Highlights
- Generated net cash flows from operating activities of
$347 million and adjusted funds from operations (AFFO) of$206 million in the third quarter of 2021 - Generated net income of
$38 million and adjusted EBITDA of$286 million in the third quarter of 2021 - Announced 15-year renewable power purchase agreement with Dow Chemical Canada ULC for a portion of our Whitla Wind 2 project, currently under construction in
Alberta - Continued constructive discussions for the re-contracting of the Island Generation facility
- Strong performance, financial position and outlook led to announced suspension of the Company’s Dividend Re-investment Plan (DRIP)
“Our operating and financial results for the third quarter of 2021 were generally in line with management’s expectations,” said
“Alberta power prices remain strong, averaging
Operational and Financial Highlights 1 (unaudited) | Three months ended | Nine months ended | ||||||||||
(millions of dollars except per share and operational amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||
Electricity generation (Gigawatt hours) | 6,103 | 6,327 | 16,708 | 17,361 | ||||||||
Generation facility availability | 91 | % | 98 | % | 90 | % | 94 | % | ||||
Revenues and other income | $ | 377 | $ | 453 | $ | 1,318 | $ | 1,421 | ||||
Adjusted EBITDA 2 | $ | 286 | $ | 284 | $ | 830 | $ | 735 | ||||
Net income 3 | $ | 38 | $ | 106 | $ | 156 | $ | 129 | ||||
Net income attributable to shareholders of the Company 3 | $ | 40 | $ | 108 | $ | 163 | $ | 133 | ||||
Basic earnings per share 3 | $ | 0.23 | $ | 0.89 | $ | 1.10 | $ | 0.87 | ||||
Diluted earnings per share 3 | $ | 0.23 | $ | 0.89 | $ | 1.09 | $ | 0.87 | ||||
Normalized earnings attributable to common shareholders 2,3 | $ | 63 | $ | 69 | $ | 166 | $ | 115 | ||||
Normalized earnings per share 2, 3 | $ | 0.55 | $ | 0.66 | $ | 1.50 | $ | 1.09 | ||||
Net cash flows from operating activities | $ | 347 | $ | 258 | $ | 682 | $ | 452 | ||||
Adjusted funds from operations 2 | $ | 206 | $ | 221 | $ | 456 | $ | 436 | ||||
Adjusted funds from operations per share 2 | $ | 1.78 | $ | 2.10 | $ | 4.12 | $ | 4.14 | ||||
Purchase of property, plant and equipment and other assets, net | $ | 176 | $ | 67 | $ | 424 | $ | 253 | ||||
Dividends per common share, declared | $ | 0.5475 | $ | 0.5125 | $ | 1.5725 | $ | 1.4725 |
1 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 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
Executed 15-year contract for Whitla Wind 2
On
Forced outage at Genesee 2
In
Dividend increase
On
On
Sustainability-linked credit facilities
On
Common share offering
In June of 2021 the Company completed a public offering of 7,480,750 common shares (inclusive of the full exercise of a 975,750 common shares over-allotment option), at an issue price of
Executive appointments
On
Bryan DeNeve , Senior Vice President Operations,Chris Kopecky , Senior Vice President and Chief Legal, Development and Commercial Officer, andSteve Owens , Senior Vice President Construction and Engineering.
Executed 15-year contract for Enchant Solar project
On
Construction of Enchant Solar is set to commence in the second quarter of 2022 with commercial operations expected in the fourth quarter of 2022.
During the
The favourable impacts of the weather event were largely driven by the settlement of the offtake and commodity swaps for Buckthorn Wind for the noted period of extreme weather. However, Buckthorn Wind’s counterparty is contesting the settlement, arguing that settlement should have been based upon a different reference price. Historically these two prices have been similar, but as a result of the recent extreme weather, the Company became aware of a divergence in these prices during scarcity events. Both parties invoked dispute-resolution procedures during the first quarter of 2021 and the Company subsequently initiated litigation. Based on the contract terms of the offtake and commodity swaps, the Company considers the probability of ultimate settlement using the reference price advocated by the counterparty as being unlikely. In the event that the dispute is resolved unfavourably to the Company, the net exposure to the Company’s revenues would be a reduction of up to approximately
Approval of normal course issuer bid
During the first quarter of 2021, the
Subsequent Event
Suspension of Dividend Re-investment Plan
Subsequent to the close of the third quarter of 2021,
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
The Company uses (i) 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 is as follows:
(unaudited, $ millions) | Three months ended | |||||||||||||||
Revenues and other income | 377 | 387 | 554 | 516 | 453 | 435 | 533 | 683 | ||||||||
Energy purchases and fuel, other raw materials and operating charges, staff costs and employee benefits expense, and other administrative expense | (162 | ) | (176 | ) | (264 | ) | (321 | ) | (144 | ) | (233 | ) | (323 | ) | (309 | ) |
Remove unrealized changes in fair value of commodity derivatives and emission credits included within revenues and energy purchases and fuel | 66 | 24 | 7 | 19 | (31 | ) | 9 | 18 | (28 | ) | ||||||
Adjusted EBITDA from joint venture 1 | 5 | 6 | 6 | 6 | 6 | 6 | 6 | 6 | ||||||||
Adjusted EBITDA | 286 | 241 | 303 | 220 | 284 | 217 | 234 | 352 | ||||||||
Depreciation and amortization | (133 | ) | (132 | ) | (137 | ) | (122 | ) | (115 | ) | (121 | ) | (120 | ) | (118 | ) |
Unrealized changes in fair value of commodity derivatives and emission credits | (66 | ) | (24 | ) | (7 | ) | (19 | ) | 31 | (9 | ) | (18 | ) | 28 | ||
Impairment (losses) reversal | (8 | ) | 2 | - | (13 | ) | - | - | (13 | ) | - | |||||
Gains (losses) on disposals and other transactions | 31 | (3 | ) | 2 | - | - | - | - | 24 | |||||||
Foreign exchange (loss) gain | (7 | ) | (2 | ) | 1 | 5 | 1 | 3 | (9 | ) | - | |||||
Net finance expense | (43 | ) | (46 | ) | (41 | ) | (57 | ) | (47 | ) | (49 | ) | (44 | ) | (41 | ) |
Finance expense and depreciation expense from joint venture 1 | (4 | ) | (5 | ) | - | (4 | ) | (4 | ) | (6 | ) | (13 | ) | (1 | ) | |
Income tax expense | (18 | ) | (14 | ) | (20 | ) | (9 | ) | (44 | ) | (12 | ) | (17 | ) | (63 | ) |
Net income | 38 | 17 | 101 | 1 | 106 | 23 | - | 181 | ||||||||
Net income (loss) attributable to: | ||||||||||||||||
Non-controlling interests | (2 | ) | (3 | ) | (2 | ) | (2 | ) | (2 | ) | - | (2 | ) | (1 | ) | |
Shareholders of the Company | 40 | 20 | 103 | 3 | 108 | 23 | 2 | 182 | ||||||||
Net income | 38 | 17 | 101 | 1 | 106 | 23 | - | 181 |
1 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 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 adjusted funds from operations 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 invoices in the period each tranche is paid by the Company.
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 adjusted funds from operations is as follows:
(unaudited, $ millions) | Three months ended | Nine months ended | ||||||
2021 | 2020 | 2021 | 2020 | |||||
Net cash flows from operating activities per condensed interim consolidated statements of cash flows | 347 | 258 | 682 | 452 | ||||
Add (deduct) items included in calculation of net cash flows from operating activities per condensed interim consolidated statements of cash flows: | ||||||||
Interest paid | 37 | 39 | 98 | 101 | ||||
Realized gains on settlement of interest rate derivatives | - | - | (12 | ) | (1 | ) | ||
Change in fair value of derivatives reflected as cash settlement | 6 | 8 | 17 | 26 | ||||
Distributions received from joint venture | (3 | ) | (3 | ) | (8 | ) | (8 | ) |
Miscellaneous financing charges paid 1 | 1 | 1 | 4 | 4 | ||||
Income taxes (recovered) paid | (18 | ) | 5 | (13 | ) | 38 | ||
Change in non-cash operating working capital | (120 | ) | (65 | ) | (105 | ) | (12 | ) |
(97 | ) | (15 | ) | (19 | ) | 148 | ||
Net finance expense 2 | (29 | ) | (35 | ) | (93 | ) | (106 | ) |
Current income tax expense 3 | (3 | ) | (10 | ) | (19 | ) | (26 | ) |
Sustaining capital expenditures 4 | (52 | ) | (16 | ) | (99 | ) | (50 | ) |
Preferred share dividends paid | (12 | ) | (13 | ) | (38 | ) | (39 | ) |
Cash received for off-coal compensation | 50 | 50 | 50 | 50 | ||||
Remove tax equity interests’ respective shares of adjusted funds from operations | (1 | ) | (2 | ) | (7 | ) | (6 | ) |
Adjusted funds from operations from joint venture | 3 | 4 | 12 | 13 | ||||
Line Loss Rule Proceeding 5 | - | - | (13 | ) | - | |||
Adjusted funds from operations | 206 | 221 | 456 | 436 | ||||
Weighted average number of common shares outstanding (millions) | 115.5 | 105.1 | 110.7 | 105.2 | ||||
Adjusted funds from operations per share ($) | 1.78 | 2.10 | 4.12 | 4.14 |
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 For the three and nine months ended
4 Includes sustaining capital expenditures net of partner contributions of
5 The LLR Proceeding invoicing process has resulted in gross billings to
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 | |||||||||||||||
Basic earnings (loss) per share ($) | 0.23 | 0.05 | 0.83 | (0.09 | ) | 0.89 | 0.10 | (0.11 | ) | 1.61 | ||||||
Net income attributable to shareholders of the Company per condensed interim consolidated statements of income | 40 | 20 | 103 | 3 | 108 | 23 | 2 | 182 | ||||||||
Preferred share dividends including Part VI.1 tax | (13 | ) | (14 | ) | (14 | ) | (13 | ) | (14 | ) | (13 | ) | (14 | ) | (12 | ) |
Earnings (loss) attributable to common shareholders | 27 | 6 | 89 | (10 | ) | 94 | 10 | (12 | ) | 170 | ||||||
Unrealized changes in fair value of derivatives 1 | 48 | 25 | (10 | ) | 12 | (28 | ) | 3 | 30 | (28 | ) | |||||
Genesee 2 forced outage2 | (12 | ) | - | - | - | - | - | - | - | |||||||
Provision for contingency | (6 | ) | 6 | - | - | - | - | - | - | |||||||
Impairment (reversal) losses | 6 | (2 | ) | - | 10 | - | - | 10 | - | |||||||
Reduction in applicable jurisdictional tax rates | - | - | (10 | ) | - | - | - | - | - | |||||||
Provision for Line Loss Rule Proceeding 3 | - | - | (1 | ) | 1 | - | 3 | - | 4 | |||||||
Net gain on swap transaction | - | - | - | - | - | - | - | (115 | ) | |||||||
Other | - | - | - | - | 3 | 2 | - | - | ||||||||
Normalized earnings attributable to common shareholders | 63 | 35 | 68 | 13 | 69 | 18 | 28 | 31 | ||||||||
Weighted average number of common shares outstanding (millions) | 115.5 | 109.7 | 106.8 | 105.7 | 105.1 | 105.1 | 105.4 | 105.3 | ||||||||
Normalized earnings per share ($) | 0.55 | 0.32 | 0.64 | 0.12 | 0.66 | 0.17 | 0.27 | 0.29 |
1 Includes impacts of the interest rate non-hedge held within a joint venture and recorded within income (loss) from joint venture on the Company’s condensed interim consolidated statements of income.
2 See Significant Events.
3 See Contingent Liabilities and Provisions.
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, and updates to, the Company’s 2021 AFFO and adjusted EBITDA guidance, (ii) forecasted depreciation for the remainder of 2021, (iii) the intended use of proceeds from the common share offering (see Significant Events), (iv) expectations pertaining to the financial guidance, timing of construction and timing of commercial operations commencement of Enchant Solar (see Significant Events), (v) expectations around the resolution of the pricing dispute on the Buckthorn Wind offtake and commodity swaps (see Significant Events), (vi) the intended use of proceeds and expected closing date of the
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 the need for and potential re-contracting of facilities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations, (v) effective tax rates, and (vi) matters relating to the LLR Proceeding, including the recovery and timing thereof from appropriate parties.
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 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: (780) 392-5335 kperron@capitalpower.com | Investor Relations: (780) 392-5305 or (866) 896-4636 (toll-free) investor@capitalpower.com |
Source:
2021 GlobeNewswire, Inc., source