Q2 2025 Capital Power Corp Earnings Call
Roy Arthur: Good day. Thank you for standing by. Welcome to the Capital Power's second quarter 2025 analyst conference call. At this time, all participants are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Roy Arthur, Vice President, Strategy Planning and Investor Relations. Please go ahead, sir.
Good day, thank you for standing by, welcome to the capital power. Second quarter, 2025 analyst conference call.
At this time, all participants on the list and only mode.
After this week's presentation, there will be a question-and-answer session.
To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising that your hand is raised.
Please know that today's conference may be recorded.
I will now hand it to your speaker host Roy author, vice president strategy planning and investigation. Please go ahead sir.
Roy Arthur: Good morning, everyone. My name is Roy Arthur, Vice President, Strategy Planning and Investor Relations. Thank you for joining us to review Capital Power's second quarter 2025 results, which we published earlier today. Our second quarter report and presentation for this conference call are available on our website. During today's call, our President and CEO, Avik Dey, will provide an update on our business. Following that, Sandra Haskins, SVP Finance and CFO, will review the quarter-end and year-to-date financials for the company in addition to our revised guidance for 2025. Avik will then conclude the formal part of the presentation before we open the floor to questions from analysts in our interactive Q&A. Before we start, I would like to remind everyone that certain statements about future events made on the call are forward-looking in nature and are based on certain assumptions and analysis made by the company.
Good morning, everyone. My name is Roy Arthur vice president strategy planning and investor relations thank you for joining us to review Capital Powers. Second quarter.
2025 results between earlier today,
Our second quarter report and presentation for this conference call are available on our website.
During today's call, our President and CEO, Avik Dey, will provide an update on our business. Following that, Sandra Haskins, SVP Finance and CFO, will review the quarter-end and year-to-date financials for the company, in addition to our revised guidance for 2025.
Roy Arthur: Actual results could differ materially from the company's expectations due to material risks and uncertainties associated with our business. Please refer to the cautionary statement on forward-looking information on slide three or our regulatory filings available on CDAR Plus. In today's discussion, we'll be referring to various non-GAAP financial measures and ratios also noted on slide three. These measures are not defined financial measures according to GAAP and do not have standardized meetings prescribed by GAAP and therefore are unlikely to be comparable to similar measures used by other enterprises. These measures are provided to complement the GAAP measures, which are provided in the analysis of the company's financial results from management's perspective. Reconciliations of these non-GAAP financial measures to their nearest GAAP measures can be found in our quarterly financial statements.
Before we start, I would like to remind everyone that certain statements about future events, made on the call are forward-looking in nature and are based on certain assumptions and Analysis made by the company.
Actual results could differ material from the company's expectations, due to material risks and uncertainties associated with our business.
Please refer to the cautionary. Statement on forward-looking information on slide 3 or our regulatory filings available on Cedar Plus
In today's discussion, we'll be referring to various non-gaap Financial measures and ratios. Also, noted on slide 3. These measures are not defined Financial measures according to gaap and do not have standardized meetings, prescribed by Gap, and therefore unlikely to be comparable to similar, measures used by other Enterprises
These measures are provided to complement the Gap measures which are provided in the analysis of the company's Financial results from Management's perspective.
Roy Arthur: We acknowledge that Capital Power's head office in Edmonton is located within the traditional and contemporary home of many Indigenous peoples of Treaty Six region and the Métis Nation of Alberta Region Four. We acknowledge the diverse Indigenous communities that are in these areas, whose presence continues to enrich the community and our lives as we learn about the Indigenous history of the lands on which we live and work. With that, I will hand it over to Avik.
Reconciliations of these non-gaap Financial measures to their nearest Gap measures, can be found in our quarterly financial statements.
We acknowledge that Capital Powers, head office and Edmonton is located within the traditional and contemporary home of many indigenous, peoples of treaty, 6 region, and the matey nation of Alberta Region 4. We acknowledge the diverse indigenous communities that are in these areas whose presence continues to enrich the community and our lives. As we learn about the indigenous history of the land, on which we live and work,
Avik Dey: Thank you, Roy. Good morning, everyone, and thank you for joining us today. In the second quarter of 2025, we announced and closed our largest acquisition to date, adding 2.2 gigawatts of capacity. This transaction is part of a significant transformation of our business over the past three years, which we will explore in more detail throughout the presentation. Key highlights from Q2 2025 include reaching commercial operation on our GoreWay upgrade project with an extended contract term to 2035, progressing growth projects totaling approximately 610 megawatts of capacity, delivering nine terawatt hours of power across our strategically positioned portfolio, including contributions from our newly acquired PGM assets, and lastly, continuing to deliver operational excellence by optimizing and maintaining our assets, completing 62% of our scheduled outage days for the year. This includes 18 planned turnarounds, 14 on our flexible generation assets, and four on our renewable fleet.
With that, I will hand it over to ABC.
Thank you, Roy. Good morning, everyone. And thank you for joining us today. In the second quarter of 2025, we announced and closed our largest acquisition to date adding 2.2 gigawatts of capacity. This transaction is part of a significant transformation of our business over the past 3 years, which we will explore in more detail throughout the presentation. Key highlights from Q2 2025 include reaching commercial operation, on our goreway upright project with an extended contract term to 2035.
Progressing growth projects totaling approximately 610 megawatts of capacity.
Delivering, 9 terawatt hours of power across our strategically positioned portfolio, including contributions, from our newly acquired PGM assets.
And lastly, continuing to deliver operational excellence by optimizing and maintaining our assets, completing, 62% of our scheduled outage days for the year.
Avik Dey: In summary, we continue to make tangible progress in delivering on our strategy. None of this would be possible without the enormous contribution of our people, from our exceptional operational staff to our corporate services team and everyone in between. Capital Power is truly a leading North American independent power producer of scale. Our recent transformation has created a more resilient, diversified, and growth-oriented business, anchored by one of the most efficient gas fleets in North America. This, combined with our ability to operate, expand, and optimize safely, efficiently, and economically, continues to set us apart from our peers. We now have operations across five core markets, which means our portfolio is less exposed to the volatility of any single market, enhancing the stability of our cash flows and reinforcing our investment-grade credit rating.
This includes 18 plan turnarounds 14 on our flexible generation assets and 4 on our renewable Fleet in summary, we continue to make tangible progress in delivering on our strategy. None of this would be possible without the enormous contribution of our people from our exceptional, operational staff to our corporate services team and everyone in between
Capital power is truly a leading North, American Independent power producer of scale. Our recent transformation has created a more resilient Diversified and growth-oriented business anchored by 1 of the most efficient, gas fleets in North America
This combined, with our ability to operate, expand, and optimize safely, and economically continues to set us apart from our peers.
Avik Dey: During the past three years, we've maintained our track record of delivering compelling, risk-adjusted returns and are better positioned than ever to grow and create long-term shareholder value. Between 2022 and 2025, we have delivered impressive growth in our US flexible generation portfolio, positioning us as one of the top five natural gas independent power producers in North America. We've expanded our flexible generation asset base by approximately five gigawatts and now have over 10 gigawatts of flexible generation capacity in Canada and the US. Our growth has largely been through M&A and concentrated in core markets with strong fundamentals. We continue to see opportunities to acquire generation capacity for significantly less cost than new build. As a result of our significant growth and entry into new markets, we now have 12 gigawatts of total capacity, with no single market representing more than 30% of our portfolio.
We now have operations across five core markets, which means our portfolio is less exposed to the volatility of any single market, enhancing the stability of our cash flows and reinforcing our investment-grade credit rating.
During the past 3 years, we've maintained our track record of delivering compelling risk, adjusted returns, and are better positioned than ever to grow and create long-term shareholder value.
Between 2022 and 2025. We have delivered impressive growth in our us, flexible generation portfolio. Positioning us as 1 of the top 5, natural gas independent power producers in North America.
We have expanded our flexible generation asset Base by approximately 5 gigawatts and now have over 10. Gigawatts of flexible generation capacity in Canada and the US
Our growth has largely been through m&a and concentrated in core markets with strong fundamentals. We continue to see opportunities to acquire generation capacity for significantly less cost than new builds.
Avik Dey: In each of our core markets, we continue to see strong fundamentals. Growing demand has outpaced additions of new supply, driving increased capacity and energy prices in regions such as TJM and Myso, and continued growth demand in Ontario has resulted in more calls for power. Across our portfolio, recontracting continues to be a strong priority for our business. As we strive to maximize the value of the existing generation, current fundamentals give us confidence in the ability to recontract at compelling prices for longer duration than we have seen in the past. We are engaged in multiple negotiations to extend our current contracts, given the growing need for reliable and affordable power across North America. In PJM, where we have recently added 2.2 gigawatts of generation, there is strength in both capacity and energy pricing.
As a result of our significant growth in entry into new markets. We now have 12, gigawatts of total capacity with no single Market representing more than 30% of our portfolio.
We continue to see strong fundamentals, growing demand has outpaced additions of new Supply, driving increased capacity, and energy prices in regions such as pjm and MSO.
And continued growth demand in Ontario, has resulted in more calls for power.
Across our portfolio, recontracting continues to be a strong priority for our business.
As we strive to maximize the value of the existing generation current fundamentals. Give us confidence in the ability to recontract at compelling prices for longer duration than we have seen in the past.
We are engaged in multiple negotiations, to extend our current contracts, given the growing need for Reliable and affordable power across North America.
Avik Dey: Capacity payments typically represent about one-third of the total gross margin from our PJM business, with the remainder coming from energy sales. PJM is the most liquid power trading market globally, an important factor for maximizing value for an organization like ours. This liquidity means access to a broad, high-quality set of counterparties and enables us to transact across a wide range of durations in this rising price environment. Since closing the acquisition, we've moved quickly to implement significant hedges and other contracts covering the balance of 2025 and beyond. We've executed these at pricing levels aligned with our business case and at a pace far exceeding what would be possible in Alberta. The benefits of a diversified portfolio are especially clear when we examine single variable sensitivity to energy price changes in our emergent markets.
In pjm where we have recently added 2.2, gigawatts of generation. There is strength in both capacity and energy pricing.
Capacity payments typically represent about 1/3 of the total gross margin from our PJ and business with the remainder coming from energy sales.
Pjm is the most liquid power trading Market globally, an important factor for maximizing value. For an organization like ours, this liquidity means access to a broad, high-quality set of counterparties and enables us to transact across a wide range of durations in this Rising price environment.
Since closing the acquisition, we've moved quickly to implement significant hedges and other contracts covering the balance of 2025 and beyond.
we've executed these at pricing levels aligned with our business case and at a pace far exceeding, what would be possible in Alberta
Avik Dey: For example, if we were fully unhedged, a $5 per megawatt-hour change in PJM prices would result in a 4% to 5% change in full-year adjusted EBITDA. In contrast, the same price movement in Alberta would have a smaller impact, approximately 3% to 4% going forward. This is a significant move down from approximately 7% to 8% in 2023. Our other merchant markets in the US are smaller and contribute even less to overall volatility. So, despite having greater merchant capacity in the portfolio, we expect reduced volatility of our cash flows. We have already taken steps and will continue to do so to actively manage risk through hedging in both Alberta and TJM. Our Genesee Repowering Project is an excellent example of how our growth efforts have contributed to our superior portfolio positioning. Since 2023, Alberta pool pricing has declined by approximately 70%.
The benefits of a diversified portfolio. Are especially clear when we examine single variable sensitivity to energy price changes in our Merchants markets.
For example, if we were fully unhedged, a $5 per megawatt hour change in PJM prices would result in a 4% to 5% change in full year adjusted EBITDA.
In contrast the same price movement in Alberta would have a smaller impact approximately 3 to 4% going forward. This is a significant move down from approximately 7 to 8% in 2023.
Our other Merchants markets in the US are smaller and contribute, even less to overall volatility.
So, despite having greater merchant capacity in the portfolio, we expect reduced volatility of our cash flows. We have already taken steps and will continue to do so to actively manage risk through hedging in both Alberta and PJM.
Our gene-repelling project is an excellent example of how our growth efforts have contributed to our Superior portfolio positioning.
Avik Dey: Despite this decline, our 2025 year-to-date clean spark spreads at Genesee One and Two have increased through a combination of improved efficiency, lower carbon intensity, and hedging. Our repowered units are now the most efficient in Canada. We've also reduced their carbon intensity below the Alberta tier benchmark threshold, which means we currently pay no carbon tax on these units. Finally, we continue to actively hedge power pricing and input costs to stabilize returns. Overall, through our resilient asset base, Alberta remains a market where we can harvest returns in the short and long term. This includes data center opportunities. Genesee is well-positioned to benefit from any data center demand that comes to the province. That said, we continue to believe it represents one of the most compelling sites in North America for a gigawatt-scale data center to be co-located.
Since 2023, Alberta pool pricing has declined by approximately 70%.
Despite this decline, our 2025 year-to-date clean spark spreads at Genesis 1 and 2 have increased through a combination of improved efficiency, lower carbon intensity, and hedging.
Our repowered units are now, the most efficient in Canada. We've also reduced their carbon intensity below the Alberta tier Benchmark threshold, which means we currently pay no carbon tax on these units.
Finally, we continue to actively hedge power pricing and input costs to stabilize returns overall through our resilient asset base. Alberta remains a market where we can harvest returns in the short and long term. This includes data center opportunities.
Genese is well positioned to benefit from any data center demand that comes to the province.
Avik Dey: It offers a comprehensive solution that balances affordability and reliability concerns and allows for a gigawatt-scale data center to move forward in a timely fashion, which is critical in the market today. Under ASO's large load interconnection process, a one gigawatt project is not viable under phase one. However, we will continue to pursue the one gigawatt scale option through phase two and further consultation with government. In addition, we chose not to pursue a smaller project at Genesee. However, we will pursue opportunities to provide PPAs to other DC projects that require a generation partner with available dispatchable power today. The Genesee Repowering Project, which moved us off pole, and our creative acquisitions have reinforced our strong asset positioning relative to industry peers. We operate a younger, more efficient fleet, an important advantage in merchant markets where higher efficiency translates into stronger returns across the cycle.
That said we continue to believe it represents 1 of the most compelling sites in North America for a gigawatt scale data center to be co-located.
It offers a comprehensive solution that balances affordability and reliability concerns, allowing for a gigawatt-scale data center to move forward in a timely fashion, which is critical in the market today.
2 and further consultation with government.
In addition, we chose not to pursue a smaller project at Genesis.
However, we will pursue opportunities to provide ppas to other DC projects that require a generation partner with available dispatchable power today.
Avik Dey: Further, the younger age of our assets implies a longer remaining useful life, which enhances our competitiveness for long-term contracting opportunities. These contracts are key to driving both improved returns and greater stability of our cash flows. With that, I will hand it over to Sandra to walk through our funding considerations and financial results before I conclude the call and open the floor to questions.
The Genese repowering project, which moved us off coal, and our accretive acquisitions have reinforced our strong asset positioning relative to industry peers. We operate a younger, more efficient fleet, an important advantage in merchant markets where higher efficiency translates into stronger returns across the cycle.
Sandra Haskins: Thanks, Avik. We are proud of our growth and how we have funded it. Our approach has been balanced and based on our ability to access multiple pools of low-cost capital. Most recently, we proudly executed our inaugural US debt issuance on the back of getting our third investment-grade credit rating from Fitch at triple B minus. This $1.2 billion private offering was multiple times oversubscribed for both the three-year and ten-year tranches. Our debt maturity profile continues to be well-lattered, which reduces refinancing risk in any given year. From an equity perspective, we have been highly successful in accessing discrete common equity. Our ability to deliver sustainable, growing dividends while maintaining a low-risk capital structure and investing in high-quality growth sets us apart from our IPP peers.
Further the younger age of our assets, implies a longer remaining useful life which enhances our competitiveness for long-term Contracting opportunities. These contracts are key to driving both improved returns and greater stability of our cash flows with that. I will hand it over to Sandra to walk through our funding considerations and financial results before I conclude the call and open the floor to questions.
Thanks AIC.
We are proud of our growth and how we have funded it. Our approach has been balanced and based on our ability to access multiple pools of low-cost capital
Most recently, we proudly executed our inaugural US debt issuance on the back of getting our third investment grade credit rating from Fitch at Triple B minus.
This 1.2 billion dollar private offering was multiple times oversubscribed for both the 3 year and 10 year tranches.
Our debt maturity profile continues to be well LED which reduces refinancing risk in any given year.
From an equity perspective, we have been highly successful in accessing discrete common equity.
Sandra Haskins: Reflecting on our recent efforts, we're proud to have completed and achieved commercial operation of our largest growth project, closed the largest acquisition in our history, and expanded into a new US market, increased our dividend by 6%, all while remaining within our guardrails from a payout and leverage perspective. These achievements underscore our strong positioning for continued growth. Now let's dive into our Q2 2025 results. Capital Power delivered strong financial and operational performance. Adjusted EBITDA was $322 million, which was flat year over year, driven by the diversification of our US flexible generation contributions offset by the sell-down of PDN and Quality Wind in Q4 2024 and lower renewable resource in 2025. AFFO reached $235 million, up $57 million from Q2 2024, driven by lower income tax, reduced sustaining capital, and settlement of coal compensation.
Our ability to deliver sustainable growing dividends while maintaining a low-risk capital structure and investing in high-quality growth sets us apart from our IPP peers.
Reflecting on our recent efforts. We're proud to have completed and achieved commercial operation of our largest growth project.
Close the largest acquisition in our history and expanded into a new US market.
Increased our dividend by 6%, all while remaining within our guardrails from a payout and leverage perspective.
These achievements underscore our strong positioning for continued growth.
Now let's dive into our Q2 2025 results.
Capital Power delivered strong financial and operational performance. Adjusted EVA was $322 million, which was flat year-over-year, driven by the diversification of our U.S. flexible generation contributions, offset by the sell-down of PDN and quality wind in Q4 2024, along with lower renewable resource contributions in 2025.
Afo.
Sandra Haskins: These gains were partially offset by higher financing costs from recent debt issuances and lower joint venture contributions. Overall, the quarter reflects our ability to execute our strategic priorities amid macroeconomic uncertainty. This slide breaks down adjusted EBITDA variance across our four new reporting segments. Our US flexible generation is up 10% in Q2 2025, driven by partial contributions from PGM assets and strong dispatch performance. Our Canadian flexible generation is up 2%, supported by strong Alberta dispatch and lower emissions costs. Repowered Genesee units, which incurred minimal carbon tax, enabled margin expansion despite a $5 per megawatt-hour drop in captured price. And finally, our renewables portfolio continues to contribute meaningfully, though adjusted EBITDA declined year over year due to lower wind resource in Canada and the US. The values in this table are fully consolidated for comparability purposes with prior periods.
Reached 235 million up 57 million from Q2, 2024 driven by lower income tax reduced, sustaining capital and settlement of coal compensation.
These games were partially offset by higher financing costs from recent debt issuances and lower joint venture contributions.
Overall, the quarter reflects our ability to execute our strategic priorities amidst macroeconomic uncertainty.
This slide breaks down adjusted ebit of variance across our 4 new reporting segments.
Are us flexible. Generation is up, 10% in Q2, 2025 driven by partial contributions from PGM assets, and strong, dispatch performance.
Our Canadian flexible generation is up 2% supported by strong Alberta dispatch and lower emissions costs repowered genese units, which incurred minimal carbon tax enabled, margin expansion despite a 5 dollar per megawatt-hour drop in captured price.
And finally our Renewables portfolio continues to contribute meaningfully. So adjusted ebit a decline year-over-year, due to lower wind resource in Canada and the US
The values in this table are fully Consolidated for comparability purposes with prior periods.
Sandra Haskins: For the first half of 2025, adjusted EBITDA was $689 million, up $77 million from the same period in 2024. Key drivers included stronger contributions from our US flexible generation portfolio, reflecting full-period results from La Paloma and Harkowala, which closed February 2024, and the addition of Hummel Station and Rolling Hills, which closed June 2025. Lower emissions costs from our Canadian flexible generation portfolio, driven by the Genesee Repowering, and reduced corporate expenses, primarily driven by lower salary costs. AFFO totaled $454 million, up $126 million year over year, driven by the same factors noted in the Q2 variance, most notably tax recovery, lower sustaining capital, and coal compensation settlement, partially offset by higher financing costs. Due to the addition of Hummel and Rolling Hills to our portfolio, we have updated our 2025 full-year guidance.
Period in 2024.
Key drivers included stronger contributions from our us flexible. Generation portfolio reflecting full period results from La polomann har koala, which closed February 2024 and the additional of Hummel station and Rolling Hills which closed June 2025
Lower emissions costs. From our Canadian flexible generation portfolio driven by the genese repowering.
And reduced corporate expenses, primarily driven by lower salary costs.
Afo total 454 million up, 126 million year-over-year driven by the same factors noted in the Q2 variance, most notably tax recovery lower sustaining capital and coal compensation settlement partially offset by higher financing costs.
Sandra Haskins: The revised adjusted EBITDA range is now projected to be between $1.5 billion and $1.65 billion, reflecting nearly seven months of contributions from the newly acquired PGM assets. The range continues to be supported by our strong long-term contracts and prudent risk management activities across our uncontracted assets. The revised AFFO range is expected to be between $950 million and $1.1 billion, a significant increase from original guidance due to the favorable tax impacts and the newly acquired assets. Sustaining capital is now forecast between $215 million and $245 million, covering over 40 planned outages. These revisions reinforce our confidence in the strategy and our ability to deliver strong financial performance. With that, I will hand it back to Avik to conclude the call.
Due to the addition of Homeland Rolling Hills to our portfolio. We have updated our 2025 full year guidance.
The revised adjusted EBITDA range is now projected to be between $1.5 billion and $1.65 billion, reflecting nearly 7 months of contributions from the newly acquired PGM assets.
The range continues to be supported by our strong long-term contracts and prudent risk management activities across our on contracted assets.
The revised AFFO range is expected to be between $950 million and $1.1 billion, a significant increase from the original guidance due to the favorable tax impacts and the newly acquired assets.
Sustaining capital is now, forecast between 215 million and 245 million covering over 40 planned outages.
These revisions reinforce our confidence in the strategy and our ability to deliver strong financial performance.
Avik Dey: Thanks, Sandra. To recap, the transformation of our business has created a more resilient, diversified, and growth-oriented platform with one of the most efficient natural gas fleets in North America. Our ability to operate safely, efficiently, and economically is what distinguishes us from our peers. As we look forward, we have multiple ways to win from both organic and inorganic growth perspectives. Our business is comprised of a young and efficient fleet, strategically positioned in markets with strong fundamentals. We have a proven ability to deliver rooted in disciplined capital allocation and a strong balance sheet, which has driven our compelling ten-year total shareholder returns of approximately 15% per year. We are a leading North American independent power producer positioned to capture value in markets that are expanding. We are excited about the future and the opportunities we see unfolding in this sector.
With that, I will hand it back to avoc to conclude the call.
To deliver rooted in discipline Capital allocation and a strong balance sheet which is driven our compelling tenure. Total shareholder returns of approximately, 15% per year,
We are a leading North, American Independent power, producer positioned to capture value, in markets that are expanding. We are excited about the future and the opportunities we see unfolding in this sector.
Avik Dey: Before we start Q&A, I'm pleased to announce that we will be hosting our 2025 Investor Day event on December 9th and 10th in Toronto. We will provide more details in due course. Capital Power's leadership team is excited to connect with our investors at this event. We appreciate your continued support of our business. I will now hand it over to the operator to start Q&A.
Before we start the Q&A, I'm pleased to announce that we will be hosting our 2025 Investor Day event on December 9th and 10th in Toronto. We will provide more details in due course. Capital Power's leadership team is excited to connect with our investors at this event. We appreciate your continued support of our business. I will now hand it over to the operator to start the Q&A.
Roy Arthur: Thank you. Ladies and gentlemen, if you'd like to ask a question at this time, you will need to press star one one on your touchstone telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. Please stand by while we compile the current ambassador. Our first question coming from the line of Robert Hope with Scotiabank. You're on it now, Owen.
Thank you, ladies and gentlemen. If you'd like to ask a question at this time, you will need to press *1 1 1 on your touchtone telephone and wait for your name to be announced to withdraw your questions. Simply press *1 1 1. Again, please stand by while we compile the Kenya roster.
Our first question coming from the line of Robert, hope would score your bank. Your line is now open
Speaker 5: Morning, everyone. Just regarding the Genesee commentary on the data centers, they're not pursuing a smaller opportunity there. Are you able to monetize your allocation there? And as part of that, can you make it contingent that it is included with some sort of PPA with the eventual build-out there? And I guess secondly, how should we think about kind of the timing of phase two there?
Uh, morning everyone. Um, just regarding the, uh, the Genesee, uh, commentary on the data centers, there are not pursuing a smaller opportunity there. Um, are you able to monetize your allocation there? And as part of that, can you make it contingent? Um, that it is included with some sort of PPA with, uh, uh,
With the, uh, with the eventual build-out there. And I guess, secondly, you know, how should we think about kind of the timing of Phase 2 there?
Avik Dey: Hi, Rob. Thanks. Let me just start by saying our business in Alberta is Genesee, and Genesee is Capital Power. And if I was to characterize our Alberta business, I would say two things. It's resilient, and it's positioned for growth when growth comes to Alberta. And you know the slide showed just in terms of our ability to capitalize on lower prices while increasing spark spread. Why that's important for this data center conversation? We started on this data center journey two years ago in the US. We've been incredibly fortunate that we've been able to learn from our partners amongst data center providers, hyperscalers of what's required to build hyper-data centers. And so that as a preamble, we have incredible flexibility on the Genesee site. As a leading generator in Alberta, our core business is to provide power.
Hi, Rob. Thanks. Um, let me just start by saying uh, our business in Alberta is Genesis.
And Genesis is capital power. And if I was to characterize our Alberta business, I would say, 2 things, it's resilient and it's positioned for growth when growth comes to Alberta. And, you know, the slide showed just in terms of, uh, our ability to capitalize on lower prices while increasing spark spread why that's important for this data center conversation. We started on this data center Journey 2 years ago. In the US, we've been incredibly fortunate that we've been able to learn from our partners amongst data center providers, hyperscalers of what's required to build hyper data centers. And so, uh, that as a preamble, um, we have incredible flexibility on the Genesis site.
Avik Dey: And so with this phase one, we do expect to be able to monetize our capacity by providing power to other data center projects because that's our role in the province and thereby actually preserving optionality on our site. Our physical site at Genesee is incredibly advantaged for a large hyper-data center. We chose not to use that 375 megawatts for a smaller data center project because our site has the advantage of redundant access to fiber, which is critical for a large data center. Our site has access to transmission and distribution that would require no bulk system upgrades, thereby reducing costs for power for Albertans. And so preserving that optionality was important. But make no mistake, we will be a participant because we are a preeminent generator in the province. And those data center projects that require generation partners through PPAs, we will likely be a player there.
As a leading generator in Alberta, our Core Business is to provide Power. And so with this Phase 1, uh, we do expect to be able to monetize, uh, our capacity by providing power to other data center projects because that's our role in The Province and thereby actually preserving optionality on our site. Our physical site at Genesis is incredibly advantaged for a large, hyper data center, we chose not to use that. 375 megawatts for a smaller data center project because our site has the advantage of redundant access to fiber, which is critical for a large data center. Uh our our site has access to transmission and distribution that would require no bulk system upgrades.
Thereby reducing costs for power for Albertans and so preserving that optionality was important. But make no mistake, we will be a participant because we are a preeminent generator in the province. And those data center projects that require generation partners through PPAs, uh,
Avik Dey: So hopefully that answers the question. But you know it's an important positioning point for us because for us, data centers are a new customer for our generation capacity on both sides of the border. In Alberta, it's unique because we happen to have a very unique physical site.
To be a player there. So hopefully that answers the question. But you know, it's an important positioning point for us because for us, the data centers are a new customer
For our generation capacity on both sides of the Border in Alberta. It's Unique because we happen to have a very unique physical sight.
Speaker 5: I appreciate that. And then maybe to switch gears, you know there's a lot going on in the organization with integration of PJM and as well as data centers. You know when we think about incremental M&A, you know do you think you have enough horsepower to focus on transacting you know in the near term? And what does that market look like?
Appreciate that. Uh, and then maybe to switch gears, you know, there's a lot going on in the organization with the integration of PJM as well as data centers. You know, when we think about incremental M&A, do you think you have enough horsepower to focus on transacting, you know, in the near term? And what does that market look like?
Avik Dey: Just in PJM or more broadly?
Speaker 5: More broadly.
Broadly.
Avik Dey: Look, I think we have a 15-year track record of acquiring plants, integrating them, optimizing them, finding upgrades and expansions. Nothing has changed. This journey for us in terms of expansion, we identified this as an opportunity at our January 2024 Investor Day, and we've executed against it. You know I made this comment to our team this week. In my career, having been a serial acquirer and investor in assets and companies, I've never been involved in a transaction where we announced, financed, and closed a transaction of this size all in the same quarter. So our ability to execute, I think, is well established. In terms of forward opportunity, we're continuing to see inbounds, both bilateral and auctions. And I think what's really separating us is our ability to execute and operate efficiently and safely. Because what's underpinning the opportunity to acquire assets today is two things.
Um look I think we we have a 15 year track record of acquiring plants, integrating them, optimizing them finding uprights and expansions, uh, nothing has changed. Um, this journey for us in terms of expansion. We identified this as an opportunity at our January 2024, investor day and we've executed against it. Um, you know, I, I made this comment, uh, to our team this week, um, in my career, uh, having been a Serial acquirer and investor in assets. And companies, I've never been involved in a transaction where we announced financing and closed the transaction of this size all in the same quarter. So our ability to execute, I think is well established. Um, in terms of forward opportunity, we're continuing to see, uh, inbounds uh both uh, bilateral uh and auctions. Um, and I think what's really separating us
Avik Dey: You know the relative arb between the cost to purchase these assets and what the cost of new entry is continues to widen. But to be able to capture that value, you need to be able to come in, take ownership of these assets, and steward operational efficiencies, upgrades, expansions, and recontracting. And the broader universe of investors does not currently, it's not to say they can't build it, but they don't currently have the same capability and capacity, i.e., the people to go execute that. So we feel pretty good about the acquisition pipeline, the expansion pipeline, the recontracting pipeline. All of that continues to get more favorable for us as a company.
Is our ability to execute and operate efficiently and safely because what's underpinning the opportunity to acquire assets? Today is 2 things, you know the relative ARB between the the cost to purchase these assets and what the cost of new entry is continues to widen, but to be able to capture that value, you need to be able to come in, take ownership of these assets and Steward operation.
Efficiencies upgrades, expansions and recontracting. And the broader Universe of investors uh does not currently it's not to say they can't build it, um, but not C. They don't currently have the same capability and capacity.
Speaker 5: Thank you.
Thank you.
Roy Arthur: Thank you. Our next question coming from the line of Julian Dumont-Smith with Jeffrey. He's on his now open.
Thank you. Our next question comes from the lineup.
Julian, Timon Smith with Jeffrey fionn is now open.
Speaker 5: Hi, this is Tanner on for Julian. How are you guys doing?
Hi, this is Tanner on for Julian. How are you guys doing?
Avik Dey: Great, Tanner.
Great Tanner.
Speaker 5: Hi. So thank you for your commentary on the recontracting opportunity. Just a follow-up to that. Has the tenor of conversations with existing customers at all shifted given the recent inflationary data points for electricity prices? I know last quarter, Avik, you mentioned you're always balancing options and that perhaps in the event you can't reach agreements on commercial terms, you could weigh options for expansion or co-location. Has that line of thinking evolved?
Um, so so thank you for your commentary on the recontracting opportunity. Uh, just a follow-up to that uh, has the tenor conversations with existing customers that all shifted given the recent inflationary data points for electricity prices. I, I know last quarter AIC, you mentioned, you're always balancing options, uh, and that perhaps in the event, you can't reach agreements on Commercial terms, you could weigh options for expansion or collocation, uh, has that line of thinking evolved
Avik Dey: It has evolved only from the standpoint that we're seeing more interest in recontracting and more parties coming to the table at our different facilities. But the context that's changing is we're able to have more comprehensive conversations around what a recontracting looks like, whether it's term, it's pricing, it's how do we talk about further partnerships with potential off-takers, how do we parlay those conversations into broader discussions, whether it's through expansions or upgrade projects. So I think the tailwinds of increasing demand, reducing reliability, and the importance of addressing near-term grid firming requirements is opening up a broader opportunity set for recontracting. All of that is subject to utilities and their IRPs, and most importantly, us having strong working relationships with those utilities and loan-serving entities. But we're excited about the opportunity set.
Uh, it has evolved, uh, only from the standpoint that, uh, we're seeing more interest in recontracting, uh, and more, uh, parties coming to the table at our different facilities. And but the context that's changing is, uh, we're able to have more comprehensive conversations around what recontracting looks like, whether it's term, its pricing. Uh, it's how do we talk about, you know, further partnerships with potential off-takers? How do we, uh, parlay those conversations into broader discussions, whether it's through expansions or upgrade projects? So I think the tailwinds of uh, increasing demand, uh, reducing reliability, uh, and the importance of addressing near-term grid firming requirements, um, is opening up a broader opportunity.
Avik Dey: We're not in a position to announce something now, but I would say things are progressing and we continue, we're having more conversations and they're moving forward in a positive direction.
Set for a recontracting. Uh, all of that is subject to, you know, Utilities in their irps and most importantly, um, us having strong working relationships with those Utilities in load serving entities. But we're, we're excited about the opportunities that, um, we are not in a position to announce something now, but I would say, uh, things are progressing, uh, and we continue, we're having more conversations and they're moving forward. Um, in a positive
Speaker 5: Great. And switching gears here, on the PJM acquisition, now that you have the PJM assets in the portfolio, you've had a better look at them. Are there further opportunities for upside to the accretion figures you initially provided? Perhaps specifically here, kind of given the age and the composition of Rolling Hills, could there be some opportunity or some form of optimization or improvement relative to your initial expectations?
Great, uh, and Switching gears here. Uh, you know, on the pjm acquisition now that now that you have the pjm Assets in the portfolio, uh, you you've had a better look at them. Uh, are there further opportunities for upside to the accretion figures you initially provided, you know, perhaps specifically here, kind of given the uh, the age and and the composition of Rolling Hills, could there be some opportunity or for, you know, some form of optimization or Improvement relative to your initial expectations,
Speaker 6: Yeah, thanks for the question, Tanner. Yeah, what we're seeing right now with having owned the assets for just over six weeks is that they are performing in line with business case currently. But as we noted at the time of the acquisition, is that we do see the ability for us to optimize and improve and then be able to do upgrades on the site as well. So while nothing there is scheduled to occur in the immediate term here, we do expect that there will be the same opportunities with those assets as what we saw with other acquisitions where we're able to find some improvements and increase the accretion on those.
Speaker 6: And when we think about, you know, capital allocation to upgrades, expansions, whatnot, as we go into 2026 and the integration continues to go extremely well with these assets, is that the current development project, now that repowering is done, Halcurt II and our solar project in Ontario upgrades, is that we're going into 2026 with the expectation of having over 1 billion of discretionary cash flow that we'll be able to deploy to upgrades, to acquisitions, to expansions. So with that and leveraging that allows us to do 2 billion in growth opportunities next year without even accessing the equity market. So expect that there's a lot of opportunity for us over the next 18 months to announce highly accretive growth initiatives.
Uh, what we're seeing right now is having, you know, own the assets or just just over 6 weeks is that uh they are performing in line with with business case, um, currently. But as we noted at the time of the acquisition is that, uh, we do see the ability for us to to optimize and improve and then be able to do upgrades on on the site as well. So while nothing there is scheduled uh, to occur in in the immediate term here. We we do expect that there will be the same opportunities with those assets as what we saw with other Acquisitions where, where we're able to, uh, to find find some improvements and up up up, increase the, uh, the appreciation on those. And when we think about, you know, Capital allocation to operate expansions whatnot, whereas we go into 2026 and the integration continues to go extremely well, with these assets, is that, um, the current development projects now that repower,
Is done, uh, however, 2 and our solar solar projects in Ontario operates is that we're going into 2026 with the expectation of having over 1 billion of, uh, discretionary cash flow, that will be able to deploy, uh, to upgrade to Acquisitions to expansion. So um, with that and leveraging that uh uh allows us to do 2 billion in in growth opportunities next year. Uh, without even accessing the equity Market.
It's expected. There's a lot of opportunity for us, uh, over the next 18 months to, uh, to announce, uh, highly accretive, uh, growth growth initiatives.
Speaker 5: Fantastic. Thank you very much.
Fantastic. Thank you very much.
Roy Arthur: Thank you. Our next question coming from the line of Mark Jarvey with CIPC. You're on his now open.
Thank you. Our next question, coming from the line of Mark Jarvy with CIBC, is now open.
Speaker 7: Hi, everyone. Just coming back to the comments and Rob's question, Genesee, sort of the path forward. The decision not to take the allocation to phase one, was that just the view that you couldn't get enough capacity initially to meet a customer demand, or was it on the customer side where you seem to feel like you're getting traction and you decided to forego the opportunity for now, at least in taking that allocation?
Hi everyone. I'm just coming back to the comments. Rob's question. Jesus or the path forward, the decision not to take the allocation to phase 1. Was that just the view that you couldn't get enough capacity, uh, initially to meet a customer demand or was it on the customer side where you just didn't feel like you're getting traction and you decided to forego the opportunity for now at least uh and taking that allocation
Avik Dey: Thanks, Mark. We and our partner did not see a path to securing the 1,000 megawatts through phase one that was required to go forward with our project. So you know I think, as I said, we're going to continue to advocate and pursue it together with our partner through phase two and subsequent to that. But that was why we elected to go down the path that we did.
Speaker 7: Then in terms of, you know, I think you mentioned you could provide power to other data center operators. How do you balance that in terms of maybe locking in some off-take versus keeping the optionality open for a bigger gigawatt-type opportunity at Genesee?
Thanks, Mark. We and our partner did not see a path to securing the thousand megawatts through Phase 1 that was required to go forward with our project. So, you know, I think, as I said, we're going to continue to advocate and pursue it together with our partner, um, you know, through Phase 2 and subsequent phases. But that was why we elected to go down the path that we did.
Avik Dey: Great question. There's 1,200 megawatts that was accounted for by the ASO as available for generation for large loads starting in 2027. That does not include the capacity that we currently have installed at Genesee that's above the 466 MSCC limit. So it goes back to the original point I made around resilience and position for growth in Alberta. We, as a large generator with the most efficient and largest power plant in Alberta, are in the middle of providing critical baseload power and have the flexibility to contract that capacity.
In terms of, you know, I think you mentioned you could provide power to other data center operators. How do you balance that in terms of maybe, you know, locking in some offtake versus keeping the optionality open for a bigger gigawatt-type opportunity at Tennessee?
Uh, great question. Uh, there's 1,200 megawatts that was, uh, accounted for, um, by the ASO as available for generation for large loads. Uh, starting in 2027 that does not include, uh, the capacity that we currently have installed at genese, uh, that's above the 466 mscc limit.
So it goes back to the original point. I made around resilience and position for growth in Alberta.
Avik Dey: So in our view, given where we stand on T&D and the fact that there isn't a significant investment in T&D required to co-locate a data center at our site, we believe we've got significant flexibility to not just provide PPAs to others in the short to medium term, but also to pursue the larger project on our site with a partner. I think the key point in all of this is it's not about the data center. It's about providing power generation to customers. This has been our core competency for 15 years in all the markets that we play, and predominantly in our home market, which is Alberta.
We as a large generator, with the most uh, efficient and largest power plant in Alberta are in the middle of providing critical base, load power and have the flexibility to contract that capacity. So, uh, in our view given where we stand, uh, on tnd and the fact that there isn't a significant investment in tnd, required to co-locate a data center at our site. We believe we've got significant flexibility to not just provide ppas to others uh in the short to medium term. Uh, but also to pursue the larger project
Avik Dey: So for us, that was our calculus in making that decision to either elect, pursue more megawatts, and the decision we've ultimately made, which is we have an opportunity to provide a PPA and participate in phase two just as a straight-up power provider, which requires no capital on our behalf, just the monetization of megawatts, while continuing to work with government and pursue what we think would be a transformative project, not just for Alberta, but for the country.
just the monetization of megawatts uh, while continuing to, to work with government and pursue what we think is would be a transformative project not just for Alberta but for the country
Speaker 7: Just based on the phase one allocations, your choice to not move forward right now and maybe a bit longer timeline at Genesee, what's sort of the confidence level that you'll actually see that 1,200 megawatts that excess generation be absorbed by data centers by 2029 timeframe in Alberta?
Just based on the phase 1 allocations. Um, your choice to not move forward right now and maybe a bit longer timeline at genese um which sort of the confidence level that you'll actually see that 1,200 megawatts.
Avik Dey: I can't comment on what others are doing. I think we've been in the midst of a number of commercial organizations and feel confident that others are going to be able to execute some smaller projects, which we welcome and think is great news for the province and the industry. And look, you know all new demand coming in and new industry coming in to create jobs and bring capital into Alberta is positive for the Alberta power industry. And you know with Genesee specifically, it's positive for consumers around electricity pricing, which is where our focus is. So you know I think there will be projects done. We'll see where it comes out relative to the 1,200. But our business in Alberta is resilient. And I go back to the point that 60% of our business is focused in thriving and growing US markets.
That excess generation be absorbed by data centers by 2829. Time frame: in Alberta.
Avik Dey: So as we've demonstrated in 2025, our business, we increased our spark spread amongst a 70% drop in price in 2025. And why that's important is it positions us well to provide off-takes to new customers in this province.
I can't comment on what others are doing. I I think we've been in the midst of a number of commercial organizations and and feel confident that, you know, others are going to be able to execute the smaller projects which we welcome and think is great news for the province and the industry and and look uh, you know, all new demand coming in and new industry coming in to create jobs, and bring Capital into Alberta as positive for the Alberta power industry. Um, and you know, and with Genesis specifically is positive for consumers around electricity pricing, uh, which is where our focus is so. You know, I I I think there will be projects done. We'll see where it comes out relative to the 1200 but our business in Alberta is resilient and I go back to the point that 60% of our businesses, uh, focus in, you know, thriving and growing us markets. So as we've demonstrated in,
2025 uh, our business. We we increased our spark spread amongst the 70% drop in price in 2025 and why that's important is it positions us. Well, to provide off takes to new customers in this province.
Speaker 7: Maybe just using moving to the US business, talked about recontracting opportunities. We're also seeing on the gas supply, some of the producers' infrastructure firms become more involved on the power side of things. How do you think that's shaping in terms of gas supply, spark spread realization? Are you thinking more longer term if you lock in on the power supply that you sort of match that with gas supply and are there sort of active dialogue there?
Maybe just moving to the U.S. business, talked about recontracting opportunities. We're also seeing on the gas supply that some of the producers' infrastructure firms become more involved on the power side of things. How do you think that is shaping the terms of gas supply? Spark spread realization—are you thinking more longer term if you lock in on the power supply that you sort of match that with gas supply in order to sort of have an active dialogue there?
Avik Dey: There's absolutely active dialogue across the entire gas to molecule to computed megabyte value chain. It's something that we're a huge advocate of because, you know, as we said in January 2024, this is all going to be about balanced energy solutions and how you bring that value chain together. I think specifically around gas supply, midstream contracts, and firming up the infrastructure to provide gas generation capacity, that's more tied to IRP requests or around new generation capacity. We're not seeing that being as relevant to upgrades and expansions. So if you look at our business, which is primarily focused on acquiring mid-merit CCGTs and peakers and finding ways to upgrade, expand, and recontract those, you know, the gas supply for the most part, because our historic strategy for 15 years has been go in where there's firm gas supply, go in where there's existing T&D.
Uh, there's absolutely active dialogue across the entire gas molecule to computed megabyte value chain. It's something that we're, uh, a huge advocate of because, you know, as we said in January 2024, this is all going to be about balanced Energy Solutions and how you bring that value chain together. I think specifically around gas supply, midstream contracts, and firming up the infrastructure to provide, uh, gas generation capacity. That's more tied to, uh, IRP, you know, uh, IRP requests or uh, around new generation capacity. Uh, we're not seeing that being as relevant to up.
Avik Dey: It's less of a concern in the plants that we're targeting. But I think it's going to be a critical component to the broader ecosystem as it develops. Midstreamers are going to have to be part of the conversation for new build. Upstream companies are going to have to be part of the conversation as we continue to look at new builds, and utilities are considering that right now as they're looking at their IRPs and trying to firm up infrastructure build-out over the next decade. It's a critical point. That's the conversations that are happening amongst load-serving entities and RTOs right now.
Rates and expansions. So if you look at our business, which is primarily focused on acquiring mid-merit combined cycle gas turbine (CCGT) plants and peers, and finding ways to upgrade, expand, and recontract those, you know, the gas supply for the most part, because our historic strategy for 15 years has been going where there's firm gas supply, go in where, you know, there's existing transmission and distribution (T&D). It's less of a concern in the plants that we're targeting, but I think it's going to be a critical component to the broader ecosystem as it develops. Midstreamers are going to have to be part of the conversation. For new build upstream companies, they are going to have to be part of the conversation as we continue to look at new builds. Utilities are considering that right now as they're looking at their integrated resource plans (IRPs) and trying to, you know, firm up infrastructure and build out over the next decade. It's a critical point. That's the conversations that are happening amongst loads.
Speaker 7: Understood. Okay. Thanks for the time today.
Are serving, entities and RTO right now.
Understood. Okay, thanks for the time today.
Roy Arthur: Thank you. And our next question coming from the line of Maurice Joy with RBC Capital Markets. You're on this now open.
Thank you.
From the lineup.
Speaker 8: Thank you. And good morning, everyone. Just wanted to come back to the Alberta data center theme here. It's clear that phase two is a focus for you and your stock, and you previously wrote that there were things in phase one that were suboptimal. When you look at phase two, what tangibly do you think needs to change for your gigawatt-scale data center opportunities to materialize?
Maurice Joy with RBC Capital markets, Elon is now open. Thank you and good morning, everyone. Um, just wanted to come back to the
Phase 2 is a focus for you and your stock uh and you previously wrote that there were things in Phase 1, that were suboptimal. Uh when you look at Phase 2 what tangibly do you think needs to change for your gigawatt scale data center opportunities to materialize?
Avik Dey: Hey, Maurice. Thanks for the question. I think phase two is really going to be dependent upon two things. One, how much capacity remains available from phase one to be discussed in phase two, because phase two will really be a conversation around what the glide path is to installed capacity. Phase one is where data centers and data center providers are going to have to put up a deposit to execute projects. But the long-term opportunity is how do we create an ecosystem that allows for new generation build and large-scale data centers to be installed and built in the province. Why we are so focused on our site as a hyper-data center is all the ingredients exist for the customer. At the end of the day, this opportunity only exists because it's an economic one with access to market in a timely fashion.
Hey Maurice. Uh thanks for the question. Uh, I think
1. How much capacity remains available from Phase 1?
Uh, to be discussed in Phase 2, because Phase 2 will really be a conversation around. Uh, what the Glide path is to installed capacity.
Um, Phase 1 is where data centers and data center providers, are going to have to put up a deposit, uh, to execute projects. But the long-term opportunity is, how do we create an ecosystem, uh, that allows for New Generation build and large-scale data centers to be, uh, installed and built in the province.
Avik Dey: It's not a business we can create without creating the economic conditions for those customers to come in at scale and for duration for an investment that'll be in the tens of billions of dollars. So you know we will be an active participant in phase two. The government and the ASO have been clear that you know they, in their allocation process, that they thought the smaller allocations were the better way to go about it. We're supportive of that by virtue of us participating the way we hope to participate. But it doesn't take our foot off the gas of advocacy for this 1,000-megawatt site. So whether it's phase two or it's through, you know, further conversations and dialogue to identify a pathway for that 1,000-megawatt site, we'll continue down that path.
Why we are so focused on our site? Uh as a hyper data center is all the ingredients exist for the customer. At the end of the day. This opportunity only exists because it's an economic 1 with access to Market. In a timely fashion, it's not a business, we can create without creating the economic conditions for those customers to come in at scale and for duration for an investment that will be in the tens of billions of dollars. So you know, we will be an active participant in Phase 2, uh the government and the ASO has been clear that you know they you know in their allocation process that you know. They thought the smaller allocations were the better way to go about it. We're supportive.
Avik Dey: And I think it's important also to recognize that, you know, we are not a data center provider. We're not in the data center business. What we're trying to do is firm up bringing in new demand for the market in Alberta. Whether it's on our site or someone else's, we believe that having these large sites is in the best interest of all market participants.
Of that, uh, by virtue of us, uh, participating in the way we, uh, hope to participate. But it doesn't take our foot off the gas of advocacy for this thousand megawatt site, so whether it's Phase 2 or it's through, you know, further conversations and dialogue, uh, to identify a pathway for that thousand megawatt site. Um, we'll continue down that path and I think it's important also to recognize that, you know, we are not a data center provider. We're not in the data center business. What we're trying to do to what we're trying to do is firm up bringing in new demand for the market in Alberta.
Whether it's on our site or someone else's, we believe that having these large sites is in the best interest of uh, all Market participants.
Speaker 8: Thanks, then. Maybe just a quick follow-up to that. I know the system operator is beginning its engagement on a long-term framework perhaps later this year. Is it fair to say that given that timing, any gigawatt-scale DC announcement you may make is possibly more of a mid-2026 onwards event?
Thanks. And I mean, just a quick follow up to that, I know the system operator.
Is beginning its engagement on a long-term framework, perhaps later this year uh is it fair to say that? Given that timing any gigawatt scale, DC announcement. You may make is possibly more of a mid 2026 onwards event.
Avik Dey: Well, I think there's different elements to this, Maurice. I think the advantage Alberta has today, and I've said this publicly and at conferences and at multiple meetings with investors, the advantage Alberta has today is we have a pathway to a large data center that can be in service by 2028. We've been incredibly fortunate with deep dialogue with a number of hyperscalers and data center providers over the last two years as this business is maturing rapidly. And what's been clear to us is the market is not focused on in-service states that are 2029, 2030, 2031. All of the attention of hyperscalers and data center providers as it relates to AI-related compute is laser-focused on 2027, 2028, and maybe first half of 2029. So that's why for us, preserving the option value and continuing this advocacy is important because we've got a 12-gigawatt fleet across North America.
Well, I think there's 2. There's different elements to this Maurice. I think the advantage Alberta has today. And I've said this, uh, publicly and at conferences and at multiple meetings with investors, the advantage. Alberta has today is we have a pathway to a large data center that can be in service by 2028.
We've been incredibly fortunate to have deep dialogue with a number of hyperscalers and data center providers over the last two years as this business matures rapidly.
And what's been clear to us is the market is not focused on inservice dates that are 2029 2030 2031, all of the attention of hyperscalers and data center providers. As it relates to AI. Related compute is laser focused on 2027 2028 and maybe first half of 2029
Avik Dey: We're seeing this play out in different markets. And we believe the best play for us is to continue to advocate for a quick in-service date. And because we've got the ingredients at Genesee to advocate for that. But again, I would go back to the point in terms of materiality for us in our business. Alberta is resilient and it's positioned for this growth, whether it's our data centers or someone else's.
So that's why for us preserving the option value and continuing this advocacy is important, because we've got a 12 gigawatt suite across North America. We're seeing this play out in different markets.
And we believe the best play for us is to continue to advocate for a quick in-service date. Um, and because we've got the ingredients at Genesis to advocate for that. But again, I would go back to the point in terms of materiality for us. Uh, in our business, Alberta is resilient and it's positioned for this growth, whether it's our data centers or someone else's.
Speaker 8: Understood. Maybe just to finish up on a strategy question, in your prepared remarks, you mentioned that you continue to see opportunities to acquire generation capacity for significantly less cost than new build. There clearly are some more PGM assets out there today. So just your view as to what the gating factors are when assessing these opportunities. For example, how big do you see PGM being as a percentage of your portfolio or whether you need to see the thesis on Hummel and Rolling Hills play out before moving forward with more?
Understood um, maybe just to finish up on.
Opportunities to acquire a generation capacity for significantly less.
Than new build.
PGM, um, assets out there, uh, today. So just your view as to what the gating factors. Are when assessing these opportunities, for example, how big do you see PGM being as a percentage of your portfolio or whether you need to see the thesis on humble and Rolling Hills play out before moving forward with more?
Avik Dey: Look, I think, as I've said before, you know, our capital allocation process, we've been very clear around how we allocate capital, what our return thresholds are. That, above all else, is driving where we deploy capital. We saw the strategic opportunity in PGM because of the market's construct, the size of the market, the complexity of the market with 13 jurisdictions, and then the tailwinds from multiple ways to win in terms of demand increase. That clearly has played out, and we've been fortunate in our ability to negotiate and close a bilateral transaction of scale in that market. We continue to see opportunities to grow there. But I would not say that we're sitting here saying PGM will be four gig or five gig.
Avik Dey: We're sitting here saying, let's go find those opportunities of high-quality assets, you know, young CCGTs with a good heat rate or peaker sites with significant optionality where they've got existing gas supply, access to T&D, and an opportunity for us to wholesale. That's what we're looking for. And so as we've high-graded over time, I think we continue to see those opportunities in PGM, Myso, and LEC. Obviously, we think the opportunity is getting better in PGM. You know, the market signals there are excellent. But you know, what's driving our capital allocation is going to be plant-level economics and our outlook against delivering against three things: upgrades, expansions, and recontracting. Simple.
Uh look I think as I've said before you know our Capital allocation process, we've been very clear around how we allocate Capital. What our return thresholds are that above all else is driving where we deploy Capital. We saw the Strategic opportunity in PGM because of the Market's construct, the size of the market. The complexity of the market with 13 jurisdictions and then the Tailwind from multiple ways to win. In terms of demand, uh, increase that clearly has played out. And we've been fortunate in in our ability to negotiate, uh, and close a bilateral. Transaction of scale in that market. We continue to see opportunities to grow there. But I would not say that we're sitting here. Saying pjm will be 4 gig or 5 gig. We're sitting here saying, let's go find those opportunities.
High quality assets. You know young CC GTS with a good heat rate uh or peeker sites with significant optionality where they've got existing gas supply access to T and d and an opportunity for us to wholesale.
That's what we're looking for. And so as we've high-rated over time, I think we continue to see those opportunities in pjm, MSO and lack. Um, obviously we think the opportunity is getting better in pjm, uh, you know, the, the market signals there are are excellent. Uh, but you know, what's driving, our Capital allocation is going to be, you know, plant level economics, uh, in our Outlook against delivering against 3 things upgrades, expansions, uh, and recontracting simple.
Speaker 5: Got it. Thank you very much.
Got it. Thank you very much.
Roy Arthur: Thank you. Our next question coming from the line of Patrick Kenny with NBF. You're on this now open.
Thank you.
my next question, coming from the line of Patrick Kenney, with NPS now, open
Speaker 5: Thank you. Good morning. Avik, just back on the recent PGM capacity auction, you know, clearing above the price cap. Do you still see a risk in the cap coming down over the next two to three auctions through '26, or you know, perhaps would you see, would you have a bias towards the price cap continuing to move higher? And also, if you had an update on the unit at Rolling Hills coming back online later this year and just how that facility is positioned to, you know, participate in future capacity auctions.
Thank you. Good morning. Um,
Have you had a good look at the recent PJM capacity auction? Clearing above the price cap, do you still see a risk in the cap coming down over the next 2 to 3 auctions through 2026?
You know, perhaps, would you see, um, would you have a bias towards the price cap continuing to move higher?
And also, if you had an update on um, the unit at Rolling Hills coming back online later this year and just how that facility is positioned to, um, you know, participate in future capacity, auctions.
Avik Dey: Yeah, thanks for the question, Pat. Look, I think our answer hasn't changed from last quarter to this quarter in terms of our expectation for the PGM market. You know, obviously, you know, this last auction coming out at the high end of the range was a surprise to many. But I think the market signals from the last auction, the delay, and what we're seeing on the demand side, certainly, as we said last year, we were comfortable with the bookends of the floor and the cap. And I think this auction demonstrated that that floor and the cap was reasonable. At this point, I don't expect to see a change in that range. And I think we're in the same market construct of that 175 to 325.
Yeah, thanks for the question, Pat. I look, I think our answer hasn't changed from last quarter to this quarter, in terms of our expectations, for the pjm market. You know, obviously, uh,
you know, this last auction coming out, uh, at the high end of the range. Um, was a surprise to many, but I think the market signals from the last auction, the delay. Uh, and what we're seeing on the demand side certainly, as we said, uh, last year, uh, we were comfortable with the book ends of the floor in the cap.
Avik Dey: Now, you know, with respect to the second part of your question, whether it's to the mid or to the high, you know, mid to high, you know, I would reaffirm where we were. Like that midpoint when we gave our guidance on five-year average, we think is reasonable when you parlay all of the market factors, design factors around what's happening in the market. We on Rolling Hills, I would say, you know, six weeks into closing, we continue to maintain the same schedule that we had. We've now had a chance to assess the plant and the opportunity set around it. Our balanced energy solution team has already put forward, you know, DC packages and are out to market on those. So, you know, we feel pretty good about what our underwrite was.
And I think this auction, uh, demonstrated that, that that flora and the cap was reasonable. Um, at this point, I don't expect to see a change in that range um and I think we're in the same Market construct of that 175 to 325 now, you know, with respect to the second part of your question, whether it's to the mid or to the
Avik Dey: I think when we announced the transaction, we said, look, it would take one to two quarters for us to figure out and quantify and qualify what the growth opportunity set at Rolling Hills was. So I'm not in a position to say definitively, you know, we expect, you know, this level of, you know, how we'll participate in auction versus off-take or, you know, future expansions. But, you know, all indications are things are looking favorable for us there.
To market on those. Um, so, you know, we feel pretty good about what our underwrite was. Um, I think when we announced the transaction, we said, look, it would take one to two quarters for us to figure out and quantify and qualify what the growth opportunity is at Rolling Hills. Um, so I'm not in a position to say definitively, you know, we expect, you know, this level, you know, how we'll participate in an auction versus offtake or, you know, future expansion. But, you know, all indications are that things are looking favorable for us there.
Speaker 5: Okay, great. I appreciate the update there. And then switching to.
okay, great, appreciate the update there and then um,
Avik Dey: Yeah, sorry, one last point I'd make on that, Pat, is, you know, we got to start early. I don't think we expected to be able to close in the same quarter we announced. So, you know, I think we've got a head start on integration versus our previous timelines and being able to frame up the opportunity set.
Switching to Alberta 1 1.
Speaker 5: Yeah, good point. And then switching to Alberta power prices, you know, despite the small market remaining relatively weak here, it looks like the forward curve has at least rebounded somewhat recently. Not sure if that's solely a function of some of the REM design changes that were confirmed last month or if perhaps you're seeing other market dynamics at play. And then as a follow-up, if you can comment on, you know, whether or not the REM design changes increase your desire to continue to diversify your portfolio outside of Alberta or do these changes incentivize you to, you know, maintain your current exposure to the Alberta market?
Yeah, good point. Um,
And then switching to Alberta, power prices. Um, you know, despite the spot Market remaining.
Relatively weak here. It looks like the forward curve has at least rebounded somewhat recently. Not sure if that's solely a function of some of the REM design changes that were confirmed last month or...
If perhaps you're seeing other market dynamics at play, and then as a follow-up,
If you can comment on whether or not the REM design changes increase your desire to...
Continue to diversify your portfolio outside of Alberta.
Or to these changes, incentivize you to you know, maintain your current exposure to the Alberta Market.
Avik Dey: Yeah, thanks. So, on the first part of your question on 20, I mean, clearly 26, 27, 28, we all saw, you know, the the strip come up, on the back of the large load allocation. So I think, you know, our view is that was the primary driver of of pricing coming up. And, you know, we continue to look to ways to, you know, hedge out as we historically have in that market. our position, on that, on the market overall is on REM, we need clarity. So, you know, we do have concerns, around, you know, locational marginal pricing, and transmission rights. That continues to be a focus for us. we've provided, our, full submission on feedback to the government on that, which, will highlight that. And, you know, that'll ultimately become, the specifics of our feedback will become public, sometime next quarter.
Yeah, thanks. So uh, on on the the first part of your question on 20, I mean, clearly 262728. Uh, we all saw, you know, the the strip come up uh on the back of the large load allocation. So I think you know, our view is that was the primary driver of of pricing coming up and you know we continue to look at 2 ways to, you know, hedge out as we his historically have in that market. Um our position uh on that uh on the market overall is on rim, we need Clarity. So you know
We do have concerns, uh, around, you know, location marginal pricing. Uh, and transmission rights. That continues to be a focus for us. Um, we've provided uh, our uh, full submission on feedback to the government on that which um, will highlight that. And you know, that will ultimately become uh, the specifics of our feedback will become public, uh, sometime.
Avik Dey: but I think the the market broadly knows that that's a concern amongst generators. and in terms of, our position on Alberta is we've got a resilient business. We've got the most efficient, largest gas plant in the province that's critical for baseload power. we take that responsibility very seriously. and it is a resilient portfolio that allows us to maximize and optimize the value of that megawatt over the medium to long term. And so from a capital allocation perspective, as we've demonstrated, we're clearly directing our capital, towards those markets that we can convert investment into, you know, megawatts produced, quickly, efficiently, and economically.
Avik Dey: So for us, playing that arc of buying capacity, at a much lower cost than the cost of new entry, investing in it to upgrade, expand, and repower, or repower or recontract, that's where our focus is, which, you know, today means, PJM, Myso, and KISS, and WEC. but for Alberta, it's we've got a very important business here. It's very resilient because of the investment we made in repowering it. and it's well-positioned, for upside when new demand comes into this market. But I would emphasize the point that, you know, we need to get through REM. We need to address some of the concerns that we and others have so that we can give clarity to the broader market on how you invest in new generation in Alberta. And I think this ties back to the the data center point.
Next quarter. Um but I think the the market browser knows that that's a concern amongst generators. Uh and in terms of uh, our position on Alberta is we've got a resilient business. We've got the most efficient largest gas plant in the province. That's critical for base load power. Uh, we take that responsibility, very seriously. Um, and it is a resilient portfolio that allows us to maximize and optimize the value of that. Make a lot over the medium to long term. And so, from a capital allocation perspective, uh, as we've demonstrated, we're clearly directing our Capital, uh, towards those markets that we can convert investment into, you know, megawatts produced uh, quickly efficiently and economically. So for us playing that ARB of buying capacity uh at a much lower cost than the cost of new entry.
Investing in it to upgrade expand and repower, uh, or repower or recontract. That's where our focus is, which, you know, today means, uh, pjm myso and case and case and whack. Um, but for Alberta, it's, we've got a very important business here. It's very resilient because of the investment. We made in repowering it. Uh, and it's well, positioned, uh, for upside when new demand,
Avik Dey: You know, the data centers that will get, in that will get built, in Alberta before 2029 will be ones that leverage existing installed generation in the province because new generation can't be built until REM gets resolved.
And comes into this market. But I would emphasize the point that, you know, we need to get through REM, we need to address some of the concerns that we and others have, so that we can give clarity to the broader market on how you invest in new generation in Alberta. And I think this ties back to the data center point.
Generation in the province.
Because new generation.
Can't be built until REM gets resolved.
Speaker 5: Yeah, that makes sense. What about on the US renewable development front? So, you know, adding some horsepower with Roger coming on board, which is great. But, you know, with the sunset on US tax credits, you know, wondering how that might change your 20% capital allocation target through 2029, at least until, you know, you have more clarity on government subsidies. or on the flip side, does your decision not to pursue the phase one Alberta data center opportunity perhaps open up a bit more dry powder to allocate towards US renewables?
Yeah, that makes sense. What about on the, uh, U.S. renewable development front? So, you know, adding some horsepower with Roger coming on board, which is great. But, you know, with the sunset on U.S. tax credits...
You know, wondering how that might change your 20% Capital, allocation Target through 20229 and at least until, you know, you have more clarity on government subsidies um, or on the flip side.
Does your decision not to pursue the Phase 1 Alberta data center opportunity perhaps open up a bit more dry powder to allocate towards our renewables?
Avik Dey: So I think, you know, Roger, our new head of US renewables and Corp Dev, joined in early June. We are going through an assessment of the opportunity set in front of us in the US right now. I think, you know, as I've said in past quarters, I think we see the opportunity as the bid-ask spread closes on renewables, in particular on the operating asset side, that it could be a competitive market for us to participate in because we can leverage our expertise for repowering and development and contracting. We have not seen that bid-ask spread close. So for me, the question around renewables is really around, can we hit our return thresholds or not? And does it positively benefit shareholder value creation or not for us as a company?
So I think, you know, uh, you know, Roger our new, uh, head of us, Renewables and Corp, Dev joined in early June, uh, we are going through, uh, an assessment of the opportunity to set in front of us in the US right now. I think, you know, as I've said in past quarters, I think we see the opportunity as the bid aspect closest on Renewables in particular, on the operating asset side, um, that it could be a competitive market for us to participate in because we can leverage our expertise for, uh, repowering and development.
Avik Dey: So I think that's something we'll have more clarity on between now and the end of the year. But I would say generally, where you have volatility in markets, it generally creates opportunity for investors. And where we have the advantage of understanding market structure, being able to trade and originate short, medium, and long term, and the ability to develop and operate, it should bring compelling opportunities. But, you know, I think we've tremendously benefited over our history of being very disciplined around renewables. We didn't chase installed gigawatts. We only pursued projects that hit our return thresholds, and that hasn't changed. So I can't comment today if our capital allocation will change or not because directionally, it could go either way, depending on what the market affords us as opportunities.
And Contracting, we have not seen that bid ass spread close. So for me, the question around Renewables is really around. Can we hit our return thresholds or not? Uh, and does it positively benefit shareholder value creation or not for us as a company? Um, so I think that's something, we'll have more clarity on between now and the end of the year. But I would say generally where you have volatility in markets, it generally creates opportunity for investors and where we have the advantage of understanding Market structure, being able to trade and originated short medium and long term uh and the ability to develop and operate. It should bring compelling opportunities but you know, I think we've tremendously benefited over our history of being very disciplined around Renewables. We didn't chase.
Avik Dey: If operating renewable assets that are 12 to 14 years in average contract length, that have good transmission and distribution access, are miraculously trading at eight to nine times, which is probably where I think they should trade, given, you know, their margin relative on an EBIT/KW basis relative to gas. Then, you know, you could, you know, we might be a purchaser. So I've probably gone into more detail than you expected, but just that's a window into how I think about value.
Uh, gigawatt installed gigawatts. We only pursued projects that hit our return thresholds, and that hasn't changed. So I can't comment today if our capital allocation will change or not because directionally it could go either way, depending on what the market affords us as opportunities. If renewable, if operating renewable assets that are 12 to 14 years in average contract length, uh, that have good.
Transmission and distribution access are miraculously trading, uh, at 8 to 9 times, uh, which is probably where I think they should trade, uh given, you know, their margin relative on an ibitta for KW basis, relative to gas. Uh, then you know, you could, you know, we might be a purchaser.
So I've probably gone into more detail than you expected, but just that's a window into how I think about value.
Speaker 5: Okay. No, that's great. I appreciate it. I'll leave it there. Thanks, Avik.
Okay, now that that’s great. I appreciate it. I’ll leave it there. Thanks a lot.
Roy Arthur: Thank you. Our next question coming from the line of John Multwood-Teacow. And you're on this now open.
Lot, it's now open.
Speaker 7: Hi, morning, everybody. Maybe going back to your partner for Genesee, you've stressed the need for speed to market in this broader data center opportunity for the province. And I'd just like some clarity on the timeline of your partner. I appreciate you probably don't want to speak for them, but what timeline do they need for a one-gigawatt facility at Genesee to remain viable? Presumably, at some point, they'll look elsewhere, and you know, this one-gigawatt opportunity doesn't have an unlimited expiry date. Can you comment on that?
Hi morning everybody. Um maybe going back to your partner for Genesis you, you you stressed the Need for Speed to Market in this broader data center opportunity.
For the province and I I just like some clarity on the timeline of your partner. Appreciate you probably don't want to speak for them but what timeline do they need for a 1 gigawatt facility at genese to remain viable? Presumably at some point they'll they'll look elsewhere and you know, this 1 gigawatt opportunity doesn't have an you know an unlimited expiry date. Can can you comment on that?
Avik Dey: Well, I think the way to think about it, John, is it's a, you know, if we can't build capacity in North America, that timeline keeps extending. So next year, '28 becomes '29. So so long as the economic cost and our ability to bring something online within that two to three-year timeframe, I think we'll continue to have that opportunity in Alberta. It's just, you know, the opportunity, the risk is, is that other markets figure this out, and, you know, provide incentives, and make investments in infrastructure to facilitate, large-scale investment. So it's not, it's not like there's a cliff in 2028. It's just those that can bring capacity on. And part of this issue is the following. You know, when you're signing, if you have a million square foot, hyper-data center, those data centers are phased.
well, I think the way to think about it John is it's a, you know, if we can't build capacity in North America, that timeline keeps extending
so, next year, 28 becomes 29
So, so long as the economic cost and our ability to bring something online within that 2 to 3-year time frame, I think we'll continue to have that opportunity in Alberta.
Uh, and make investments in infrastructure to facilitate, uh, large-scale investments.
Avik Dey: It's not like you go build a, you know, it's all modular and clusters. So it's not like you build a million square foot, you know, hall, and then you're piling in racks, you know, starting COD. What happens is, and what's required is the hyperscaler requires the right to have access up to that total capacity or the commensurate power because on a rolling basis, they're ordering and procuring the chips in the racks to scale with their requirement. So this is the chicken and the egg of the data center opportunity, which is if you need this requirement for scale of 1,000 megawatts or a million square feet, you need to know that you've got the transmission and distribution and generation to meet that timeline and that ramp schedule.
So it's not, it's not like there's a cliff in 2028. It's just those that can bring capacity on. And part of this issue is the following, you know, when you're signing, if you have a million square foot, uh hyper data center, those data centers are phased. It's not like you go build a, you know, it's all modular and clusters. So it's not like you build a million square foot, uh, you know hall and then you're piling in racks. Uh, you know, starting starting Co what happens is and what's required is the hyperscaler requires the right,
Avik Dey: This is really all about the ramp and the guarantee for access to power and how you match capital and equipment coming in on a timely basis. So I don't think it goes away in '28. It's just we have this advantage because of how much generation we as the market participants have collectively installed, and you know, what access we have on the installed transmission and distribution infrastructure in the province.
To have access up to that total capacity, or the commensurate power. Because on a rolling basis, they're ordering and procuring the chips in the racks to scale with the requirement. So this is the chicken-and-egg of the data center opportunity, which is if you need this requirement for a scale of 1,000 megawatts or a million square feet, you need to know that you've got the transmission, distribution, and generation to meet that timeline and that ramp schedule. This is really all about the ramp and the guarantee.
For access to power and how you match capital and equipment coming in in a timely basis.
So I don't think it goes away in 28. It's just we have this Advantage because of how much generation we as the market. Participants have collectively installed uh and you know what access we have on the install transmission distribution infrastructure in the province.
Speaker 7: Okay, thanks for that. And maybe just, apologies if this is repetitive, but just going back to the phase two, you know, timelines you commented on that, you know, you're seeking to preserve your auction value and.Continuing
Roy Arthur: your your advocacy there and advocating for a quick in-service date. You know, based on your conversations with ASO and the government so far, you know, what's your confidence level that that phase two, you know, could result in that relatively quick in-service date with the glide path that that would be needed for something of a larger scale?
Okay, thanks for that and and maybe just um apologies if this is repetitive, but just going back to the phase 2, you know, timelines, you commented on that, you know you're seeking to preserve your option value and continuing your your advocacy there and advocating for a quick inservice State, you know, based on your conversations with ASO and the government so far. You know, what's your confidence level that that Phase 2 you know, could result in
That relatively quick inservice state with the Glide path. That that would be needed for something of a larger scale.
Roy Arthur: I don't think I could answer that with a confidence interval, but what I would say is I think we all want the same thing here. You know, in the conversations with government, yes, we agree, we disagreed on the on the allocation process, for large loads in phase one. But I think all parties in this, whether it's the ASO or the Utilities Commission or the government more broadly, are keen to bring this industry to the province. We have a different view on how that should be allocated, but I think everyone's trying to work to the same end game here. and you know, I will concede, you know, the ASO and and the utilities, you know, the the Utilities Ministry and the government are balancing multiple, needs and considerations.
I don't think I could, uh, answer that with a confidence interval. But what I would say is I think we all want the same thing here. You know, in the conversations with government, yes, we agree. We disagreed on the allocation process for large loads in Phase 1, but I think all parties in this, whether it's the ASO.
Roy Arthur: So we are looking at it through the lens of, you know, optimizing for ourselves, and also to the benefit of consumers because of this advantage we have at Genesee. but I think everyone's keen to bring the industry here. So, you know, I'm I'm optimistic, but you know, we were on a timeline, before this large load allocation, that could have delivered, 27 or early 28. And so now, you know, we've we've got to go back to the drawing board, not based on the technical requirements of the project, but you know, in terms of negotiating how we get a customer, access to co-locate a thousand megawatt site at Genesee.
Or the Utilities Commission or the government. More broadly are Keen to bring this industry to the province. We have a different view on how that should be allocated, but I think everyone's trying to work to the same endgame here. Uh and you know, I will concede, you know, the ASO and and the utilities uh, you know, the the utilities Ministry and the government are balancing multiple uh, needs and considerations. So we are looking at it through the lens of, you know, optimizing for ourselves. Uh, and also to the benefit of consumers, because of this Advantage, we have at genese, um, but I think everyone's Keen to bring the industry here. So, you know, I'm I'm optimistic. But, you know, we were on a timeline uh, before this large load allocation, uh, that could have delivered uh, 27 or early 28th.
And so now you know we’ve got to go back to the drawing board, not based on the technical requirements of the project, but you know, in terms of negotiating how we get a customer access to co-locate a 1,000 megawatt site at Genesis.
Roy Arthur: Okay, thanks for that. And maybe just just apologies if I misheard this, a clarification on the allocation, which I think you may have said is about 370 megawatts. Are you not accepting it so it goes back into the pool for other proponents or or selling it to another party that you believe will best put it to work and, you know, bring that load to the province?
Roy Arthur: What I would say at this point is we are looking to ensure that that load gets utilized, and our, monetization of it will be providing power. So we're keen to see the industry get going. So we're trying to be a constructive player, within this phase one process. The benefit to us will be providing power.
Okay, thanks for that. And maybe just just apologies. If I misheard this, the clarification on the allocation, which I think you may have said, is about 370 megawatts, are you not accepting it? So it goes back into the pool for other proponents or or selling it to another party that you believe will best put it to work. And, and, you know, bring that load to the province.
We're trying to be a constructive player. Uh, within this Phase 1 process,
the benefit to us will be providing power.
Roy Arthur: Got it. Okay. And maybe I'll just sneak one more in because you you said new generation can't be built until the REM gets revolved. Wondering about the clean electricity regulations, you know, what kind of dialogue you've had there with government, since since we've had a a change in, in leadership and and how that plays into your willingness to invest in gas in Canada currently.
Okay, maybe I'll just sneak 1 more in because you you said New Generation can't be built. Until the REM gets revolved wondering about the clean electricity regulations, you know, what kind of dialogue you've had their, with government, uh, since since we've had a, a change in, in leadership and, and how that plays into your willingness to invest in gas, in Canada, currently
Roy Arthur: Look, I think for Alberta, the the question mark is equally around REM and clean electricity regs. federally, it's obviously clean electricity regs. So that constraint exists, nationally for new gas generation. our concerns remain the same on clean electricity regs. We support the notion of CER, but we have, you know, we still have to see critical, changes to the CER that allow for offsets, that addresses, emissions, caps, and specifically addresses end of life, end of prescribed life. So we have had conversations. I think, our current government understands what the constraints around, CER are. but you know, I think we'll we'll see, you know, how and if that translates into, legislative change. But you know, I think we've got an engaged and willing federal government, that is listening and understanding what the concerns are for sure.
All right, I look, I think for Alberta the, the question mark is equally around rim and clean electricity Rags. Uh, federally, it's obviously clean electricity rigs, so that constraint exists, uh, nationally for new gas generation, um, our concerns remain the same on clean electricity Rags. We support the notion of CER, uh, but we have, you know, we still have to see critical uh, changes to the CER, that allows for offsets uh, that addresses, uh, emissions caps, uh, and specifically, addresses end of life, end of prescribed life. So we have had conversations, I think, uh, our current government understands what the constraints around, uh, CER are. Um, but you know, I think we'll we'll see, you know, what? How, and if that translates into, uh,
Legislative change. But, you know, I think we've got an Engaged and willing federal government. Uh, that is listening and understanding what the concerns are for sure.
Roy Arthur: Okay, I'll leave it there. Thank you for taking my questions.
Okay, I'll leave it there. Thank you for taking my questions.
Avik Dey: Thank you. And as somebody who's asked a question, please press star one, one. Our next question coming from the line of Benjamin Pham with BMO, Yolanda Snowfin.
Thank you. And as somebody to ask a question, please press *1 1.
Our next question, coming from the line of Benjamin fam, with BMO your line is now open.
Sandra Haskins: All right, thanks. Good morning. A couple of clarification questions on what's been asked on phase one, phase two, and so just a couple of ones from me. On the one gig that you're you're targeting, is the expectation you'll you'll be phasing that in over a number of years? You expected to pop in right away?
All right, thanks. Good morning. A couple of clarification questions on all Lots been asked on Phase 1, Phase 2, and then just a couple, couple ones for me, on on the 1 gig that you're, you're targeting is expectation, you'll you'll be facing that. In over a number of years, you expected the the pop in right away.
Roy Arthur: Yeah, and specifically for Alberta?
Sandra Haskins: That's right.
yeah, in specifically for Alberta
Roy Arthur: It was always phased. I mean, that's why I mentioned to John's question, like this whole process on hyper data centers, not one of them is DOD day one, 100% deliverable. It's always a ramp schedule that's negotiated on behalf of, and in coordination with the customer and their requirements. So it's not like they're going out and buying half a million NVIDIA chips, all for delivery, for racks on day one. and each customer has different requirements based on location and and use. but it's it's a ramp that could be over, you know, two years, three years, four years, depending on what, the customer's needs are. So even in this, and that that's the same for actually all data centers, pretty much.
That's right.
It was always phased. I mean, it's why I mentioned, uh, to John's question, like that this whole process on hyper data centers. Not one of them is code day 1, 100% deliverable; it's always a ramp schedule that's negotiated on behalf of, uh, in coordination with the customer and their requirements. So it's not like they're going out and buying half a million Nvidia chips all for delivery, uh, for racks on day 1. Um, and each.
Customer has different requirements, based on location, and, and use. Uh, but it's, it's a ramp that could be over, you know, 2 years, 3 years, 4 years. Depending on what, uh, the customer's needs are
So, even in this and that, that's the same for actually all data centers, pretty much.
Sandra Haskins: Okay. so so I guess theoretically, in a sense, you had some good visibility on the first phase of this build. The close to 400 megawatts is more your your lack of visibility on subsequent phases is what you you needed to see.
Um so so I guess theoretically in a sense, you had some good visibility on the first phase of this bill, the postal megawatts is more.
Roy Arthur: Correct.
Your lack of visibility on subsequent phases, what did you need to see?
Correct.
Sandra Haskins: Okay. and then on on phase two then, like how how competitive do you think it could materialize? Because there's there's a lot of large-scale projects in the queue, which I think 20 gigawatts now, you give time for your competitors to catch up to you in a sense. But is is really your your your key advantage here is really speed to market. Is that still your main primary benefit?
Okay.
Um, and then on on Phase 2, then like how, how competitive do you think it could materialize? Because there's there's a lot of
Large scale projects in the queue which I think, 20 gigawatts. Now you give time for your competitors to catch up to you in a sense. But is is really your your your key Advantage here is really
Roy Arthur: So, you know, if we are successful, there will be space for many projects. That's the objective here from a market perspective. You know, the scale requirements for AI and what's going to be required for inference computing, quantum computing, cloud and edge computing to support that inference computing, you know, that rising tide will lift all boats. We are not concerned about other large projects because ultimately, location, location, location, the cheapest, quickest one will get built first. And we today believe that's our site, because of largely transmission and distribution, and the way the fiber is laid out in Alberta, to be able to meet redundancy requirements. but that could not, that could be different two years from now. but great. Someone builds a thousand megawatt center and it's not at Genesee and they can do it before us or within a timeframe.
For speed to market, is that still your main primary benefit?
So, you know, if we are so successful, there will be space for many projects. That's the objective here from a market perspective. You know, the scale requirements for AI and what's going to be required for inference computing, quantum computing, cloud and edge computing, the support that inference computing— you know, that rising tide will lift.
All boats, we are not concerned about other large projects because ultimately, location, location, location; the cheapest, quickest one will get billed first.
Roy Arthur: I mean, that ultimately benefits us. And, but the long-term growth of this business is going to be predicated on building new generation alongside that new capacity. So this is why we come back to this point that where Capital Power has built and established generation with capacity and a T&D connect, while we're going through this REM process, you know, our project is one that can be underwritten, and we can get shovels in the ground for a customer, while REM is getting, sorted.
Redundancy requirements... Um, but that could not... that could be different two years from now. Um, but great, someone builds a 1,000-megawatt center and it's not at Genesis, and they can do it before us or within a time frame. I mean, that ultimately benefits us. And the long-term growth of this business is going to be predicated on building new generation alongside.
that new capacity.
So this is why we come back to this point that where Capital Power has built and established generation with capacity and a TND connect. While we're going through this RIM process, you know, our project is one that can be underwritten, and we can get shovels in the ground for a customer while RIM is getting sorted.
Sandra Haskins: Okay, got it. Thank you. I'll leave it there.
Okay, got it. Thank you. I'll leave you there.
Avik Dey: Thank you. And I'm showing no further questions in the queue at this time. I will now turn the call back over to Roy Arthur for any closing remarks.
Thank you.
And I'm showing no further questions. Thank you at this time. I will not send a call back over to you, and I'll talk to any closing remarks.
Roy Arthur: If there are no more questions, this will conclude our conference call. Thank you for joining us and for your interest in Capital Power. Today's presentation and webcast will be made available on our website. We hope you have a great day.
There are no more questions. This will conclude our conference call. Thank you for joining us and for your interest in Capital Power. Today's presentation and webcast will be made available on our website. We hope you have a great day.
Avik Dey: This concludes today's conference. Thank you for your participation, and you may now you.
And the Cities Conference. Thank you for your participation, and you may now disconnect.