Capital Power Corporation (TSX: CPX) today released financial
results for the quarter ended March 31, 2023.
Financial highlights
- Generated net cash flows from operating activities of $349
million and adjusted funds from operations (AFFO) of $210
million
- Generated net income of $285 million and adjusted EBITDA of
$401 million
- Full-year AFFO and adjusted EBITDA trending to the upper end of
annual guidance ranges for 2023
Strategic highlights
- Appointment of Avik Dey as President and Chief Executive
Officer
- Executed a 6-year contract extension for Goreway with Ontario
IESO
- Positive general developments for Genesee CCS project announced
in the Federal Budget 2023 notably reaffirmation of the role and
mandate for the Canada Growth Fund to support de-risking of large
scale decarbonization
- Announced a 23-year clean electricity supply agreement for
Halkirk 2 Wind
“Financial results were strong for the first quarter despite
unseasonably warm temperatures,” said Brian Vaasjo, President and
CEO of Capital Power. “This included warm temperatures in Alberta
for most of the quarter that resulted in an average power price of
$142 per megawatt hour which was well below our expectations of
$208 per megawatt hour. Our financial forecast and outlook for
Alberta power prices and fleetwide performance continues to be
positive for the remainder of the year. We expect financial results
to be trending to the upper end of the adjusted EBITDA and AFFO
guidance ranges of $1,455 million to $1,515 million and $805
million to $865 million, respectively.”
“The Ontario IESO capacity procurement confirms our natural gas
strategy and is a good investment opportunity for Capital Power,”
stated Mr. Vaasjo. “We were awarded a 6-year IESO contract
extension associated with our 40 megawatt efficiency upgrade bid
for Goreway, which applies to the new combined contracted capacity
of 880 megawatts and extends the current contract from 2029 to
2035. We continue discussions with the IESO on a similar contract
award for York Energy Centre and look forward to the results on our
competitive bids relating to a gas turbine expansion at East
Windsor and battery projects at Goreway and York Energy.”
“On behalf of all of Capital Power, I would like to welcome Avik
Dey to the Company. Avik will be a tremendous catalyst for the team
and as he noted in the April 19th press release, he is looking
forward to accelerating the company’s existing strategic plan. I
would also like to congratulate Kate Chisholm, Senior Vice
President and Chief Strategy and Sustainability Officer on her
retirement. Kate has been an integral part of the executive team
with outstanding service and valuable contributions since the
inception of Capital Power. We wish Kate the very best in
retirement,” added Mr. Vaasjo.
“Capital Power has been very fortunate to have Brian as our
inaugural President & CEO,” said Board Chair, Jill Gardiner.
“On behalf of the Board of Directors and the Company, I want to
thank him for his tremendous leadership and bringing Capital Power
to the strong position it is in today.”Operational and
Financial Highlights1
|
(unaudited, millions of dollars except per share and operational
amounts) |
Three months ended March 31 |
|
|
2023 |
|
2022 |
|
|
Electricity generation (Gigawatt hours) |
|
7,417 |
|
|
6,893 |
|
| Generation facility
availability |
|
94% |
|
|
95% |
|
| Revenues and other
income |
$ |
1,267 |
|
$ |
501 |
|
| Adjusted EBITDA 2 |
$ |
401 |
|
$ |
348 |
|
| Net income 3 |
$ |
285 |
|
$ |
119 |
|
| Net income attributable to
shareholders of the Company |
$ |
286 |
|
$ |
122 |
|
| Basic earnings per share |
$ |
2.39 |
|
$ |
0.96 |
|
| Diluted earnings per
share |
$ |
2.38 |
|
$ |
0.96 |
|
| Net cash flows from operating
activities |
$ |
349 |
|
$ |
415 |
|
| Adjusted funds from operations
2 |
$ |
210 |
|
$ |
200 |
|
| Adjusted funds from operations
per share 2 |
$ |
1.80 |
|
$ |
1.72 |
|
| Purchase of property, plant
and equipment and other assets, net |
$ |
86 |
|
$ |
132 |
|
|
Dividends per common share, declared |
$ |
0.5800 |
|
$ |
0.5475 |
|
- The operational and
financial highlights in this press release should be read in
conjunction with the Management’s Discussion and Analysis and the
unaudited condensed interim financial statements for the three
months ended March 31, 2023.
- Earnings before net
finance expense, income tax expense, depreciation and amortization,
impairments, foreign exchange gains or losses, finance expense and
depreciation expense from joint venture interests, gains or losses
on disposals and unrealized changes in fair value of commodity
derivatives and emissions credits (adjusted EBITDA) and adjusted
funds from operations (AFFO) are used as non-GAAP financial
measures by the Company. The Company also uses AFFO per share which
is a non-GAAP ratio. These measures and ratios do not have
standardized meanings under GAAP and are, therefore, unlikely to be
comparable to similar measures used by other enterprises. See
Non-GAAP Financial Measures and Ratios.
- Includes
depreciation and amortization for the three months ended March 31,
2023 and 2022 of $141 million and $142 million, respectively.
Forecasted depreciation and amortization for the remainder of 2023
is $137 million per quarter.
Significant Events
Approval of normal course issuer
bid
During the first quarter of 2023, the Toronto Stock Exchange
approved Capital Power’s normal course issuer bid to purchase and
cancel up to 5.8 million of its outstanding common shares during
the one-year period from March 3, 2023 to March 2, 2024.
Executed 23-year clean electricity supply
agreement for Halkirk 2 Wind
On February 3, 2023, we announced a 23-year clean electricity
supply agreement with Public Services and Procurement Canada. The
Agreement will provide approximately 250,000 MWh of clean
electricity per year initially through Canada-sourced renewable
energy credits until Capital Power’s proposed Alberta-based Halkirk
2 Wind project is completed, which is expected to be operational by
January 1, 2025 (subject to regulatory approval). The 151 MW
Halkirk 2 Wind project will provide renewable energy for the
remainder of the term – representing approximately 49% of the
facility’s output. As part of the transaction, Capital Power
committed to securing an equity partnership with local Indigenous
communities related to the proposed project.
Subsequent Events
Goreway awarded 6-year contract extension
by Ontario IESO
On April 25, 2023, Capital Power and the Ontario Independent
Electric System Operator (IESO) executed a 6-year contract
extension for Goreway associated with its successful efficiency
upgrade bid of approximately 40 megawatts (MW) in IESO’s
competitive capacity procurement process. The uprate will increase
Goreway’s current combined contracted capacity from 840 MW to 880
MW. The IESO contract extension applies to the new combined
contracted capacity of 880 MW and extends the current Clean Energy
Supply Contract from 2029 to 2035. The upgrade is expected to be
completed in 2025. Goreway is a natural gas-fired combined cycle
facility located in Brampton, Ontario.
Avik Dey appointed of as President and
Chief Executive Officer, Brian Vaasjo to Retire
On April 19, 2023, the Company’s Board of Directors
announced that it unanimously selected Avik Dey to be its next
President and Chief Executive Officer and become a member of the
Board of Directors, effective May 8, 2023. The appointment follows
the planned retirement of Brian Vaasjo who will support Mr. Dey in
an advisory role for six months to ensure a seamless
transition.
Retirement announced for Kate Chisholm,
Senior Vice President and Chief Strategy and Sustainability
Officer
On April 13, 2023, the Company announced internally
that Kate Chisholm, our Senior Vice President and Chief Strategy
and Sustainability Officer has advised of her intention to retire
effective July 4, 2023. Kate has been an integral part of the
Executive Team with outstanding service and valuable contributions
since the inception of Capital Power. Announcement for Kate's
replacement will occur in due course.
Analyst conference call and
webcast
Capital Power will be hosting a conference call and live webcast
with analysts on May 1, 2023 at 9:00 am (MT) to discuss the first
quarter financial results. The conference call dial-in number
is:
(800) 319-4610 (toll-free from Canada and USA)
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 conclusion of the analyst
conference call.
Non-GAAP Financial Measures and
Ratios
Capital Power 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 our joint venture interests, gains or losses on
disposals and unrealized changes in fair value of commodity
derivatives and emission credits (adjusted EBITDA), and (ii) AFFO
as financial performance measures.
Capital Power also uses AFFO per share as a performance measure.
This measure is a non-GAAP ratio determined by applying AFFO 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 Capital Power, 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 our results of operations from
management’s perspective.
Adjusted EBITDA
Capital Power uses adjusted EBITDA to measure the operating
performance of facilities and categories of facilities from period
to period. Management believes that a measure of facility operating
performance is more meaningful if results not related to facility
operations such as impairments, foreign exchange gains or losses,
gains or losses on disposals and other transactions, and unrealized
changes in fair value of commodity derivatives and emission credits
are excluded from the adjusted EBITDA measure. A reconciliation of
adjusted EBITDA to net income (loss) is as follows:
|
(unaudited, $ millions) |
Three months ended |
|
|
Mar 2023 |
Dec 2022 |
Sep 2022 |
Jun 2022 |
Mar 2022 |
Dec 2021 |
Sep 2021 |
Jun 2021 |
|
Revenues and other income |
1,267 |
|
929 |
|
786 |
|
713 |
|
501 |
|
672 |
|
377 |
|
387 |
|
| Energy purchases and fuel,
other raw materials and operating charges, staff costs and employee
benefits expense, and other administrative expense |
(723 |
) |
(909 |
) |
(543 |
) |
(429 |
) |
(178 |
) |
(506 |
) |
(162 |
) |
(176 |
) |
| Remove unrealized changes in
fair value of commodity derivatives and emission credits included
within revenues and energy purchases and fuel |
(179 |
) |
247 |
|
136 |
|
28 |
|
18 |
|
123 |
|
66 |
|
24 |
|
|
Adjusted EBITDA from jointventures1 |
36 |
|
36 |
|
4 |
|
7 |
|
7 |
|
5 |
|
5 |
|
6 |
|
|
Adjusted EBITDA |
401 |
|
303 |
|
383 |
|
319 |
|
348 |
|
294 |
|
286 |
|
241 |
|
| Depreciation and
amortization |
(141 |
) |
(139 |
) |
(133 |
) |
(139 |
) |
(142 |
) |
(137 |
) |
(133 |
) |
(132 |
) |
| Unrealized changes in fair
value of commodity derivatives and emission credits |
179 |
|
(247 |
) |
(136 |
) |
(28 |
) |
(18 |
) |
(123 |
) |
(66 |
) |
(24 |
) |
| Impairment (losses)
reversals |
- |
|
- |
|
- |
|
- |
|
- |
|
(52 |
) |
(8 |
) |
2 |
|
| Gains (losses) on acquisition
and disposal transactions |
- |
|
(33 |
) |
(3 |
) |
(1 |
) |
- |
|
6 |
|
31 |
|
(3 |
) |
| Foreign exchange gains
(losses) |
1 |
|
3 |
|
(12 |
) |
(7 |
) |
1 |
|
(1 |
) |
(7 |
) |
(2 |
) |
| Net finance expense |
(48 |
) |
(44 |
) |
(40 |
) |
(35 |
) |
(37 |
) |
(44 |
) |
(43 |
) |
(46 |
) |
| Other items1,2 |
(21 |
) |
(17 |
) |
(4 |
) |
(1 |
) |
- |
|
(4 |
) |
(4 |
) |
(5 |
) |
| Income
tax expense |
(86 |
) |
75 |
|
(24 |
) |
(31 |
) |
(33 |
) |
(8 |
) |
(18 |
) |
(14 |
) |
|
Net income (loss) |
285 |
|
(99 |
) |
31 |
|
77 |
|
119 |
|
(69 |
) |
38 |
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss)
attributable to: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Non-controlling interests |
(1 |
) |
(1 |
) |
(3 |
) |
(3 |
) |
(3 |
) |
(4 |
) |
(2 |
) |
(3 |
) |
|
Shareholders of the Company |
286 |
|
(98 |
) |
34 |
|
80 |
|
122 |
|
(65 |
) |
40 |
|
20 |
|
|
Net income (loss) |
285 |
|
(99 |
) |
31 |
|
77 |
|
119 |
|
(69 |
) |
38 |
|
17 |
|
- Total income from joint ventures as
per our consolidated statements of income (loss).
- Includes finance expense,
depreciation expense and unrealized changes in fair value of
derivative instruments from joint ventures.
Adjusted funds from operations and adjusted
funds from operations per share
AFFO and AFFO per share are measures of the Company’s ability to
generate cash from its operating activities to fund growth capital
expenditures, the repayment of debt and the payment of common share
dividends.
AFFO represents net cash flows from operating activities
adjusted to:
- remove timing impacts of cash
receipts and payments that may impact period-to-period
comparability which include deductions for net finance expense and
current income tax expense, the removal of deductions for interest
paid and income taxes paid and removing changes in operating
working capital,
- include the Company’s share of the
AFFO of its joint venture interests and exclude distributions
received from the Company’s joint venture interests which are
calculated after the effect of non-operating activity joint venture
debt payments,
- include cash from off-coal
compensation that will be received annually,
- remove the tax equity financing
project investors’ shares of AFFO associated with assets under tax
equity financing structures so only the Company’s share is
reflected in the overall metric,
- deduct sustaining capital
expenditures and preferred share dividends,
- exclude the impact of fair value
changes in certain unsettled derivative financial instruments that
are charged or credited to the Company’s bank margin account held
with a specific exchange counterparty, and
- exclude other typically
non-recurring items affecting cash from operations that are not
reflective of the long-term performance of the Company’s underlying
business.
Commencing with the Company’s December 31, 2022 quarter-end, the
Company refined its AFFO measure to better reflect the purpose of
the measure and include in its adjustment to exclude other
typically non-recurring items affecting cash from operations that
are not reflective of the long-term performance of the Company’s
underlying business. No comparative AFFO figures have impacted or
restated for this change.
A reconciliation of net cash flows from operating activities to
adjusted funds from operations is as follows:
|
(unaudited, $ millions) |
Three months ended March 31 |
|
|
2023 |
|
2022 |
|
|
Net cash flows from operating activities per condensed
interim consolidated statements of cash flows |
349 |
|
415 |
|
|
Add (deduct) items included in calculation of net cash flows from
operating activities per condensed interim consolidated statements
of cash flows: |
|
|
|
Interest paid |
50 |
|
38 |
|
|
Change in fair value of derivatives reflected as cash
settlement |
(111 |
) |
(7 |
) |
|
Distributions received from joint ventures |
(9 |
) |
- |
|
|
Miscellaneous financing charges paid1 |
2 |
|
2 |
|
|
Income taxes paid |
14 |
|
12 |
|
|
Change in non-cash operating working capital |
3 |
|
(180 |
) |
|
|
(51 |
) |
(135 |
) |
|
Net finance expense2 |
(35 |
) |
(31 |
) |
| Current income tax
expense |
(51 |
) |
(15 |
) |
| Sustaining capital
expenditures3 |
(15 |
) |
(25 |
) |
| Preferred share dividends
paid |
(7 |
) |
(10 |
) |
| Remove tax equity interests’
respective shares of adjusted funds from operations |
(2 |
) |
(4 |
) |
| Adjusted funds from operations
from joint ventures |
22 |
|
5 |
|
|
Adjusted funds from operations |
210 |
|
200 |
|
|
Weighted average number of common shares outstanding
(millions) |
116.9 |
|
116.2 |
|
|
Adjusted funds from operations per share ($) |
1.80 |
|
1.72 |
|
- Included in other cash items on the
condensed interim consolidated statements of cash flows to
reconcile net income to net cash flows from operating
activities.
- Excludes unrealized changes on
interest rate derivative contracts, amortization, accretion charges
and non-cash implicit interest on tax equity investment
structures.
- Includes sustaining capital
expenditures net of partner contributions of $3 million and $1
million for the three months ended March 31, 2023 and 2022,
respectively.
Forward-looking Information
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 disclosures regarding (i) status of the Company’s 2023
AFFO and adjusted EBITDA guidance, (ii) budgeted 2023 depreciation,
and (iii) the generation capacity and timing of Goreway’s
efficiency upgrade.
These statements are based on certain assumptions and analyses
made by the Company considering 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: (i) electricity, other energy and carbon prices, (ii)
performance, (iii) business prospects (including potential
re-contracting of facilities) 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, natural gas and carbon prices in
markets in which the Company operates and the use of derivatives,
(ii) regulatory and political environments including changes to
environmental, climate, financial reporting, market structure and
tax legislation, (iii) generation facility availability, wind
capacity factor and performance including maintenance expenditures,
(iv) ability to fund current and future capital and working capital
needs, (v) acquisitions and developments including timing and costs
of regulatory approvals and construction, (vi) changes in the
availability of fuel, (vii) ability to realize the anticipated
benefits of acquisitions, (viii) limitations inherent in the
Company’s review of acquired assets, (ix) changes in general
economic and competitive conditions and (x) changes in the
performance and cost of technologies and the development of new
technologies, new energy efficient products, services and programs.
See Risks and Risk Management in the Company’s Integrated Annual
Report for the year ended December 31, 2022, prepared as of
February 28, 2023, 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.
Territorial Acknowledgement
In the spirit of reconciliation, Capital Power respectfully
acknowledges that we operate within the ancestral homelands,
traditional and treaty territories of the Indigenous Peoples of
Turtle Island, or North America.
Capital Power’s head office is located within the traditional
and contemporary home of many Indigenous Peoples of the Treaty 6
region and Métis Nation of Alberta Region 4. We acknowledge the
diverse Indigenous communities that are located in these areas and
whose presence continues to enrich the community.
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. Capital Power owns approximately 7,500 MW of power
generation capacity at 29 facilities across North America. Projects
in advanced development include approximately 151 MW of owned
renewable generation capacity in Alberta and 512 MW of incremental
natural gas combined cycle capacity, from the repowering of Genesee
1 and 2 in Alberta.
For more information, please
contact:
|
Media Relations: |
Investor Relations: |
| Katherine Perron |
Randy Mah |
| (780) 392-5335 |
(780) 392-5305 or (866) 896-4636
(toll-free) |
| kperron@capitalpower.com |
investor@capitalpower.com |
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