Q4 2019 Earnings Call

Moving to side he'd overview our fourth quarter 2019 Financial results compared to the fourth quarter of 2018 revenues and other income were 683 million month 1% compared to the fourth quarter of 2018 due to strong results from the Alberta commercial portfolio off of optimization segment and from the acquisition of core way in the second quarter of 2019 adjusted ebitda was $352 Million up 106% year-over-year as noted in the footnote on the slide adjusted even includes one-time items associated with the swap of interests in Genesee three and keep Hill Street excluding these items adjusted ebit. That would be 230 million higher the higher adjusted ebit. It was largely driven by a position of Corwin the second quarter of 2019 and from strong portfolio optimization results normalized earnings of $0.29 per share with slightly down compared to Thursday.

as per share in the fourth quarter

2018 we generated $120 million in the ffo that was up 60% year-over-year effortful per share was a dollar twenty two was 56 per month from the fourth quarter of 2018 side. Nine shows are full year financial performance for 2019 compared to 2018 revenues and other income of approximately two billion up 39% Year-over-year adjusted ebitda was 1 billion up 40% compared to 2018 excluding the one-time items described in the full custody. Bedell would be nine hundred and seven million up 23% due to the dishes of Arlington Valley goreway and New Frontier in stronger performance from the Alberta commercial segment with normalized earnings of a dollar thirty four per share were up 20% compared to a Dollar 12th of 2018.

As mentioned we generated $555 billion in a f f o that was up 40% year-over-year. The f f o Bashar was $5.32 was up 38% from 2018. Overall. We had double-digit increases in the key financial metrics.

I'll provide an update on our commercial portfolio positions since the third quarter of this year. We've increased our 2020 hedge position from 53% to 72% off an average contract price in the mid fifty dollars per megawatt-hour range for 20 21. We're 3% hedged an average contract price in the mid sixty dollars per megawatt-hour range and for 2022. We're 11% hatched an average contract price in the low fifty dollars per megawatt-hour range. This compares to current average forward prices of $60 per me 1 hour 20 $57 for $21 and $53 for 20 22. I'll now turn the call back to Verizon. Thanks, Brian. Hello, ma'am targets for 2020 on slide eleven. These are the same as we shared with you in December our 2020 Financial targets are based on 63% of the Alberta commercial.

generation has

An average contract at price in the mid $50 per megawatt-hour range. They include are any impacts from the $500 million of committed capital for growth. And as a reminder, there is a forty million dollar reduction in from Arlington valleys previous tolling agreement that expired in 2019 or 2012. We are targeting 935 to 985 million in adjusted ebitda. And for a f f o we're targeting a range of $500 to $550 million slide twelve outlines our Development and Construction targets for 2020. We currently have to wind projects under construction. The construction of life in Illinois is nearly completed and is on schedule for commercial operations next month the project expected to be in the budgeted range and it's dead.

last dollar monkey

On currency. We're also proceeding with the second phase of whitlaw wind in Alberta. It is a 97 megawatt project with an expected Capital cost of 165 million and expect it to begin commercial operations in 2021.

Turning to slide 13 later today Capital power will release its inaugural integrated annual report that combines our financial and ESG reporting to get together in one target of this report provides a comprehensive view of our priorities performances and progress as well as insight into our strategy for creating long-term value month. We also conducted third-party limited Assurance on some of our keys sustainability indicators. We have also released our 2019 climate change disclosure report, which is aligned with the recommendations of the task force for climate-related financial disclosures commonly referred to as the report provides additional damage on climate change governance strategy risk management and opportunities.

in January

20/20 we received an A- score from the CDP on their 2019 annual assessment or highest score today for the first time last year. We also participated in c d c DPS water security assessment and received a B minus the water assessment looks at how companies are reducing risks and seizing opportunities for water security. The B minus is a strong score for first-time submission in a solid platform to build upon as we focus more on water managing and disclosures.

I'll conclude our presentation with any slide on slide. Fourteen where Capital power 2019 was another outstanding year or strategy has been delivering value for our shareholders year after year under painting. Our strategies has always been a strong commitment to sustainability. I won't go over the highlights name on this slide, but you can see very good progress and recognition in all three areas of environment social and governance. We also recognize the growing stakeholder interest in a standing climate-related risks and opportunities and I can assure you that sustainability is and will remain a very important part of our business. I'll now turn the call back over to Randy e, okay. Thanks Brian operator. We're ready start the question answer session. Certainly. We will now begin the question-and-answer session to join the question queue you may birth

Star then one on your telephone.

You will hear a tone acknowledging your request. If you are using a speaker phone, please pick up your handset before pressing any keys to withdraw your question, please press star eight thousand two. We will pause for a moment as caller is join the queue.

The very first question comes from Rob hope with Scotiabank, please go ahead.

Good morning, everyone maybe to start off just want to touch on the sustainability and you're thinking of allocation of capital there when you're looking at Thursday or Capital Investments. How do you weigh? You know, I guess your historical practice of buying mid Merit gas plants vs. New Renewables home. So generally speaking when you look at Renewables, they tend to have a much longer Project Life, you know building a win for life such as Whitlock to you know, is a 3240 year life. Whereas a mid-life natural gas asset is considerably shorter. So the the the basic economics takes into consideration, you know, evolving Trends associated with decarbonisation in addition to that we can

Can you to do some?

Work considering that different discount rates that should be applied to those assets which fully takes into account the changing Trends in terms of overall Capital traction associated with either, you know, natural gas or with Renewables. So we we think we are taking into consideration at least the economic implications associated with the difference between natural gas assets and wind assets.

All right, so I guess it would be fair to say that you're quite happy continuing to invest in gas but with a higher employee discount right there. Yeah, and you know, we've always said that our own reference if you if you're ending up with projects that look the same in terms of sort of you know adjusted economics returns Etc that we would view the down payment of renewable assets more favorably.

All right, and then just moving on can you update us on your re-contracting initiatives and you know de quatre and what else is on going into place? So I have two re-contracting discussions taking place one with Decatur and the other one was Island generation and over the the last couple of months, very significant progress has been made on both projects and we are hopeful that we'll have something to announce the on Decatur within the near future.

All right, and then just on Decatur that was a pretty similar kind of messaging as the investor days. Is anything holding up or is it just taking longer to close everything off?

It's it's actually more associated with a approval processes than it is actual kind of negotiations or or working out terms and conditions.

All right. That's very helpful. Thank you.

Our next question comes from Maurice Choice with RBC Capital markets, please. Go ahead. Good afternoon. Good morning where you are first question, I guess trying in relation to the announcement that you continue your role appeal to the extent that it matters to investors. May I ask what's change your decision to retire this year and in real life into that should we view strategy as being like just a moving forward?

So essentially, you know, it's it ended up being a very much a personal decision and you know, as long as I've been going through that the last number of months and looking at the other activities that I would be getting involved in, you know outside of capital power and and Thursday through retirement. I was finding that, you know, I would tend to be almost as busy and came to the conclusion that that certainly if I was going to continue to be very active in a in a in a business and giving back to the community life. I might as well go back to you know, what I was very much enjoying and continuing to enjoy life which was the president and CEO of Capitol power and the timing of it basically, you know, the board had, you know a vigorous birth.

process taking place

In terms of this search and it kind of came to a point where you know, it was it was continuing to to proceed in a reached a point where I either needed to come to a decision and and throw my hat in the ring or continue to on my plans for retirement. So from that perspective the month of January was when I approached the board and said that you know, I would be happy to to continue in my role as as CEO for another three years.

Thanks, and and and just follow up in that strategy-wise. I know we just had our invested a a couple of months ago. I suppose that she look across your your three year contract should we expect to offend the visitation as part of your strategy forward or should we expect a little bit of a move or change before so actually it's the the month, you know, one of the things that that you know, really continue to excite me about Capital power and its future was a ongoing prospects of girls that that Capital power has and certainly they that challenges going forward in terms of in terms of the growth decarbonisation esge. Those are all you know challenges to Capital power which we are extremely well situated to meet so that sort of excitement actually got greater and yep.

As I was looking at retirement.

Not lessen the last so very enthusiastic about continuing on generally the same path. I was Capital power has been on having said that very responsive to the changes that that we do expect will be taking place in in the market.

Thanks, and just to finish off this you mentioned changes to the market. I wonder if you've had any recent discussions with the Alberta Government with regard to the two I swear initiatives on market pricing. Sorry pricing framework as well as Market power, obviously some of the recommendations from my so to the government were not made public. So I wonder if they have reached out to you or vice versa.

Yeah, they the actual go to have a process that's underway where they are engaging stakeholders. So, you know, we're both are involved in terms of providing our thoughts and feedback on on those two items.

Thank you.

once again, if you have a question, please press * then 1

our next question comes from John mold with TD Securities, please go ahead. Good morning. Everybody firstly maybe just starting on the 9th. I'm just wondering if you can give us a little more color on how that testing is progressing both at Shepherd and with Heidelberg Canadian subsidiary.

So, you know as as as I indicated, you know, we see to see Auntie continues to work with Heidelberg and terms of finding basic package different or into different areas one is around the actual production of the optimal carbon nanotubes for for Concord. And the other one is for the interface between the carbon nanotubes and and concrete in terms of of getting an appropriate distribution and you know considerable progress has been made on both but it is an as expected and iterative process of continually optimizing so I would say generally speaking it's going as expected. Okay, great. And then just one question on the data tagore way. I think just look at your financials that 560 job.

is that just the

Refi in normal course with more non-recourse project project financing. Excuse me. Is that the plan there?

Yeah, and actually we we we've completed that extension out from from The 20/20 timeframe, but that's yeah, that's just normal course in terms of moving it out doesn't dramatically affect the the cost of that debt. Okay, great. Those are all the questions I had. Thank you.

Our next question comes from Patrick Kenney with National Bank Financial, please go ahead.

Hey, good morning, guys. Congrats Brian on your announcement. Just wanted to start off by asking about the recent announcement Dylan on Cascade and that took it coming online. And what impact you might think that could have on the market kind of goes twenty twenty-two time frame.

So the it certainly if that that plan was to proceed there would be an impact on a power crisis like given given son course announcement to move ahead with their co-gen facility at the end of 2023 our view that's very unlikely that that plant will proceed the economics are going to be materially challenged if it was to be coming on at the same time as as the Suncor coach.

Okay, and maybe more in the near-term here so, you know 72% hedged for 2020 only 3% 2021. Looks like the Fords are still in the end of the month. Look at the all arranged noise wasn't sure if that's a reflection of your view on board prices potentially moving higher in 2021 or just lack of liquidity in the market wage. A lot of it working 20-21 is driven by our view of fundamentals in the upload of Market, which we feel are very bullish and um would anticipate Thursdays prices will settle materially above where forwards are currently trading for that year.

Okay, great. And the last one maybe just to follow up on on the sustainability report and you know looking across your portfolio of assets here any assets that you know may not quite fit with your story going forward and you know thinking about you know, potential consolidation opportunity or wage. I still see you know at the Joffrey facility or any other assets that you think may not be a strategic fit from a DSG perspective.

So it's as we look across the fleet and and the the assets that we have, you know from an ESG perspective, you know, certainly the the facilities in in North Carolina have a have I'll call it in a more negative profile in those, you know, the the the contracts are are terminating next year. So we think that's that's taking a course that that will one way or another have those facilities in our Fleet little as we as we look at the other assets, you know, certainly the Joffrey co-gen facility is a is a good asset efficient cogeneration facility large one month, you know, we would as as always consider either increasing our interest or reducing our interest on that facility depending on birth

the other two partners when we look across the kinds of

Opportunities that might be out there on the natural gas side. Certainly, you know, there's a there's a number of co-gen facilities in the province that from time to time are are rumored to be potentially, you know, come to Market and would certainly consider those from a contracted perspective and and from a natural gas perspective. But again as we look across the alarm Fleet, you know, we the you know, this the natural gas assets we have are very efficient and and in fact becoming more efficient in our hands are very pleased with, you know, our move to taking our coal assets and moving them to dual-fuel and certainly as the as we continue to look at those assets and you know as we've talked in the past, you know, we always look at a range of opportunities associated with those assets and certainly the the wage

the possibility of repowering is

Always there so as we look forward, you know, we're at we have in our and will be ending up with a very very efficient Fleet of natural gas assets and there really aren't any weak ones there any ones that that we would say From nesg perspective, you know are reasonably positive. So I I think you know with the exception of the North Carolina assets were in a in a pretty good position having said that that doesn't mean that at some point in time. We might not be looking at divesting various assets for you know, a whole range of of reason and including demand for Capital.

All right, that's great. I'll leave it there. Thanks guys.

This concludes the question-and-answer session. I would like to turn the conference back over to. Mr. Random for any closing remarks. Okay, if there are no more questions will conclude our conference call off in capital power and have a good day everyone.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Thursday

wage