Highlights
- Generated net cash flows from operating activities of
$258 million and adjusted funds from operations (AFFO) of$221 million in the third quarter of 2020 - Generated net income of
$106 million and adjusted EBITDA of$284 million in the third quarter of 2020 - Executed a 10-year contract extension for Decatur Energy through to 2032
- Executed 20-year contracts for three solar development projects in
North Carolina that will add 160 megawatts in 2022
“Capital Power delivered financial and operational results in the third quarter of 2020 that were in line with management’s expectations thanks to the efforts of our employees who work at our facilities and those who continue to work remotely during the COVID-19 pandemic,” said
“One of the highlights in the third quarter was the 10-year contract extension for Decatur Energy out to 2032. With our upgrades to the combustion turbines since its acquisition in 2017, the expected financial contributions from the contract extension will add significant value both in the remaining years of the existing contract and beyond the current contract expiry in 2022. The contract extension also validates our acquisition strategy of acquiring mid-life contracted gas assets that have a positive outlook for re-contracting and have value beyond the current contract term,” added
“In October, we signed 20-year power purchase agreements for three solar development projects in
Operational and Financial Highlights 1 (unaudited) | Three months ended September 30 | Nine months ended September 30 | ||||||||||
(millions of dollars except per share and operational amounts) | 2020 | 2019 | 2020 | 2019 | ||||||||
Electricity generation (Gigawatt hours) | 6,327 | 6,808 | 17,361 | 18,090 | ||||||||
Generation facility availability | 98 | % | 96 | % | 94 | % | 95 | % | ||||
Revenues and other income 3 | $ | 453 | $ | 517 | $ | 1,421 | $ | 1,280 | ||||
Adjusted EBITDA 2, 3 | $ | 284 | $ | 284 | $ | 735 | $ | 677 | ||||
Net income (loss) 3 | $ | 106 | $ | (228 | ) | $ | 129 | $ | (62 | ) | ||
Net income (loss) attributable to shareholders of the Company 3 | $ | 108 | $ | (226 | ) | $ | 133 | $ | (57 | ) | ||
Basic earnings (loss) per share 3 | $ | 0.89 | $ | (2.25 | ) | $ | 0.87 | $ | (0.90 | ) | ||
Diluted earnings (loss) per share 3 | $ | 0.89 | $ | (2.25 | ) | $ | 0.87 | $ | (0.90 | ) | ||
Normalized earnings attributable to common shareholders 2,3 | $ | 69 | $ | 64 | $ | 115 | $ | 109 | ||||
Normalized earnings per share 2, 3 | $ | 0.66 | $ | 0.60 | $ | 1.09 | $ | 1.05 | ||||
Net cash flows from operating activities | $ | 258 | $ | 209 | $ | 452 | $ | 519 | ||||
Adjusted funds from operations 2 | $ | 221 | $ | 225 | $ | 436 | $ | 427 | ||||
Adjusted funds from operations per share 2 | $ | 2.10 | $ | 2.11 | $ | 4.14 | $ | 4.11 | ||||
Purchase of property, plant and equipment and other assets | $ | 50 | $ | 193 | $ | 236 | $ | 523 | ||||
Dividends per common share, declared | $ | 0.5125 | $ | 0.4800 | $ | 1.4725 | $ | 1.3750 |
1 | The operational and financial highlights in this press release should be read in conjunction with Management’s Discussion and Analysis and the unaudited condensed interim consolidated financial statements for the nine months ended |
2 | 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, normalized earnings per share, AFFO and AFFO 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 | Includes depreciation and amortization for the three months ended |
Significant Events
Wind facility long-term service agreement extensions and Whitla Wind 2 and 3 turbine supply
In late
The agreement for the 10-year extension on the series of LTSAs with Vestas covers a wider scope of services for all of our Vestas-equipped wind facilities while reducing costs by an estimated 26% compared to current service and maintenance agreements. The new LTSAs were executed in
Extension of Decatur Energy tolling agreement
In
Since the acquisition in
Under the terms of the extension, Decatur Energy will receive payments for 34 MW of additional capacity immediately and will receive capacity payments on up to an additional 79 MW upon execution of an updated interconnection agreement that is expected to be finalized in 2021.
Strathmore Solar project proceeding
On
Strathmore Solar will generate carbon credits that can be used to hedge against Capital Power’s carbon compliance costs from its
Executive appointments
On
Kate Chisholm , Senior Vice President Planning and Stakeholder Relations and Chief Sustainability Officer,Bryan DeNeve , Senior Vice President Business Development and Commercial Services,Sandra Haskins , Senior Vice President Finance and Chief Financial Officer,Chris Kopecky , Senior Vice President and Chief Legal Officer, andJacquie Pylypiuk , Senior Vice President People, Culture and Technology.
Reinstatement of Dividend Reinvestment Plan
On
Dividend increase
On
Whitla Wind 3 project proceeding
In
Whitla Wind 3 will generate carbon credits that can be used to hedge against Capital Power’s carbon compliance costs from its
Acquisition of Buckthorn Wind
On
Buckthorn Wind is located in
Buckthorn Wind has a 15-year weighted average contract life remaining with two offtake arrangements including one with
Buckthorn Wind has a tax equity investor (TEI) where the TEI receives the majority of the cash flows prior to the date on which the TEI reaches the agreed upon target rate of return (the flip date). The flip date is expected to occur in the late 2020s. Prior to the flip date, the Company expects average annual adjusted EBITDA and AFFO to be approximately
On
Discontinuation of the Genesee 4 and 5 project
During the first quarter of 2020, the Company and its partner on the Genesee 4 and 5 project determined that they would no longer be pursuing the project. Arbitration has commenced between the Company and its partner around the costs of exiting the series of agreements previously entered into. As a result of the decision to no longer pursue the project, the Company has determined that
Subsequent Events
20-year contracts for three new solar development projects in
In
With their 20-year contract terms, the
On
Analyst conference call and webcast
(855) 327-6838 (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
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 joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), (ii) AFFO, (iii) AFFO 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.
Adjusted EBITDA
A reconciliation of adjusted EBITDA to net income (loss) is as follows:
(unaudited, $ millions) | Three months ended | ||||||||||||||||||
Dec 31 2019 | Sep 30 2019 | Jun 30 2019 | Mar 31 2019 | Dec 31 2018 | |||||||||||||||
Revenues and other income 2 | 453 | 435 | 533 | 683 | 517 | 366 | 397 | 340 | |||||||||||
Energy purchases and fuel, other raw materials and operating charges, staff costs and employee benefits expense, and other administrative expense | (144 | ) | (233 | ) | (323 | ) | (309 | ) | (231 | ) | (134 | ) | (167 | ) | (233 | ) | |||
Remove unrealized changes in fair value of commodity derivatives and emission credits included within revenues and energy purchases and fuel | (31 | ) | 9 | 18 | (28 | ) | (8 | ) | (48 | ) | (34 | ) | 53 | ||||||
Adjusted EBITDA from joint ventures 1 | 6 | 6 | 6 | 6 | 6 | 7 | 6 | 11 | |||||||||||
Adjusted EBITDA | 284 | 217 | 234 | 352 | 284 | 191 | 202 | 171 | |||||||||||
Depreciation and amortization 2 | (115 | ) | (121 | ) | (133 | ) | (118 | ) | (135 | ) | (122 | ) | (98 | ) | (85 | ) | |||
Unrealized changes in fair value of commodity derivatives and emission credits | 31 | (9 | ) | (18 | ) | 28 | 8 | 48 | 34 | (53 | ) | ||||||||
Impairment | - | - | - | - | (401 | ) | - | - | - | ||||||||||
Gains on acquisition and disposal transactions | - | - | - | 24 | - | - | - | 159 | |||||||||||
Foreign exchange gain (loss) | 1 | 3 | (9 | ) | - | (1 | ) | - | (4 | ) | 6 | ||||||||
Net finance expense | (47 | ) | (49 | ) | (44 | ) | (41 | ) | (42 | ) | (37 | ) | (36 | ) | (33 | ) | |||
Finance expense and depreciation expense from joint ventures 1 | (4 | ) | (6 | ) | (13 | ) | (1 | ) | (7 | ) | (7 | ) | (8 | ) | (10 | ) | |||
Income tax (expense) recovery 2 | (44 | ) | (12 | ) | (17 | ) | (63 | ) | 66 | 33 | (30 | ) | (19 | ) | |||||
Net income (loss) | 106 | 23 | - | 181 | (228 | ) | 106 | 60 | 136 | ||||||||||
Net income (loss) attributable to: | |||||||||||||||||||
Non-controlling interests | (2 | ) | - | (2 | ) | (1 | ) | (2 | ) | (2 | ) | (1 | ) | (2 | ) | ||||
Shareholders of the Company 2 | 108 | 23 | 2 | 182 | (226 | ) | 108 | 61 | 138 | ||||||||||
Net income (loss) | 106 | 23 | - | 181 | (228 | ) | 106 | 60 | 136 |
1 | Total income from joint ventures as per the Company’s consolidated statements of income (loss). Prior quarters’ values include Capital Power’s share of K2 Wind up until the |
2 | Fiscal 2018 quarters’ amounts have been restated to reflect the IAS 8 accounting policy change resulting from the transition to IFRS 16. |
Adjusted funds from operations and adjusted funds from operations per share
AFFO is a measure 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 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, and
- 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.
AFFO per share is determined by applying AFFO to the weighted average number of common shares used in the calculation of basic, diluted and normalized earnings per share.
A reconciliation of net cash flows from operating activities to AFFO is as follows:
(unaudited, $ millions) | Three months ended September 30 | Nine months ended September 30 | ||||||
2020 | 2019 | 2020 | 2019 | |||||
Net cash flows from operating activities per condensed interim consolidated statements of cash flows | 258 | 209 | 452 | 519 | ||||
Add (deduct) items included in calculation of net cash flows from operating activities per condensed interim consolidated statements of cash flows: | ||||||||
Interest paid | 39 | 36 | 101 | 83 | ||||
Realized loss (gain) on settlement of interest rate derivatives | - | - | (1 | ) | 19 | |||
Change in fair value of derivatives reflected as cash settlement | 8 | 1 | 26 | (36 | ) | |||
Distributions received from joint ventures | (3 | ) | (3 | ) | (8 | ) | (9 | ) |
Miscellaneous financing charges paid 1 | 1 | 1 | 4 | 4 | ||||
Income taxes paid | 5 | 2 | 38 | 4 | ||||
Change in non-cash operating working capital | (65 | ) | (3 | ) | (12 | ) | (26 | ) |
(15 | ) | 34 | 148 | 39 | ||||
Net finance expense 2 | (35 | ) | (33 | ) | (106 | ) | (90 | ) |
Current income tax expense 3 | (10 | ) | (6 | ) | (26 | ) | (7 | ) |
Sustaining capital expenditures 4 | (16 | ) | (18 | ) | (50 | ) | (58 | ) |
Preferred share dividends paid | (13 | ) | (13 | ) | (39 | ) | (36 | ) |
Cash received from coal compensation | 50 | 50 | 50 | 50 | ||||
Remove tax equity interests’ respective shares of adjusted funds from operations | (2 | ) | (2 | ) | (6 | ) | (4 | ) |
Adjusted funds from operations from joint ventures | 4 | 4 | 13 | 14 | ||||
Adjusted funds from operations | 221 | 225 | 436 | 427 | ||||
Weighted average number of common shares outstanding (millions) | 105.1 | 106.5 | 105.2 | 104.0 | ||||
Adjusted funds from operations per share ($) | 2.10 | 2.11 | 4.14 | 4.11 |
1 | 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. |
2 | Excludes unrealized changes on interest rate derivative contracts, amortization, accretion charges and non-cash implicit interest on tax equity investment structures. |
3 | Excludes current income tax related to the Genesee 3 and |
4 | Includes sustaining capital expenditures net of partner contributions of |
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 per share is based on earnings (loss) used in the calculation of basic earnings (loss) per share 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
(unaudited, $ millions except per share amounts and number of common shares) | Three months ended | ||||||||||||||||
Sep 30 2020 | |||||||||||||||||
Basic earnings (loss) per share ($)2 | 0.89 | 0.10 | (0.11 | ) | 1.61 | (2.25 | ) | 0.93 | 0.49 | 1.24 | |||||||
Net income (loss) attributable to shareholders of the Company per condensed interim consolidated statements of income (loss) 2 | 108 | 23 | 2 | 182 | (226 | ) | 108 | 61 | 138 | ||||||||
Preferred share dividends including Part VI.1 tax | (14 | ) | (13 | ) | (14 | ) | (12 | ) | (14 | ) | (12 | ) | (11 | ) | (11 | ) | |
Earnings (loss) attributable to common shareholders 2 | 94 | 10 | (12 | ) | 170 | (240 | ) | 96 | 50 | 127 | |||||||
Unrealized changes in fair value of derivatives 1 | (28 | ) | 3 | 30 | (28 | ) | (3 | ) | (30 | ) | (20 | ) | 35 | ||||
Restructuring charges | 2 | - | - | - | - | - | - | - | |||||||||
Other tax adjustment | 1 | - | - | - | - | - | - | - | |||||||||
Provision for Line Loss Rule Proceeding (See Contingent Liabilities and Provisions) | - | 3 | - | 4 | - | - | - | - | |||||||||
Termination of East Windsor steam contract | - | 2 | - | - | - | - | - | - | |||||||||
Loss on discontinuation of Genesee 4 and 5 project (see Significant Events) | - | - | 10 | - | - | - | - | - | |||||||||
Net (gain) loss on Genesee 3 and | - | - | - | (115 | ) | 307 | - | - | - | ||||||||
- | - | - | - | - | (51 | ) | - | - | |||||||||
Gain on disposal of joint venture | - | - | - | - | - | - | - | (134 | ) | ||||||||
Asset held for sale accounting treatment of K2 Wind | - | - | - | - | - | - | - | 3 | |||||||||
Normalized earnings attributable to common shareholders 2 | 69 | 18 | 28 | 31 | 64 | 15 | 30 | 31 | |||||||||
Weighted average number of common shares outstanding (millions) | 105.1 | 105.1 | 105.4 | 105.3 | 106.5 | 103.6 | 101.8 | 102.3 | |||||||||
Normalized earnings per share ($)2 | 0.66 | 0.17 | 0.27 | 0.29 | 0.60 | 0.14 | 0.29 | 0.30 |
1 | Includes impacts of the interest rate non-hedge held within a joint venture and recorded within loss from joint venture on the Company’s condensed interim consolidated statements of income. |
2 | Fiscal 2018 quarters’ amounts have been restated to reflect the IAS 8 accounting policy change resulting from the transition to IFRS 16. |
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 2020 AFFO and adjusted EBITDA guidance, (ii) forecasted depreciation for the remainder of 2020, (iii) expected timing of commencement of commercial operations of Whitla Wind 2 and 3 and expected capital costs of Whitla Wind 3, (iv) expectations around the Vestas agreements including cost reductions and impacts on adjusted EBITDA and AFFO, (v) the timing of completion of the Decatur Energy combustion turbine upgrades, (vi) expectations around the likelihood of meeting the threshold and paying out contingent consideration related to Buckthorn Wind, (vii) expectations pertaining to the financial impacts of the acquisition of Buckthorn Wind, including the impacts to adjusted EBITDA and AFFO, (viii) the expected timing of when the Buckthorn Wind tax equity investor reaches the agreed upon target rate of return, (ix) expectations pertaining to the financial impacts of
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 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) operating and asset development performance, (iii) business prospects (including potential re-contracting opportunities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations, (v) effective tax rates and (vi) foreign exchange 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) generation facility availability, wind capacity factor and performance including maintenance expenditures, (v) ability to fund current and future capital and working capital needs, (vi) acquisitions and developments including timing and costs of regulatory approvals and construction, (vii) changes in market prices and availability of fuel, (viii) ability to realize the anticipated benefits of the Buckthorn Wind acquisition, (ix) limitations inherent in the Company’s review of acquired assets, and (x) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis for both the nine months 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.
About
For more information, please contact:
Media Relations: | Investor Relations: |
(780) 392-5335 | (780) 392-5305 or (866) 896-4636 (toll-free) |
kperron@capitalpower.com | investor@capitalpower.com |
Source:
2020 GlobeNewswire, Inc., source