Financial highlights
- Generated adjusted funds from operations (AFFO) of
$151 million and net cash flows from operating activities of$11 million - Generated adjusted EBITDA of
$327 million and net income of$85 million - 2023 financial guidance for adjusted EBITDA and AFFO are expected to be above midpoint of annual guidance ranges
- Increased annual common share dividend by 6% to
$2.46 per year representing the 10th consecutive annual increase - Reinstated the Company’s dividend reinvestment plan effective for the third quarter 2023 dividend
Strategic highlights
- Executed three long-term contracts and two contract extensions with the Ontario Independent Electric System Operator (IESO) for one natural gas plant expansion, two battery energy storage system (BESS) projects, and two natural gas upgrades at our
Ontario natural gas facilities - Executed a 25-year fixed price renewable power purchase agreement with
Duke Energy Progress for 100% of the output from the Maple Leaf Solar project inNorth Carolina - Secured our first order for approximately one gigawatt of responsibly produced solar modules from First Solar that will be used in solar development projects from our renewable development pipeline
- Provided updated costs and schedule for the Genesee Repowering project and cancelled the Genesee BESS project, which is no longer required. As a result of the updated schedule, we expect to continue blending natural gas with coal to align with the commissioning of the repowered units in 2024, ensuring reliability and capacity of the grid.
“As the need for energy only grows, we delivered on our balanced approach and executed on our proven midlife natural gas strategy and buildout of renewables, exceeding our annual
“Our growth in renewables continues with the execution of a 25-year contract for our Maple Leaf Solar project in North Carolina,” stated
“Consistent with our dividend growth guidance of 6% per year to 2025, I am pleased to announce the Board of Directors has approved a 6% per common share dividend increase effective for the third quarter 2023 dividend payment. This marks a decade of consecutive annual dividend increases with a compound annual growth rate of nearly 7%,” added
“While second quarter financial results were generally below management’s expectations as ill-timed outages at Genesee during periods of high
“The modest impacts of the delay in commissioning for Genesee repowering will be more than offset across the
Operational and Financial Highlights1
(unaudited, $ millions, except per share amounts) | Three months ended | Six months ended | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Electricity generation (Gigawatt hours) | 7,857 | 6,638 | 15,274 | 13,531 | ||||
Generation facility availability | 95 | % | 92 | % | 94 | % | 93 | % |
Revenues and other income | 881 | 713 | 2,148 | 1,214 | ||||
Adjusted EBITDA 2 | 327 | 319 | 728 | 667 | ||||
Net income 3 | 85 | 77 | 370 | 196 | ||||
Net income attributable to shareholders of the Company | 87 | 80 | 373 | 202 | ||||
Basic earnings per share ($) | 0.68 | 0.59 | 3.06 | 1.56 | ||||
Diluted earnings per share ($) | 0.67 | 0.59 | 3.05 | 1.55 | ||||
Net cash flows from operating activities | 11 | 108 | 360 | 523 | ||||
Adjusted funds from operations 2 | 151 | 180 | 361 | 380 | ||||
Adjusted funds from operations per share ($) 2 | 1.29 | 1.55 | 3.09 | 3.27 | ||||
Purchase of property, plant and equipment and other assets, net | 131 | 147 | 217 | 279 | ||||
Dividends per common share, declared ($) | 0.5800 | 0.5475 | 1.1600 | 1.0950 |
- 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 six months ended
June 30, 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
June 30, 2023 and 2022 of$143 million and$139 million , respectively, and for the six months endedJune 30, 2023 and 2022 of$284 million and$281 million , respectively. Forecasted depreciation and amortization for the remainder of 2023 is$148 million and$145 million for the third and fourth quarters, respectively, which mostly reflects higherGenesee Mine depreciation.
Significant Events
Updates to Genesee Repowering project schedule and costs and Battery Energy Storage System project no longer required
On
Subsequently, the
Maple Leaf Solar project awarded 25-year contract
On
Contracts executed for Natural Gas and Batteries from Ontario IESO’s bids
Capital Power’s active participation in the Ontario Independent Electric System Operator’s (IESO) expedited call for new power generation and capacity in high priority areas to help address the IESO’s forecasted shortfall, resulted in five successful bids.
On
- Executed two long-term contracts for the East Windsor Expansion (81 MW summer and 100 MW winter contracted capacities) and the York BESS project as part of the IESO’s Expedited Long-Term RFP process. Both projects are expected to begin commercial operations in 2025.
Capital Power holds 100% interest in the York Energy BESS project. - Been selected as a successful proponent for the Goreway BESS project as part of Category 2 of the Ontario IESO’s Expedited Long-Term request for proposals. The contract was subsequently executed in
July 2023 and the project is expected to enter service in 2025.
Growth Projects
Project | Contracted Capacity | Term | Status |
East Windsor Expansion | 81 to 100 MW | to 2040 (approximately 15 years) | Contract Executed |
York Energy BESS | 114 MW | to 2047 (approximately 22 years) | Contract Executed |
Goreway BESS | 48 MW | to 2047 (approximately 22 years) | Contract Executed |
In addition, on
Commercial Initiatives
Contracted Capacity | ||||||
Project | Existing | New | Total | Contract Expiry | Status | |
Goreway upgrade | 840 MW | 40 MW | 880 MW | 2035 | Contract Executed | |
York Energy upgrade1 | 393 MW | 38 MW | 431 MW | 2035 | Contract Executed |
- 50% interest in joint venture
On
Retirement announced for
On
Approval of normal course issuer bid
During the first quarter of 2023, the
Executed 23-year clean electricity supply agreement for
On
Subsequent Events
Board of Directors changes
On
Reinstatement of Dividend Reinvestment Plan
On
Dividend increase
On
Secured 1 GW supply of responsibly produced, ultra-low carbon First Solar modules
On
Analyst conference call and webcast
(800) 319-4610 (toll-free from
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
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
Adjusted EBITDA
(unaudited, $ millions) | Three months ended | |||||||||||||||
Jun 2023 | Mar 2023 | Dec 2022 | Sep 2022 | Jun 2022 | Mar 2022 | Dec 2021 | Sep 2021 | |||||||||
Revenues and other income | 881 | 1,267 | 929 | 786 | 713 | 501 | 672 | 377 | ||||||||
Energy purchases and fuel, other raw materials and operating charges, staff costs and employee benefits expense, and other administrative expense | (614 | ) | (723 | ) | (909 | ) | (543 | ) | (429 | ) | (178 | ) | (506 | ) | (162 | ) |
Remove unrealized changes in fair value of commodity derivatives and emission credits included within revenues and energy purchases and fuel | 23 | (179 | ) | 247 | 136 | 28 | 18 | 123 | 66 | |||||||
Adjusted EBITDA from joint ventures 1 | 37 | 36 | 36 | 4 | 7 | 7 | 5 | 5 | ||||||||
Adjusted EBITDA | 327 | 401 | 303 | 383 | 319 | 348 | 294 | 286 | ||||||||
Depreciation and amortization | (143 | ) | (141 | ) | (139 | ) | (133 | ) | (139 | ) | (142 | ) | (137 | ) | (133 | ) |
Unrealized changes in fair value of commodity derivatives and emission credits | (23 | ) | 179 | (247 | ) | (136 | ) | (28 | ) | (18 | ) | (123 | ) | (66 | ) | |
Foreign exchange gains (losses) | 4 | 1 | 3 | (12 | ) | (7 | ) | 1 | (1 | ) | (7 | ) | ||||
Net finance expense | (34 | ) | (48 | ) | (44 | ) | (40 | ) | (35 | ) | (37 | ) | (44 | ) | (43 | ) |
(Losses) gains on acquisition and disposal transactions | (3 | ) | - | (33 | ) | (3 | ) | (1 | ) | - | 6 | 31 | ||||
Impairment (losses) reversals | - | - | - | - | - | - | (52 | ) | (8 | ) | ||||||
Other items 1,2 | (19 | ) | (21 | ) | (17 | ) | (4 | ) | (1 | ) | - | (4 | ) | (4 | ) | |
Income tax (expense) recovery | (24 | ) | (86 | ) | 75 | (24 | ) | (31 | ) | (33 | ) | (8 | ) | (18 | ) | |
Net income (loss) | 85 | 285 | (99 | ) | 31 | 77 | 119 | (69 | ) | 38 | ||||||
Net income (loss) attributable to: | ||||||||||||||||
Non-controlling interests | (2 | ) | (1 | ) | (1 | ) | (3 | ) | (3 | ) | (3 | ) | (4 | ) | (2 | ) |
Shareholders of the Company | 87 | 286 | (98 | ) | 34 | 80 | 122 | (65 | ) | 40 | ||||||
Net income (loss) | 85 | 285 | (99 | ) | 31 | 77 | 119 | (69 | ) | 38 |
- 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
A reconciliation of net cash flows from operating activities to adjusted funds from operations is as follows:
(unaudited, $ millions) | Three months ended | Six months ended | ||||||
2023 | 2022 | 2023 | 2022 | |||||
Net cash flows from operating activities per condensed interim consolidated statements of cash flows | 11 | 108 | 360 | 523 | ||||
Add (deduct) items included in calculation of net cash flows from operating activities per condensed interim consolidated statements of cash flows: | ||||||||
Interest paid | 13 | 16 | 63 | 54 | ||||
Change in fair value of derivatives reflected as cash settlement | 30 | 52 | (81 | ) | 45 | |||
Realized gain on settlement of interest rate derivatives | (10 | ) | - | (10 | ) | - | ||
Distributions received from joint ventures | (9 | ) | (2 | ) | (18 | ) | (2 | ) |
Miscellaneous financing charges paid 1 | 2 | 2 | 4 | 4 | ||||
Income taxes paid | 11 | 5 | 25 | 17 | ||||
Change in non-cash operating working capital | 192 | 75 | 195 | (105 | ) | |||
229 | 148 | 178 | 13 | |||||
Net finance expense 2 | (31 | ) | (29 | ) | (66 | ) | (60 | ) |
Current income tax expense | (30 | ) | (9 | ) | (81 | ) | (24 | ) |
Sustaining capital expenditures 3 | (41 | ) | (30 | ) | (56 | ) | (55 | ) |
Preferred share dividends paid | (8 | ) | (10 | ) | (15 | ) | (20 | ) |
Remove tax equity interests’ respective shares of adjusted funds from operations | (2 | ) | (4 | ) | (4 | ) | (8 | ) |
Adjusted funds from operations from joint ventures | 23 | 6 | 45 | 11 | ||||
Adjusted funds from operations | 151 | 180 | 361 | 380 | ||||
Weighted average number of common shares outstanding (millions) | 116.9 | 116.4 | 116.9 | 116.3 | ||||
Adjusted funds from operations per share ($) | 1.29 | 1.55 | 3.09 | 3.27 |
- 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
$1 million and$4 million for the three and six months endedJune 30, 2023 , respectively, compared with$1 million and$2 million for the three and six months endedJune 30, 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) forecasted 2023 depreciation, (iii) our plans to transition off-coal, (iv) the impacts of the IRA on our projects, and (v) the timing of, funding of, generation capacity of, costs of technologies selected for, environmental benefits or commercial and partnership arrangements regarding existing, planned and potential development projects and acquisitions (including phase 2 of Halkirk Wind, the repowering of Genesee 1 and 2 (including being hydrogen ready, carbon conversion ready, and battery storage), the Genesee carbon capture and storage (CCS) project, the uprate at Goreway and York Energy, Goreway BESS, York Energy BESS, East Windsor expansion, and the Maple Leaf Solar project.
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
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’s head office is located within the traditional and contemporary home of many Indigenous Peoples of the Treaty 6 region and Métis Nation of
About
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