Capital Power Corp T.CPX.PR.A

RBC

[retiredcf]

February 28, 2024

Capital Power Corp
Quick Take: Q4/23 EBITDA in line; 2024 outlook reaffirmed

TSX: CPX | CAD 37.98 | Sector Perform | Price Target CAD 42.00

Sentiment: Neutral

Our take

With in-line Q4/23 EBITDA results, and the reaffirmation of the company's 2024 guidance (that was released in mid-January) and disclosures around major developments (including the $1.35 billion Genesee units 1 and 2 repowering project), we do not expect the news to have a material impact on the company's share price.

Details

• Q4/23 EBITDA in line with our estimate and consensus. Capital Power's Q4/23 normalized EBITDA was $313 million, which compares to our estimate of $317 million and consensus of $315 million (nine estimates; range of $303-322 million). AFFO was $162 million ($1.38/share), which compares to our estimate of $150 million ($1.28/share) and the company compiled consensus of $148 million ($1.26/share), with the variance to our estimate mainly being lower sustaining capital expenditures resulting from less outage activities.

• Guidance for 2024 reaffirmed. Capital Power expects EBITDA of $1,405-1,505 million in 2024, which compares to our estimate of $1,480 million and consensus of $1,457 million. The company further expects AFFO of $770-870 million in 2024, which compares to our forecast of $836 million. This guidance range assumes $180-200 million of sustaining capital expenditures during the year. The company’s annual dividend growth target of 6% through 2025 and long-term target payout ratio (on AFFO) of 45-55% remain unchanged.

• Update on its power hedge position
 2024: 10,500 GWh of Alberta baseload hedged in the high-$70/MWh range (unchanged from previous disclosure)
 2025: 9,500 GWh of Alberta baseload hedged in the high-$70/MWh range (previously 9,000 GWh in the mid-$70/MWh range)  2026: 8,000 GWh of Alberta baseload hedged in the high-$70/MWh range(previously 7,500 GWh in the mid-$70/MWh range)

• Update on its gas hedge position
 2024: 70,000 TJ hedged at less than $2.00/GJ (unchanged from previous disclosure)
 2025: 60,000 TJ hedged at less than $3.00/GJ (unchanged from previous disclosure)
 2026: 55,000 TJ hedged at less than $4.00/GJ (previously 50,000 TJ hedged at less than $4.00/GJ)

Conference Call: today at 11:00 AM (ET)

[1condor]

The 42 dollar target is too low..I would say 44-45 is more realistic by year end. This is going to be a great company to hold over the next several years. Nice divvy combined with some decent capital appreciation make this one a winner.