Capital Power reports first quarter 2011 results
EDMONTON, Alberta – Capital Power Corporation (Capital Power, or the Company) (TSX: CPX) today released its results for the quarter ended March 31, 2011. Normalized earnings attributable to common shareholders, after adjusting for one-time items and fair value adjustments, was $11 million, or $0.33 per share, in the first quarter of 2011, compared with $11 million, or $0.51 per share, in the comparable 2010 period. Funds from operations, excluding non-controlling interests in Capital Power Income L.P. (CPILP), totaled $78 million in the first quarter of 2011, up 10% from $71 million in the first quarter of 2010.
“The decline in normalized net income in the first quarter of 2011 compared with the corresponding period in 2010 was primarily attributable to lower margins realized on the merchant trading portfolio,” said Capital Power’s President and CEO, Brian Vaasjo. “With the shutdown of two large coal plants in the region and colder-than-average weather in Alberta, spot prices increased in the quarter. However, the Company’s average realized price for the Alberta commercial portfolio decreased from approximately $67/MWh in the first quarter of 2010 to approximately $64/MWh in the corresponding period in 2011 as a more significant portion of the Company’s Alberta portfolio was sold forward at lower prices. If forecasted Alberta power prices remain in the low-$60/MWh for the balance of the year, we expect our normalized earnings per share to be approximately $1.40.”
“Overall, we were very pleased with the performance of our assets”, added Mr. Vaasjo. “Average plant availability, excluding CPILP plants, remained strong at 93% and electricity generation reached 3,590 gigawatt hours. The quarter was also highlighted by the announcements of agreements to acquire three New England power generation facilities, located in Tiverton, Rhode Island, Rumford, Maine and Bridgeport, Connecticut. These facilities cumulatively represent approximately 1,069 megawatts of production and are expected to contribute $34 million to $38 million in earnings after depreciation expense and before financing and income tax expenses in 2011. We are very excited about putting together this great hub of assets in one of our key target markets.”
| Operational and Financial Highlights(1) | Three months ended March 31 (unaudited) |
|
| (millions of dollars except per share and operational amounts) | 2011 | 2010 |
| Electricity generation (GWh) | 3,590 | 3,529 |
| Generation plant availability (excluding CPILP plants) (%) | 93% | 93% |
| Revenues and other income | 458 | 501 |
| Gross income | 167 | 217 |
| Earnings before interest, taxes, depreciation and amortization (EBITDA)(2) | 82 | 169 |
| Normalized earnings attributable to common shareholders(2) | 11 | 11 |
| Normalized earnings per share(2) | $0.33 | $0.51 |
| Net income attributable to shareholders | 3 | 12 |
| Earnings per share | $0.06 | $0.55 |
| Dividends declared per share | $0.315 | $0.315 |
| Funds from operations(2) | 99 | 99 |
| Funds from operations excluding non-controlling interests in CPILP(2) | 78 | 71 |
| Capital expenditures | 89 | 62 |
(1) The operational and financial highlights in this press release should be read in conjunction with Management’s Discussion and Analysis and the unaudited Condensed Interim Consolidated Financial Statements for the three months ended March 31, 2011.
(2) Earnings before interest, taxes, depreciation and amortization (EBITDA), Normalized earnings attributable to common shareholders, Normalized earnings per share, Funds from operations, and Funds from operations excluding non-controlling interests in CPILP are non-IFRS financial measures and do not have standardized meanings under IFRS, and therefore, may not be comparable to similar measures used by other enterprises. See Non-IFRS Financial Measures. Reconciliations of these non-IFRS financial measures to Net income attributable to shareholders, Earnings per share and Cash provided by operating activities are included in the Company’s Management’s Discussion and Analysis dated April 28, 2011, which is available under the Company’s profile on SEDAR at www.SEDAR.com.
Significant Events
$232 million common share offering
In March 2011, the Company issued and sold 9,315,000 common shares 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 $232 million less issue costs of $9 million. The sale included an initial sale of 8,100,000 common shares on March 17, 2011 followed by the sale of an additional 1,215,000 common shares on March 28, 2011 pursuant to the exercise of an over-allotment option granted to the syndicate of underwriters. The net proceeds from the common share offering were used to repay a portion of the outstanding indebtedness under the Company’s credit facilities. The Company expects to draw down on its credit facilities to finance the acquisitions of three New England plants discussed below.
Acquisition of two New England power plants
In February 2011, Capital Power LP (CPLP) entered into an agreement to acquire two generating facilities from Brick Power Holdings LLC, one facility located in Tiverton, Rhode Island (Tiverton) and one facility located in Rumford, Maine (Rumford). Both plants are natural gas-fired combined cycle power generation facilities serving the New England region in the U.S. Northeast, and have a maximum combined capacity of 549 MW. The Company expects the transaction to close on April 29, 2011 at a purchase price of US$315 million subject to working capital adjustments and other closing adjustments.
Both plants are merchant facilities and sell their output into the New England Power Pool (NEPOOL). The plants began commercial operations in 2000 and have similar design configurations that utilize a single fuel GE 7FA power island. The Company commissioned and operates similar technology at the Frederickson power facility in Washington State.
Tiverton and Rumford supply electricity to the New England Independent System Operator (ISO-NE). Both plants are exempt wholesale generators and have Federal Energy Regulatory Commission (FERC) authorization to sell capacity, energy, and ancillary services at market-based rates. The plants are operated as mid-merit generation units and sell their outputs on an hourly basis into the NEPOOL. The NEPOOL serves six New England states: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont which contain approximately 14 million people and over 6 million households and businesses. The NEPOOL is subject to FERC jurisdiction and has more than 400 participants, over 8,000 miles of transmission lines, and 13 interconnections to the New York and Canadian power systems. It is one of the most advanced and liquid markets in the U.S. and has a peak demand of approximately 28,000 MW.
Subsequent Events
$300 million debt offering
On April 18, 2011, CPLP completed a public offering of $300 million unsecured medium-term notes. The notes have a coupon rate of 4.6%, payable semiannually commencing on June 1, 2011, and mature on December 1, 2015. The net proceeds of the offering will be used for general corporate purposes including repayment of amounts owing under credit facilities, short-term investment, financing of ongoing capital projects and working capital requirements. The notes have been rated BBB by Standard & Poor’s and BBB by DBRS. The offering was made pursuant to CPLP’s short form base shelf prospectus dated April 14, 2010 and a related pricing supplement dated April 13, 2011.
Acquisition of a third New England power plant
In March 2011, the Company 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. Bridgeport Energy is a natural gas-fired combined cycle power generation plant located in Bridgeport, Connecticut, with a nominal capacity of 520 MW. It is an efficient, young, mid-merit generation plant that can maximize energy and ancillary services revenue through operational flexibility.
Under the purchase and sale agreement, CPLP is acquiring one hundred per cent of the equity interests in Bridgeport Energy, LLC. The transaction closed on April 28, 2011 at a purchase price of US$355 million plus working capital adjustments and other closing adjustments.
As part of the NEPOOL, Bridgeport Energy dispatches into the premium Southwest Connecticut Zone of the 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 CPILP’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.
The Company expects to permanently finance both New England acquisitions using a combination of debt and equity. It also expects the acquisitions to contribute approximately $51 million – $55 million to EBITDA and to increase depreciation expense by approximately $17 million in 2011.
Following the acquisitions, Capital Power will have added or placed into development approximately 2,000 MW of generating capacity since the Company’s July 2009 IPO. The acquisitions demonstrate the Company’s commitment to its growth strategy aimed at reaching 10,000 MW of assets by 2020. The acquisitions also provide Capital Power with the foundation for a networked hub of assets in the U.S. Northeast, which is one of the Company’s target markets, and contributes to a balanced portfolio of contracted and merchant assets. As relatively young, highly efficient natural gas-fired plants that use proven technologies, these additions to the fleet fit the Company’s technology and operating focus.
Analyst Conference Call and Webcast
Capital Power will be hosting a conference call and live webcast with analysts on May 2, 2011 at 9:00 am (ET) to discuss first quarter results. The conference call dial-in numbers are:
(403) 532-8075 (Calgary)
(604) 681-0262 (Vancouver)
(647) 837-0597 (Toronto)
(877) 353-9586 (toll-free from Canada and USA)
Participant access code for the call: 21543#
A replay of the conference call will be available following the call at: (877) 353-9587 (toll-free) and entering pass code 541020. The replay will be available until midnight on June 2, 2011.
Interested parties may also access the live webcast on the Company’s website at www.capitalpower.com with an archive of the webcast available following the conference call.
Non-IFRS Financial Measures
The Company uses (i) EBITDA, (ii) funds from operations, (iii) funds from operations excluding non-controlling interests in CPILP, (iv) normalized earnings attributable to common shareholders and (v) normalized earnings per share as financial performance measures. These terms are not defined financial measures according to IFRS and do not have standardized meanings prescribed by IFRS, and therefore may not be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, cash flow from operating activities or other measures of financial performance calculated in accordance with IFRS. Rather, these measures are provided to complement IFRS measures in the analysis of the Company’s results of operations from management’s perspective. Reconciliations of EBITDA to net income, funds from operations and funds from operations excluding non-controlling interests in CPILP to cash provided by operating activities, normalized earnings attributable to common shareholders to net income attributable to common shareholders, and normalized earnings per share to earnings per share are contained in the Company’s Management’s Discussion and Analysis dated April 28, 2011 for the quarter ended March 31, 2011 which is available under the Company’s profile on SEDAR at www.SEDAR.com.
Forward-looking Information
Certain information in this press release is forward-looking within the meaning of Canadian securities laws as it relates to anticipated financial 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 in this press release includes, among other things, information relating to: (i) expectations regarding the use of the proceeds from the common share and debt offerings; (ii) expectations that Bridgeport can maximize energy and ancillary services revenue through operational flexibility; (iii) expectations regarding the purchase price and timing of closing of the Tiverton and Rumford acquisition; (iv) expectations regarding the permanent financing of the New England plant acquisitions using a combination of debt and equity; (v) expectations regarding the impact of the acquisition of the New England facilities on earnings after depreciation expense and before financing and income tax expense, EBITDA and depreciation expense in 2011; (vi) expectations regarding the ability to attain the goal of 10,000 MW of assets by 2020; (vii) expectations that the Tiverton, Rumford and Bridgeport power plants will provide Capital Power with the foundation of a networked hub in the U.S. Northeast; (viii) expectations that the Tiverton, Rumford and Bridgeport power plants will contribute to a balanced portfolio of contracted and merchant assets; and (ix) expectations regarding normalized earnings per share of $1.40 in 2011.
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 the Company’s facilities; (ii) power plant availability and dispatch, including Sundance which is subject to an acquired PPA; (iii) the Company’s financial position and credit facilities and sources of funding; (iv) the Company’s assessment of commodity and power markets, including power prices for 2011; (v) the Company’s assessment of the markets and regulatory environments in which it operates; (vi) weather; (vii) availability and cost of labour and management resources; (viii) performance of contractors and suppliers; (ix) availability and cost of financing; (x) foreign exchange rates; (xi) management’s analysis of applicable tax legislation; (xii) 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) renewal and terms of PPAs; (xvi) ability to successfully integrate and realize benefits of its acquisitions; (xvii) ability to implement strategic initiatives which will yield the expected benefits; (xviii) ability to obtain necessary regulatory approvals for development projects; (xix) the Company’s assessment of capital markets, common share ownership distribution, and ability to complete future share and debt offerings; (xx) locations of projects and the areas of which they will be developed, including the availability and use of certain optioned lands; (xxi) costs of construction and development; and (xxii) current risk management strategies including hedges will be in place.
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 relating to: (i) operation of the Company’s facilities; (ii) power plant availability and performance, including unplanned plant outages at facilities of other market participants; (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) construction; (x) availability and cost of financing; (xi) foreign exchange; (xii) availability and cost of labour, equipment and management resources; (xiii) performance of counterparties, partners, contractors and suppliers in fulfilling their obligations to the Company; (xiv) developments in the North American capital markets; (xv) compliance with financial covenants; (xvi) ability to successfully realize the benefits of acquisitions and investments; (xvii) the tax attributes of and implications of any acquisitions; (xviii) the outcome of CPILP’s strategic review; and (xix) ability to secure new contracts and terms of such contracts. 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.
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. Capital Power is headquartered in Edmonton, Alberta. Following the close of its recently announced New England acquisitions, Capital Power will have interests in 34 facilities in Canada and the U.S. totaling nearly 4,900 megawatts of generation capacity. Capital Power and its subsidiaries develop, acquire and optimize power generation from a wide range of energy sources.
Click here to view the management’s discussion and analysis and consolidated financial statements.