EDMONTON, Alberta, May 02, 2022 (GLOBE NEWSWIRE) -- Capital Power Corporation (TSX: CPX) today released financial results for the quarter ended March 31, 2022.
Financial highlights
- Generated net cash flows from operating activities of $415 million and adjusted funds from operations (AFFO) of $200 million in the first quarter of 2022
- Generated net income of $119 million and adjusted EBITDA of $348 million in the first quarter of 2022
- Forecast is on track to generate AFFO and Adjusted EBITDA that meet or exceed the upper ends of the annual guidance ranges for 2022
Strategic highlights
- Completed Strathmore Solar on-schedule with 100% of the renewable energy and associated renewable energy credits under a 25-year power purchase agreement
- Executed a 10-year renewable energy agreement for the balance of our Whitla Wind facility
- Federal Government proposed details for a refundable investment tax credit for corporations that incur eligible carbon capture, utilization and storage (CCUS) expenses, which would support our potential Genesee CCS Project
- Completed preliminary front-end engineering and design (FEED) study for Genesee CCS Project
- Continued discussions with BC Hydro on a medium-term contract extension for Island Generation
“Our financial results in the first quarter of 2022 exceeded management’s expectations,” said Brian Vaasjo, President and CEO of Capital Power. “We had a strong operating performance from our facilities with a 95% average availability and solid contributions from generally all areas of our business. The strong performance generated $348 million in adjusted EBITDA, the highest quarterly adjusted EBITDA in two years. Based on our outlook for 2022, we are on track to deliver adjusted EBITDA and AFFO that meet or exceed the upper ends of the $1,110 million to $1,160 million and $580 million to $630 million annual guidance ranges, respectively.”
“We continue to expand our renewable contracted cash flows with the recent execution of a 10-year renewable energy agreement with MEGlobal Canada ULC for the balance of our Whitla Wind facility. Combined with our renewable energy agreement with Dow Chemical Canada ULC, the additional phases of the Whitla Wind facility are now fully contracted for 100% of the energy generated and approximately 86% of the environmental attributes for 10 years,” stated Mr. Vaasjo.
“Significant progress has been made on our proposed Genesee CCS Project including the completion of a preliminary FEED study that updated various technical and cost parameters,” added Mr. Vaasjo. “Enbridge received approval from the Government of Alberta to pursue development of their Open Access Wabamun Carbon Hub, which would provide transportation and sequestration services for the Genesee CCS Project. With the recent 2022 Budget announcement by the Federal Government, we are encouraged by the level of refundable investment tax credits for CCUS projects. We will continue to evaluate the Genesee CCS Project as part of our overall plans in reducing our emissions profile through decarbonization technologies."
Operational and Financial Highlights1
| (unaudited, millions of dollars except per share and operational amounts) | Three months ended March 31 | |||||
| 2022 | 2021 | |||||
| Electricity generation (Gigawatt hours) | 6,893 | 5,630 | ||||
| Generation facility availability | 95% | 96% | ||||
| Revenues and other income | $ | 501 | $ | 554 | ||
| Adjusted EBITDA 2 | $ | 348 | $ | 303 | ||
| Net income 3 | $ | 119 | $ | 101 | ||
| Net income attributable to shareholders of the Company | $ | 122 | $ | 103 | ||
| Basic and diluted earnings per share | $ | 0.96 | $ | 0.83 | ||
| Normalized earnings attributable to common shareholders 2 | $ | 108 | $ | 68 | ||
| Normalized earnings per share 2 | $ | 0.93 | $ | 0.64 | ||
| Net cash flows from operating activities | $ | 415 | $ | 206 | ||
| Adjusted funds from operations 2 | $ | 200 | $ | 159 | ||
| Adjusted funds from operations per share 2 | $ | 1.72 | $ | 1.49 | ||
| Purchase of property, plant and equipment and other assets, net | $ | 132 | $ | 97 | ||
| Dividends per common share, declared | $ | 0.5475 | $ | 0.5125 | ||
- 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, 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 March 31, 2022 and 2021 of $142 million and $137 million, respectively. Forecasted depreciation and amortization for the remainder of 2022 is $146 million per quarter.
Significant Events
Strathmore Solar begins commercial operations
On March 17, 2022, Strathmore Solar, a 41 MW facility in Strathmore Alberta, began commercial operations. The project was completed on-schedule at a total cost of $58 million compared to the original projected total cost of $53 million. The facility is fully contracted with 100% of the renewable energy and associated renewable energy credits sold to TELUS Communications under a 25-year power purchase agreement.
Executed 10-year contract for Whitla Wind
On March 18, 2022, the Company announced that it executed a 10-year renewable energy agreement with MEGlobal Canada ULC. The agreement commenced April 1, 2022 and covers the renewable energy for the balance of our Whitla Wind facility.
Approval of normal course issuer bid
During the first quarter of 2022, the Toronto Stock Exchange approved Capital Power’s normal course issuer bid to purchase and cancel up to 8 million of its outstanding common shares during the one-year period from February 28, 2022 to February 27, 2023.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on May 2, 2022 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
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.
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 and gains or losses on disposals 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 2022 | Dec 2021 | Sep 2021 | Jun 2021 | Mar 2021 | Dec 2020 | Sep 2020 | Jun 2020 | |||||||||
| Revenues and other income | 501 | 672 | 377 | 387 | 554 | 516 | 453 | 435 | ||||||||
| Energy purchases and fuel, other raw materials and operating charges, staff costs and employee benefits expense, and other administrative expense | (178 | ) | (506 | ) | (162 | ) | (176 | ) | (264 | ) | (321 | ) | (144 | ) | (233 | ) |
| Remove unrealized changes in fair value of commodity derivatives and emission credits included within revenues and energy purchases and fuel | 18 | 123 | 66 | 24 | 7 | 19 | (31 | ) | 9 | |||||||
| Adjusted EBITDA from joint venture 1 | 7 | 5 | 5 | 6 | 6 | 6 | 6 | 6 | ||||||||
| Adjusted EBITDA | 348 | 294 | 286 | 241 | 303 | 220 | 284 | 217 | ||||||||
| Depreciation and amortization | (142 | ) | (137 | ) | (133 | ) | (132 | ) | (137 | ) | (122 | ) | (115 | ) | (121 | ) |
| Unrealized changes in fair value of commodity derivatives and emission credits | (18 | ) | (123 | ) | (66 | ) | (24 | ) | (7 | ) | (19 | ) | 31 | (9 | ) | |
| Impairment (losses) reversals | - | (52 | ) | (8 | ) | 2 | - | (13 | ) | - | - | |||||
| Gains (losses) on acquisition and disposal transactions | - | 6 | 31 | (3 | ) | 2 | - | - | - | |||||||
| Foreign exchange gain (loss) | 1 | (1 | ) | (7 | ) | (2 | ) | 1 | 5 | 1 | 3 | |||||
| Net finance expense | (37 | ) | (44 | ) | (43 | ) | (46 | ) | (41 | ) | (57 | ) | (47 | ) | (49 | ) |
| Finance expense and depreciation expense from joint venture 1 | - | (4 | ) | (4 | ) | (5 | ) | - | (4 | ) | (4 | ) | (6 | ) | ||
| Income tax expense | (33 | ) | (8 | ) | (18 | ) | (14 | ) | (20 | ) | (9 | ) | (44 | ) | (12 | ) |
| Net income (loss) | 119 | (69 | ) | 38 | 17 | 101 | 1 | 106 | 23 | |||||||
| Net income (loss) attributable to: | ||||||||||||||||
| Non-controlling interests | (3 | ) | (4 | ) | (2 | ) | (3 | ) | (2 | ) | (2 | ) | (2 | ) | - | |
| Shareholders of the Company | 122 | (65 | ) | 40 | 20 | 103 | 3 | 108 | 23 | |||||||
| Net income (loss) | 119 | (69 | ) | 38 | 17 | 101 | 1 | 106 | 23 | |||||||
- Total income from joint venture as per the Company’s consolidated statements of income.
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 current 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
- include net expected cash outflows for the Company’s share of Line Loss Rule (LLR) Proceeding amounts in the period each tranche is paid by the Company.
A reconciliation of net cash flows from operating activities to adjusted funds from operations is as follows:
| (unaudited, $ millions) | Three months ended March 31 | |||
| 2022 | 2021 | |||
| Net cash flows from operating activities per condensed interim consolidated statements of cash flows | 415 | 206 | ||
| Add (deduct) items included in calculation of net cash flows from operating activities per condensed interim consolidated statements of cash flows: | ||||
| Interest paid | 38 | 41 | ||
| Change in fair value of derivatives reflected as cash settlement | (7 | ) | 4 | |
| Distributions received from joint venture | - | (3 | ) | |
| Miscellaneous financing charges paid 1 | 2 | 1 | ||
| Income taxes paid | 12 | 5 | ||
| Change in non-cash operating working capital | (180 | ) | (20 | ) |
| (135 | ) | 28 | ||
| Net finance expense 2 | (31 | ) | (35 | ) |
| Current income tax expense | (15 | ) | (3 | ) |
| Sustaining capital expenditures 3 | (25 | ) | (18 | ) |
| Preferred share dividends paid | (10 | ) | (13 | ) |
| Remove tax equity interests’ respective shares of adjusted funds from operations | (4 | ) | (4 | ) |
| Adjusted funds from operations from joint venture | 5 | 4 | ||
| Line Loss Rule Proceeding 4 | - | (6 | ) | |
| Adjusted funds from operations | 200 | 159 | ||
| Weighted average number of common shares outstanding (millions) | 116.2 | 106.8 | ||
| Adjusted funds from operations per share ($) | 1.72 | 1.49 | ||
- 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 $5 million for the three months ended March 31, 2022 and 2021, respectively.
- Consistent with the Company’s definition of AFFO described above pertaining to the LLR Proceeding, AFFO for the three months March 31, 2021 is impacted only by the Company’s net obligations related to the 2010–2013 invoice tranche.
Normalized earnings attributable to common shareholders and normalized earnings per share
The Company uses normalized earnings attributable to common shareholders and normalized earnings per share to measure performance by period on a comparable basis. Normalized earnings attributable to common shareholders and normalized earnings per share are based on net income (loss) attributable to shareholders of the Company according to GAAP and adjusted for items that are not reflective of performance in the period such as unrealized fair value changes, impairment charges, unusual tax adjustments, gains and losses on disposal of assets or unusual contracts, and foreign exchange gain or loss on the revaluation of U.S. dollar denominated debt. The adjustments, shown net of tax, consist of unrealized fair value changes on financial instruments that are not necessarily indicative of future actual realized gains or losses, non-recurring gains or losses, or gains or losses reflecting corporate structure decisions.
| (unaudited, $ millions except per share amounts and number of common shares) | Three months ended | |||||||||||||||
| Mar 2022 | Dec 2021 | Sep 2021 | Jun 2021 | Mar 2021 | Dec 2020 | Sep 2020 | Jun 2020 | |||||||||
| Basic earnings (loss) per share ($) | 0.96 | (0.67 | ) | 0.23 | 0.05 | 0.83 | (0.09 | ) | 0.89 | 0.10 | ||||||
| Net income (loss) attributable to shareholders of the Company per condensed interim consolidated statements of income (loss) | 122 | (65 | ) | 40 | 20 | 103 | 3 | 108 | 23 | |||||||
| Preferred share dividends including Part VI.1 tax | (10 | ) | (13 | ) | (13 | ) | (14 | ) | (14 | ) | (13 | ) | (14 | ) | (13 | ) |
| Earnings (loss) attributable to common shareholders | 112 | (78 | ) | 27 | 6 | 89 | (10 | ) | 94 | 10 | ||||||
| Unrealized changes in fair value of derivatives 1 | (2 | ) | 83 | 48 | 25 | (10 | ) | 12 | (28 | ) | 3 | |||||
| Genesee 2 forced outage | - | (5 | ) | (12 | ) | - | - | - | - | - | ||||||
| Provision for contingency | - | - | (6 | ) | 6 | - | - | - | - | |||||||
| Impairment losses (reversal) | - | 41 | 6 | (2 | ) | - | 10 | - | - | |||||||
| Reduction in applicable jurisdictional tax rates | - | 10 | - | - | (10 | ) | - | - | - | |||||||
| Provision for Line Loss Rule Proceeding | - | - | - | - | (1 | ) | 1 | - | 3 | |||||||
| Other | (2 | ) | 4 | - | - | - | - | 3 | 2 | |||||||
| Normalized earnings attributable to common shareholders | 108 | 55 | 63 | 35 | 68 | 13 | 69 | 18 | ||||||||
| Weighted average number of common shares outstanding (millions) | 116.2 | 116.0 | 115.5 | 109.7 | 106.8 | 105.7 | 105.1 | 105.1 | ||||||||
| Normalized earnings per share ($) | 0.93 | 0.47 | 0.55 | 0.32 | 0.64 | 0.12 | 0.66 | 0.17 | ||||||||
- Includes impacts of the interest rate non-hedge held within a joint venture and recorded within income from joint venture on the Company’s condensed interim consolidated statements of income.
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 2022 AFFO and adjusted EBITDA guidance, (ii) the timing of the investment decision for the Company’s potential CCS project, and (iii) forecasted depreciation for the remainder of 2022.
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 both the Company’s Management’s Discussion and Analysis for the three months ended March 31, 2022, prepared as of April 29, 2022 and the Company’s 2021 Integrated Annual Report, prepared as of February 23, 2022, 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.
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 6,600 MW of power generation capacity at 27 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.
For more information, please contact:
| Media Relations: Katherine Perron (780) 392-5335 kperron@capitalpower.com | Investor Relations: Randy Mah (780) 392-5305 or (866) 896-4636 (toll-free) investor@capitalpower.com |
