Capital Power announces 2023 financial targets, showcases its carbon reduction initiatives and highlights positive outlook at Investor Day
Advances Genesee CCS project with limited notice to proceed milestone and accelerates net zero target to 2045
EDMONTON, Alberta – At its 14th annual Investor Day event, themed “Powered by Purpose”, being held in Brampton Ontario today, Capital Power Corporation (TSX: CPX) (“Capital Power” or “the Company”) will provide updates on its strategy, sustainability targets, operations, construction projects, renewable growth pipeline, market outlook and 2023 operational and financial targets.
“Capital Power continues to deliver on its strategy of operating the best assets in the Alberta power market and investing in renewables and strategically located natural gas assets while pursuing pathways to be net zero by 2045,” said Brian Vaasjo, President and CEO of Capital Power. “This strategy has proven to be resilient with 2022 being another strong year for the company. We expect to finish the year at the upper ends of our revised financial guidance ranges, which are significantly higher than our original targets and 2023 will see continued strong financial performance.”
“Our growth outlook remains excellent given political support for renewable energy both in the United States and in Canada and the 4,000 megawatts (MW) incremental capacity required in Ontario. We are well positioned to participate in the accelerating build out of renewables and storage with our robust development pipeline of wind, solar and storage opportunities as well as potential expansion and contract extension for our three natural gas assets in Ontario. Overall, we see significant near-term growth opportunities in Western Canada, Ontario and the Midcontinent Independent System Operator (MISO) region,” stated Mr. Vaasjo.
“Our Genesee CCS project has reached a major milestone with a limited noticed to proceed (LNTP),” said Mr. Vaasjo. “Our decision to move to LNTP reflects the positive interim results from the front-end engineering design (FEED) study and continued progress on the programs the Alberta and Federal governments have taken to encourage and accelerate deployment of CCS technology. CCS is an essential part of the pathway to accelerating and achieving decarbonization of Alberta’s power sector while maintaining reliability and affordability. Our Genesee CCS project is the most advanced in the sector and would position our Genesee Generating Station to be a near-zero emitting source of reliability and other services to support increasing levels of renewable generation and an evolving Alberta power grid.”
Limited notice to proceed on Genesee Carbon Capture and Storage (CCS) project
Capital Power continues to advance its Genesee CCS project with the Board of Directors approval of a LNTP for the $2.3 billion project. Progress on funding programs from the Alberta and Federal governments such as the Alberta CCS Hub initiative, Emissions Reduction Alberta support for the FEED study, the Federal CCUS Investment Tax Credit, the Canada Infrastructure Bank, the Canada Growth Fund and the Strategic Innovation Fund supported our LNTP decision. Proceeding with LNTP allows the Company to move into the next stage of final due diligence and commercial, financing and technical assessment in advance of a final investment decision expected by the third quarter of 2023 with commercial operations as early as 2027. Once operational, Genesee CCS is expected to capture up to 3 million tonnes of CO2 per year, which would be transported and stored through Enbridge’s Open Access Wabamun Carbon Hub. This will position Genesee 1 and 2 amongst the cleanest baseload thermal generation facilities in the world.
Accelerating net zero target
In action of our purpose, to power a sustainable future for people and planet, Capital Power has accelerated its net zero target to 2045 from 2050. The growing government support for CCS and other carbon reduction technologies, including direct air capture, and Capital Power’s commitment to reducing its carbon footprint supported accelerating its target to achieve net zero by 2045.
Genesee 1 and 2 Repowering Project on-schedule
Progress on the Genesee 1 and 2 repowering project continues and is on schedule for the Company to meet its off-coal commitment in 2023. Genesee 1 and 2 is expected to achieve simple cycle commissioning in late 2023, followed by combined cycle commissioning in 2024. The repowering project cost has been revised to $1.1 billion compared to the $997 million budget largely due to significantly higher interconnection costs.
Clydesdale Solar on-schedule for commercial operations by year-end
An additional 75 MW from Clydesdale Solar (formerly Enchant Solar), located in the Municipal District of Taber, Alberta, is expected to begin commercial operations on schedule in December 2022. The total project cost is expected to be $124 million compared to the original budget of $102 million due to Covid-related supply chain pressures and significant increases in transportation costs. The facility currently has a 15-year renewable energy agreement with Labatt Breweries of Canada for 51% of the output and expect that most of the remaining capacity will be contracted.
The financial outlook for 2022 is trending to be in the upper end of the revised financial guidance provided in the third quarter 2022 report. This includes adjusted EBITDA of $1,300 million to $1,340 million and adjusted funds from operations (AFFO) of $770 million to $810 million.
- Capacity-weighted average facility availability of 94%, reflecting planned outages for Genesee 1 and 2 repowering, and other thermal facilities,
- Sustaining capital expenditures of $135 million to $145 million.
Financial and dividend targets
The 2023 financial targets are based on various assumptions including: 10,000 gigawatt hours of the Alberta commercial generation portfolio sold forward at an average contract price in the high-$70 per megawatt hour (MWh) range, average forward Alberta spot power price of approximately $136/MWh, and forward AECO natural gas price of approximately $4.60/GJ.
- Adjusted EBITDA of $1,455 million to $1,515 million,
- AFFO of $805 million to $865 million, and
- Annual dividend growth guidance of 6% from 2023 to 2025 with an expected average AFFO payout of approximately 40% through 2025 compared to the 45% to 55% target range.
- Continue progress on the Genesee 1 and 2 Repowering project based on revised schedule and forecast,
- Advancement of Genesee CCS Project and Genesee Carbon Conversion Centre,
- Proceed with two renewable projects,
- Continued progress on Halkirk 2 on time and on budget, and
- Target $600 million of committed capital for growth for 2023.
Investor Day event webcast
Today’s event is scheduled to start at 9:00 am (ET) and can be accessed on the Company’s website at www.capitalpower.com. The webcast will be archived and accessible for replay.
Non-GAAP Financial Measures and Ratios
The Company uses (i) adjusted EBITDA, (ii) AFFO, and (iii) normalized earnings attributable to common shareholders as financial performance measures.
The Company also uses AFFO per share and normalized earnings per share as performance measures. These measures are non-GAAP ratios determined by applying AFFO and normalized earnings attributable to common shareholders, respectively, to the weighted average number of common shares used in the calculation of basic and diluted earnings per share.
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.
Additional disclosure around the Company’s non-GAAP financial measures and ratios, including reconciliations of these non-GAAP financial measures to their nearest GAAP financial measures are disclosed in the Company’s Management’s Discussion and Analysis prepared each quarter, most recently prepared as of October 28, 2022 for the third quarter of 2022, which is available under the Company’s profile on SEDAR at SEDAR.com and on the Company’s website at capitalpower.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 expectations around: [our company-wide targets specific to climate-related performance, including reduction of emissions and emission intensity and achieving net zero by 2045, investment in carbon capture and utilization technology, completion of the Genesee Carbon Conversion Centre, and commercial application of carbon conversion, capture and storage technologies; implementation of our approach to decarbonization, and our pathway to net zero by 2045 and the expected reduction of carbon from our operations; our 2023 targets and outlook for 2022, including for facility availability, sustaining capital expenditures, AFFO, adjusted EBITDA, growth targets, sustainability targets; expectations around timing and costs associated with our upgrades, projects, timelines, and repowering plans at our Genesee facility with addition of battery storage, including being off coal in 2023; expectations of timing, funding, costs, and financial impacts for existing, planned, and potential growth projects and acquisitions, including the acquisition; expectations around future growth opportunities; AFFO payout ratio; future dividend growth; future pricing of electricity and market fundamentals in existing and target markets; sources of funding, adequacy and availability of committed bank credit facilities and future borrowings; and future cash requirements, including debt repayments, capital expenditures, dividends and distributions.
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 including its review of purchased businesses and assets. The material factors and assumptions used to develop these forward-looking statements relate to: electricity and other energy prices and carbon prices; performance; business prospects (including potential re-contracting of facilities) and opportunities including expected growth and capital projects; status of and impact of policy, legislation and regulations; effective tax rates; the development and performance of technology; foreign exchange rates; including the timing and recovery from appropriate parties; and other matters discussed under the Performance Overview, Outlook and Risks and Risk Management sections.
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: changes in electricity, natural gas and carbon prices in markets in which the Company operates and the use of derivatives; regulatory and political environments including changes to environmental, climate, financial reporting, market structure and tax legislation; disruptions, or price volatility within the Company’s supply chains; generation facility availability, wind capacity factor and performance including maintenance expenditures; ability to fund current and future capital and working capital needs; acquisitions and developments including timing and costs of regulatory approvals and construction; changes in the availability of fuel; ability to realize the anticipated benefits of acquisitions; limitations inherent in the Company’s review of acquired assets; changes in general economic and competitive conditions, including inflation; changes in the performance and cost of technologies and the development of new technologies, new energy efficient products, services and programs; and risks and uncertainties discussed under the Risks and Risk Management section. See Risks and Risk Management in the Company’s 2021 Integrated Annual Report and in the Company’s third quarter 2022 MD&A 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 news release 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 approximately 7,400 MW of power generation capacity at 28 facilities across North America. Projects in advanced development include approximately 385 MW of owned renewable generation capacity in North Carolina and Alberta and 512 MW of incremental natural gas combined cycle capacity, from the repowering of Genesee 1 and 2 in Alberta.