EDMONTON, Alberta – Capital Power Corporation (“Capital Power”, or the “Company”) (TSX: CPX) today released its financial results for the three and nine month periods ended September 30, 2010. Normalized net income, after adjusting for one-time items and fair value adjustments, was $12 million or $0.55 per share in the third quarter of 2010 while net income was $7 million or $0.32 per share for the same period. For the nine month period ending September 30, 2010, normalized net income was $25 million or $1.15 per share and net income was $12 million or $0.55 per share.
“The Company had solid performance in the third quarter of 2010,” said Brian Vaasjo, President and CEO of Capital Power Corporation. “Although Alberta spot power prices remained low in the third quarter, the strategy to sell forward a substantial portion of our Alberta power portfolio for 2010 when prices were higher, has resulted in our captured price being 26% higher than the average Alberta spot power price for the first nine months of the year. Our financial performance in the first nine months of the year, as measured by normalized earnings per share, is tracking slightly ahead of plan and we are well positioned to meet our earlier full year guidance for 2010.”
“On October 19th, we successfully completed the acquisition of the 275 megawatt Island Generation facility. Island Generation represents an important milestone in Capital Power’s growth strategy as it is the first addition to our fleet via acquisition. In addition, with close to 700 megawatts committed in development opportunities, we continue to make progress towards our growth objective of owning or operating 10,000 megawatts by 2020.”
|Operational and Financial Highlights(1) (unaudited) (millions of dollars except per share and operational amounts)||Three months ended
September 30, 2010
|Nine months ended
September 30, 2010
|Electricity generation (GWh)||3,635||10,352|
|Generation plant availability (%)||95%||92%|
|Normalized net income (2)||12||25|
|Normalized earnings per share(2)||$0.55||$1.15|
|Earnings per share||$0.32||$0.55|
|Dividends declared per share||$0.315||$0.945|
|Funds from operations(2)||106||271|
|Funds from operations excluding non-controlling interests in CPILP(2)||86||207|
(1) The operational and financial highlights in this press release should be read in conjunction with Management’s Discussion and Analysis and the Consolidated Financial Statements for the nine months ended September 30, 2010.
(2) Gross margin, Operating margin, Normalized net income, Normalized earnings per share, Funds from operations, and Funds from operations excluding non-controlling interests in CPILP are non-GAAP financial measures and do not have standardized meanings under Canadian GAAP, and therefore, may not be comparable to similar measures used by other enterprises. Reconciliations of these non-GAAP financial measures to net income are included in the Company’s Management’s Discussion and Analysis dated October 29, 2010.
Review of strategic alternatives for Capital Power Income L.P. (CPILP)
On October 5, 2010 Capital Power Corporation and CPILP jointly announced that CPILP will initiate a process to review its strategic alternatives. Capital Power Corporation will support the review of strategic alternatives, and if the process results in a determination to proceed with a sale of CPILP, Capital Power Corporation does not intend to participate as a prospective buyer.
The initiation of the strategic review is not in response to any proposed transaction for CPILP, nor can there be any assurance that it will lead to a transaction.
The process to review strategic alternatives is anticipated to take place over the next several months. During this period it will be business as usual for CPILP and Capital Power Corporation and it is anticipated that CPILP will continue to provide the same amount of monthly distributions to its unitholders, and maintain the same investor proposition that it offers today. Capital Power Corporation, through wholly owned subsidiaries, will continue to manage CPILP assets and seek growth opportunities that fit CPILP’s strategy.
Acquisition of Island Generation Facility
CPLP’s acquisition of Island Generation from Kelson Canada Inc. closed on October 19, 2010. Island Generation is a 275 MW gas-fired combined cycle power plant at Campbell River, British Columbia. The Company has initially financed the purchase price of approximately $207 million, plus closing costs less approximately $2 million of working capital adjustments, with funds drawn on credit facilities.
Island Generation is fully contracted from April 2010 to April 2022 under a tolling arrangement where BC Hydro is responsible for the fuel supply to the facility. Commissioned in 2002, Island Generation is consistent with Capital Power’s fleet of young assets that deploy efficient technologies.
The Island Generation facility is expected to be modestly and immediately accretive to earnings, and more significantly accretive to cash flow, based on the Electricity Purchase Arrangement (EPA) terms and Capital Power’s expectation that the EPA will not be considered a capital lease for accounting purposes.
A+ rating for Capital Power’s first Corporate Responsibility Report
Capital Power has achieved an A+ rating for its 2009 Corporate Responsibility Report, “Moving in the Right Direction”. The report documents the impacts that Capital Power has on the environment, and its employees, shareholders, and communities. The internationally-recognized A+ standard, defined by the Global Reporting Initiative, has been independently verified by Pricewaterhouse Coopers LLP.
“Capital Power’s first corporate responsibility report is a concrete example of the Company’s values of acting with integrity and transparency, being accountable and environmentally responsible, and working safely towards a zero-injury workplace,” said Capital Power President & CEO Brian Vaasjo. “Capital Power’s diligence in tracking, monitoring, and reporting throughout the year, and the input of our people from across North America, were critical factors in achieving an A+ rating for the report.”
Following are some highlights from the report:
- Net generation was 18.3 million megawatt hours (MWh) in 2009, an increase of approximately 12% over the previous year (under Capital Power’s predecessor company). Increased generation in 2009 was primarily due to a return to normal levels of production at the Genesee facility in Alberta, which underwent approximately 66 days of planned and unplanned shutdowns in 2008. Added production from new facilities, such as the Morris co-generation plant in Illinois (acquired by Capital Power Income L.P. in late 2008), and two new units at the Clover Bar Energy Centre in Edmonton, Alberta, also contributed to increased production in 2009.
- Greenhouse gas emissions intensity improved in 2009. Capital Power’s facilities emitted 0.71 tonnes of CO2 per MWh of power produced, compared to 0.73 tonnes per MWh in 2008. Although production volumes increased 12%, total CO2 emissions rose by only 8%. Emissions of particulate matter, nitrogen oxide and mercury also increased. Both the volume and intensity of sulphur dioxide emissions were lower in 2009, with reductions of 11% and 21% respectively.
- Capital investments improved environmental performance at a number of facilities. An investment of US$87 million in the Southport and Roxboro plants in North Carolina increased plant efficiency and reduced the volume of coal used. Upgrades to a combined heat and power facility in North Island, California are expected to reduce nitrogen oxide emissions to one-sixth of previous levels.
- Total recordable injuries and lost time injury rates were lower than the average of the three years prior.
Analyst Conference Call and Webcast
Capital Power will be hosting a conference call and live webcast with analysts on November 1, 2010 at 1:00 pm (ET) to discuss second 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: 56777#
A replay of the conference call will be available following the call at: (877) 353-9587 (toll-free) and entering pass code 388630. The replay will be available until midnight on November 30, 2010.
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 Measure
Operating margin is not a defined financial measure according to Canadian generally accepted accounting principles (GAAP) and does not have a standardized meaning prescribed by GAAP. Therefore, operating margin may not be comparable to similar measures presented by other enterprises.
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 review of strategic alternatives for CPILP, its potential outcome, and the intention of Capital Power to support the review of strategic alternatives but not participate as a prospective buyer if a sale were to occur; (ii) expectations regarding the timing of the CPILP strategic review process and that during the review process CPILP will continue its business as usual, provide the same amount of monthly distributions to its unitholders and maintain the same proposition it offers today; (iii) Capital Power’s intention to continue managing CPILP assets and seek growth opportunities that fit CPILP’s strategy; (iv) expectations that Island Generation will be modestly and immediately accretive to earnings and cash flow; and (v) expectations regarding BC Hydro’s responsibility for the fuel supply to the Island Generation Facility.
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; (iii) the Company’s financial position and credit facilities and sources of funding; (iv) the Company’s assessment of commodity and power markets; (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 including Island Generation; (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 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) accounting treatment for Island Generation.
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; (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 including Island Generation; and (xvii) the tax attributes of and implications of any acquisitions. 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
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. Headquartered in Edmonton, Alberta, Capital Power has interests in 32 facilities in Canada and the U.S. totaling nearly 3,800 megawatts of generation capacity. Capital Power and its subsidiaries develop, acquire and optimize power generation from a wide range of energy sources.