Mr. Brian Vaasjo reports

CAPITAL POWER REPORTS THIRD QUARTER 2014 RESULTS

Capital Power Corp. has released its financial results for the third quarter and nine months ended Sept. 30, 2014.

Normalized earnings attributable to common shareholders in the third quarter of 2014, after adjusting for one-time items and fair value adjustments, were $10-million, or 12 cents per share, compared with $51-million, or 72 cents per share, in the comparable period of 2013.

As reported on Oct. 17, 2014, the company incurred a $73-million non-cash writedown of deferred tax assets in the third quarter of 2014. This charge, in conjunction with the timing of both unplanned outages and the extension of a planned outage, resulted in a net loss attributable to shareholders in the third quarter of 2014 of $45-million, or 62 cents per share, compared with net income attributable to shareholders of $44-million, or 55 cents per share, in the comparable period of 2013. Funds from operations were $83-million in the third quarter of 2014, down 34 per cent from $125-million in the third quarter of 2013, reflecting the impact of the timing of the outages and lower average power prices.

For the nine months ended Sept. 30, 2014, normalized earnings attributable to common shareholders were $42-million, or 51 cents per share, compared with $95-million, or $1.35 per share, in the first nine months of 2013. Funds from operations totalled $260-million compared with $316-million in the comparable nine-month period last year.

"Financial results in the third quarter were below our expectations, primarily due to an extended planned outage and unplanned outages at the acquired Sundance PPA units and other plant derates," said Brian Vaasjo, president and chief executive officer of Capital Power. "These outages occurred primarily in July coinciding with a period of pricing volatility, with Alberta spot power prices in July averaging $122 per megawatt hour compared with $45 per megawatt hour in August and $24 per megawatt hour in September. As a result, with commercial production 100 per cent sold forward in July, we were required to cover a short market position that negatively impacted our portfolio optimization position in the quarter. With the expected output from our commercial plants fully hedged in the high $50 per megawatt hour for the remainder of the year, we expect funds from operations in 2014 to be at the low end of our annual financial target range of [$360-million] to $400-million.

"Capital Power's owned plants achieved strong availability of 97 per cent in the third quarter, which was consistent with expectations," continued Mr. Vaasjo. "However, due to lower plant availability at the acquired Sundance PPA units, other plant derates and lower Alberta wind generation, overall electricity generation production was below expectations.

"In the third quarter, net income was impacted by the non-cash $73-million writedown of deferred tax assets relating to U.S. income tax loss carryforwards that can no longer be recognized for accounting purposes based on our current long-term forecast for U.S. taxable income," said Mr. Vaasjo. "For income tax purposes, these U.S. net operating losses do not expire until the 2027 to 2033 period. Accordingly, they retain economic value, and as we continue to pursue U.S. contracted power opportunities, the company could record deferred tax assets in the future. Importantly, the writedown is a non-cash item and has no impact on our operations or other key performance measures."

                    OPERATIONAL AND FINANCIAL HIGHLIGHTS
       (millions of dollars except per-share and operational amounts)

                                             Three months         Nine months
                                           ended Sept. 30,      ended June 30,
                                           2014      2013      2014      2013
Electricity generation (excluding
acquired Sundance PPA) (GWh)              3,220     4,317     9,174    12,205
Generation plant availability
(excluding acquired Sundance PPA)
(%)                                          97        97        95        93
Revenues                              $     248  $    380 $     796  $  1,066
Adjusted EBITDA                       $      91  $    151 $     282  $    390
Net (loss) income                     $     (57) $     59 $       2  $    130
Net (loss) income attributable to
shareholders of the company           $     (45) $     44 $       7  $     98
Normalized earnings attributable to
common shareholders                   $      10  $     51 $      42  $     95
Basic (loss) earnings per share       $   (0.62) $   0.55 $   (0.12) $   1.19
Diluted (loss) earnings per share     $   (0.62) $   0.51 $   (0.12) $   1.14
Normalized earnings per share         $    0.12  $   0.72 $    0.51  $   1.35
Funds from operations                 $      83  $    125 $     260  $    316
Purchase of property, plant and
equipment, and other assets           $      25  $    422 $     163  $    884
Dividends per common share, declared  $  0.3400  $ 0.3150 $  0.9700  $ 0.9450

Significant events

Writedown of deferred tax assets

Capital Power's third quarter 2014 net income was negatively impacted by a non-cash writedown of deferred tax assets of $73-million. The writedown related to the accounting impact of U.S. income tax loss carryforwards that can no longer be recognized for accounting purposes based on the company's current long-term forecast for U.S. taxable income. The forecast showed a decline in taxable income over the latter years of the forecast period. For income tax purposes, these U.S. net operating losses do not expire until the 2027 to 2033 period. Accordingly, they retain economic value and could result in the company recording deferred tax assets in the future. The company continues to pursue U.S. contracted power opportunities, and the U.S. business development pipeline is active. Importantly, the writedown is a non-cash item and has no impact on operations or other key performance measures.

Dividend increase

On July 25, 2014, the company announced that its board of directors approved a 7.9-per-cent increase in the annual dividend for holders of its common shares, from $1.26 per common share to $1.36 per common share. This increased common dividend will commence with the third quarter 2014 quarterly dividend payment payable on Oct. 31, 2014, to shareholders of record at the close of business on Sept. 30, 2014.

Genesee coal mine

Capital Power is a party to various agreements with Prairie Mines & Minerals Royalty Ltd. in relation to the operations of the Genesee coal mine. Pursuant to the Genesee coal mine agreements, PMRL operates the Genesee coal mine. In connection with the acquisition by Westmoreland Coal Company of PMRL and the acquisition by Altius Minerals Corp. of the royalty assets of PMRL, the Genesee coal mine agreements and certain related agreements have, among other things, been amended to: (a) confirm the acquisitions by Westmoreland and Altius; (b) provide for certain amendments to the Genesee coal mine agreements; and (c) provide for a payment to Capital Power of $20-million on completion of the acquisitions. The payment was received in the second quarter of 2014.

Genesee 4 and 5

On April 24, 2014, Capital Power and Enmax Corp. executed a purchase and sale agreement in support of a joint arrangement agreement to jointly develop, construct and operate the Genesee 4 and 5 power project. The joint arrangement agreement provides for, among other things, an agreement for Enmax to purchase approximately 225 megawatts from Capital Power for eight years. The joint arrangement agreement closing occurred in July, 2014.

Construction of K2 wind power project commences

On March 24, 2014, construction of the K2 wind power project commenced following the successful completion of an $850-million financing in the form of a construction loan that will convert to long-term project debt once K2 wind starts commercial operations. K2 wind is a 270-megawatt wind power project located in Goderich, Ont., that is under joint development by Samsung Renewable Energy Inc., Pattern Energy Group LP and Capital Power, with operations expected to commence in the second half of 2015. The total estimated project cost has been revised upward to $930-million from the previous upper end of range of $900-million primarily due to foreign exchange changes on U.S. contract deliverables. Capital Power's share is $310-million. As a higher portion of the project is expected to be financed with project debt than originally forecast, Capital Power expects higher equity returns on the project.

Analyst conference call and webcast

Capital Power will be hosting a conference call and live webcast with analysts on Oct. 27, 2014, at 11 a.m. (Eastern Time) to discuss the third quarter results.

            CONFERENCE CALL DIAL-IN NUMBERS

Vancouver                                604-681-8564 
Calgary                                  403-532-5601 
Toronto                                  416-623-0333 
Montreal                                 514-687-4017 
Toll-free from Canada and 
the United States                        855-353-9183 
Participant access code for the call     21543 followed by the number sign

A replay of the conference call will be available following the call at 855-201-2300 (toll-free) and entering conference reference No. 1165968 followed by the number sign followed by participant code 21543 followed by the number sign. The replay will be available until midnight on Jan. 27, 2015.

Interested parties may also access the live webcast on the company's website with an archive of the webcast available following the conference call.

We seek Safe Harbor.