Mr. Avik Dey reports

CAPITAL POWER REPORTS SECOND QUARTER RESULTS AND ANNOUNCES A 6% COMMON SHARE DIVIDEND INCREASE

Capital Power Corp. has released its financial results for the quarter ended June 30, 2023.

Financial highlights:

• Generated adjusted funds from operations (AFFO) of $151-million and net cash flows from operating activities of $11-million;
• Generated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $327-million and net income of $85-million;
• 2023 financial guidance for adjusted EBITDA and AFFO are expected to be above the midpoint of annual guidance ranges;
• Increased annual common share dividend by 6 per cent to $2.46 per year, representing the 10th consecutive annual increase;
• Reinstated the company's dividend reinvestment plan effective for the third quarter 2023 dividend.

Strategic highlights:

• Executed three long-term contracts and two contract extensions with the Ontario Independent Electric System Operator (IESO) for one natural gas plant expansion, two battery energy storage system (BESS) projects and two natural gas upgrades at the company's Ontario natural gas facilities.
• Executed a 25-year fixed price renewable power purchase agreement with Duke Energy Progress for 100 per cent of the output from the Maple Leaf solar project in North Carolina.
• Secured the company's first order for approximately one gigawatt of responsibly produced solar modules from First Solar that will be used in solar development projects from the company's renewable development pipeline.
• Provided updated costs and schedule for the Genesee repowering project and cancelled the Genesee BESS project, which is no longer required. As a result of the updated schedule, the company expects to continue blending natural gas with coal to align with the commissioning of the repowered units in 2024, ensuring reliability and capacity of the grid.

"As the need for energy only grows, we delivered on our balanced approach, and executed on our proven midlife natural gas strategy and buildout of renewables, exceeding our annual $600-million growth target for 2023," said Avik Dey, president and chief executive officer of Capital Power. "This includes successful natural gas expansion and battery energy storage project bids in the Ontario IESOs expedited long-term request for proposals, as well as securing two new uprates with contract extensions at our Goreway and York Energy facilities.

"Our growth in renewables continues with the execution of a 25-year contract for our Maple Leaf solar project in North Carolina," stated Mr. Dey. "We have partnered with First Solar for one gigawatt (GWDC) of responsibly produced ultralow-carbon solar technology, to support our solar development pipeline in the United States totalling nearly 2.4 GWDC, and ensure the use of U.S.-made products will qualify our projects for domestic content under the Inflation Reduction Act (IRA).

"Consistent with our dividend growth guidance of 6 per cent per year to 2025, I am pleased to announce the board of directors has approved a 6 per cent per common share dividend increase effective for the third quarter 2023 dividend payment. This marks a decade of consecutive annual dividend increases, with a compound annual growth rate of nearly 7 per cent," added Mr. Dey.

"While second quarter financial results were generally below management's expectations, as ill-timed outages at Genesee during periods of high Alberta power prices in June dampened results in the second quarter, we expect to see strong fleet-wide performance through the balance of the year," said Sandra Haskins, senior vice-president, finance, and chief financial officer of Capital Power.

"The modest impacts of the delay in commissioning for Genesee repowering will be more than offset across the Alberta commercial portfolio," stated Ms. Haskins. "Based on our current financial forecast, we expect to be above the midpoints of our annual guidance ranges for adjusted EBITDA and AFFO."

Significant events

Updates to Genesee repowering project schedule and costs, and battery energy storage system project no longer required

On June 29, 2023, the company announced modifications to the commissioning timelines for the repowered units as a result of construction delays on the repowering project. Simple cycle commissioning of unit 1 is expected to commence in December, 2023, approximately 60 days later than initially anticipated. Simple cycle commissioning for unit 2 is expected to be further delayed and will begin in March, 2024. Combined cycle commissioning is expected to begin in April, 2024 (unit 1), and June, 2024 (unit 2). The total capital costs for the repowering project have increased to $1.35-billion as a result of cost escalations and increased labour costs.

Subsequently, the Alberta Electric System Operator (AESO) completed its review process and provided conditional approval to Capital Power's alternate solution to utilize unique operational characteristics of the repowered units to meet the most severe single contingency (MSSC) limit of 466 MW (megawatts). The 210 MW Genesee BESS, which was added to the repowering project to meet the MSSC limit, will not be needed. As a result, the company is cancelling that portion of the project.

Maple Leaf solar project awarded 25-year contract

On June 29, 2023, the company announced it executed a 25-year, fixed-price renewable power purchase agreement (PPA) for 100 per cent of the output from its Maple Leaf solar project with Duke Energy Progress (DEP) as part of the 2022 Duke Energy solar procurement program. Maple Leaf is a 73 MWAC (megawatts alternating current) (92 MWDC (megawatts direct current)) solar development project in Selma, N.C. The construction of Maple Leaf is planned to begin in 2025 at a total cost of approximately $165-million (U.S.), with an expected commercial operation date in the fourth quarter of 2026, pending completion of the Duke interconnection upgrades. Local zoning approvals were obtained in May, 2023, and detailed design and permitting are under way.

Contracts executed for natural gas and batteries from Ontario IESO's bids

Capital Power's active participation in the Ontario Independent Electric System Operator's (IESO) expedited call for new power generation and capacity in high-priority areas to help address the IESO's forecasted shortfall, resulted in five successful bids.

On June 29, 2023, the company announced that it has:

• Executed two long-term contracts for the East Windsor expansion (81 MW summer and 100 MW winter contracted capacities) and the York BESS project as part of the IESO's expedited long-term RFP process. Both projects are expected to begin commercial operations in 2025. Capital Power holds 100-per-cent interest in the York Energy BESS project.
• Been selected as a successful proponent for the Goreway BESS project as part of category 2 of the Ontario IESO's expedited long-term request for proposals. The contract was subsequently executed in July, 2023, and the project is expected to enter service in 2025.

Capital Power also executed a three-year contract extension for the York Energy Centre associated with its successful bid in the same technology upgrade solicitation. The upgrade will increase York Energy's contracted capacity from 394 MW to 431 MW. The contract extension applies to the new contracted capacity of 431 MW (from the commercial operation date of the upgrades expected in 2025) and extends the current contract from 2032 to 2035.

In addition, on April 25, 2023, Capital Power and the Ontario IESO executed a six-year contract extension for Goreway, associated with its successful efficiency upgrade bid of approximately 40 MW in IESO's competitive capacity procurement process. The efficiency upgrade will increase Goreway's current combined contracted capacity from 840 MW to 880 MW. The IESO contract extension applies to the new combined contracted capacity of 880 MW and extends the current clean energy supply contract from 2029 to 2035. The upgrade is expected to be completed in 2025.

Mr. Dey appointed as president and chief executive officer, Brian Vaasjo to retire

On April 19, 2023, the company's board of directors announced that it unanimously selected Mr. Dey to be the next president and chief executive officer, and become a member of the board of directors, effective May 8, 2023. The appointment follows the planned retirement of Mr. Vaasjo, who will support Mr. Dey in an advisory role for six months to ensure a seamless transition.

Retirement announced for Kate Chisholm, senior vice-president, and chief strategy and sustainability officer

On April 13, 2023, the company announced internally that Ms. Chisholm, its senior vice-president, and chief strategy and sustainability officer has advised of her intention to retire, effective July 4, 2023. Ms. Chisholm has been an integral part of the executive team, with outstanding service and valuable contributions since the inception of Capital Power. Ms. Chisholm's replacement will occur in due course.

Approval of normal course issuer bid

During the first quarter of 2023, the Toronto Stock Exchange approved Capital Power's normal course issuer bid to purchase and cancel up to 5.8 million of its outstanding common shares during the one-year period from March 3, 2023, to March 2, 2024.

Executed 23-year clean electricity supply agreement for Halkirk 2 wind

On Feb. 3, 2023, the company announced a 23-year clean electricity supply agreement with Public Services and Procurement Canada. The agreement will provide approximately 250,000 MWh (megawatt hours) of clean electricity per year, initially through Canadian-sourced renewable energy credits, until Capital Power's Alberta-based Halkirk 2 wind project is completed, which is expected to be operational by Jan. 1, 2025. The 151 MW Halkirk 2 wind project will provide renewable energy for the remainder of the term -- representing approximately 49 per cent of the facility's output. As part of the transaction, Capital Power committed to securing an equity partnership with local indigenous communities related to the proposed project. On July 27, 2023, the Alberta Utilities Commission approved the Halkirk 2 wind project, and included conditions that Capital Power will review and incorporate as part of its final project design.

Subsequent events

Board of directors changes

On Aug. 1, 2023, the company announced the appointment of Carolyn Graham to Capital Power's board of directors, effective Aug. 2, 2023. The appointment follows the retirement of Katharine Stevenson from the board. With this appointment and retirement, the board consists of 10 directors, with 44 per cent of the independent directors being women, and 33 per cent of the independent directors representing diverse groups beyond gender.

Reinstatement of dividend reinvestment plan

On Aug. 1, 2023, the company reinstated its dividend reinvestment plan, which was previously suspended during the fourth quarter of 2021. Eligible shareholders may elect to participate in the plan commencing with the company's third quarter 2023 cash dividend. The reinstated plan will provide eligible shareholders with an alternative to receiving their quarterly cash dividends. Under the plan, eligible shareholders may elect to efficiently and cost-effectively accumulate additional shares in the company by reinvesting their quarterly cash dividends on the applicable dividend payment date in new shares issued from treasury. The new shares will be issued at a discount of 1 per cent to the average closing price on the Toronto Stock Exchange for the 10 trading days immediately preceding the applicable dividend payment date. Participation in the plan is optional. Those shareholders who do not enroll in the plan will still be entitled to receive their quarterly cash dividends. Shareholders that were enrolled in the plan upon suspension, and remain enrolled with the plan administrator, will automatically resume participation in the plan.

Dividend increase

On Aug. 1, 2023, the company's board of directors approved an increase of 6 per cent in the annual dividend for holders of its common shares, from $2.32 per common share to $2.46 per common share. This increased common share dividend will commence with the third quarter 2023 quarterly dividend payment on Oct. 31, 2023, to shareholders of record at the close of business on Sept. 30, 2023.

Secured one GW (gigawatt) supply of responsibly produced, ultralow carbon First Solar modules

On July 5, 2023, the company announced it has secured its first order for approximately one GW (GWDC) of responsibly produced, ultralow carbon thin film solar modules. The Series 6 Plus modules, which will be delivered between 2026 and 2028, will support Capital Power's growing development portfolio and qualify its projects for domestic content under IRA.

Analyst conference call and webcast

Capital Power will be hosting a conference call and live webcast with analysts on Aug. 2, 2023, at 9 a.m. (MT) to discuss the second quarter financial results. The conference call dial-in number is:

• 800-319-4610 (toll-free from Canada and the United States).

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

Territorial acknowledgement

In the spirit of reconciliation, Capital Power respectfully acknowledges that the company operates within the ancestral homelands, traditional and treaty territories of the indigenous peoples of Turtle Island or North America.

Capital Power's head office is located within the traditional and contemporary home of many indigenous peoples of the Treaty 6 Territory and Metis Nation of Alberta Region 4. The company acknowledges the diverse indigenous communities that are located in these areas and whose presence continues to enrich the community.

About Capital Power Corp.

Capital Power is a growth-oriented North American wholesale power producer with a strategic focus on sustainable energy headquartered in Edmonton, Alta. The company builds, owns and operates high-quality, utility-scale generation facilities that include renewables and thermal. The company has also made significant investments in carbon capture and utilization to reduce carbon impacts and is committed to be off coal in 2023. Capital Power owns approximately 7,500 megawatts of power generation capacity at 29 facilities across North America. Projects in advanced development include 224 megawatts of renewable generation in Alberta and North Carolina, 512 megawatts of incremental natural gas combined cycle capacity from the repowering of Genesee 1 and Genesee 2 in Alberta, and approximately 350 megawatts of natural gas and battery energy storage systems in Ontario.

We seek Safe Harbor.