Q4 2023 Capital Power Corp Earnings Call

Operator: www.capitalpower.com Good day, and thank you for standing by. Welcome to the Capital Power Q423 Analyst Conference Call. At this time, all participants are in a listen-only mode.

Yes.

Good day and thank you for standing by welcome to the capital Power Q4, 'twenty three analyst conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. You'll then hear an automated message advising that your hand is raised.

Ask a question during this session you will need to press star one on your telephone you will then hear an automated message advising that your hand is raised to withdraw your question. Please press star one again.

Operator: To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Roy Arthur, Vice President of Investor Relations. Please go ahead.

Please be advised that.

Conference is being recorded I would now like to hand, the conference over to your first speaker today, Arthur Vice President of Investor Relations. Please go ahead.

Roy Arthur: Thank you, Kathy. Good morning, and thank you for joining us today to review Capital Power's fourth quarter 2023 results, which we released earlier this morning. Our fourth quarter report and the presentation for this conference call are posted on our website at capitalpower.com. Presenting this morning are Abbott Day, President and CEO, and Sandra Haskins, Senior Vice President, Finance, and CFO. AVIC will start with a high-level overview of some of our key achievements during 2023, followed by Sandra, who will provide a financial review, including our Q4 and year-end 2023. At the end, AVIC will provide concluding remarks, after which we will open the lines to the analysts.

Thank you Kathy.

Morning, and thank you for joining us today to review capital Power's fourth quarter 2023 results, which we released earlier this morning.

Our fourth quarter report and the presentation for this conference call are posted on our website at capital power Dot com.

Presenting this morning are epic day, President and CEO, and Sandra Haskins, Senior Vice President Finance and CFO.

Eric will start with a high level overview of some of our key achievements. During 2023, followed by Sandra who will provide a financial review.

Our Q4 and year end 2023 performance.

At the end ASIC will provide concluding remarks, after which we will open the lines to the analysts to take questions.

Roy Arthur: Before we start, I would like to remind everyone that certain statements about future events made on this call are forward-looking in nature and are based on certain assumptions and analysis made by the company. However, actual results could differ materially from the company's expectations due to various risks and uncertainties associated with our business. Please refer to the cautionary statement on forward-looking information on slide 3 or our regulatory filings on CDAR Plus. In today's discussion, we will be referring to various non-GAAP financial measures and ratios also noted on this slide. These measures are not defined 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.

Before we start I would like to remind everyone that certain statements about future events made on this call are forward looking in nature and are based on certain assumptions and analysis made by the company.

Actual results could differ materially from the companys expectations due to various risks and uncertainties associated with our business.

Please refer to the cautionary statement on forward looking information on slide three of our or our regulatory filings on SEDAR plus.

In today's discussion, we will be referring to various non-GAAP financial measures and ratios also noted on slide three.

These measures are not defined 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.

Roy Arthur: These measures are provided to complement gap measures which are provided in the analysis of the company's results from management's perspective. Reconciliations of these non-GAAP financial measures to their nearest-GAAP measures can be found in our 2023 Integrated Annual. I would like to acknowledge that Capital Power's head office in Edmonton is located within the traditional and contemporary home of many Indigenous peoples of the Treaty 6 Region and the Métis Nation of Alberta. We acknowledge the diverse Indigenous communities that are in these areas and whose presence continues to enrich the community and our lives as we learn more about the Indigenous history of the lands on which we live and work. With that, I will turn it over to Adik. Thanks, Roy, and good morning, everyone.

These measures are provided to complement GAAP measures, which are provided in the analysis of the company's results from management's perspective reconciliations of these non-GAAP financial measures to their nearest GAAP measures can be found in our 2023 integrated annual report.

I would like to acknowledge that capital Power's head office in Edmonton is located within the traditional and contemporary home of many indigenous peoples of the Treaty six region and the Metis nation of Alberta region. Four we acknowledge the diverse indigenous convener use that are in these areas and whose presence continues to enrich the community and our law.

Lives as we learn more about the indigenous history of the land on which we live and work.

With that I will turn it over to Eric for his remarks.

Thanks, Ryan and good morning, everyone.

Abbott Day: Capital Power has successfully delivered on our strategy in 2023 as we power change by changing power. Over the next few slides, I will highlight some of our more notable achievements during the year and a few key trends shaping our industry. To begin, our strong financial and operating results are demonstrated by our record annual adjusted EBITDA of $1.455 billion. This was achieved through delivering record power generation of more than 32 terawatt hours in response to high demand growth in our core market.

Capital Power has successfully delivered on our strategy in 2023, as we power changed by changing power.

Over the next few slides I will highlight some of our more notable achievements during the year.

Few key trends shaping our industry.

To begin our strong financial and operating results are demonstrated by our record annual adjusted EBITDA of one point or a five 5 billion. This was achieved through delivering record power generation of more than 32 Terawatt hours in response to high demand growth in our core Mark.

Yes.

Abbott Day: As we will discuss, we believe this strong demand growth will continue in the long term, making our asset base integral to providing a stable, affordable electrical grid for decades to come. We continue to strengthen our portfolio through the advancement of our $1.35 billion repowering project at Genesys. In 2023, we completed the coal-to-gas conversion of Genesee 3 and continue to make significant progress on repowering, which will take our company 100% off coal. Additionally, we acquired three natural gas-fired facilities in the U.S. WEC region, Fredrickson 1, La Paloma, and Harkahala.

As we will discuss we believe the strong demand growth will continue long term, making our asset base integral to providing a stable affordable electrical grid for decades to come.

We continue to strengthen our portfolio through the advancement of our $1 $35 billion Repowering project at Genesee.

In 2023, we completed the coal to gas conversion of Genesee three and continued to make significant progress on Repowering, which will take our company 100% off Paul.

Additionally, we acquired three natural gas fired facilities in the U S West region projects than one la Paloma and higher Kahala.

Facilities represent one seven gigawatt of net additional.

This capacity enhancing our presence in these markets.

We are positioned for growth and have demonstrated this through our advancement of 380 megawatts of new renewable and storage projects. Furthermore, we advanced our ability to create net euro solution for customers through two new partnerships.

Capital Power announced its first order for approximately one gigawatt of responsibly produced ultra low carbon thin film solar modules from our partner first solar.

Abbott Day: These facilities represent 1.7 gigawatts of net additional capacity, enhancing our presence in these markets. We are positioned for growth and have demonstrated this through our advancement of 380 megawatts of new renewable and storage projects. Furthermore, we advanced our ability to create net zero solutions for our customers through two new partnerships. Capital Power announced its first order for approximately one gigawatt of responsibly produced ultra low carbon thin film solar modules from our partner First Solar.

In addition, capital power and Ontario power generation.

Turned into an agreement to jointly assess the development and deployment of grid scale small modular reactors, otherwise known as <unk> to provide clean reliable nuclear energy for Alberta.

From a leadership perspective, we have enhanced and realigned our executive team with the addition of four new senior Vice presidents to ensure the successful implementation of our long term strategy.

Moving onto our financial guidance and credit metrics, our full year 2023, adjusted EBITDA of $1 four or five 5 billion was in line with our revised guidance.

This result was driven by strong demand for our generation in the U S and Ontario markets. In addition to the full year contribution from Midland Cogeneration.

Abbott Day: In addition, Capital Power and Ontario Power Generation entered into an agreement to jointly assess the development and deployment of grid-scale small modular reactors, otherwise known as SMRs, to provide clean, reliable nuclear energy for Alberta. From a leadership perspective, we have enhanced and realigned our executive team with the addition of four new senior vice presidents to ensure the successful implementation of our long-term strategy. Moving on to our financial guidance and credit metrics, our full year 2023 adjusted EBITDA of $1.455 billion was in line with our revised guidance. This result was driven by strong demand for our generation in the U.S. and Ontario markets, in addition to full year contribution from Midland Co-generation. In addition, the reduced emissions on Genesee 3 from the coal to gas conversion I mentioned earlier resulted in year-over-year GHG compliance cost savings of about $34 million.

In addition, the reduced emissions intensity Genesee three from the coal to gas conversion I mentioned earlier resulted in year over year ghd compliance cost savings of about $34 million.

I would also like to highlight our growth through material M&A transactions that diversified our portfolio we.

We have utilized cornerstone investment from private equity partners to maintain our strong balance sheet.

At year end, our net debt.

So that just over two six times, we will continue to capitalize our business with a strong balance sheet and liquidity to defend our investment grade credit rating.

Taken together these financial and operational achievements demonstrate we are driving shareholder value through a balanced approach to capital allocation portfolio diversification and decarbonization.

To put our 2023 achievements in context of our long term efforts here, we show, how we have grown shareholder value through de carbonization and diversification.

Our organization has averaged a 12, 5% total shareholder return over the past 10 years.

That return has been generated as we reduce the call dual fuel generation capacity in our portfolio from 53% to 9%.

We have greatly enhanced our geographic diversification by increasing our U S exposure from 5% of our total capacity in 2013% to 50% in 2023, while adding significant contracted cash flow at the same time.

Abbott Day: I would also like to highlight our growth through material M&A transactions that diversified our portfolio. We have utilized cornerstone investment from private equity partners to maintain our strong balance sheet, as at year-end, our net debt was up to just over 2.6 times. We will continue to capitalize our business with a strong balance sheet and liquidity to defend our investment grade credit rating. Taken together, these financial and operational achievements demonstrate we are driving shareholder value through a balanced approach to capital allocation, portfolio diversification, and decarbonization. To put our 2023 achievements in context of our long-term efforts, here we show how we have grown shareholder value through decarbonization and diversification. Our organization has averaged a 12.5% total shareholder return over the past 10 years.

The outcome of this effort to reposition the portfolio has seen the organization achieve a CAGR of 11% and 8% for adjusted EBITDA and dividends per share respectively over the past 10 years.

With that retrofits retrospective on how capital power has delivered during the past allow me to give you some perspective as to why we are excited about our portfolio and its ability to deliver value for our customers and shareholders well into the future.

As we take a leading role to advance the energy transition across North America, our fleet of assets will play an integral role in providing reliable and affordable power as demand grows across our key markets from today to 2015.

Here, we show that according to the U S Energy information Administration U S supply will increase from one one terawatt to two two terawatt during that time.

The trend will result in this basketball power from nuclear natural gas and other hydrocarbons combined being reduced from approximately 70% of the total stack to less than 40% in 2015 as renewables grow.

Abbott Day: That return has been generated as we reduce the coal dual fuel generation capacity in our portfolio from 53% to 9%. We have greatly enhanced our geographic diversification by increasing our U.S. exposure from 5% of our total capacity in 2013 to 50% in 2023, while adding significant contracted cash flow at the same time. The outcome of this effort to reposition the portfolio has seen the organization achieve a CAGR of 11% and 8% for adjusted EBITDA and dividends per share, respectively, over the past 10 years. With that retrospective on how capital power has delivered during the past, allow me to give you some perspective as to why we are excited about our portfolio and its ability to deliver value for our customers and shareholders well into the future.

During the same period peak demand is expected to grow from 0.8 GW to more than 1.0, tw and will create a reliability gap between dispatch of both power capacity and peak demand.

This outcome will result in greater demand for natural gas to deliver growing peak capacity to meet grid demand cap.

Capital Power's portfolio consists of low cost lower carbon intensity generation in large and growing population areas and positions our portfolio uniquely to meet growing electricity demand with reliable power.

Building on the theme of creating a well positioned portfolio of assets to meet the needs of our customers and generate value for shareholders I wanted to show some context for how our business has grown and performed from an emissions perspective.

Despite pursuing a strategy for critical natural gas generating infrastructure are our carbon emission intensity has decreased at the same time is increasing our overall generation.

Abbott Day: As we take a leading role to advance the energy transition across North America, our fleet of assets will play an integral role in providing reliable and affordable power as demand grows across our key markets from today to 2050. Here, we show that, according to the U.S. Energy Information Administration, U.S. supply will increase from 1.1 terawatts to 2.2 terawatts during that time. The trend will result in dispatchable power from nuclear, natural gas, and other hydrocarbons combined being reduced from approximately 70% of the total stack to less than 40% in 2050 as renewables grow. During this same period, peak demand is expected to grow from 0.8 TW to more than 1.0 TW and will create a reliability gap between dispatchable power capacity and peak demand.

As mentioned, we achieved 32 terawatt hours of generation. During 2023, however, the carbon intensity of this power was 40% below that of 2014.

As we move into 2024, we will continue to advance more than 380 megawatts of additional renewable and storage capacity and our Genesee Repowering project, which at completion will result in annual Cotwo emissions reductions of over three empty from 2019.

Levels, and our portfolio will be 100% off call.

The net result, being we are increasing our capacity, while reducing our emissions.

With that I will turn it over to <unk> to discuss our 2024 target and some incremental detail with respect to our 2023 Q4 and full year financial performance.

Thanks, Eric.

Abbott Day: This outcome will result in greater demand for natural gas to deliver growing peak capacity to meet grid demand. Capital Power's portfolio consists of low-cost, lower-carbon intensity generation in large and growing population areas, and positions our portfolio uniquely to meet growing electricity demand with reliable power. Building on the theme of creating a well-positioned portfolio of assets to meet the needs of our customers and generate value for shareholders, I wanted to show some context for how our business has grown and performed from an emissions perspective. Despite pursuing a strategy for critical natural gas generating infrastructure, our carbon emission intensity has decreased at the same time as increasing our overall generation. As mentioned, we achieved 32 terawatt hours of generation in 2023. However, the carbon intensity of this power was 40 percent below that of 2014.

I would like to start by summarizing financial targets for 2024, and then provide some details around the performance that has positioned us to achieve that.

Our facility availability remains strong and above target at 95% in 2023, and we expect to remain strong in 2024 at 93%. Despite the outage is required for the Genesee Repowering project.

Sustaining capital expenditures remains relatively consistent with 2022 and 2023, but also includes additional capex of about $40 million related to our newly acquired U S facilities, and Genesee Repower related outage costs of about $14 million.

Our key financial targets will remain on par with 2023 for both adjusted EBITDA and <unk> with midpoint of 145, 5 billion and $820 million respectively.

Strong fleet wide performance with an average facility availability of 93% combined with results of our Alberta commercial portfolio optimization led to reported adjusted EBITDA of $313 million for the fourth quarter, an increase of 3% year over year.

Sandra Haskins: As we move into 2024, we will continue to advance more than 380 megawatts of additional renewable and storage capacity, and our Genesee repowering project, which at completion, will result in annual CO2 emissions reductions of over 3MT from 2019 levels, and our portfolio will be 100 percent off coal. The net result is that we are increasing our capacity while reducing our emissions. With that, I will turn it over to Sandra to discuss our 2024 targets and some incremental detail with respect to our 2023 Q4 and full year financial performance. Thanks, Avik.

This offsets the impact of lower power prices captured by our Alberta commercial segment compared to Q4 2022.

<unk> of $162 million in the quarter is up 16% from a year ago.

Strong adjusted EBITDA results in lower shutdown capital spend in the quarter were offset by higher current income taxes compared to 2022.

Okay.

As previously noted we had a record year with adjusted EBITDA of 145 5 billion up 8% over the same period in 2022.

The benefits of a diversified fleet were highlighted in 2023 as the growth was primarily driven by strong contributions from our U S contracted segment, including a full year's result from Mcd acquired in September 2022.

Furthermore results from the optimization of our Alberta commercial portfolio offset the impact of lower power prices captured compared to one year ago.

Sandra Haskins: I would like to start by summarizing our financial targets for 2024 and then provide some details around the performance that has positioned us to achieve these. Our facility availability remains strong and above target at 95% in 2023, and we expect it to remain strong in 2024 at 93% despite the outages required for the Genesee repowering project. Sustaining capital expenditures remain relatively consistent with 2022 and 2023, but also includes additional CapEx of about $40 million related to our newly acquired U.S. facilities and Genesee Repower-related outage costs of about $14 million. Our key financial targets will remain on par with 2023 for both adjusted EBITDA and AFFO, with midpoints of $1.455 billion and $820 million, respectively. Strong fleet-wide performance with an average facility availability of 93% combined with the results of our Alberta Commercial Portfolio Optimization led to reported adjusted EBITDA of $313 million for the fourth quarter, an increase of 3% year-over-year. This offsets the impact of lower power prices captured by our Alberta commercial segment compared to Q4 2022. AFFO of $162 million in the quarter is up 16% from a year ago.

<unk> of $819 million was down 3% year over year due to the impacts of higher current income taxes and financing expenses offset by our strong adjusted EBITDA results lower shutdown capital spend and preferred dividends paid.

Okay.

This slide provides an overview of the capital allocation highlights of 2023 or.

Our leverage and liquidity remains quite strong, allowing us to maintain our investment grade credit ratings, a triple b minus and triple B low for S&P and <unk>, respectively.

Financing of our recent U S facility acquisitions represents the largest capital markets transaction in the company's history through a 400 million subscription receipts offering and the completion of over 850 medium term notes, which was significantly oversubscribed.

Our acquisition was complemented by the support of two key private equity investors Blackrock, which is a 50 50 JV partner at heart Koala, and AMCOL, which is now a significant common shareholder.

These purchase partnerships provide a strong endorsement of our grid critical natural gas strategy and better position us to continue delivering on our strategic pillars.

In addition to further stagger our debt maturities, we executed a $350 million MTM in September with a five year term.

We advanced our decarbonization efforts by investing $100 million of Capex in new renewable projects in storage. In addition to $400 million towards our Genesee Repower project during 2023.

Sandra Haskins: Strong adjusted EBITDA results and lower shutdown capital spend in the quarter were offset by higher current income taxes compared to 2022. As previously noted, we had a record year with adjusted EBITDA of $1.455 billion, up 8% over the same period in 2022. The benefits of a diversified fleet were highlighted in 2023 as the growth was primarily driven by strong contributions from our U.S. contracted segments, including a full year's result from MCV acquired in September 2022. Furthermore, results from the optimization of our Alberta commercial portfolio offset the impact of lower power prices captured compared to one year ago. AFFO of $819 million was down 3% year-over-year due to the impacts of higher current income taxes and finance expenses offset by our strong adjusted EBITDA result, lower shutdown capital spend, and preferred dividends paid.

In total we completed $1 6 billion in M&A activity by investing in this Fisher dispatch nickel grade critical natural gas facilities inclusive of the clothing closing of our acquisition of Lapoma at <unk> in February 2024.

With respect to returning capital to shareholders 2023 marked the 10th consecutive year, where we delivered a dividend increase and we continue to have a payout ratio below the targeted range, we maintained our dividend guidance for 6% annual increase in 2025.

With respect to our continuing journey toward net zero, we spent $25 million on innovation and we will be leveraging our partnership with LPG for the feasibility assessment of SMS.

I'll now touch on our Alberta power and natural gas hedge positions, which are shown as of December 31 2023.

Since we last discussed this slide as part of our release of the 2020 guidance or power hedge volumes for 2024 remain unchanged, but we have increased slightly and 25 and 26 for.

For 2024, we're still at 10500 gigawatt hours, while 2025, and 2026 have gone up by 500 gigawatt hours each year and are now at 90 508000 gigawatt hours respectively.

Sandra Haskins: This slide provides an overview of the capital allocation highlights for 2023. Our leverage and liquidity remain quite strong, allowing us to maintain our investment grade credit ratings of BBB- and BBB-low, respectively, from S&P and DBRS. The financing of our recent U.S. facility acquisitions represents the largest capital markets transaction in the company's history through a 400 million subscription receipts offering and the completion of over 850 medium-term notes, which were significantly oversubscribed. Our acquisition was complemented by the support of two key private equity investors, BlackRock, which is a 50-50 JV partner at Harkawala, and AIMCO, which is now a significant common shareholder. These partnerships provide a strong endorsement of our grid-critical natural gas strategy and better position us to continue delivering on our strategic pillars. In addition, to further stagger our debt maturities, we executed a $350 million MTM in September with a five-year term.

The weighted average hedge prices are now in the high $70 per megawatt hour across all three years. The hedge positions include long duration origination contracts is another mechanism to manage price risk.

Graph on the left shows the relative magnitude of hedges that are long duration.

Our natural gas hedge volumes remain unchanged in 2024, and 2025 at 70000, Pjs and 60000 Tj's. While 2026 has increased slightly from 50 to 55000 T J's.

Our current hedge position office favorable pricing relative to Alberta forward prices and locks in natural gas at at or below strip gas prices at a time, where domestic natural gas demand continues to rise to gas fired power generation and LNG exports.

I will now hand, it back over to <unk>.

Thank you Sandra.

We remain steadfast in our focus to deliver reliable and affordable power today, while building Decarbonize power systems for tomorrow, and creating real net zero power solutions for our customers for 2024, we are focused on delivering safe reliable power.

Executing on our major turnaround schedule in integrating our new acquisitions.

We will advance all of Genesee Repowering projects to thoughtfully move off coal continued construction on over 560 megawatts of total incremental capacity and focus on expanding our <unk>.

Sandra Haskins: We advanced our decarbonization efforts by investing $100 million of CapEx in new renewable projects and storage, in addition to $400 million towards our Genesee Repower project in 2023. In total, we completed $1.6 billion in M&A activity by investing in dispatchable grid-critical natural gas facilities, inclusive of the closing of our acquisition of La Paloma and Harkalala in February 2024. With respect to returning capital to shareholders, 2023 marked the 10th consecutive year where we delivered a dividend increase, and we continue to have a payout ratio below the targeted range. We maintained our dividend guidance for a 6% annual increase in 2025.

Our team of innovators will continue to prioritize the game changing low carbon solutions, including our pursuit of Tcl announced Tomorrow initiative.

Thank you for the work we will achieve in 2024 to advance our path to net zero by 2045.

We will be hosting our investor day event in and maintain on May 17, eight for analysts and institutional investors on day. One the experience will include a tour of the Genesee generating station site and all north of Repowering project with an evening reception thereafter.

On <unk>, we will host a lunch and with the executive team at the conclusion of the formal presentation in the morning.

We really look forward to welcome me welcoming you to Edmonton.

Lastly, I encourage you to view our 2023 integrated annual report for further details on our 2023 performance, including full year highlights and ESG disclosures with that I'll now turn the call back over to Roy.

Thanks, Patrick.

Cathy we are now ready to take questions. Okay. Thank you as mentioned at this time, we will conduct a question and answer session. As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one.

Sandra Haskins: With respect to our continuing journey toward net zero, we spent $25 million on innovation and will be leveraging our partnership with OPG for the feasibility assessment of SMRs. I'll now touch on our Alberta Power and Natural Gas hedge positions, which are shown as of December 31st, 2023. Since we last discussed this slide as part of our release of the 2024 guidance, our power hedge volumes for 2024 remain unchanged, but we have increased slightly in 2025 and 2026. For 2024, we are still at 10,500 gigawatt hours, while 2025 and 2026 have gone up by 500 gigawatt hours each year and are now at 9,500 and 8,000 gigawatt hours, respectively. The weighted average hedge prices are now in the high $70 per megawatt hour across all three years.

Once again, please stand by while we compile our Q&A roster.

Okay.

Our first question comes from the line of Patrick Kenny with MBS. Your line is now open.

Hey, good morning, Eric.

Not sure if youre able to comment yet on Alberta lifting the pause on new renewables this week.

But I guess declaring certain no-bill zones, just wondering.

If there were any developments.

Within your three four gigawatt pipeline that might be impacted.

And also curious your thoughts on what these restrictions could mean for the Alberta power market just in general over the next coming few years.

Okay.

Okay. Thanks Pat.

There's limited comments, we can make a good point since we're still awaiting the official response.

We've seen the press release.

And we think that the announcements are consistent with what market expectations were in terms of restricting land use I think overall impact on the market as I've said before.

The pause was to understand and years looked at things like interconnect and just establish what the provinces view was.

Marrying renewable development.

With grid.

Grid integrity reliability and affordability.

It seems like everything is consistent with that I think long term impact on the market should be negligible.

Yes.

We have no impact on our existing portfolio or or our pipeline.

Okay, that's great.

Abbott Day: The hedge positions include long-duration origination contracts as another mechanism to manage price risk. The graph on the left shows the relative magnitude of hedges that are long duration. Our natural gas hedge volumes remain unchanged in 2024 and 2025 at 70,000 TJs and 60,000 TJs, while 2026 increased slightly from 50,000 to 55,000 TJs. Our current hedge position offers favorable pricing relative to Alberta forward prices and locks in natural gas at or below strip gas prices at a time when domestic natural gas demand continues to rise through gas firepower generation and LNG exports. I will now hand it back over to Abbott. Thank you, Sandra.

And then I guess with respect to the clean electricity regulations.

Obviously been quite.

Quite a bit of pushback from industry and various provinces, but.

I'm wondering if any of these potential amendments or modifications still to come Mike.

Might change or your long term economic outlook.

For your portfolio, either in Alberta, or Ontario, and.

And as well.

If there is anything in there that might further support or help accelerate the timing.

A positive Friday on your Youre Genesee Ccs project.

I'll take the <unk>.

Last one first on Ccs.

We don't we don't see any positive developments on advancing Ccs.

With respect to the CER movement.

On Tcs, maybe I'll just take that question.

Uh huh.

In.

Stand on it further.

We have not advanced.

Our Ccs effort at Genesee.

We continue to work with government discuss alternatives to our cfd.

But we haven't been able to materially move that forward on a commercial standpoint. So we're in the same place today as we were last July when we stopped our spending on the technical side of Ccs.

Abbott Day: We remain steadfast in our focus to deliver reliable and affordable power today while building decarbonized power systems for tomorrow and creating real net zero power solutions for our customers. For 2024, we are focused on delivering safe, reliable power while executing on our major turnaround schedule and integrating our new U.S. acquisition. We will advance our Genesee repowering project to successfully move off coal, continue construction on over 560 megawatts of total incremental capacity, and focus on expanding our U.S. Our team of innovators will continue to prioritize game-changing low-carbon solutions, including our pursuit of CCS and SMR initiatives. I'm excited for the work we will achieve in 2024 to advance our path to net zero by 2045. We'll be hosting our Investor Day event in Edmonton on May 7th and 8th for analysts and institutional investors. On day one, the experience will include a tour of the Genesee generating station site and our massive repowering project, with an evening reception thereafter. On day two, we will host a luncheon with the executive team at the conclusion of the formal presentation in the morning.

In terms of the CER overall, we were early in terms of providing our comments both publicly and privately to government on on what we thought where the pitfalls of the CER. We continue to believe there is a workable framework there.

Our government and for the country. If you accommodate the provincial nuances of where our Baseload generation comes from so we're.

Sure.

Think that the announcement was a positive step towards a reconciling and.

Accommodating some of those differences, but there's still quite a bit of work to do.

For us this wasn't a document that you could horse trade.

One factor against the other.

Fundamentally we had to accommodate meeting base load demand.

In Alberta for example, because of our reliance on natural gas for base load. We Couldnt just have one or two of accommodations you Couldnt just meet the peak or requirement you Couldnt just meet the end have prescribed like you had to do all of it so that we could march towards a viable net zero Todd.

Yes.

Okay, that's great color to the question Pat.

Yes, I think thats, great color, obviously more to come down the road.

One last one for me if I could just for center on the funding front.

Any update on bringing in.

Roy Arthur: We really look forward to welcoming you to Edmonton. Lastly, I encourage you to view our 2023 Integrated Annual Report for further details on our 2023 performance, including full year highlights and ESG disclosures. With that, I'll now turn the call back over to Roy. Thanks, Alec.

Partnerships here to help fund your Capex budget for the year.

I know just looking at the.

Recent disclosures it looks to be somewhere in the $3 million to $400 million range is what youre looking for.

And then maybe just an update as well on your debt capital market needs for the year both hybrids.

Operator: Kathy, we are now ready to take questions. Okay, thank you. As mentioned, at this time, we'll conduct the question and answer session. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

Hybrids in MTS.

So when you look at the funding that we have to do this year. There are the refinancings that we have with the reset of our perhaps which we expect.

We will come out with a larger offering at some time during the year to help with the funding of the development Capex that we've got as well as the <unk>.

<unk> piece of the acquisition that wasn't funded at the end of 2023.

Patrick Kenny: Please stand by while we compile our Q&A roster. Our first question comes from the line of Patrick Kenny with NBF. Your line is now open. Yeah, good morning, Avik.

We also have a <unk>.

Another MTN in September that will we'll just refinance so as far as partnerships. We are looking at some partnership opportunities.

Abbott Day: Not sure if you're able to comment yet on Alberta lifting the pause on new renewables this week, but I guess declaring certain no-build zones. Just wondering, you know, if there are any developments within your 3.4 gigawatt pipeline that might be impacted. And also curious about your thoughts on what these restrictions could mean for the Alberta power market, just in general, over the next few years. Thanks, Pat.

On on certain assets and development projects that we have nothing at this point that that we would be announcing with respective to that.

Aspect of our funding.

Okay.

But in terms of targeted timing are you looking at kind of mid year to secure those partnerships.

Is it to the back half of the year, yes.

Okay. That's great. Thank you I'll leave it there.

Okay. Thank you.

One moment for our next question.

Next question comes from the line of Ben Pham with BMO. Your line is now open.

Hi, Thanks, Good morning, I wanted to ask on Slide 14, you have here.

Abbott Day: There are limited comments we can make at this time because we're still awaiting the official response, but we've seen the press release, and we think that the announcements are consistent with what market expectations were in terms of restricting land use. I think overall impact on the market, as I've said before, you know, I think the pause was to understand land use, look at things like interconnection, and just establish what the province's view was of marrying renewable development with grid integrity, reliability, and affordability. So it seems like everything is consistent with that.

Got it.

Hi, Ben.

Looking more specifically at the natural gas.

Sort of things.

It looks like the market's heading into <unk>.

A structural change in pricing and moving higher.

Over time.

You comment then just as gas prices go up into 2025 and 26, how do you how are you.

You think Alberta power prices could respond to that.

Does that change your hedging policy, whether it's on <unk>.

Power side or even.

The gas side of things.

Abbott Day: I think the long-term impact on the market should be negligible. It likely has no impact on our existing portfolio or our pipeline. Okay, that's great.

Yeah. Thanks, Dan So, yes, we do look at both power and gas sort of in tandem and as we see natural gas go up the expectation is that.

The variable cost will increase on the power side and that will drive up pricing. So you should see a correlation between natural gas and power is as we move out when were hedging we look at both sides of the equation. So from a spark spread perspective, and so there is there is.

Abbott Day: And then I guess with respect to the clean electricity regulations, there's obviously been quite a bit of pushback from industry and various provinces, but, you know, wondering if any of these... potential amendments or modifications still to come, might change your long-term economic outlook for your portfolio either in Alberta or Ontario, and as well, if there's anything in there that might further support or, you know, help accelerate the timing for a positive FID I'll take the last one first, on CCS, we don't see any positive developments in advancing CCS with respect to the CER movement. On CCS, maybe I'll just take that question and expand on it further. We have not advanced our CCS effort at Genesee.

Attention given to both of those those dynamics, but in general feel that there is.

A stronger correlation now that there is no coal in the market than there was previously between power and natural gas.

Yeah.

And can I follow up on that.

Hopefully this is more of.

It is a hard correlation then is that maybe more of a bias to not.

Yes.

Hedge does maybe you've been in the past.

Yeah.

I think the question becomes whether or not you you locked in the gas at the time, we lock in the powers, so that you're achieving it as spark spreads, but there is there could be a strategy around that depending on your view.

Of where gas is going relative to power and also I would say that the liquidity as you look out farther between those two are quite different as well as being a much more liquid market in the longer term to transact and power.

Abbott Day: We continue to work with government and discuss alternatives to a CCSD, but we haven't been able to materially move that forward from a commercial standpoint. So we're in the same place today as we were last July when we stopped our spending on the technical side of CCS. In terms of the CER overall, we were early in terms of providing our comments both publicly and privately to government on what we thought were the pitfalls of the CER.

Okay got it.

We made that a question on the last question.

Returns between renewables and maybe if I can.

Gas, whether it's expansion or M&A can you update Adam.

Youre seeing maybe just versus last year and then just think about this.

Any sort of projects.

Abbott Day: We continue to believe there's a workable framework there for government and for the country if you accommodate the provincial nuances of where our base load generation comes from. We think that the announcement was a positive step towards reconciling and accommodating some of those differences, but there's still quite a bit of work to do. For us, this wasn't a document that you could force trade one factor against the other.

Thank you Brenda.

So with respect to returns on natural gas versus renewables was that the question. So I think when we're looking at returns there's a number of things that the contract length. So there are elements of.

Our fuel type that would be taken into consideration you see that natural gas.

Continues to have strong returns the renewable market is still coming out of periods of strong or large capex spending so if youre referencing the write down of our <unk>.

Our solar projects that we had in North Carolina, certainly you would need a much higher pricing today for those projects as you rebuild them back into the market than you would've seen so not seen that the returns on renewables necessarily shifting but certainly the ppas that would be required to achieve those returns.

Abbott Day: Fundamentally, we had to accommodate meeting base load demand. In Alberta, for example, because of our reliance on natural gas for base load, we couldn't just have one or two accommodations. You couldn't just meet the peaker requirement. You couldn't just meet the end of prescribed life.

Are being driven by higher capital costs, and we've seen those dynamic changes in the renewable market right now.

Abbott Day: You had to do all of it so that we could march towards a viable net zero target. Okay, that's a great color. Yeah, I think that's a great color.

Okay. Thank you Sandra.

Thank you.

One moment for our next question.

This question comes from the line of Maurice Choy with RBC capital markets. Your line is now open.

Sandra Haskins: Obviously, more to come down the road. One last one for me, if I could, just for Sandra, on the funding front, any update on bringing in partnerships here to help fund your CapEx budget for the year? I know, just looking at the recent disclosure looks to be somewhere in the $300 million to $400 million range is what you're looking for, and then maybe just an update as well on your debt capital market needs for the year, both hybrids and MTNs. Yeah, so when you look at the funding that we have to do this year, there are the refinancings that we have with the reset of our preps, which we expect will come out with a We also have another MTN in September that will just refinance.

And good morning, everyone just sticking with the CR theme of questions here and I know the ASIC you mentioned.

How are we kind of Hall Street, one factor over the other and you need improvements on many fronts.

Does this cause you to rethink your allocation of growth capital between the U S and Canada and was that the allocation between gas and renewables.

I think it doesn't change our view on gas and renewables I think it does.

Shift our focus on.

U S versus Canada.

We see a massive growing opportunity to not just acquire gas asset, but optimize and expand our existing fleet as well as.

A growing opportunity around renewables to stand at this point, we haven't seen an expansion in returns in the U S.

As a result of IRA.

But we're seeing PPA prices response, so that we can still make attractive rates of return on renewables in that market.

Why we entered into the first solar partnership. So you know I think that given the size of the market the liquidity of the market and the growth that we're seeing in those markets.

We'll continue to.

See more opportunity there to reallocate growth capex.

Sandra Haskins: So as far as partnerships, we are looking at some partnership opportunities on certain assets and development projects that we have, but nothing at this point that we would be announcing with respect to that aspect of our funding. But in terms of targeted timing, are you looking at, you know, kind of mid-year to secure those partnerships or do you need to visit the back half of the year yet?

Towards the U S.

Got it and then just as a quick follow up and maybe a little bit of a preview to your investor day.

I think as you continue on your on your tenure as CEO and you start laying down the path for the company.

Would a paint a picture of what your company will look like three years to five years from now versus where it is today.

But what what percentage changes in terms of.

Sandra Haskins: Okay, that's great. Thank you. I'll leave it there.

Exposure or what kind of picture should we be expecting.

If I may I would love to defer that to me.

When we have our Investor day, but I think what you've seen from us over the past six months is what youre going to see as we formalize and articulate our longer term strategy, which is going towards those markets that are focused on.

Operator: Okay, thank you. One moment for our next question. This question comes from the line of Ben Pham with BMO. Your line is now open. Hi, thanks. Good morning.

More a growing reliable and affordable electricity needs and playing in those arenas that we feel like we can take advantage of our core competencies around operational excellence around utility scale generation. So I think one of the things we as a company have great conviction around it.

Ben Pham: I wanted to ask on slide 14, you have your cast looking more specifically at the natural gas price side of things. It looks like the market's heading into a structural change in pricing and moving higher over time. Can you comment then, just as gas prices go up into 2025 and 2026, how do you think Alberta Power Producers could respond to that? Does that change your hedging policy, whether it's on the PowerSide or even the gas side of things? Thanks, Ben.

Is the absolute critical illness of natural gas as part of reliable affordable grids.

But to most importantly.

Our belief that a net zero features doesn't happen without natural gas so our ability to go.

Acquire optimize expand natural gas as well as continuing to build renewables and then defining our net zero pathway.

Is really what we're going to articulate in may.

Where we're going and how we're going to do it.

But it will very much look like.

Sandra Haskins: So yeah, we do look at both power and gas sort of in tandem. And as we see natural gas go up, the expectation is that the variable cost will increase on the power side, and that will drive up prices. So you should see a correlation between natural gas and power as we move out. And when we're hedging, we look at both sides of the equation. So from a spark spread perspective, and so there is attention given to both of those dynamics, but in general, I feel that there is a stronger correlation now that there's no coal in the market than there was previously between power and natural gas. Can I follow up on that, and that's helpful, or is it more of a...

Expanding upon what we've always been doing I think the only.

Direction shift will be we may be more directive about.

Our focus on which growth markets, we'll pursue.

Which I've telegraphed to you today just now.

Given our growing focus on the U S market.

Got it that makes sense and maybe just to finish up on what you're focusing on.

Markets can we can we can I just get you.

Thoughts on markets that obviously is not necessarily a focus right now, but you do have exposure to.

Is there an opportunity for you to optimize your portfolio by selling any assets business environment to do so.

Recognizing of course that rates have come down a little bit.

I think.

I'll just repeat comment that sounds are estimated in the past I think we are looking at capital recycling opportunities.

And I think through normal course, we will always looked at opportunities to optimize the portfolio.

Sandra Haskins: It is a higher correlation than, so is there a bias to not be as hedged as maybe you've been in the past? I think the question becomes whether or not you lock in the gas at the time you lock in the power so that you're achieving a spark spread, but there could be a strategy around that depending on your view of where gas is going relative to power.

But no no specific asset built in mind today.

Got it thank you.

Thank you.

Our next question.

This question comes from the line of Jessica <unk> with Scotiabank. Your line is now open.

Great. Thanks for taking my question.

It is the start to 2023 with obviously a busy year for acquisitions or capital power. So given that's just what are your thoughts on further M&A or does the organization I need some time to integrate these recent acquisitions.

Sandra Haskins: And also, I'd say that the liquidity, as you look out farther between those two, is quite different as well, gas being a much more liquid market in the longer term to transact and power. Okay, got it. And we made it that our question, the last question, returns returns between renewables and maybe Midlife Gas, whether it's expansions or M&A. Can you update that on what you're seeing, maybe just versus last year? And I'm just thinking about this one of your SOAR projects that you've written down. So with respect to returns on natural gas versus renewables, is that the question? So I think when we're looking at returns, there are a number of things that the contract length and fuel type that would be taken into consideration.

Thanks for the question Jessica.

We I mean M&A.

M&A has been a cornerstone of.

Our growth strategy for a long time and it's something we're good at it's something that.

We can use as a tool to create shareholder value.

So today, we are very much focused on integrating our three new assets that we acquired.

But you can expect that M&A will continue to be.

A big part of our strategy as we go forward.

Great. Thanks for the color and just moving over to the Alberta power market just has there been any change or update.

On your conversations with the government just regarding market reforms or anything on that side of thing.

Sandra Haskins: We see that natural gas continues to have strong returns, and the renewable market is still coming out of periods of strong or large capex spending. So if you're referencing the write-down of our solar projects that we had in North Carolina, certainly you would need much higher pricing today for those projects as you rebid them back into the market than you would have seen. So I'm not seeing that the returns on renewables are necessarily shifting, but certainly the PPAs that would be required to achieve those returns are being driven by higher capital costs. And we've seen those dynamic changes in the renewable energy market right now. Thank you, Patrick.

No no new no new updates from our standpoint, we are.

Very much looking forward to.

Minister of new doors comments at the <unk> conference inbound.

A week a week from now so but you know as we've said in our past calls we think the focus on reliability and affordability and the results of.

The studies that the government has facilitated.

We think will be constructive.

We think that the energy only market will continue to exist and be preserved and we're expecting to see tweaks to that.

I'm very much looking forward to administer noodles comments in a week to give us more color.

Thanks very much.

Operator: Thank you. One moment for our next question. This question comes from the line of Maurice Choi with RBC Capital Markets. Your line is now open. And good morning, everyone.

Thank you.

Our next question.

Yes.

This question comes from the line of John Malone, The TB Cowen Your line is now open.

Hey, good morning, everybody.

Maurice Choi: Just sticking with the CER theme of questions here, and I know that, Avik, you mentioned how we can't horse-treat one factor over the other, and you need improvements on many fronts. Does this cause you to rethink your allocation of growth capital between the U.S. and Canada, and with that, the allocation between gas and renewables? I think it doesn't change our view on gas and renewables, but I think it does shift our focus on the US versus Canada. So we see a massive growing opportunity to not just acquire gas assets but optimize and expand our existing fleet, as well as a growing opportunity around renewables. To Sanja's point, we haven't seen an expansion in returns in the U.S. as a result of IRA, but we're seeing PPA prices respond so that we can still make attractive rates on renewables in that market.

Just starting with your <unk>.

Development efforts and prospective pipeline.

I guess, you could say a series of clusters of Av.

Markets that you've.

You've been active on the development front, where you've got projects I'm just wondering if there are specific markets.

Most attractive right now for your prospective development dollars, where maybe you are considering spending a little more to advance those those projects.

Thanks, John obviously, the near term pipeline over the next two years in particular on renewables and batteries is pretty focused on the Alberta, and Ontario and executing.

Projects that were already in in construction on the pipeline for $2004 25 in terms of capital deployment, we will be focused on those.

And then secondarily.

Our shift and focus on capital allocation on the renewables front is driving towards delivering projects against our partnership with first solar on the panels. So I think that the shift that you'll see in capital allocation on the renewable side.

Our focus on U S solar in particular.

Abbott Day: That's why we entered into the first solar partnership. I think that given the size of the market, the liquidity of the market, and the growth that we're seeing in those markets, we'll continue to see more opportunity there to reallocate growth capex towards the U.S. And just as a quick follow-up and maybe a little bit of a preview to your investor day, as you continue your tenure as CEO and start laying down the path for the company, if you were to paint a But what are the percentage changes in terms of, Thank you.

And optimizing against the existing pipeline that we have so the shifts you won't see a shift in direction in terms of where we're looking or specific market. It's really.

How how can we advance that existing two gigawatt renewable pipeline that we have in the U S market.

Okay, Great that's helpful.

And then maybe just on your SMA partnership with OTG I guess two parts. One can you just give us a sense of like what your annual expected spend looks like on the succession process over the next couple of years.

Secondly, what are the key puts you are looking for from this process to inform whether.

If you take whatever the next steps youre contemplating and bigger.

Bigger picture considerations of pullbacks from our involvement in Alberta.

Abbott Day: Maurice, if I may, I'd love to defer that to May, you know, when we have our Investor Day, but I think what you've seen from us over the past six months is what you're going to see as we formalize and articulate a longer-term strategy, which is going towards those markets that are focused on more growing, reliable, and affordable electricity needs and playing in those arenas that we feel like we can take advantage of our So I think one of the things we as a company have great conviction about is the absolute criticalness of natural gas as part of reliable, affordable grids. One, but two, most importantly, our belief that a net zero future doesn't happen without natural gas.

Yeah. Thanks.

We're very much excited to partner with LPG first and foremost.

They are a world leading nuclear operator from an efficiency and safety perspective.

Ah.

Great for the country here in Canada, we've been a leader on.

Safety regulatory.

And design.

To facilitate the nuclear.

In terms of spend that we haven't we haven't indicated a spend level publicly but it's immaterial.

What we're really focused on in those first two year period in partnership with LPG is really three things.

The first is <unk> well over.

Five years evaluating some was leveraging their 50 year operating history.

They've looked at over 20 different similar technology.

Hybrid of those two effects, which they learn how to grow to three and they selected GE Hitachi is there a proven solution at Darlington in Ontario. So the first stream for US is really technology evaluation and.

Partnering with LPG to come up to speed on all of their work and then evaluate the viability of those high grade with technologies in the Alberta for Alberto's needs for Alberta is good so that stream one screen to is working in partnership with LPG.

Abbott Day: So, our ability to acquire, optimize, expand natural gas, as well as continuing to build renewables, and then define our net zero pathway is really what we're going to articulate in May as where we're going and how we're going to do it. But it will very much look like, you know, expanding upon what we've always been doing. I think the only, you know, direction shift will be, you know, we may be more directive about our focus on which growth markets we pursue, which I've telegraphed to you today just now given our growing focus on the U.S. market. That makes sense.

And the government of Alberta, Ontario, and Canada.

Evaluate what our regulatory and permitting framework should look like.

Look like here in Alberta, and then the last stream.

Fighting and that's working in conjunction with government and stakeholders to look at potential sites. So our goal over the first two years is to one determine.

Which technology could work for Alberta, and what Alberta needs.

The second one is hopefully a pan of all Florida with in partnership with government, but we have a line of sight towards how and when and if.

Abbott Day: And maybe just finishing up on what you're focusing on in terms of markets. Can we, can we, can I just get your thoughts on, you know, markets that obviously are not necessarily focused right now, but you do have exposure to. Is there an opportunity for you to optimize your portfolio by selling any assets? Is this the environment to do so?

And after a month to get permitted in the province, and then thirdly, hopefully advanced to a point where we.

We at least have a notional understanding of where potential sites could be in the province.

So I think the important thing on S. M. Meyers is in Alberta, We've never had one we haven't had nuclear and so this will be a 10 plus year journey.

Abbott Day: Recognizing, of course, that we have come down a little bit. I think, you know, I'll just repeat comments that Sandra's made in the past. I think we are looking at, you know, capital recycling opportunities. And I think, in the normal course, we'll always look at opportunities to optimize the portfolio. But, you know, no, no specific assets built in mind today.

But in order to get it.

If we have an ambition to have one operating by 2035, we really need to get the ball rolling now.

So it is early days, but we're very excited about the partnership and hope to be able to advance the ball here over the next the next two years with LPG.

Okay. That's that's great detail, thanks for that I'll leave it there.

Okay.

Thank you.

Okay.

Our next question.

This comes from the line of Mark Jarvi.

Operator: Thank you. One moment for our next question. This question comes from the line of Jessica Hoyle with Scotiabank. Your line is now open.

Yes. Thanks. Good morning, everyone can you just coming back to the potential modifications of the CER, including potentially changing towards the.

Start of new operations for gas fired units.

Jessica Hoyle: Great, thanks for taking my question. So just to start, 2023 was obviously a busy year for acquisitions for Capital Power. Given this, what are your thoughts on further M&A, or does the organization need some time to integrate these recent acquisitions? Thanks for the question, Jessica. We, I mean, M&A has been a cornerstone of our growth strategy for a long time. It's something we're good at.

If those modifications, which the kind of expressed in the letter a couple of weeks ago are correct does that give you the comfort to move forward with east Windsor and the up rates in Ontario, and do you plan to put capital work this year on those projects.

We continue to advance those projects, we continue to believe that within <unk>.

Whatever construct C R.

Lands on that those projects will proceed.

Okay, and then coming back to the first solar agreement can you remind us again of any sort of.

I believe it was $26 228, but in terms of firm commitments obligations, obviously, if youre going to have me acquiring panels timeframe, because you're moving on some projects just remind me again against the firmness of that obligation and whether or not you would bring in partners kind of ramp up activities on those projects.

Abbott Day: It's something that we can use as a tool to create shareholder value. So, you know, today we are very much focused on integrating our three new assets that we acquired. But you can expect that M&A will continue to be a big part of our strategy as we go forward.

Fulfill any obligations on that agreement.

Yeah, I'll just reaffirm what we had disclosed at the time, which is it is a firm agreement to acquire panels for delivery in 2627 28.

Abbott Day: And just moving over to the Alberta power market, has there been any change or update on your conversations with the government just regarding market reforms, or anything on that side of things? No new updates from our standpoint. We are very much looking forward to Minister Newdorf's comments at the IPSA conference in Banff a week from now. But as we've said in our past calls, we think the focus on reliability and affordability and the results of the studies that the government has facilitated will be constructive. We think that the energy-only market will continue to exist and be preserved.

We do have an existing pipeline and projects that can fulfill that.

But it is a firm commitment on those panels.

And we.

We do have an ability to move those panels should.

Should we not be able to fulfill.

We don't have a project to fulfill them, but so it's not like we have a situation here, where we will have to.

Agreed to a solar project, just because we've got panels to court against them.

Alright. So then if you if you think about where projects are today.

Abbott Day: And we're expecting to see tweaks to that, but we are very much looking forward to Minister Newdorf's comments in a week to give us more color. Thanks very much.

Interconnection queue sighting and just even relative economics and return expectations would you say that you feel pretty confident that you could you know.

Internally source or within the development pipeline come through with one gigawatt of projects to fulfill that obligation today.

Operator: Thank you. One moment for our next question. This question comes from the line of John Mould with T. D. Cohen. Your line is now open. Hey, good morning, everybody.

I would say so.

What I would say is at the front end of 2006, so on the timeline of 26 27 28.

John Mould: Maybe just starting with your development efforts and prospective pipeline, you know, you've got a, I guess we could say, you know, a series of clusters of, you know, markets that you've been active in on the development front where you've got projects. I'm just wondering if there are specific markets that are the most attractive right now for your prospective development dollars where maybe you're considering spending a little more to advance those projects. Thanks, John.

The initial delivery of panels looks good.

Everything's.

As we had projected.

We think we'll be able to deliver in the 2000 and 728 pipeline is continuing to evolve.

So in terms of timeliness I think we're on track with what I would say, but no we do not have locked in.

The exact projects for 2006 27 28 against the the the pipeline.

Abbott Day: You know, obviously, the near-term pipeline for the next two years, in particular for renewables and batteries, is pretty focused on Alberta and Ontario and executing the projects that we're already in construction on. So, the pipeline for 2024-2025, in terms of capital deployment, will be focused on those. And then secondarily, our shift in focus on capital allocation on the renewables front is driving towards delivering projects against our partnership with First Solar on the panels. So, I think that's the shift that you'll see in capital allocation on the renewable side is our focus on U.S. solar in particular and optimizing against the existing pipeline that we have. So, the shift, you know, you won't see a shift in direction in terms of where we're looking or specific markets. It's really how can we advance that existing 2 gigawatt renewable pipeline that we have in the U.S. market. Okay, great, that's helpful.

Understood what we thought the pipeline so just but just to give you comfort on that point, we have two gigawatt of projects that are in the U S alone.

Okay on the solar side of things, yes, and those are identified project.

On the identified sites okay.

Okay.

Then kind of coming back to some of your comments and then Sanders.

Either asset sales at some point.

Prioritization of investments seems like kind of lean into the midlife gas strategy.

I know theres nothing to announce here on asset sales in the near term, but can you run US again in terms of anything from a from a credit metrics perspective credit rating agencies in terms of asset mix contract profiles that would limit.

How far you would shift the mix of assets I know at one point I think it was two thirds contracted was kind of a rough mark to maintain where are you guys or is there anything else in terms of fuel exposure or anything else that kind of goes into the framework of how you might evolve your asset mix over the next three to five years.

Yes.

Abbott Day: And then maybe just on your SMR partnership with OPG. I guess, you know, two parts. One, can you just give us a sense of, like, what your annual expected spend looks like on this assessment process over the next couple of years? And, you know, secondly, what are the key outputs you're looking for from this process to inform, you know, whether you take whatever the next steps you're contemplating in, you know, bigger picture considerations of SMR involvement in Alberta? Yeah, thanks.

Rating agencies still look for a 60% contracted so versus that two third so thats two thirds is more what we've given as our target and that's against the rating agency, 60% requirement.

As far as fuel mix no there isn't anything with respect to our fuel that they expect us to grow in one direction or another so that's not part of any of the metrics that are either rating agency has far simpler currently.

So aside from philosophical and optimizing returns and free cash flow growth is there anything else, we mindful that might temper any big shifts in asset mix or is it really has come down to where do you guys want the company to position within the contract of.

Abbott Day: And we're very excited to partner with OPG, first and foremost, you know, they're a world-leading nuclear operator from an efficiency and safety perspective and, in particular, the country here in Canada. You know, we've been a leader on safety regulatory and design to facilitate nuclear power. In terms of spend, we haven't, we haven't indicated a spend level publicly, but it's in material.

Contracted profile.

From a rating agency perspective, or anything else from a philosophical approach to how you guys think about the business risk profile or anything like that diversification.

So I think that we've said that we're agnostic to fuel type when we're looking at growth. We're looking for the best allocation of capital in terms of the opportunities that are in front of us.

When we select our natural gas assets, we do look for those that are resilient with respect to a longer term need in the market.

Abbott Day: What we're really focused on in this first two-year period in partnership with OPG is really three things. The first is that OPG has spent, you know, well over five years evaluating SMRs, leveraging their 50-year operating history. They've looked at over 20 different SMR technologies, high-graded those to six, which they then high-graded to three, and they selected GE Hitachi as their proven solution at Darlington in Ontario. So the first stream for us is really technology evaluation, and it's partnering with OPG to get up to speed on all of their work, and then evaluate the viability of those high-graded technologies in Alberta for Alberta's needs and So that's stream number one.

So I think more to come at Investor day around our longer term strategy and our thinking there but at this point in time, we have not set any targets for ourselves with respect to <unk>.

Fuel type.

Diversification is certainly within the hubs that we've identified as being the primary focus for us and that's just by default that those markets fall into the criteria that we see as being most constructive for our for the assets that we operate.

Okay. Thanks Edwin.

Thank you.

I'm showing no further questions. At this time, then we would now like to turn it back to Roy Arthur for closing remarks.

If there are no more questions, we will conclude our conference call.

Abbott Day: Stream two is working in partnership with OPG and the governments of Alberta, Ontario, and Canada to evaluate what a regulatory and permitting framework should look like and could look like here in Alberta. And then the last stream is siting, and that's, you know, working in conjunction with the government and stakeholders to look at potential sites. So our goal over the first two years is, one, to determine which technology could work for Alberta and what Alberta needs. The second one is, hopefully, to advance the ball far enough in partnership with government that we have a line of sight towards how and when and if an SMR could be permitted in the province. And then thirdly, hopefully, advance to a point where we at least have a theoretical understanding of where potential sites could be in the province. So I think the important thing about SMRs is that in Alberta, we've never had one.

Thank you Cathy and thank you everyone for joining us and for your continued interest in capital Power story. As a reminder, today's presentation and webcast will be made available on capital power Dot com have a great day.

Thank you. This does conclude the program you may now disconnect.

Okay.

[music].

Abbott Day: We haven't had nuclear power, and so this will be a 10 plus year journey. But in order to get, you know, if we have an ambition to have one operating by 2035, we really need to get the ball rolling now. So it is early days, but we're very excited about the partnership and hope to be able to advance the ball here over the next two years with OPG. Okay, that's a great detail. Thanks for that. I'll leave it there.

Yes.

[music].

Operator: Thank you. One moment for our next question. This comes from the line of Mark Jarvie. Yeah, thanks. Good morning, everyone.

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Mark Jarvie: So maybe just coming back to the potential modifications of the CER, including potentially changing sort of the, I guess, start of new operations for gas-fired units. If those modifications, which they kind of expressed in the letter a couple weeks ago, are correct, does that give you the comfort to move forward with East Windsor and the upgrades in Ontario? And do you plan to put capital work this year on those projects? We continue to advance those projects. We continue to believe that within whatever contract CER lands on, those projects will proceed. Okay, and then coming back to the first solar agreement, can you remind us again of any sort of... I believe it's 26 to 2028, but in terms of firm commitments and obligations, obviously, if you're going to be acquiring panels in that time frame, you've got to get moving on some projects.

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Abbott Day: Just a reminder, again, of the firmness of that obligation and whether or not you'd bring in partners to kind of ramp up activities on those projects to fulfill any obligations under that agreement. Yeah, I'll just reaffirm what we had disclosed at the time, which is that it is a firm agreement to acquire panels for delivery in 26, 27, 28. We do have an existing pipeline and project that can fulfill that, but it is a firm commitment on those panels. And, you know, we do have the ability to move those panels, should we not be able to fulfill, you know, we don't have a project to fill them with. So it's not like we have a situation here where we'll have to, you know, agree to a solar project just because we've got panels to put together.

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Abbott Day: Right, so then if you think about where projects are today, interconnection queues, siting, and just even relative economics and return expectations, would you say that you feel pretty confident that you could, you know, internally source or within the development pipeline, come through with the one gigawatt of projects to fulfill that obligation today? I would say so. What I would say is at the front end of 26, so on the timeline of 26, 27, 28, I think the initial delivery of panels looks good.

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Abbott Day: Everything's, you know, as we had projected, we think we'll be able to deliver, and the 27, 28 pipeline is continuing to evolve. So, in terms of timeliness, I think we're on track is what I would say, but no, we do not have locked in the exact projects for 26, 27, 28 against the, the, pipe, understood we've got the pipeline. So just to give you some comfort on that point, we have two gigawatts of projects that are in the US alone. Okay, on the solar side of things. Yeah, and those are identified projects on identified sites.

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Abbott Day: Okay. And then kind of coming back to some of your comments and Sandra's about asset sales at some point, prioritization of investments, seems like you're kind of leaning into the midlife gas strategy. I know there's nothing to announce here on asset sales in the near term, but can you remind us again in terms of anything from a credit metrics perspective, their perspective, the credit rating agencies, in terms of asset mix contract profiles that would limit, you know, how far you shift the mix of assets? I know at one point, I think it was two-thirds contract.

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Sandra Haskins: It was kind of a rough mark to maintain where you guys are. Is there anything else in terms of fuel exposure, anything else that kind of goes into the framework of how you might evolve your asset mix over the next three to five years? The rating agencies still look for a 60% contracted versus the two-thirds, so that's two-thirds is more what we've given as our target, and that's against the rating agency 60% requirement. As far as fuel mix, no, there isn't anything with respect to fuel that they expect us to grow in one direction or another, so that's not part of any of the metrics that either rating agency has for us currently. So, aside from philosophy and optimizing returns and free cash flow growth, is there anything else to be mindful of that might temper any big shifts in asset mix? Or has it really just come down to where you guys want the company to be positioned within the contract of contracted profile?

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Sandra Haskins: from a rating agency perspective, no, I would say... Or anything else from a philosophical approach to how you guys think about the business risk profile and anything like that, diversification. So I think that we've said that, you know, we're agnostic to fuel type when we're looking at growth; we're looking for the best allocation of capital in terms of the opportunities that are in front of us. When we select our natural gas assets, we do look for those that are resilient with respect to a longer-term need in the market. So I think, you know, more to come at Investor Day around our longer-term strategy and our thinking there. But at this point in time, we have not set any targets for ourselves with respect to fuel type.

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Sandra Haskins: The diversification is certainly within the hubs that we've identified as being the primary focus for us, and that's just by default that those markets fall into the criteria that we see as being most constructive for the assets that we operate. Okay. Thanks, everyone. Thank you. I'm showing no further questions at this time and would now like to turn it back to Roy Arthur for closing remarks. If there are no more questions... We will conclude our conference call. Thank you, Kathy, and thank you, everyone, for joining us and for your continued interest in the Capital Power story. As a reminder, today's presentation and webcast will be made available on capitalpower.com. Have a great day. Thank you. This does conclude the program.

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