Capital Power Q1-2018 Earnings & Price Target Update
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Capital Power (TSX:CPX) is a North American power producer headquartered in Edmonton owning 4,500MW of power generation capacity and $6.9B in power generation and related assets. This includes acquisitions of the Ontario natural gas-fired generation assets from Veresen in Q2-2017 for $499M, Decatur Energy acquisition in Jun-2017 for $603M and completion of the Bloom Wind Project in the US in Jun-2017 for $250M. There is 800MW of owned generation capacity in advanced development in Alberta and North Dakota(Frontier Wind) of which 99MW is expected to come on stream in Dec-2018. They are in the permitting process for the 298MW Whitla Wind Facility in 50/50 partnership with Alberta first nations. Phase One is 202MW and will be completed in Q4-2019. The balance of the forecast 500MW capital projects is mainly natural gas facilities in Alberta that are pending final investment decision.
As of Dec-31-2017 they own interests in 24 facilities. Facilities in Canada comprise 74% of capacity and 26% in the US. Alberta comprises 53% of total capacity, Ontario – 12%, BC-9%, and US -26%. Coal facilities comprise 34%, natural gas 50% and the balance is wind powered with a bit of solar at 16%. Contracted revenues comprise 66% of capacity with the balance sold at current market prices. Hedging has made a significant improvement to prices earned over the past 8 years. Approximately 30% of total capacity is coal fired and located in Alberta, of which two thirds is contracted until 2020. This portion of the Alberta production is subject to an off-coal agreement with the Alberta government that will pay $52M ($0.40 per share after tax) until 2030. They plan to convert the Alberta coal fired facilities to natural gas using the same boilers converted to a different fuel source.
Following the purchase of the Decataur Energy Centre in Jun-2017 and completion of the Bloom Wind project they will have 1,172MW of capacity in the US mainly natural gas and wind powered, about 26% of capacity.
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