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Capital Power Corp (CPXWF) Q2 2024 Earnings Call Highlights: Navigating Challenges and Seizing ...

Published 2024-10-09, 09:34 a/m
Capital Power Corp (CPXWF) Q2 2024 Earnings Call Highlights: Navigating Challenges and Seizing ...
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  • Adjusted EBITDA: $323 million, down approximately $4 million year-over-year.
  • Adjusted Funds from Operations (AFFO): $178 million, up $27 million from a year ago.
  • First Half 2024 Adjusted EBITDA: $126 million lower year-over-year.
  • First Half 2024 AFFO: $41 million lower than the corresponding period in 2023.
  • US Adjusted EBITDA Contribution: Increased from 26% in Q2 2023 to 43% in Q2 2024.
  • Dividend Growth: 11th consecutive annual increase, with a compound average growth rate of 7% since 2013.
  • Hybrid Bond Issuance: $450 million hybrid bond closed in June 2024, maturing in 2054.
  • Facility Availability: 92% in the first half of 2024, just below the target of 93%.
  • Sustaining CapEx: $81 million in the first six months, on track for $180 million to $200 million in 2024.
  • Revised 2024 Adjusted EBITDA Guidance: $1,310 million to $1,410 million, down from the original range due to lower Alberta power prices and outages.
Release Date: July 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Capital Power Corp (TSX:CPX) (CPXWF) achieved significant milestones by delivering 9 terawatt hours of reliable and affordable power in Q2 2024, including contributions from newly acquired assets.
  • The company completed simple cycle commercial operations on Genesee Units 1 and 2, achieving 100% off-coal status five years ahead of the government mandate.
  • Capital Power Corp (CPXWF) entered into a Power Purchase Agreement (PPA) with Duke Energy (NYSE:DUK) for North Carolina solar projects, enhancing cash flow stability.
  • The US business segment showed strong growth, with adjusted EBITDA contribution rising from 26% in Q2 2023 to 43% in Q2 2024.
  • The company successfully closed a $450 million hybrid bond offering, which was more than two times oversubscribed, demonstrating strong investor confidence.
Negative Points
  • Overall financial results for Q2 2024 were modestly lower year-over-year due to lower generation and captured prices from the Alberta commercial segment.
  • Adjusted EBITDA for the first half of 2024 was $126 million lower year-over-year, impacted by lower Alberta power prices and outages at Genesee.
  • The company is facing tightness in its FFO to debt ratio for 2024, which is right on top of the thresholds for maintaining its investment-grade status.
  • The Alberta market is experiencing lower power prices and less volatility, which could impact future revenue projections.
  • Capital Power Corp (CPXWF) is in a transition year with Genesee repowering, leading to lower cash flow and generation in the short term.
Q & A Highlights Q: Can you expand on how you're thinking about crystallizing additional value from your undeveloped land in the US and provide an update on discussions with data customers for co-location opportunities?

A: Avik Dey, President and CEO, explained that the opportunity is multifaceted, involving upgrading existing facilities, evaluating expansion opportunities, and potentially co-locating additional load. They see opportunities across their portfolio, particularly in Arizona and Michigan, and are now seeing these opportunities on both sides of the border.

Q: Based on the recent transmission policy update in Alberta, which of your assets might be well-positioned to attract new load?

A: Avik Dey highlighted Genesee as a cornerstone asset due to its efficiency and significant acreage. He emphasized presenting Alberta as a viable jurisdiction for data centers, which would involve multiple sites, with Genesee being a key asset.

Q: Could you share details on the power price or EBITDA contributions for your announced solar projects?

A: Sandra Haskins, CFO, stated that they haven't provided specific EBITDA guidance due to the economics being tied up in ITCs. However, the projects meet their return hurdles for equity projects, and they may provide more guidance in the future.

Q: What are potential data center customers looking for, and how does Alberta compare to other regions?

A: Avik Dey noted that customers seek reliable, scalable generation with access to transmission and distribution. Alberta is well-positioned due to its existing infrastructure, energy-only market, and favorable climate. However, there's a need to market Alberta's advantages to hyperscalers.

Q: How do you see the trend for 2025 power prices in Alberta, especially with new mitigation measures?

A: Sandra Haskins mentioned that while supply is coming to the market, causing lower prices, volatility will continue due to weather and asset performance. The current forward prices are on the low end, and the market can change quickly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This content was originally published on Gurufocus.com

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