EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) (Capital Power or the Company) today announced that it has entered into an agreement to acquire two generating facilities from Brick Power Holdings LLC (Brick Power), one facility located in Tiverton, Rhode Island (Tiverton) and one facility located in Rumford, Maine (Rumford). Both plants are natural gas-fired combined cycle power generation facilities serving the New England region in the U.S. Northeast, and have a maximum combined capacity of 549 megawatts (MW).
“Capital Power’s business and financial strategies are designed to deliver disciplined growth as we aim to reach 10,000 megawatts of assets by 2020 on a consistently accretive basis,” said Capital Power’s President and CEO, Brian Vaasjo. “The acquisition of Tiverton and Rumford demonstrates our commitment to the strategy. They provide Capital Power with the foundation for a networked hub of assets in the U.S. Northeast, one of our target markets; they help us sustain a balanced portfolio of contracted and merchant assets; and as relatively young, highly efficient gas-fired plants that use proven technologies, they fit our technology and operating focus.”
The buyer under the Share Purchase Agreement (SPA) for the transaction is a subsidiary of Capital Power LP, the legal entity that directly and indirectly holds Capital Power’s assets. The transaction is expected to close in April 2011, subject to regulatory approvals and satisfaction of other customary closing conditions. The purchase price for the acquisition is US$315 million subject to working capital adjustments and other closing adjustments.
The acquisition is expected to exceed the targeted rate of return Capital Power seeks from merchant assets, and be accretive to earnings both immediately and over the life of the facilities. Depending on the permanent financing alternative selected for the acquisition, Capital Power expects the acquisition to add on average $0.02 to $0.07 in earnings per share over the first two years. Earnings from the facilities are expected to increase significantly following the expected recovery of power prices in the New England market as the U.S. economy strengthens. Capital Power will provide additional guidance, including earnings before interest, taxes, depreciation and amortization (EBITDA) projections, upon closing.
Following the acquisition of Tiverton and Rumford, Capital Power will have added or placed into development approximately 1,500 MW of generating capacity since the Company’s July 2009 Initial Public Offering.
Overview of the power plants
Tiverton and Rumford are both natural gas-fired combined cycle plants, each with a nominal capacity of 265 MW. Tiverton and Rumford have winter generation capacities of 279 MW and 270 MW, respectively with a combined maximum capacity of 549 MW. Tiverton is located in Tiverton, Rhode Island while Rumford is located in Rumford, Maine. Both plants are merchant facilities and sell their output into the New England Power Pool (NEPOOL). The plants began commercial operations in 2000 and have similar design configurations that utilize a single fuel GE 7FA power island. Capital Power commissioned and operated similar technology at the Frederickson power facility in Washington State.
New England power market description
Tiverton and Rumford supply electricity to the New England Independent System Operator (ISO-NE). Both plants are Exempt Wholesale Generators (EWG) and have Federal Energy Regulatory Commission (FERC) authorization to sell capacity, energy, and ancillary services at market-based rates. The plants are operated as mid-merit generation units and sell their outputs on an hourly basis into the NEPOOL. The NEPOOL serves six New England states: Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont which contain approximately 14 million people and over 6.5 million households and businesses. NEPOOL is subject to FERC jurisdiction and has more than 400 participants, over 8,000 miles of transmission lines, and 13 interconnections to the New York and Canadian power systems. It is one of the most advanced and liquid markets in the United States and has a peak demand of approximately 28,000 MW.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on February 17, 2011 at 9:00 AM (ET) to discuss the transaction. The conference call toll-free dial-in number is: (877) 353-9586, access code 56777#. Interested parties may also access the webcast at www.capitalpower.com. An archive of the webcast will be available on the website.
A replay of the conference call will be available following the call at: (877) 353-9587 (toll-free) and entering conference reference number 537196# and access code 56777#. The replay will be available until 12:00 midnight (ET) on March 17, 2011.
Certain information in this news release is forward-looking within the meaning of Canadian securities laws as it relates to anticipated financial and operating 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 includes, among other things, information relating to: (i) expectations that the Tiverton and Rumford acquisition (Acquisition) will exceed the targeted rate of return Capital Power seeks from merchant assets, (ii) the expected accretion to earnings from the Acquisition, (iii) the expected timing of the closing of the purchase transaction for the Acquisition, (iv) expectations that Capital Power will attain its goal of 10,000 MW of assets by 2020 on a consistently accretive basis, (v) expectations that the Tiverton and Rumford power plants will provide Capital Power with the foundation of a networked hub in the U.S. Northeast, (vi) expectations that the Tiverton and Rumford power plants will help Capital Power sustain a balanced portfolio of contracted and merchant assets, (vii) expectations that power prices will recover in the New England market, (viii) expectations that earnings from the Tiverton and Rumford plants will increase as power prices increase, and (ix) expectations regarding the addition on average of $0.02 to $0.07 in earnings per share over the first two years, depending on financing.
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 Tiverton and Rumford plants (together “the plants”); (ii) the plants availability; (iii) the Company’s financial position and credit facilities and sources of financing; (iv) the Company’s assessment of commodity and power markets; (v) the Company’s assessment of the markets and regulatory environments in which the plants operates; (vi) expected recovery of power prices in the New England market as the U.S. economy strengthens, (vii) weather; (viii) availability and cost of labour and management resources; (ix) performance of contractors and suppliers; (x) availability and cost of financing; (xi) management’s analysis of applicable tax legislation; (xii) the 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) the Company’s ability to successfully integrate and realize benefits of the acquisition of the plants; (xvi) the Company’s ability to implement strategic initiatives which will yield the expected benefit; and (xvii) the Company’s assessment of capital markets and ability to complete future securities offerings.
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 and uncertainties relating to: (i) operation of the plants; (ii) the plants 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) availability and cost of financing; (x) availability and cost of labour, equipment and management resources; (xi) performance of counterparties, partners, contractors and suppliers in fulfilling their obligations to the Company; (xii) developments in North American capital markets; (xiii) compliance with financial covenants; (xiv) ability to successfully realize the benefits of the acquisition of the plants; (xv) the tax attributes of the acquisition of the plants; and (xvi) the outcome of the review of Capital Power Income L.P.’s strategic alternatives jointly announced by Capital Power and Capital Power Income L.P. on October 25, 2010 and any transaction that may result therefrom.
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. Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Forward-looking statements are provided for the purpose of providing information about management’s current expectations, and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. 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 Corporation
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.