Edmonton, Alberta – Capital Power Corporation (“Capital Power”, or the “Company”) (TSX: CPX) today released its financial results for the second quarter and six months ended June 30, 2013. The Company also announced that it expects to exceed its 2013 financial guidance for normalized earnings per share and cash flow per share.
Normalized earnings attributable to common shareholders in the second quarter of 2013, after adjusting for one-time items and fair value adjustments, were $17 million, or $0.24 per share, compared with $5 million, or $0.07 per share, in the comparable period of 2012.
Funds from operations were $85 million in the second quarter of 2013, up 57 per cent from $54 million in the second quarter of 2012. Cash flow per share for the quarter was $0.86 compared with $0.55 for the same quarter in the previous year.
Net income attributable to shareholders in the second quarter of 2013 was $20 million, or $0.20 per share, compared with a net loss of $32 million, or $0.50 per share, in the comparable period of 2012.
For the six months ended June 30, 2013, normalized earnings attributable to common shareholders were $42 million, or $0.60 per share, compared with $32 million, or $0.50 per share, in the first six months of 2012. Funds from operations totaled $188 million compared with $170 million in the comparable six-month period last year.
“Second quarter financial performance exceeded our expectations,” said Brian Vaasjo, President and CEO of Capital Power. “Normalized earnings of $0.24 per share increased significantly from the $0.07 per share a year ago and we generated strong cash flow, up 56 per cent from last year to $0.86 per share. Financial results benefited from strong Alberta power prices in the quarter that averaged $123 per megawatt hour (MWh) compared to $40 per MWh for the same period last year and resulted in a record quarterly adjusted EBITDA contribution of $114 million from the Alberta commercial plants and portfolio optimization segment.”
The strong pricing reflects the positive supply and demand dynamics of the Alberta power market, which is recognized as one of the most attractive power markets in North America. On July 2, 2013, Alberta’s demand for electricity reached an all-time summer high of 10,062 megawatts (MW), surpassing the previous summer record of 9,885 MW set in July 2012.
“Capital Power is making significant investments in Alberta that will uniquely position the Company to benefit from continued strong demand growth and the need for new sources of generation to replace coal units that are expected to retire later in the decade,” added Mr. Vaasjo. ”With the completion in 2015 of the jointly-owned Shepard Energy Centre, and the addition of our Capital Power Energy Centre later this decade, Capital Power will own an outstanding fleet of power generation assets in Alberta and will be well positioned to continue benefiting from this attractive power market,” said Mr. Vaasjo.
The second quarter results position the Company strongly in terms of its annual financial guidance. “Based on our positive year-to-date results and current Alberta forward prices of approximately $75 per MWh for the balance of the year, we now expect full year 2013 financial results to exceed the high end of our annual guidance of $1.20 to $1.40 for normalized earnings per share and $3.80 to $4.20 for cash flow per share,” said Mr. Vaasjo.
Operational and Financial Highlights 1
|Three months ended June 30 ||Six months ended June 30 |
|(millions of dollars except per share and operational amounts)||2013||2012||2013||2012|
|Electricity generation (excluding acquired Sundance PPA) (GWh)||3,746||3,499||7,888||7,721|
|Generation plant availability (excluding acquired Sundance PPA) (%)||86%||82%||90%||89%|
|Revenues and other income||$321||$261||$686||$637|
|Net income (loss) attributable to shareholders||$20||$(32)||$54||$8|
|Basic earnings per share||$0.20||$(0.50)||$0.64||$0.08|
|Diluted earnings per share||$0.19||$(0.57)||$0.63||$0.06|
|Dividends declared per common share||$0.315||$0.315||$0.63||$0.63|
|Normalized earnings attributable to common shareholders(2)||$17||$5||$42||$32|
|Normalized earnings per share(2)||$0.24||$0.07||$0.60||$0.50|
|Funds from operations(2)||$85||$54||$188||$170|
|Cash flow per share(2)||$0.86||$0.55||$1.90||$1.74|
|Discretionary cash flow (2)||$6||$(26)||$58||$41|
$200 million offering of 4.50% Cumulative Rate Reset Preference Shares
On March 14, 2013, Capital Power Corporation issued 8 million Cumulative Rate Reset Preference Shares, Series 5 (Series 5 Shares) at $25 per share for aggregate gross proceeds of $200 million on a bought deal basis with a syndicate of underwriters.
The Series 5 Shares will pay fixed cumulative preferential dividends of $1.125 per share per annum, yielding 4.50% per annum, payable on the last business day of March, June, September and December each year, as and when declared by the Board of Directors of Capital Power Corporation. These dividends are applicable for the initial period ending June 30, 2018. The Series 5 Shares are subject to specified redemption, conversion and reset rights.
Standard & Poor’s (a division of the McGraw Hill Companies, Inc.) has assigned a rating of P-3 and DBRS Limited has assigned a rating of Pfd-3 (low) for these Series 5 Shares.
Purchase of interest in Shepard Energy Centre
The Company has entered into a series of agreements with ENMAX Corporation (ENMAX) to purchase a 50% interest in the 800 MW natural-gas-fuelled Shepard Energy Centre (Shepard) located on the eastern limits of the City of Calgary. Construction is scheduled for completion in the first quarter of 2015. On February 28, 2013, the purchase of the first tranche of the Company’s interest in Shepard closed. Upon close of this transaction, the Company paid $237 million and acquired a 25% interest in Shepard. The total amount incurred by the Company to the date of close was $287 million compared with the total anticipated capital cost of $860 million. The second tranche, expected to close in the first quarter of 2014, will result in the Company’s acquisition of an additional 25% interest in Shepard bringing its total ownership interest to 50%. Subsequent to the close of the first tranche, and prior to the close of the second tranche, all decisions related to Shepard will require unanimous approval by the Company and ENMAX. As a result, the Company jointly controls Shepard with ENMAX upon close of the first tranche. Based on the terms of the Shepard agreements, the Company will account for the Shepard joint arrangement, under the new accounting standard for joint arrangements, as a joint operation.
Analyst Conference Call and Webcast
Capital Power will be hosting a conference call and live webcast with analysts on July 29, 2013 at 11:00 AM (ET) to discuss second quarter results. The conference call dial-in numbers are:
(604) 681-8564 (Vancouver)
(403) 532-5601 (Calgary)
(416) 623-0333 (Toronto)
(514) 687-4017 (Montreal)
(855) 353-9183 (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: (855) 201-2300 (toll-free) and entering conference reference number 1044204# followed by participant code 21543#. The replay will be available until midnight on October 29, 2013.
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-GAAP Financial Measures
The Company uses (i) adjusted EBITDA, (ii) funds from operations, (iii) cash flow per share, (iv) discretionary cash flow, (v) normalized earnings attributable to common shareholders, and (vi) 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 are, therefore, unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, net income attributable of 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. Reconciliations of adjusted EBITDA to net income, funds from operations to net cash flows from operating activities and normalized earnings attributable to common shareholders to net income attributable to common shareholders are contained in the Company’s Management’s Discussion and Analysis dated July 26, 2013 for the six months ended June 30, 2013 which is available under the Company’s profile on SEDAR at www.SEDAR.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 information with respect to: (i) expectations regarding future earnings, and (ii) expectations regarding future cash flows.
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 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 commodity prices in markets in which the Company operates 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 expenditures, (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 (vii) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s December 31, 2012 annual Management’s Discussion and Analysis for further discussion of these and other risks.