7% annual dividend growth guidance extended to 2021
EDMONTON, Alberta – At its 10th annual Investor Day event held in Toronto today, Capital Power Corporation (TSX: CPX) (“Capital Power” or “the Company”) will provide updates on its plans and progress on various topics including operations, construction projects, growth and financial outlook, sustainability and its operational and financial targets for 2019.
“The growth from the recent acquisition of Arlington Valley and the expected completion of our New Frontier Wind facility before the end of the year, along with higher Alberta power prices will contribute to an approximate 21% increase in our adjusted funds from operations (AFFO) in 2019 based on the midpoint of our $460 million to $510 million target range,” said Brian Vaasjo, President and CEO of Capital Power. “The target range includes approximately $40 million in additional AFFO in 2019 during the final year of Arlington Valley’s current tolling agreement, compared to the new 6-year tolling agreement from 2020 to 2025. The increase in AFFO per share in 2019 is 22% which recognizes the impact of share buybacks completed in 2018.”
“Since Capital Power’s last dividend guidance in July 2017, we have committed approximately $800 million in growth for the construction of three contracted wind projects without requiring capital from the equity markets,” continued Mr. Vaasjo. “The wind projects are targeted for completion between December 2018 and the first quarter of 2020 and the AFFO generated from these long-term contracted wind facilities, averaging nearly 15 years in length, provide the support for the Company to extend its 7% annual dividend growth guidance for an additional year to 2021. This will represent eight years of consistent, sustainable dividend growth.”
Acquisition of Arlington Valley completed
On November 30, 2018, the Company completed the acquisition of the Arlington Valley facility from funds managed by Oaktree Capital Management, L.P. and its co-investors, for approximately US$305 million, including preliminary closing adjustments. Arlington Valley is a 580 megawatt combined cycle natural gas generation facility located in Arizona and is under long-term tolling agreements through 2025.
The acquisition was originally announced on September 6, 2018.
Updated financial guidance for 2018
Based on its most recent forecast, Capital Power expects its AFFO for 2018 to be approximately $390 million to $410 million, compared to its original guidance of $360 million to $400 million.
- Capacity-weighted average plant availability of 95%, reflecting major planned outages at Genesee 1, Shepard Energy Centre, and Joffre, and
- sustaining capital expenditures of $80 to $90 million.
Growth from development and construction projects
- Completion of the Whitla Wind project on-budget and on-time for commercial operations in December 2019,
- continue construction of Cardinal Point for commercial operations in March 2020,
- commit capital of $500 million for contracted growth, and
- secure an additional two contracted wind developments.
- AFFO of $460 million to $510 million, based on 70% of the Alberta commercial baseload generation portfolio sold forward at an average contracted price in the low-$50 per megawatt hour range,
- Adjusted EBITDA of $800 million to $850 million, and
- a dividend increase of 7% in-line with annual dividend growth guidance, which will result in an AFFO payout ratio of 39%.
Investor Day event and webcast information
Today’s Investor Day event is being held at Vantage Venues located at 150 King Street West, 16th floor in Toronto. Registration begins at 8:30 am (ET) with presentations starting at 9:00 am. A live audio webcast of the event is available on the Company’s website at www.capitalpower.com. The webcast will be archived and accessible for replay.
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) 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.
Commencing with the Company’s March 31, 2019 quarter-end, adjusted EBITDA will exclude unrealized changes in fair value of commodity derivatives and emission credits which were previously included in adjusted EBITDA. This change has been made to better align the Company’s measure of adjusted EBITDA with its other non-GAAP measures, as both the AFFO and the normalized earnings per share measures exclude the impacts of unrealized changes in fair value of commodity derivatives and emission credits. This change will also result in period over period adjusted EBITDA being more comparable.
Forward-looking information or statements 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) 2019 plant availability, (ii) 2019 sustaining capital expenditures, (iii) securing of new development projects, (iv) future additional committed capital for growth, (v) expected completion dates and costs compared to budget for ongoing development projects, (vi) future AFFO, AFFO per share and expected increases in those metrics, (vii) 2019 adjusted EBITDA, and (viii) future dividend growth.
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) anticipated facility performance, (iii) business prospects (including potential re-contracting opportunities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations, 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 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) facility availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) developments including timing and costs of regulatory approvals and construction, (vii) changes in market prices and availability of fuel, and (viii) 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, 2017, prepared as of February 15, 2018, 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 power producer headquartered in Edmonton, Alberta. The company develops, acquires, owns, and operates power generation facilities using a variety of energy sources. Capital Power owns approximately 5,100 megawatts (MW) of power generation capacity at 25 facilities across North America. Approximately 1,000 MW of owned generation capacity is in advanced development in Alberta, North Dakota, and Illinois.