Record quarterly generation and increased EBITDA diversification from newly acquired U.S. assets
EDMONTON, Alberta, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Capital Power Corporation (TSX: CPX) today released financial results for the quarter ended September 30, 2024.
Financial highlights
- Generated adjusted funds from operations (AFFO) of $315 million and net cash flows from operating activities of $236 million
- Generated adjusted EBITDA of $401 million and a net income of $178 million
- Successfully closed a $600 million medium term note offering, the Company's largest single tranche to date
- Completed operational integration of Harquahala and on track for integration of La Paloma, with total U.S. facilities contributing over 50% of Q3 adjusted EBITDA
- Quarterly generation record of 11TWh across the Company's fleet, driven by high dispatch at U.S. flexible generation facilities
- Genesee Repower 1 and 2 combined cycle commissioning are on track for Q4 2024 completion
- Signed a 3-year partnership and equity option agreement with four First Nations to acquire a combined total of 25% of Halkirk 2 Wind following the 3-year agreement
"The third quarter results continue to demonstrate the success of our geographic diversification strategy, with over 50% of adjusted EBITDA contribution coming from our U.S. facilities for the first time. In particular, we saw meaningful contributions from the newly acquired assets in California, Arizona and Washington and higher than expected overall dispatch to meet increasing demand driving strong adjusted EBITDA and AFFO performance for the quarter,” said Sandra Haskins, SVP Finance and CFO of Capital Power.
Ms. Haskins added, "From a funding perspective, Capital Power successfully closed a $600 million medium term note offering, demonstrating our disciplined approach to balance sheet optimization and continued ability to access capital to fund our growth and diversification efforts.”
Operational and Financial Highlights1
| ($ millions, except per share amounts) | Three months ended
September 30 | Nine months ended September 30 | ||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Electricity generation (Gigawatt hours) | 11,001 | 8,521 | 28,413 | 23,795 | ||||
| Generation facility availability | 94% | 96% | 93% | 95% | ||||
| Revenues and other income | 1,030 | 1,150 | 2,923 | 3,298 | ||||
| Adjusted EBITDA 2 | 401 | 414 | 1,003 | 1,142 | ||||
| Net income 3 | 178 | 272 | 459 | 642 | ||||
| Net income attributable to shareholders of the Company | 179 | 274 | 459 | 647 | ||||
| Basic earnings per share ($) | 1.32 | 2.27 | 3.39 | 5.33 | ||||
| Diluted earnings per share ($) | 1.32 | 2.26 | 3.38 | 5.31 | ||||
| Net cash flows from operating activities | 236 | 480 | 706 | 840 | ||||
| Adjusted funds from operations 2 | 315 | 296 | 635 | 657 | ||||
| Adjusted funds from operations per share ($) 2 | 2.42 | 2.53 | 4.97 | 5.62 | ||||
| Purchase of property, plant and equipment and other assets, net | 231 | 262 | 675 | 479 | ||||
| Dividends per common share, declared ($) | 0.6519 | 0.6150 | 1.8819 | 1.7750 | ||||
- 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 September 30, 2024.
- 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 and other items that are not reflective of the long-term performance of the Company's underlying business (adjusted EBITDA) and AFFO are used as non-GAAP financial measures by the Company. The Company also uses AFFO per share which is a non-GAAP ratio. 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 September 30, 2024 and 2023 of $124 million and $148 million, respectively, and for the nine months ended September 30, 2024 and 2023 of $366 million and $432 million, respectively. Forecasted depreciation and amortization for the remainder of 2024 is $130 million for the fourth quarter.
$600 million medium term notes offering
On September 16, 2024, the Company closed a public offering of unsecured medium term notes in the aggregate principal amount of $600 million (the Notes). The Notes have a coupon rate of 4.831% and mature on September 16, 2031. The Company used the net proceeds to repay, redeem and refinance existing indebtedness, including indebtedness under the Company's credit facilities, and for general corporate purposes.
$350 million Green Hybrid Subordinated Notes, Series 1 exchange
On August 15, 2024, the Company announced the approval of amendments to the indenture governing the $350 million 7.95% Fixed-to-Fixed Rate Subordinated Notes, Series 1, due September 9, 2082 (Series 1 Notes). These changes allowed for the exchange of all outstanding principal amount of Series 1 Notes for an equal principal amount of new 7.95% Fixed-to-Fixed Rate Subordinated Notes, Series 3, due September 9, 2082 (Series 3 Notes).
The Series 3 Notes have the same economic terms as the Series 1 Notes, including interest rates and maturity dates, but without the provision for delivery of preferred shares upon the occurrence of certain bankruptcy and related events. Holders will continue to receive interest accrued on the exchanged Series 1 Notes.
This note exchange was completed on August 15, 2024, following the execution of the necessary supplemental indentures. The Series 3 Notes will rank equally in right of payment with the $450 million 8.125% Fixed-to-Fixed Subordinated Notes, Series 2, due June 5, 2054. S&P Global Ratings and Morningstar DBRS confirmed the instrument rating of the Series 3 Notes at BB and BB with a Stable trend, respectively.
Dividend increase
On July 30, 2024, the Company's Board of Directors approved an increase of 6% in the annual dividend for holders of its common shares, from $2.46 per common share to $2.61 per common share. This increased common share dividend commenced with the third quarter 2024 quarterly dividend payment on October 31, 2024 to shareholders of record at the close of business on September 30, 2024.
Partnership with Maskwacis First Nations
On July 19, 2024, the Company signed a three-year partnership and equity option agreement with the Louis Bull Tribe, Ermineskin Cree Nation, Montana First Nation and Samson Cree Nation of Maskwacis located in Alberta. Following the three-year agreement, the Company is offering the four First Nations an opportunity to acquire a combined total of 25% of Halkirk 2 Wind. As part of the Company's commitment to reconciliation, the agreement provides an equitable profit-sharing model that supports a pathway to future, long-term equity ownership in the project that can support these nations with sustainable income throughout the lifetime of its operations.
Subsequent Event
Organizational Review - Voluntary Departure Program
On October 24, 2024, the Company announced the rollout of the voluntary departure program (VDP or the Program) aimed to reduce its workforce of Canada-based corporate employees by at least 25% (approximately 130 positions). The VDP is part of a strategic organizational review to optimize the organization to scale and grow efficiently, inclusive of decentralizing corporate functions, reducing headcount in certain areas and expanding in key growth areas. The program is open to eligible Canada-based corporate employees and offers eligible employees a financial incentive to voluntarily leave the organization. Employees who wish to participate in the Program must elect to participate by November 7, 2024.
The Company expects to incur a total cost of approximately $30 million related to the VDP and the timing of the recognition of the cost in the financial statements will be determined once participation in the Program is known. Actual cost may differ from the Company's initial expectations significantly if nearly all or all eligible employees elect to participate. The Company believes this initiative will enhance operational efficiency, aligns the workforce with the organization's strategic objectives and in respect to employees, provides them a choice in the change process.
Analyst conference call and webcast
Capital Power will be hosting a conference call and live webcast with analysts on October 30, 2024 at 9:00 am (MT) to discuss the second quarter financial results. The webcast can be accessed at: https://edge.media-server.com/mmc/p/rvd9z4cf/.
Conference call details will be sent directly to analysts.
An archive of the webcast will be available on the Company's website at www.capitalpower.com following the conclusion of the analyst conference call.
Non-GAAP Financial Measures and Ratios
Capital Power 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 our joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), and (ii) AFFO as specified financial measures. Adjusted EBITDA and AFFO are both non-GAAP financial measures.
Capital Power also uses AFFO per share as a specified performance measure. This measure is a non-GAAP ratio determined by applying AFFO 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 Capital Power, 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 our 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 are excluded from the adjusted EBITDA measure such as impairments, foreign exchange gains or losses, gains or losses on disposals and other transactions, unrealized changes in fair value of commodity derivatives and emission credits and other items that are not reflective of the long-term performance of the Company's underlying business.
A reconciliation of adjusted EBITDA to net income (loss) is as follows:
| ($ millions) | Three months ended | |||||||||||||||
| Sep 2024 | Jun 2024 | Mar 2024 | Dec 2023 | Sep 2023 | Jun 2023 | Mar 2023 | Dec 2022 | |||||||||
| Revenues and other income | 1,030 | 774 | 1,119 | 984 | 1,150 | 881 | 1,267 | 929 | ||||||||
| Energy purchases and fuel, other raw materials and operating charges, staff costs and employee benefits expense, and other administrative expense | (612 | ) | (504 | ) | (677 | ) | (694 | ) | (626 | ) | (614 | ) | (723 | ) | (909 | ) |
| Remove unrealized changes in fair value of commodity derivatives and emission credits included within revenues and energy purchases and fuel | (78 | ) | (8 | ) | (200 | ) | (14 | ) | (151 | ) | 23 | (179 | ) | 247 | ||
| Remove other non-recurring items 1 | - | 4 | - | 1 | 4 | - | - | - | ||||||||
| Adjusted EBITDA from joint ventures 2 | 61 | 57 | 37 | 36 | 37 | 37 | 36 | 36 | ||||||||
| Adjusted EBITDA | 401 | 323 | 279 | 313 | 414 | 327 | 401 | 303 | ||||||||
| Depreciation and amortization | (124 | ) | (120 | ) | (122 | ) | (142 | ) | (148 | ) | (143 | ) | (141 | ) | (139 | ) |
| Unrealized changes in fair value of commodity derivatives and emission credits | 78 | 8 | 200 | 14 | 151 | (23 | ) | 179 | (247 | ) | ||||||
| Other non-recurring items | - | (4 | ) | - | (1 | ) | (4 | ) | - | - | - | |||||
| Impairments | (27 | ) | - | - | - | - |
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