Mr. Avik Dey reports

CAPITAL POWER ANNOUNCES THIRD QUARTER 2023 RESULTS

Capital Power Corp. has released its financial and operational results for the third quarter ended Sept. 30, 2023.

Financial highlights:

• Generated adjusted funds from operations (AFFO) of $296-million and net cash flows from operating activities of $480-million;
• Generated adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $410-million and net income of $272-million;
• 2023 full-year adjusted EBITDA and AFFO are currently trending below the midpoint of the annual guidance ranges.

Strategic highlights:

• Entered into an agreement to acquire 50.15-per-cent interest in the 265-megawatt (MW) Frederickson 1 generating station in Pierce county, Washington, that strategically diversifies the company's geographic presence in North America;
• Completed a $350-million medium-term note offering at a coupon rate of 5.816 per cent that will mature on Sept. 15, 2028;
• Expanded executive team to drive strategic growth of reliable, affordable and decarbonized power.

"During the quarter, we once again saw strong fleet-wide performance. Solid contributions from our U.S. and Ontario contracted assets -- including the Midland cogeneration venture in Michigan that we acquired just over a year ago -- partially offset the impact of lower realized power prices in the Alberta commercial portfolio, and underscore the benefit of a diversified fleet," said Sandra Haskins, senior vice-president of finance and chief financial officer of Capital Power. Ms. Haskins added that, "Based on year-to-date results and our outlook for the fourth quarter, 2023 full-year results are currently trending below the midpoint of the guidance range for AFFO and adjusted EBITDA."

"As we work towards achieving net zero in our power supply by 2045, we continue to capitalize on opportunities to diversify our footprint and deliver reliable, affordable and decarbonized power for communities across North America," said Avik Dey, president and chief executive officer of Capital Power. "Consistent with our mid-life natural gas strategy, we've entered into an agreement to acquire the high-quality Frederickson 1 generating station that will diversify our presence into the Pacific Northwest. This fully contracted, flexible power generation asset is well positioned to provide reliable, long-term energy security in the region," stated Mr. Dey.

Capital Power has expanded its executive team and optimized its portfolios to lead the company to net zero by 2045. "With decades of industry experience, this dynamic group is the propelling force behind the development of critical solutions that will meet the growing long-term demand for power across North America. I am happy to extend a warm welcome to Pauline McLean, May Wong, Jason Comandante and Steve Wollin to our leadership team," said Mr. Dey. "Lastly, Capital Power will host our investor day in Edmonton, Alta., on May 7 and 8, 2024. Further details and our 2024 full-year guidance will be announced in Q4 2023."

Significant events

$350-million medium-term note offering

On Sept. 15, 2023, the company closed a public offering of unsecured medium-term notes in the aggregate principal amount of $350-million. These notes have a coupon rate of 5.816 per cent and mature on Sept. 15, 2028. The net proceeds of the offering will be used to repay, redeem or refinance existing indebtedness, including indebtedness under Capital Power's credit facilities, or for general corporate purposes.

Executive appointments

Capital Power has expanded its executive team through internal promotions and an external hire to lead the company to net zero by 2045. With decades of industry experience, they share a joint commitment to drive the energy transition through the delivery of reliable, affordable and decarbonized power-generation solutions. The executive team's portfolios have been optimized to enhance and accelerate the delivery of its strategy through corporate services, commercial business and asset management activities.

New members and portfolio changes

Corporate services

Ms. Wong, senior vice-president, strategy, planning and sustainability

Ms. Wong leads the development and execution of Capital Power's corporate strategy and sustainability direction, and is accountable for the long-term planning process. With 20 years of service with the company, Ms. Wong previously held the role of vice-president of strategy, forecasting and sustainability, where she oversaw strategy, sustainability priorities, and the corporate analytics and commodity risk management function responsible for developing market assessment analytics across North American power markets.

Ms. McLean, senior vice-president, external relations and chief legal officer

Ms. McLean leads the legal, regulatory, corporate compliance and external relations functions of Capital Power. She also provides support, risk management and strategic insights to senior management and the board of directors. Prior to joining Capital Power in September, 2023, Ms. McLean spent 14 years working for the Alberta Electric System Operator (AESO) in senior legal and commercial roles, and, prior to that, practised corporate and commercial law.

Asset management

Mr. Wollin, senior vice-president, operations

Mr. Wollin oversees the safe operation of approximately 7,500 megawatts of power generation capacity across North America, including Capital Power's operations, supply chain, and health, safety, security and environment functions. He is responsible for reliability and plant efficiency programs that provide industry-leading plant availability and emission reductions. Mr. Wollin also brings knowledge and hands-on experience in precombustion and postcombustion carbon capture technologies. With 22 years of service with the company, Mr. Wollin previously held the positions of vice-president, thermal operations, East, and renewables, where he oversaw the addition and integration of over 3,000 megawatts of assets to Capital Power's portfolio, and vice-president, engineering, where he established the Capital Power reliability program for the fleet.

Commercial

Mr. Comandante, senior vice-president, head of Canada

Mr. Comandante oversees the physical and financial optimization of Capital Power's Canadian fleet, the successful execution of Canadian development and acquisition opportunities, and the assessment and investment in decarbonization technologies in Canada. With 22 years of service with the company, Mr. Comandante has held senior leadership roles focused on commodity trading, corporate strategy, regulatory and commercial management, including capital deployment into energy transition.

Bryan DeNeve, senior vice-president, chief commercial officer

Moving into a new portfolio, Mr. DeNeve now oversees commercial business initiatives across North America, including the physical and financial optimization and decarbonization of Capital Power's fleet. With 27 years of service with the company, Mr. DeNeve has previously served as senior vice-president, operations, where he was responsible for the safe operation of approximately 7,500 megawatts of power generation capacity across North America, as well as senior vice-president, business development and commercial services, and senior vice-president, finance, and chief financial officer.

Ms. Haskins, Jacquie Pylypiuk and Steve Owens continue to serve in their current roles as senior vice-president, finance and chief financial officer, senior vice-president, technology, and chief people and culture officer, and senior vice-president, construction and engineering, respectively. Chris Kopecky, former senior vice-president, and chief legal, development and commercial officer, remained in an adviser role with the company until Sept. 15, 2023.

Board of director 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. 29, 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 of responsibly produced, ultralow-carbon thin film solar modules for approximately one gigawatt direct current (GWdc) from First Solar Inc. The solar 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 the Inflation Reduction Act (IRA).

Updates to Genesee repowering project schedule and costs, and battery energy storage system (BESS) 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 AESO completed its review process and provided conditional approval to Capital Power's alternative solution to utilize unique operational characteristics of the repowered units to meet the most severe single contingency (MSSC) limit of 466 MW. 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 operations 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 Independent Electric System Operator'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:

• 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 request for proposals (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.
• Was 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 393 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.

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 Canada-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 event

Acquisition of Frederickson 1 generating station

On Oct. 10, 2023, the company announced that it executed an agreement to acquire a 50.15-per-cent ownership interest in the Frederickson 1 generating station from Atlantic Power & Utilities for $137-million ($100-million (U.S.)). The other 49.85 per cent is owned by Puget Sound Energy (PSE). Capital Power will finance the transaction using cash on hand and its credit facilities. The transaction is expected to close in the fourth quarter of 2023, subject to customary regulatory approvals, and other closing adjustments and conditions.

Frederickson 1 is a 265 MW natural-gas-fired combined-cycle generating facility located in Pierce county, Washington. It has tolling agreements for 100 per cent of its capacity out to October, 2030, with credit-worthy counterparties. Frederickson 1 is expected to generate average contracted adjusted EBITDA of $21-million ($15-million (U.S.)) per year during the five-year period of 2024 to 2029.

Frederickson 1 is well positioned as a flexible and dispatchable resource that provides reliable power in support of the continuing energy transition to renewables in the region. Capital Power will operate and maintain the facility with its knowledge and experience in plant operations and optimization, and will receive an annual management fee under the operating arrangement with PSE. Located southeast of Tacoma in the Puget Sound region load centre, Frederickson sits on approximately seven acres of land that is adjacent to additional lands owned by Capital Power. Current layout and additional space allow for future development such as battery installation or a hybrid opportunity.

Analyst conference call and webcast

Capital Power will be hosting a conference call and live webcast with analysts on Nov. 1, 2023, at 9 a.m. (MT) to discuss the third quarter financial results. The webcast can be accessed on-line.

Conference call details will be sent directly to analysts.

An archive of the webcast will be available on the company's website following the conclusion of the analyst conference call.

Territorial acknowledgement

In the spirit of reconciliation, Capital Power respectfully acknowledges that it 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 region and Metis Nation of Alberta Region 4. Capital Power 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 power producer committed to net zero by 2045. Its balanced approach to the energy transition prioritizes reliable, affordable and decarbonized power that communities across North America can depend on.

Capital Power owns approximately 7,500 megawatts (MW) of power generation capacity at 29 facilities across North America. Projects in advanced development include approximately 213 MW of renewable generation capacity in Alberta and North Carolina, 512 MW of incremental natural gas combined cycle capacity from the repowering of Genesee 1 and 2 in Alberta, and approximately 350 MW of natural gas and battery energy storage systems in Ontario.

We seek Safe Harbor.