Strong plant availability and higher Alberta power prices lead to
excellent results from the Alberta contracted plants
EDMONTON, Oct. 25, 2013 /CNW/ - Capital Power Corporation ("Capital
Power", or the "Company") (TSX: CPX) today released its financial
results for the third quarter and nine months ended September 30, 2013.
The Company also reiterated that it expects to exceed its 2013
financial guidance for normalized earnings per share and cash flow per
share.
Normalized earnings attributable to common shareholders in the third
quarter of 2013 were $51 million, or $0.72 per share, compared with $38
million, or $0.55 per share, in the comparable period of 2012.
Funds from operations were $122 million in the third quarter of 2013,
down 5 per cent from $128 million in the third quarter of 2012. Cash
flow per share for the quarter was $1.23 compared with $1.31 for the
same quarter in the previous year.
Net income attributable to shareholders in the third quarter of 2013 was
$44 million, or $0.55 per share, compared with net income attributable
to shareholders of $39 million, or $0.55 per share, in the comparable
period of 2012.
For the nine months ended September 30, 2013, normalized earnings
attributable to common shareholders were $95 million, or $1.35 per
share, compared with $70 million, or $1.06 per share, in the first nine
months of 2012. Funds from operations totaled $310 million compared
with $298 million in the comparable nine-month period last year.
"Third quarter results exceeded management's expectations," said Brian
Vaasjo, President and CEO of Capital Power. "Normalized earnings of
$0.72 per share increased significantly from $0.55 per share a year
ago. Alberta power prices averaged $84 per megawatt hour (MWh) in the
third quarter compared to $78 per MWh in the third quarter of 2012. The
combination of the higher average Alberta power prices and nearly 100%
availability from our Alberta contracted plants resulted in higher
availability incentive revenues, which in turn led to a strong adjusted
EBITDA contribution of $55 million for this segment, up 45% compared to
the same period a year ago."
"With Alberta power prices averaging $90 per MWh in the first nine
months of the year compared to $58 per MWh that was used to develop our
2013 financial targets, Capital Power remains on track to exceed our
2013 financial targets," continued Mr. Vaasjo.
"At the end of August, we announced a refocusing of our merchant power
business on Alberta, which included a number of direct and indirect
cost saving initiatives that will reduce annual expenses by
approximately $25 million to $30 million starting in 2014. This
refinement of Capital Power's strategy to create a leaner, more focused
business with less risk is expected to provide our shareholders with a
stable and growing contracted cash flow base with upside exposure to
the attractive Alberta power market," said Mr. Vaasjo.
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Operational and Financial Highlights 1
(unaudited)
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Three months ended
September 30
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Nine months ended
September 30
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(millions of dollars except per share and operational amounts)
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2013
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2012
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2013
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2012
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Electricity generation (excluding acquired Sundance PPA) (GWh)
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4,317
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4,575
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12,205
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12,296
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Generation plant availability (excluding acquired Sundance PPA) (%)
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97%
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97%
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93%
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92%
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Revenues and other income
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$
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380
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$
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394
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$
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1,066
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$
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1,031
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Adjusted EBITDA 2
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$
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151
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$
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151
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$
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390
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$
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368
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Net income attributable to shareholders
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$
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44
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$
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39
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$
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98
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$
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47
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Basic earnings per share
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$
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0.55
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$
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0.55
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$
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1.19
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$
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0.65
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Diluted earnings per share
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$
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0.51
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$
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0.55
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$
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1.14
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$
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0.63
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Dividends declared per common share
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$
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0.3150
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$
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0.3150
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$
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0.9450
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$
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0.9450
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Normalized earnings attributable to common shareholders 2
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$
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51
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$
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38
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$
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95
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$
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70
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Normalized earnings per share 2
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$
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0.72
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$
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0.55
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$
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1.35
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$
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1.06
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Funds from operations 2
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$
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122
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$
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128
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$
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310
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$
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298
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Cash flow per share 2
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$
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1.23
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$
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1.31
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$
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3.13
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$
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3.05
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Discretionary cash flow 2
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$
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76
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$
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79
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$
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134
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$
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120
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Capital expenditures
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$
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422
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$
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150
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$
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884
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$
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433
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1
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The operational and financial highlights in this press release should be
read in conjunction with Management's
Discussion and Analysis and the unaudited Condensed Interim Consolidated
Financial Statements for the nine
months ended September 30, 2013.
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2
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Earnings before finance expense, income tax expense, depreciation and
amortization, impairments, foreign
exchange losses, and gains on disposals (adjusted EBITDA), funds from
operations, cash flow per share,
discretionary cash flow, normalized earnings attributable to common
shareholders, and normalized earnings
per share are non-GAAP financial measures and do not have standardized
meanings under GAAP and are,
therefore, unlikely to be comparable to similar measures used by other
enterprises. See Non-GAAP
Financial Measures.
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Significant Events
Purchase of interest in Shepard Energy Centre
The Company entered into a series of agreements with ENMAX Corporation
(ENMAX) to purchase a 50% interest in the 800 MW natural-gas-fuelled
Shepard Energy Centre (Shepard) located on the eastern limits of the
City of Calgary. Shepard is expected to begin commercial operations in
the first quarter of 2015. On February 28, 2013 and September 30, 2013,
respectively, the purchases of the first and second tranches of the
Company's interest in Shepard closed. Upon close of the first tranche,
the Company paid $237 million and acquired a 25% interest in Shepard.
Upon close of the second tranche, the Company paid an additional $325
million and acquired an additional 25% interest in Shepard bringing the
Company's total ownership interest to 50%. The total amount incurred by
the Company to the date of close of the second tranche was $649 million
compared with the total anticipated capital cost of $860 million.
Commencing with the close of the first tranche, all decisions related
to Shepard require unanimous approval by the Company and ENMAX. As a
result, the Company jointly controls Shepard with ENMAX upon close of
the first tranche. Based on the terms of the Shepard agreements, the
Company will account for the Shepard joint arrangement, under the new
accounting standard for joint arrangements, as a joint operation.
Agreement to sell North East U.S. assets and refocusing of business
On August 28, 2013, Capital Power announced that it has entered into an
agreement with Emera Inc. to sell its three North East U.S. combined
cycle, natural gas-fired power generation facilities for US$541
million. This transaction is expected to close in the fourth quarter of
2013, subject to regulatory approvals and other customary closing
conditions. The timing of the closing may be affected by the U.S.
Federal government shutdown and debt ceiling issues which could impact
the Federal Energy Regulatory Commission's regulatory approval
processing time. The Company has recorded a pre-tax impairment loss of
$6 million in the third quarter of 2013. When the sale is finalized,
Capital Power expects to record a gain on disposal that includes the
related accumulated foreign currency translation gains of $51 million
that, as at September 30, 2013, were recorded in other reserves as
accumulated other comprehensive income.
The Company has incurred pre-tax restructuring costs of approximately
$12 million, cumulatively in the second and third quarters of 2013, as
a result of its decision to exit the North East U.S. market and to
refocus its merchant power business in Alberta. Future expected impacts
include efficiencies in operations and maintenance spending while
approximately 160 employee positions will have been eliminated by the
end of 2013 resulting in approximately 700 employee positions at the
beginning of 2014. The expected annual cost savings are $25 million to
$30 million consisting of an estimated $22 million related to general
and administration (including support services such as treasury,
finance, internal audit, legal, human resources, corporate risk
management, asset management, and environment, health and safety) and
$8 million related to operations. The estimated costs savings consist
primarily of employee compensation including benefits less margins from
the discontinued trading operations.
$200 million offering of 4.50% Cumulative Rate Reset Preference Shares
On March 14, 2013, Capital Power Corporation issued 8 million Cumulative
Rate Reset Preference Shares, Series 5 (Series 5 Shares) at $25 per
share for aggregate gross proceeds of $200 million on a bought deal
basis with a syndicate of underwriters.
The Series 5 Shares will pay fixed cumulative preferential dividends of
$1.125 per share per annum, yielding 4.50% per annum, payable on the
last business day of March, June, September and December each year, as
and when declared by the Board of Directors of Capital Power
Corporation. These dividends are applicable for the initial period
ending June 30, 2018. The Series 5 Shares are subject to specified
redemption, conversion and reset rights.
Standard & Poor's (a division of the McGraw Hill Companies, Inc.) has
assigned a rating of P-3 and DBRS Limited has assigned a rating of
Pfd-3 (low) for these Series 5 Shares.
Subsequent Event
Secondary offering of Capital Power common shares by EPCOR
On October 10, 2013, EPCOR exchanged 9,600,000 of its exchangeable
common limited partnership units in CPLP for common shares of Capital
Power on a one-for-one basis and sold 9,600,000 common shares of
Capital Power to the public pursuant to a secondary offering at $21.00
per common share. The underwriters for the sale of common shares were
granted an option to purchase up to an additional 1,440,000 common
shares at the issue price to cover over-allotments, if any. The
over-allotment option is exercisable, in whole or in part, by the
underwriters at any time up to 30 days after the closing of the
offering. Capital Power will not receive any of the proceeds from
EPCOR's sale of common shares. The October 10, 2013 transactions
reduced EPCOR's ownership interest in CPLP to approximately 19% from
its interest of approximately 29% at September 30, 2013 and reduced
EPCOR's ownership of the common shares of Capital Power, on a diluted
basis, to 19% from 29%. If the over-allotment option is fully
exercised, EPCOR's ownership interest will be further reduced to 18%.
EPCOR has advised that it plans to eventually sell all or a substantial
portion of its remaining interest in Capital Power subject to market
conditions, its requirements for capital and other circumstances that
may arise in the future.
EPCOR's ownership interest in the limited partnership units of CPLP has
dropped below 20% as a result of these transactions. Thus, the terms of
the agreement for the debt payable to EPCOR provide that EPCOR may, by
advance written notice, require repayment of all or any portion of the
outstanding principal amount of this debt and accrued interest thereon.
The debt payable to EPCOR at September 30, 2013 was approximately $342
million. Also, EPCOR may only elect two of Capital Power's directors
compared to four previously.
Analyst Conference Call and Webcast
Capital Power will be hosting a conference call and live webcast with
analysts on October 28, 2013 at 11:00 AM (ET) to discuss third quarter
results. The conference call dial-in numbers are:
(604) 681-8564 (Vancouver)
(403) 532-5601 (Calgary)
(416) 623-0333 (Toronto)
(514) 687-4017 (Montreal)
(855) 353-9183 (toll-free from Canada and USA)
Participant access code for the call: 21543#
A replay of the conference call will be available following the call at:
(855) 201-2300 (toll-free) and entering conference reference number
1053151# followed by participant code 21543#. The replay will be
available until midnight on January 28, 2014.
Interested parties may also access the live webcast on the Company's
website at www.capitalpower.com with an archive of the webcast available following the conference call.
Non-GAAP Financial Measures
The Company uses (i) adjusted EBITDA, (ii) funds from operations, (iii)
cash flow per share, (iv) discretionary cash flow, (v) normalized
earnings attributable to common shareholders, and (vi) normalized
earnings per share as financial performance measures. These terms are
not defined financial measures according to GAAP and do not have
standardized meanings prescribed by GAAP, and are, therefore, unlikely
to be comparable to similar measures used by other enterprises. These
measures should not be considered alternatives to net income, net
income attributable of Shareholders of the Company, net cash flows from
operating activities or other measures of financial performance
calculated in accordance with GAAP. Rather, these measures are provided
to complement GAAP measures in the analysis of the Company's results of
operations from management's perspective. Reconciliations of adjusted
EBITDA to net income, funds from operations to net cash flows from
operating activities and normalized earnings attributable to common
shareholders to net income attributable to common shareholders are
contained in the Company's Management's Discussion and Analysis dated
October 25, 2013 for the nine months ended September 30, 2013 which is
available under the Company's profile on SEDAR at www.SEDAR.com.
Forward-looking Information
Forward-looking information or statements included in this press release
are provided to inform the Company's shareholders and potential
investors about management's assessment of Capital Power's future plans
and operations. This information may not be appropriate for other
purposes. The forward-looking information in this press release is
generally identified by words such as will, anticipate, believe, plan,
intend, target, and expect or similar words that suggest future
outcomes.
Material forward-looking information in this press release includes
information with respect to: (i) expectations regarding future
earnings, (ii) expectations regarding future cash flows, and (iii)
expectations regarding the sale of the North East U.S. assets and the
refocusing of the Company's merchant power business.
These statements are based on certain assumptions and analyses made by
the Company in light of its experience and perception of historical
trends, current conditions and expected future developments, and other
factors it believes are appropriate. The material factors and
assumptions used to develop these forward-looking statements relate to:
(i) electricity and other energy prices, (ii) performance, (iii)
business prospects and opportunities including expected growth and
capital projects, (iv) status and impact of policy, legislation and
regulation, and (v) effective tax rates.
Whether actual results, performance or achievements will conform to the
Company's expectations and predictions is subject to a number of known
and unknown risks and uncertainties which could cause actual results
and experience to differ materially from the Company's expectations.
Such material risks and uncertainties are: (i) changes in electricity
prices in markets in which the Company operates, (ii) changes in
commodity prices in markets in which the Company operates and use of
derivatives, (iii) regulatory and political environments including
changes to environmental, financial reporting and tax legislation, (iv)
power plant availability and performance including maintenance
expenditures, (v) ability to fund current and future capital and
working capital needs, (vi) acquisitions and developments including
timing and costs of regulatory approvals and construction, (vii)
changes in market prices and availability of fuel, and (viii) changes
in general economic and competitive conditions. See Risks and Risk
Management in the Company's December 31, 2012 annual Management's
Discussion and Analysis for further discussion of these and other
risks.
SOURCE Capital Power Corporation