GuruFocus -
- Adjusted EBITDA: $401 million for Q3 2024, down approximately $13 million year-over-year.
- AFFO (Adjusted Funds from Operations): $315 million for Q3 2024, up $19 million from Q3 2023.
- US EBITDA Contribution: 53% of total Q3 2024 EBITDA, up from 40% in the same period last year.
- Capacity Factor for US Thermal and Nat Gas Assets: 53% year-to-date in 2024, up from 31% in 2021.
- Sustaining CapEx: $128 million for the first nine months of 2024, tracking in line with the guidance range of $180 million to $200 million for the year.
- Revised 2024 Guidance: Adjusted EBITDA range of $1.310 billion to $1.410 billion; AFFO range of $770 million to $870 million.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Capital Power Corp (TSX:CPX) (CPXWF) delivered a record 11 terawatt hours of power in Q3 2024, driven by new asset acquisitions.
- US assets contributed 53% of Q3 2024 EBITDA, showcasing the success of the company's diversification strategy.
- The company is advancing 10 growth projects, adding 1.1 gigawatts of incremental capacity, including the Genesee Repower project.
- Capital Power Corp (CPXWF) announced a three-year agreement with four First Nations for potential equity ownership in Halkirk 2 Wind, supporting reconciliation efforts.
- The company is actively engaged in negotiations to extend and amend contracts for US assets, indicating potential for future growth.
- Adjusted EBITDA for Q3 2024 was down $13 million year-over-year due to lower generation and power prices in Alberta.
- The Alberta segment's contribution to EBITDA decreased by 36% due to lower prices and generation from Genesee units.
- Higher finance expenses and sustaining capital costs impacted AFFO, despite lower income tax expenses.
- The company faces challenges in securing interconnects and transmission access for data center projects.
- Volatility in Alberta power prices is expected to continue due to oversupply and increased renewable energy integration.
A: Avik Dey, President and CEO, explained that while they are not in a position to comment on specific contractual arrangements, they continue to advocate for Alberta as an excellent location for data centers. The main obstacles include interconnects, providing viable balanced solutions, and ensuring appropriate access to transmission and distribution. The confidence level in Alberta has increased, and they are seeing real interest in the region.
Q: How has the opportunity set for data centers changed over the past six months?
A: Avik Dey noted that conversations with hyperscalers and data center providers have evolved, with increased interest in Alberta due to reliability and speed to market becoming more important. The opportunity set has broadened, and they are now in active discussions with large players looking to place hyper data centers in Alberta.
Q: How do you plan to fund data center-related growth, and is the First Nations agreement a main approach?
A: Sandra Haskins, CFO, stated that the First Nations agreement is a potential avenue for more opportunities. They are looking for other opportunities across their fleet and development pipeline to build relationships and do similar transactions. Monetization of existing renewable assets is also considered as a way to raise capital for other projects.
Q: How do you see the data center opportunity evolving in Alberta, and will data centers need to bring their own generating capacity?
A: Avik Dey emphasized that the focus is on bringing load to the market, with an opportunity to utilize existing excess capacity. The Genesee generating station is seen as a key asset to meet market needs and introduce new demand. The approach will likely involve a combination of grid-connected and new generating capacity.
Q: What is your perspective on the US M&A market for thermal assets, and how are you considering potential deals versus leveraging existing assets?
A: Avik Dey explained that they evaluate opportunities based on optimizing dollars per KW of net present value. They have seen increased activity by private equity players in the space and continue to focus on assets where their operating capabilities can add value. The data center load has not changed their underwriting approach but has validated their existing strategy.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.