EDMONTON, Alberta, Sept. 06, 2018 (GLOBE NEWSWIRE) -- Capital Power Corporation (Capital Power or the Company) (TSX: CPX)
announced today that it has entered into an agreement to acquire 100% of the ownership interests in Arlington Valley, LLC, which
owns the Arlington Valley facility (Arlington facility), a 580 megawatt (MW) combined cycle natural gas generation facility, from
funds managed by Oaktree Capital Management, L.P. and its co-investors for a total of US$300 million, subject to working capital
and other closing adjustments. The transaction is expected to close in the fourth quarter of 2018, subject to regulatory approvals
and other customary closing conditions.
“The Arlington facility is a key addition to our U.S. growth plans and fully meets all our investment criteria,” said Capital
Power’s President and CEO, Brian Vaasjo. “Arlington is a well-positioned asset in the attractive Desert Southwest (DSW) power
market with growing demand and a low investment risk environment. In addition to meeting our expected return criteria, the
investment contributes to our dividend growth strategy through immediate adjusted funds from operations (AFFO) accretion supported
by contracted cash flows to the end of 2025 with a high probability of re-contracting as confirmed through third-party market
assessments.”
Capital Power will finance the transaction using its credit facilities followed by permanent debt financing. Given the strength
of its balance sheet, Capital Power will not need to access the equity markets to finance the transaction.
Arlington Facility Overview
- Nameplate capacity - 580 MW
- Location - approximately 50 miles southwest of Phoenix, Arizona
- Commercial operation date - June 2002
- Equipment - utilizes two GE 7FA combustion turbines, which are well known to Capital Power; two
Aalborg (CMI) heat recovery steam generators (HRSG) with duct burners and a single GE D11 steam turbine
- Natural gas source - two large natural gas pipelines (El Paso and Transwestern). In the first half
of 2018, a new fuel gas interconnection to the Transwestern Gas Pipeline was completed allowing a dual fuel connection where each
pipeline can provide 100% of the facility’s fuel requirements.
- Interconnection - interconnected at a major substation and power pricing hub (Palo Verde Hub)
- Large land ownership provides development opportunities - acquisition includes approximately 3,000 acres of
land, the majority of which is suitable for development of additional energy projects.
Arlington Valley sells capacity and electricity to an investment grade load serving utility (credit ratings of A2/A- from
Moody’s and S&P, respectively) under tolling agreements through 2025.
The Arlington facility is expected to generate approximately US$62 million of EBITDA and US$44 million of adjusted funds from
operations (AFFO) in 2019 during the last year of its current toll. Subsequently, EBITDA averages US$35 million per year (ranging
from US$32 million to US$38 million) and US$16 million of AFFO during the 6-year period from 2020 to 2025. Based on the expected
financing, the 5-year average accretion for AFFO is expected to be $0.22 per share reflecting a 6% increase. The average accretion
to earnings is expected to be $0.03 per share in the first 5 years, representing a 2% increase.
The Arlington facility is adjacent to the Palo Verde hub allowing for additional capacity and energy to be sold into the DSW or
the California Independent System Operator (CAISO) wholesale markets during the months outside the summer tolling months. Capital
Power intends to pursue additional contracts that would expire in 2025 for the output generated in the non-Summer months. The
existing tolling arrangements and expected non-Summer offtake arrangements are expected to generate approximately 60% of the value
of the purchase price with the balance of the value to be captured through re-contracting opportunities post-2025.
“In summary, Arlington represents a lower risk, long term cash generating investment which establishes an important platform for
potential further growth in the DSW market”, concluded Brian Vaasjo.
Non-GAAP Financial Measures
The Company uses adjusted funds from operations (AFFO) as a financial performance measure to measure the Company’s ability to
generate cash from its current operating activities to fund growth capital expenditures, debt repayments and common share dividends
to the Company’s shareholders. The AFFO performance measure is net cash flows from operating activities adjusted to include net
finance expense and current income tax expense and exclude changes in operating working capital and distributions received from the
Company’s joint venture interests. Net finance expense and current income tax expense are included as the timing of cash receipts
and payments of interest and income taxes and the resulting cash basis amounts are not comparable from period to period. Changes in
operating working capital are excluded from AFFO as the timing of cash receipts and payments also affects the period-to-period
comparability. Distributions received from the Company’s joint venture interests are excluded as the distributions are calculated
after the effect of joint venture debt payments, which are not considered operating activities. AFFO is reduced by the tax equity
financing project investors’ shares of AFFO associated with assets under tax equity financing structures to ensure that only the
Company’s share is reflected in the overall metric. AFFO also excludes the impact of fair value changes in certain unsettled
derivative financial instruments that are charged or credited to the Company’s bank margin account held with a specific exchange
counterparty. AFFO is reduced by sustaining capital expenditures and preferred share dividends and adjusted to include the
Company’s share of the AFFO of its joint venture interests and cash from coal compensation that will be received annually.
The Company uses earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign
exchange gains or losses, finance expense and depreciation expense from its joint venture interests, and gains or losses on
disposals (adjusted EBITDA) to measure the operating performance of facilities and categories of facilities from period to period.
Management believes that a measure of facility operating performance is more meaningful if results not related to facility
operations such as impairments, foreign exchange gains or losses and gains or losses on disposals are excluded from the adjusted
EBITDA measure.
These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP and,
therefore, are unlikely to be comparable to similar measures used by other enterprises. AFFO and adjusted EBITDA should not be
considered alternatives to net cash flows from operating activities and net income, respectively, calculated in accordance with
GAAP. Rather, these measures are provided to complement the nearest GAAP measures in the analysis of the Company’s results of
operations from management’s perspective.
See Non-GAAP measures in the Company’s second quarter 2018, and year-end 2017 Management’s Discussion and Analysis for further
discussion of these metrics and reconciliations of adjusted EBITDA and AFFO to net income and net cash flows from operating
activities, respectively.
Forward-looking Information
Certain information in this news release is forward-looking within the meaning of Canadian securities law as it relates to
anticipated financial and operating performance, events or strategies. The forward-looking information or statements 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 around the acquisition of the Arlington facility includes
expectations regarding: (i) financing plans, (ii) transaction close timing, (iii) financial impacts including expected accretion in
AFFO and net income, and margin and EBITDA contributions, (iv) contracted cash flows, (v) re-contracting of Arlington Valley
following expiry in 2025, and (vi) receipt of all regulatory approvals.
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, expected future developments, and other factors it believes are appropriate, including its
review of the Arlington facility and consultation with an independent third party around market analysis and re-contracting
opportunities. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity and
other energy prices, (ii) anticipated performance of the Arlington facility, (iii) re-contracting and wholesale market
opportunities, (iv) status of and impact of policy, legislation and regulations, 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 the DSW power market, (ii)
changes in energy commodity market prices and use of derivatives, (iii) regulatory and political environments including changes to
environmental, financial reporting, market structure and tax legislation, (iv) generation facility availability and performance
including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) changes in
market prices and availability of fuel, (vii) ability to realize the anticipated benefits of the Arlington facility, (viii)
limitations inherent in the Company’s review of the Arlington facility, and (ix) changes in general economic and competitive
conditions. See Risks and Risk Management in the Company’s 2017 Management’s Discussion and Analysis for further discussion of
these and other risks.
Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the specified
approval date. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions
to any forward-looking statements to reflect any change in the Company’s expectations or any change in events, conditions or
circumstances on which any such statement is based, except as required by law.
About Capital Power
Capital Power (TSX: CPX) is a growth-oriented North American power producer headquartered in Edmonton, Alberta. The company
develops, acquires, owns, and operates power generation facilities using a variety of energy sources. Capital Power owns
approximately 4,500 megawatts (MW) of power generation capacity at 24 facilities across North America. Approximately 1,000 MW of
owned generation capacity is in advanced development in Alberta, North Dakota, and Illinois.
For more information, please contact:
Media Relations:
Michael Sheehan
(780) 392-5222
msheehan@capitalpower.com |
Investor Relations:
Randy Mah
(780) 392-5305 or (866) 896-4636 (toll-free)
investor@capitalpower.com |
![Capital-Power_CMYK-600x276.jpg](https://resource.globenewswire.com/media/5f9136b6-a505-4387-ad1d-51ad8a4517f3/small/capital-power-cmyk-600x276-jpg.jpg)
![](http://www.globenewswire.com/newsroom/ti?ndecode=NzA2NDAjNzM3MzY5OQ==)