations, including compensation for early retirement of coal facilities and the continuation of Alberta’s competitive electricity market. The government has indicated an independent facilitator and the system operator will work with owners of coal-fired power generation to develop a transition plan. Capital Power will participate in discussions to successfully implement the government’s policies for the electricity sector and for its shareholders.
“We have completed our analysis of the information provided to date in the Climate Leadership Plan and have determined that, in the near term, the impact on the Company’s financial performance is positive,” said Brian Vaasjo. “We expect to satisfy the carbon tax obligation through a combination of low-cost carbon credits and cash. The higher carbon compliance costs for our coal facilities are expected to be partly recovered through higher power prices, which will benefit our natural gas and wind facilities.”
“Longer term, all the impacts of the Climate Leadership Plan are yet to be determined. With respect to the decision to phase out all coal-fired generation by 2030, the Alberta government has committed to manage the transition in a manner that treats workers, communities and affected companies fairly, avoids unnecessarily stranding capital, and ensures reasonable price stability for consumers. We will work collaboratively with the government to consider and resolve these issues in a timely manner, and endeavor to achieve fair and appropriate outcomes for our shareholders.”
“Over the past decade, Capital Power has been the largest investor in Alberta power generation. We support government policies that treat investors fairly, and maintain an attractive climate for investment in new power generation,” continued Mr. Vaasjo. “We are well positioned to compete to supply both new merchant natural gas generation and new renewables.”
Near term opportunities include the Genesee 4&5 project, a fully-permitted combined cycle natural gas-fired generation facility proposed to be developed through a joint venture with ENMAX. Capital Power has also applied to connect a proposed 150-megawatt wind farm to the grid, near our existing Halkirk Wind facility.
Beaufort Solar begins commercial operations
In December 2015, Capital Power expects to complete its first solar project on-time and on-budget. The 15 megawatt Beaufort Solar facility is located in Beaufort County, North Carolina and has a 15-year power purchase agreement with Duke Energy.
Investor Day event and webcast information
Capital Power’s Investor Day event is being held today at the St. Andrew’s Club and Conference Centre (150 King Street West, 16th floor) in Toronto. Registration starts at 9:30 a.m. ET followed by executive presentations beginning at 10:00 a.m. ET. A live audio webcast of the event is available on the Company’s website at www.capitalpower.com. The presentation slides and webcast will be archived and accessible for replay.
Non-GAAP Financial Measures
The Company uses (i) funds from operations as a financial performance measure. This term is not a defined financial measure according to generally accepted accounting principles (GAAP) and do not have standardized meaning prescribed by GAAP and are therefore, unlikely to be comparable to similar measures used by other enterprises. This measure should not be considered alternatives to 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, this measure is 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 law 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 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 regarding: (i) funds from operations, maintenance capital and sustaining capital expenditures, and operating and maintenance expenses, (ii) consistent growth of dividends, (iii) the impact of environmental regulations on Capital Power and its business, including, but not limited to, emissions compliance costs, (iv) compensation to be received by Capital Power from the Government of Alberta, (v) Alberta’s electricity market structure, (vi) carbon credits and the price of electricity in Alberta, (vii) Capital Power’s ability to compete for new projects, (viii) the development of new projects, including, but not limited to, the Genesee 4&5 project and further development near the existing Halkirk Wind site, (ix) the completion, timing and cost of the Beaufort Solar project, and (x) plant availability. 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. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity and other energy prices, (ii) performance, (iii) business prospects and opportunities including expected growth and capital projects, (iv) status and impact of policy, legislation and regulation, 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 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 and tax legislation, (iv) power plant availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) acquisitions and developments including timing and costs of regulatory approvals and construction, (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 (MD&A) for the third quarter, 2015 for further discussion of these and other risks.
About Capital Power
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 3,200 megawatts of power generation capacity at 17 facilities across North America and owns 371 megawatts of capacity through a power purchase agreement. An additional 545 megawatts of owned generation capacity is under construction or in advanced development in Alberta and North Carolina.