Capital Power reports solid first quarter 2018 results and announces the commencement of its Cardinal Point Wind development project
Company on track to achieve results above the midpoint of the annual financial target range
EDMONTON, Alberta – Capital Power Corporation (Capital Power, or the Company) (TSX: CPX) today released financial results for the quarter ended March 31, 2018.
Net cash flows from operating activities were $143 million in the first quarter of 2018 compared with $99 million in the first quarter of 2017. Adjusted funds from operations were $85 million in the first quarter of 2017, compared to $88 million in the first quarter of 2017.
Net income attributable to shareholders in the first quarter of 2018 was $43 million and basic earnings per share was $0.32 per share, compared with net income attributable to shareholders of $50 million, and basic earnings per share of $0.44, in the comparable period of 2017. Normalized earnings attributable to common shareholders in the first quarter of 2018, after adjusting for one-time items and fair value adjustments, were $31 million or $0.30 per share compared with $33 million or $0.34 per share in the first quarter of 2017.
“Capital Power continued its organic growth in the United States renewables market with the commencement of our third wind development project,” said Brian Vaasjo, President and CEO of Capital Power. “The development of the Cardinal Point Wind project is underway now that we have finalized a 12-year fixed price hedge agreement in April 2018 with an investment grade U.S. financial institution for 85 per cent of the facility’s output. We continue to leverage our competitive advantages in development and construction to invest in wind projects in the U.S. Cardinal Point Wind is a 150-megawatt wind facility located in Illinois, with commercial operations expected to commence in March of 2020.”
“Our first quarter results benefitted from strong operating performance with average facility availability of 96 per cent, and contributions from assets that we acquired and developed in 2017, offset by the timing of planned Genesee outages in 2018 compared to 2017,” continued Mr. Vaasjo. “We expect the power prices in Alberta to increase over the next 6-12 months consistent with current forward prices.”
“The Alberta power market continues to experience demand growth, and the impact of higher carbon costs combined with coal plants coming off-line, resulting in an average Alberta spot price of $35 per megawatt hour (MWh) in the first quarter of 2018. This was the highest quarterly power price since the second quarter of 2015, and higher than the $22 per MWh average in 2017. With nearly 500 megawatts of peaking natural gas and wind facilities, Capital Power is well-positioned to benefit from expected higher power prices as reflected in average forward prices in the mid-$50/MWh range for the remainder of 2018 and 2019. Management expects adjusted funds from operations in 2018 to be above the mid point of the $360 million to $400 million guidance range,” said Mr. Vaasjo.
“By mid-2018, the Alberta Electric System Operator should have finalized its proposed capacity market design for Alberta’s electricity market, which will provide clarity on the future of the Alberta power market,” said Mr. Vaasjo. “The recent release of Draft 2 of the Comprehensive Market Design by AESO continues to be consistent with our view of a properly designed capacity market for Alberta.”
In the first quarter, the Company was active in its Normal Course Issuer Bid (NCIB) by purchasing and cancelling 713,100 common shares for a total cost of $17 million. Under its TSX approved NCIB, the company can purchase and cancel up to 9.3 million common shares during the one-year period ending February 20, 2019.
| Operational and Financial Highlights 1 (unaudited) |
Three months ended March 31 |
|||
|---|---|---|---|---|
| (millions of dollars except per share and operational amounts) | 2018 | 2017 | ||
| Electricity generation (Gigawatt hours) | 5,026 | 3,962 | ||
| Generation facility availability | 96% | 97% | ||
| Revenues and other income | $ 307 | $ 338 | ||
| Adjusted EBITDA 2 | $ 172 | $ 143 | ||
| Net income | $ 41 | $ 47 | ||
| Net income attributable to shareholders of the Company | $ 43 | $ 50 | ||
| Basic earnings per share | $ 0.32 | $ 0.44 | ||
| Diluted earnings per share | $ 0.32 | $ 0.43 | ||
| Normalized earnings attributable to common shareholders 2 | $ 31 | $ 33 | ||
| Normalized earnings per share 2 | $ 0.30 | $ 0.34 | ||
| Net cash flows from operating activities | $ 143 | $ 99 | ||
| Adjusted funds from operations 2,3 | $ 85 | $ 88 | ||
| Adjusted funds from operations per share 2 | $0.82 | $0.91 | ||
| Purchase of property, plant and equipment and other assets | $ 40 | $ 85 | ||
| Dividends per common share, declared | $ 0.4175 | $ 0.3900 | ||
2 Earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from its joint venture interests, and gains or losses on disposals (adjusted EBITDA), normalized earnings attributable to common shareholders, normalized earnings per share, adjusted funds from operations and adjusted funds from operations per share are non-GAAP financial measures and 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.
3 Commencing with the Company’s March 31, 2018 quarter-end, the reported adjusted funds from operations measure was refined to better reflect the purpose of the measure (see Non-GAAP Financial Measures). The applicable comparable periods have been adjusted to conform to the current period’s presentation.
Subsequent Event
Completion of contracts for Cardinal Point Wind
On April 30, 2018, Capital Power announced that the construction of Cardinal Point Wind will proceed once all applicable regulatory approvals are received. Cardinal Point Wind is a 150 MW facility to be constructed in the McDonough and Warren Counties, Illinois, and is anticipated to cost between $289 million and $301 million (US$236 million to US$246 million). Commercial operation of the facility is expected in March of 2020. Capital Power will operate Cardinal Point Wind under a 12-year fixed price contract with an investment grade U.S. financial institution covering 85% of the facility’s output. Under the contract, Capital Power will swap the market revenue of the facility’s generation for a fixed price payment over a 12-year term. In addition, the Cardinal Point Wind project has secured 15-year, fixed-price Renewable Energy Credit (REC) contracts with three Illinois utilities. The REC and output contracts will secure long-term predictable revenues, allowing Cardinal Point Wind to secure renewable energy tax equity financing and provide Capital Power the opportunity to complete its third wind development project in the growing U.S. renewables market.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on April 30, 2018 at 9:00 am (MDT) to discuss the first quarter financial results. The conference call dial-in numbers are:
(604) 638-5340 (Vancouver)
(403) 351-0324 (Calgary)
(416) 915-3239 (Toronto)
(514) 375-0364 (Montreal)
(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
The Company 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 its joint venture interests, and gains or losses on disposals (adjusted EBITDA), (ii) adjusted funds from operations, (iii) adjusted funds from operations per share (iv) normalized earnings attributable to common shareholders, and (v) normalized earnings per share as financial performance measures.
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 expected results in relation to the 2018 AFFO guidance range and expectations pertaining to the construction cost and commercial operations date for Cardinal Point Wind.
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. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity, other energy and carbon prices, (ii) anticipated facility performance, (iii) business prospects 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 prices in markets in which the Company operates, (ii) changes in energy commodity market prices and use of derivatives, (iii) regulatory and political environments including changes to environmental, financial reporting, market structure and tax legislation, (iv) facility availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) developments including timing and costs of regulatory approvals and construction, (vii) changes in market prices and availability of fuel, and (viii) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2017, prepared as of February 15, 2018, 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.
Click here to view the management’s discussion and analysis and consolidated financial statements (pdf)