Capital Power reports fourth quarter and year-end 2022 results
Excellent year highlighted by record cash flow generation and strategic advances in decarbonization
EDMONTON, Alberta – Capital Power Corporation (TSX: CPX) today released financial results for the quarter and year ended December 31, 2022.
Financial Highlights
- In the fourth quarter of 2022, generated:
- net cash flows from operating activities of $42 million and adjusted funds from operations (AFFO) of $140 million
- adjusted EBITDA of $303 million and a net loss of $99 million
- For 2022, generated:
- net cash flows from operating activities of $935 million and AFFO of $848 million
- adjusted EBITDA of $1,353 million and a net income of $128 million
Strategic Highlights
- Announced a limited notice to proceed for the Genesee Carbon Capture and Sequestration (CCS) Project
- Completed the 75-megawatt Clydesdale Solar project on-schedule with commercial operations beginning in December
- Executed a 15-year renewable energy agreement with Shaw Communications for approximately 30 MW of the output and environmental attributes from Clydesdale Solar
- Executed a 23-year clean electricity supply agreement with Public Services and Procurement Canada for power and renewable energy credits in the first two years followed by renewable energy from the proposed Halkirk 2 Wind project for the remainder of the contract term
“We made great strides in 2022 on our decarbonization strategy and commitment to being off coal in 2023,” said Brian Vaasjo, President and CEO of Capital Power. “This includes significant progress on our Genesee repowering project that is on schedule to meet our off-coal commitment by the end of this year. Once completed, Genesee 1 and 2 will have significantly reduced carbon emissions and will be the most efficient natural gas units in Canada, solidifying their dominant baseload position in the Alberta power market. We also completed modifications to Genesee 3 to operate as a 100% natural gas facility following the closure of the Genesee Mine in late 2023.”
“We are advancing technologies to enable a clean power system with abated natural gas to achieve net zero by 2045”, continued Mr. Vaasjo. “In December, we announced a limited notice to proceed on the Genesee CCS project, which reflects positive results from the ongoing front-end engineering design (FEED) study and continued progress on financial support from the Alberta and Federal governments. CCS is an essential part of the pathway to accelerating and achieving decarbonization of Alberta’s power sector while maintaining reliability and affordability. As we move into the next stage of final due diligence and commercial, financing, and technical assessment, we expect to announce a final investment decision later this year.”
“Our growth outlook remains excellent given political support for renewable energy both in the United States and in Canada and we’re well-positioned for potential uprates, expansion and contract extensions for our three natural gas facilities in Ontario in response to the 4,000 megawatts of incremental capacity required in the province. We are targeting $600 million in committed capital for growth in 2023 and expect to make an investment decision on two renewable projects,” stated Mr. Vaasjo.
“We delivered record financial performance in 2022 that benefitted from elevated Alberta spot power prices that averaged $162 per megawatt hour (MWh) in the year, the acquisition of the Midland Cogeneration facility, and strong contributions across the fleet,” said Sandra Haskins, Senior Vice President, Finance and CFO. “We generated $1,353 million in adjusted EBITDA and $848 million in AFFO that exceeded our higher revised financial guidance and were 17% and 35% above the top end of our original targets, respectively.”
“2023 started with one of the warmest winters in history, driving settled power prices well below expectations. As a result, average forward power prices for the year have modestly declined resulting in Capital Power trending towards the lower end of our adjusted EBITDA and AFFO guidance ranges of $1,455 million to $1,515 million and $805 million to $865 million, respectively. Going forward we expect to see similar market volatility as we have seen in recent years and given our competitive fleet of Alberta assets, we are well positioned to capitalize on these opportunities. We will provide further updates with our first quarter 2023 results,” added Ms. Haskins.
Operational and Financial Highlights1
| (unaudited, $ millions, except per share amounts) | Three months ended December 31 | Year ended December 31 |
||
| 2022 | 2021 | 2022 | 2021 | |
| Electricity generation (Gigawatt hours) | 8,049 | 6,103 | 28,573 | 22,811 |
| Generation facility availability | 90% | 89% | 93% | 90% |
| Revenues and other income | 929 | 672 | 2,929 | 1,990 |
| Adjusted EBITDA 2 | 303 | 294 | 1,353 | 1,124 |
| Net income (loss) 3 | (99) | (69) | 128 | 87 |
| Net income (loss) attributable to shareholders of the Company | (98) | (65) | 138 | 98 |
| Basic earnings (loss) per share ($) | (0.91) | (0.67) | 0.85 | 0.39 |
| Diluted earnings (loss) per share ($) | (0.91) | (0.67) | 0.84 | 0.39 |
| Normalized earnings attributable to common shareholders 2 | 82 | 55 | 424 | 221 |
| Normalized earnings per share ($) 2 | 0.70 | 0.47 | 3.64 | 1.97 |
| Net cash flows from operating activities | 42 | 185 | 935 | 867 |
| Adjusted funds from operations 2 | 140 | 149 | 848 | 605 |
| Adjusted funds from operations per share ($) 2 | 1.20 | 1.28 | 7.28 | 5.40 |
| Purchase of property, plant and equipment and other assets, net | 179 | 198 | 682 | 622 |
| Dividends per common share, declared ($) | 0.5800 | 0.5475 | 2.2550 | 2.1200 |
- The operational and financial highlights in this press release should be read in conjunction with the Management’s Discussion and Analysis and the audited consolidated financial statements for year ended December 31, 2022.
- 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), normalized earnings attributable to common shareholders and adjusted funds from operations (AFFO) are used as non-GAAP financial measures by the Company. The Company also uses normalized earnings per share and AFFO per share which are non-GAAP ratios. 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 December 31, 2022 and 2021 of $139 million and $137 million, respectively, and for the year ended December 31, 2022 and 2021 of $553 million and $539 million, respectively. Budgeted depreciation and amortization for 2023 is $135 million per quarter.
Significant Events
Clydesdale Solar begins commercial operations and executed a second 15-year renewable energy agreement
An additional 75 MW from Clydesdale Solar (formerly Enchant Solar), located in the Municipal District of Taber, Alberta, began commercial operations on December 13, 2022. The total project cost is expected to be $124 million compared to the original budget of $102 million due to supply chain pressures and increases in transportation costs.
Capital Power executed a 15-year renewable energy agreement with Shaw Communications for approximately 30 MW of the output and environmental attributes. Combined with a previously announced renewable energy agreement with Labatt Breweries of Canada, Clydesdale Solar is approximately 90% contracted over the next 15 years.
Advancement of carbon capture project at Genesee
On December 1, 2022, we announced that our Board of Directors approved a limited notice to proceed (LNTP) for the Genesee Carbon Capture and Sequestration (CCS) Project. The Genesee CCS Project is positioned for a final investment decision in late 2023 with commercial operations as early as 2027.
On June 27, 2022, we announced our collaboration with Mitsubishi Heavy Industries Group and Kiewit Energy Group on a front-end engineering and design (FEED) study for the Genesee CCS Project advancing the commercial application of CCS technology at our Genesee Generating Station.
$2 million contribution to Boyle Street Community Services
On November 1, 2022, Capital Power announced a $2 million contribution to the Build with Boyle initiative to help fund Boyle Street Community Services’ (Boyle Street) okimaw peyesew kamik facility in Edmonton. The purpose-built facility will serve as a base for Boyle Street’s lifechanging support services for the community’s most vulnerable citizens. Capital Power’s contribution is dedicated to funding the new facility’s community kitchen and on-site housing needs.
Genesee 3 completes 100% natural gas capability upgrades
On November 12, 2022 Genesee 3 completed necessary modifications to operate as a 100% natural gas capable facility. Upon the closure of the Genesee Mine in late 2023, Genesee 3 will operate solely on natural gas.
Genesee 2 approved for 20 MW of additional capacity
On October 1, 2022, 20 MW of additional capacity at Genesee 2 was approved by the AESO increasing its capacity to 450 MW. The additional capacity is a result of stator and low-pressure rotor replacements associated with the 2021 outage.
Subsequent Event
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.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on March 1, 2023 at 9:00 am (MT) to discuss the fourth quarter and year end financial results. The conference call dial-in number is:
- (800) 319-4610 (toll-free from Canada and USA)
- Webcast
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
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.
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) reduction in carbon emissions from Genesee 1 and 2 following the repowering project, (ii) efficiency of the Genesee 1 and 2 natural gas units in Canada and their baseload position in the Alberta power market following repowering, (iii) status of and updates to the Company’s 2023 AFFO and adjusted EBITDA guidance, (iv) budgeted 2023 depreciation, and (v) the timing of the investment decision for the Company’s potential CCS 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 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.