Results highlighted by strong cash flow generation in the quarter
EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) today released financial results for the quarter ended March 31, 2019.
First Quarter Highlights
- Achieved excellent operating performance with 96% facility availability
- Generated net cash flows from operating activities of $286 million and adjusted funds from operations of $117 million
- Entered into a heat rate call option agreement with an investment grade counterparty covering periods outside of Arlington Valley’s existing summer tolling agreements
Net cash flows from operating activities were $286 million in the first quarter of 2019 compared with $143 million in the first quarter of 2018. Adjusted funds from operations (AFFO) were $117 million in the first quarter of 2019, compared to $85 million in the first quarter of 2018. AFFO per share was $1.15 in the first quarter of 2019 compared to $0.82 in the first quarter of 2018.
Net income attributable to shareholders in the first quarter of 2019 was $61 million and basic earnings per share was $0.49 per share, compared with net income attributable to shareholders of $41 million, and basic earnings per share of $0.30, in the comparable period of 2018. Normalized earnings attributable to common shareholders in the first quarter of 2019, after adjusting for non-recurring items and fair value adjustments, were $30 million or $0.29 per share compared with $29 million or $0.28 per share in the first quarter of 2018.
“Capital Power’s financial results for the first quarter of 2019 were in line with management’s expectations,” said Brian Vaasjo, President and CEO of Capital Power. “Alberta spot power price averaged $69 per megawatt hour (MWh) in the first quarter due to unseasonably cold temperatures and higher natural gas prices and was the highest quarterly power price in over five years. Our financial results benefitted from strong operating performance in Alberta with nearly 100% availability and higher electricity generation. This contributed to the Company capturing an average realized power price of $58/MWh compared to $47/MWh for the same period a year ago.”
“We continue to have a positive outlook for Alberta power prices that has averaged nearly $60/MWh in the last 12 months. Based on our forecast for the remainder of the year, we now expect adjusted funds from operations for 2019 to be in the upper end of our annual guidance range,” stated Mr. Vaasjo.
|Operational and Financial Highlights 1
|Three months ended March 31|
|(millions of dollars except per share and operational amounts)||2019||2018|
|Electricity generation (Gigawatt hours)||5,782||5,026|
|Generation facility availability||96%||96%|
|Revenues and other income3||$397||$313|
|Adjusted EBITDA 2, 3||$202||$179|
|Net income 3||$60||$39|
|Net income attributable to shareholders of the Company 3||$61||$41|
|Basic and Diluted earnings per share 3||$0.49||$0.30|
|Normalized earnings attributable to common shareholders 2, 3||$30||$29|
|Normalized earnings per share 2, 3||$0.29||$0.28|
|Net cash flows from operating activities||$286||$143|
|Adjusted funds from operations 2||$117||$85|
|Adjusted funds from operations per share 2||$1.15||$0.82|
|Purchase of property, plant and equipment and other assets||$51||$40|
|Dividends per common share, declared||$0.4475||$0.4175|
- 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, 2019.
- Earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from its joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), normalized earnings attributable to common shareholders, normalized earnings per share, adjusted funds from operations and adjusted funds from operations per share are non-GAAP financial measures and 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.
- Prior quarter amounts have been restated to reflect the IAS 8 accounting policy change resulting from the transition to IFRS 16 – Leases.
Heat rate call option at Arlington Valley
During the first quarter of 2019, the Company entered into a heat rate call option agreement (“HRCO”) with an investment grade counterparty covering the periods outside of Arlington Valley’s existing summer tolling agreements. The HRCO commenced on April 1, 2019 and terminates December 31, 2025, covering (i) April and November-December 2019 and (ii) January-May and October-December 2020-2025. Pursuant to the HRCO the counterparty has the right to call the plant in exchange for fixed monthly premiums plus reimbursements for fuel at an indexed price, variable operating and maintenance expense and start charges. Adjusted EBITDA and AFFO from the Arlington Valley facility during the period covered by the HRCO is expected to be consistent with the guidance provided at the time the acquisition was announced.
Appointment to the Board of Directors
Effective March 1, 2019, Jane Peverett was appointed to the Capital Power Board of Directors.
Appointment to the Board of Directors
Effective April 26, 2019, Robert Phillips was appointed to the Capital Power Board of Directors.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on April 29, 2019 at 9:00 am (MDT) to discuss the first quarter financial results. The conference call dial-in numbers are:
604) 638-5340 (Vancouver)
(403) 351-0324 (Calgary)
(416) 915-3239 (Toronto)
(514) 375-0364 (Montreal)
(800) 319-4610 (toll-free from Canada and USA)
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 conclusion of the analyst conference call.
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 its joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), (ii) adjusted funds from operations, (iii) adjusted funds from operations per share (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 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 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.
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 expected impacts on adjusted EBITDA and AFFO from the Arlington Valley facility driven by the HRCO signed in the quarter as well as expected AFFO performance compared to guidance for 2019.
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, other energy and carbon prices, (ii) performance, (iii) status of and impact of policy, legislation and regulations, and (iv) 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, market structure and tax legislation, (iv) generation facility availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) changes in market prices and availability of fuel, and (vii) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2018, prepared as of February 15, 2019, 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.