Capital Power reports strong first quarter results and expects 2021 results to exceed annual financial guidance
Quarterly results confirm the robustness of the Alberta power market
EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) today released financial results for the quarter ended March 31, 2021.
- Generated net cash flows from operating activities of $206 million and adjusted funds from operations (AFFO) of $159 million in the first quarter of 2021
- Generated net income of $101 million and adjusted EBITDA of $303 million in the first quarter of 2021
- Forecast is on track to generate AFFO and adjusted EBITDA that is modestly above the top end of the annual guidance ranges for 2021
- Executed a 15-year renewable energy agreement with Labatt Brewing Company Ltd. of Canada (Labatt) for the 75 megawatt Enchant Solar project in Alberta
- Ceased operations of the Southport and Roxboro facilities in North Carolina following the expiry of their power purchase agreements
- Changes to the Capital Power Executive team
“Our first quarter results benefitted from excellent operating performance across the entire fleet with average facility availability of 96% and a solid contribution from our trading desk that captured an average realized Alberta power price of $77 per megawatt hour (MWh) in the quarter,” said Brian Vaasjo, President and CEO of Capital Power. “This strong performance delivered financial results that exceeded management’s expectations.”
“The extreme cold temperatures in February set a new daily record for demand and contributed to the high average power price of $95 per MWh in the first quarter, representing the highest average power price in a quarter in nearly eight years,” continued Mr. Vaasjo. “Based on the increase in Alberta forward power prices, our forecast is on track to generate AFFO and adjusted EBITDA that is modestly above the top end of the $500 million to $550 million and $975 million to $1,025 million annual guidance ranges for 2021, respectively.”
“We continue to expand our renewable contracted cash flows with the recent execution of a long-term renewable energy agreement with Labatt for our Enchant Solar project. This innovative agreement includes the sale of electricity and renewable energy credits that will cover all of the electricity needed to brew Budweiser in Canada and meet Labatt’s 100% renewable electricity goals.”
“Following the conclusion of our April 29 Annual General Meeting, Don Lowry retired as Chair of the Board of Directors and I would like to thank him for his outstanding leadership as Board Chair since Capital Power’s inception in 2009 and wish him well on his retirement.”
“I would like to congratulate Darcy Trufyn, Senior Vice President, Operations, Engineering and Construction on his retirement. Darcy has been an integral part of the executive team for the past twelve years and I would like to thank him for his valuable contributions and outstanding service and wish him well in his retirement.”
|Operational and Financial Highlights 1
|Three months ended
|(millions of dollars except per share and operational amounts)||2021||2020|
|Electricity generation (Gigawatt hours)||5,630||5,562|
|Generation facility availability||96%||91%|
|Revenues and other income||$554||$533|
|Adjusted EBITDA 2||$303||$234|
|Net income 3||$101||–|
|Net income attributable to shareholders of the Company||$103||$2|
|Basic and diluted earnings (loss) per share||$0.83||$(0.11)|
|Normalized earnings attributable to common shareholders 2||$68||$28|
|Normalized earnings per share 2||$0.64||$0.27|
|Net cash flows from operating activities||$206||$103|
|Adjusted funds from operations 2||$159||$118|
|Adjusted funds from operations per share 2||$1.49||$1.12|
|Purchase of property, plant and equipment and other assets||$125||$99|
|Dividends per common share, declared||$0.5125||$0.4800|
- 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 three months ended March 31, 2021.
- 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), normalized earnings attributable to common shareholders, normalized earnings per share, adjusted funds from operations (AFFO) and AFFO 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.
- Includes depreciation and amortization for the three months ended March 31, 2021 and 2020 of $135 million and $120 million, respectively. Forecasted depreciation and amortization for the remainder of 2021 is $137 million, $137 million and $138 million for the second through fourth quarters, respectively.
United States power operations relating to extreme weather event
During the February 9 to 20, 2021 period, extreme winter weather caused some disruptions to our wind facilities, most notably in Texas (Buckthorn Wind) with no significant impact on the balance of Capital Power’s U.S. operations. Buckthorn Wind experienced no significant physical damage, but some turbines were forced offline. As of February 22, 2021, the operations were back to normal. The net impact of the U.S. storm on Buckthorn Wind resulted in increases of $8 million (US$6 million) to adjusted EBITDA and AFFO. In addition, during the peak days of the weather event, the Company was able to leverage its commodity management expertise to physically flow power around North America to contribute a further positive financial impact.
The favourable impacts of the weather event were largely driven by the settlement of the offtake and commodity swaps for Buckthorn Wind for the noted period of extreme weather. However, Buckthorn Wind’s counterparty is contesting the settlement, arguing that settlement should have been based upon a different reference price. Historically these two prices have been similar, but as a result of the recent extreme weather, the Company became aware of a divergence in these prices during scarcity events. Both parties invoked dispute-resolution procedures before the close of quarter and the Company subsequently initiated litigation. Based on the contract terms of the offtake and commodity swaps, the Company considers the probability of ultimate settlement using the reference price advocated by the counterparty as being unlikely. In the event that the dispute is resolved unfavourably to the Company, the net exposure to the Company’s revenues would be a reduction of up to approximately $18 million (US$15 million).
Approval of normal course issuer bid
During the first quarter of 2021, the Toronto Stock Exchange approved Capital Power’s normal course issuer bid to purchase and cancel up to 10.7 million of its outstanding common shares during the one-year period from February 26, 2021 to February 25, 2022.
On April 30, 2021, Capital Power and the Board of Directors announced the following executive position appointments effective June 1, 2021:
- Bryan DeNeve, Senior Vice President Operations,
- Chris Kopecky, Senior Vice President and Chief Legal, Development and Commercial Officer, and
- Steve Owens, Senior Vice President Construction and Engineering.
Kate Chisholm, Sandra Haskins and Jacquie Pylypiuk will continue to serve in their current roles. Darcy Trufyn, currently Senior Vice President, Operations, Engineering and Construction will be retiring effective June 30, 2021.
Executed 15-year contract for Enchant Solar project
On April 19, 2021, the Company announced that it executed a 15-year renewable energy agreement to sell 51% of the electricity generated from the 75 megawatt Enchant Solar project (Enchant Solar) in Alberta to Labatt, along with bundled renewable energy certificates (RECs). Of the contracted capacity under this agreement, approximately one-quarter will be bundled with project-generated RECs directly from Enchant Solar and three-quarters will be packaged with RECs sourced from Eastern Canada. The terms of this agreement are consistent with the previously disclosed financial expectations for Enchant Solar.
Construction of Enchant Solar is set to commence in the second quarter of 2022 with commercial operations expected in the fourth quarter of 2022.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on April 30, 2021 at 9:00 am (MT) to discuss the first quarter financial results. The conference call dial-in number is:
(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) adjusted EBITDA, (ii) AFFO, (iii) AFFO 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 (i) status of the Company’s 2021 AFFO and adjusted EBITDA guidance, (ii) forecasted depreciation for the remainder of 2021, (iii) expectations pertaining to the financial guidance, timing of construction and timing of commercial operations commencement of Enchant Solar, (iv) expectations around the resolution of the pricing dispute on the Buckthorn Wind offtake and commodity swaps (see Significant Events) and (v) matters relating to the LLR Proceeding, including the recovery from appropriate parties.
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, (v) effective tax rates, and (vi) matters relating to the LLR Proceeding, including the recovery of payments from appropriate parties.
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 Management’s Discussion and Analysis for both the three months ended March 31, 2021, prepared as of April 29, 2021 and the Company’s Integrated Annual Report 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 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.
About Capital Power
Capital Power (TSX: CPX) 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 over 6,400 megawatts (MW) of power generation capacity at 26 facilities across North America. Projects in advanced development include 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.