14:01:48 EST Fri 01 Dec 2023
Enter Symbol
or Name

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Capital Power Corp
Symbol CPX
Shares Issued 117,504,318
Close 2023-11-20 C$ 38.95
Recent Sedar Documents

Capital Power to acquire two gas generation facilities

2023-11-20 16:57 ET - News Release

Mr. Avik Dey reports


Capital Power Corp. has entered into two separate definitive agreements with CSG Investments Inc., a subsidiary of Beal Financial Corp., to acquire:

  1. 100 per cent of the equity interests in CXA La Paloma LLC, which owns the 1,062-megawatt La Paloma natural gas-fired generation facility in Kern county, California;
  2. Under a newly formed 50/50 partnership between Capital Power Investments LLC and an affiliate of a fund managed by BlackRock's diversified infrastructure business, 100 per cent of the equity interests in New Harquahala Generation Company LLC (Harquahala), which owns the 1,092 MW Harquahala natural gas-fired generation facility in Maricopa county, Arizona.

Under the newly established 50/50 partnership, Capital Power and BlackRock will each be responsible for financing 50 per cent of the cash consideration for the Harquahala acquisition. Capital Power will be responsible for the operations and maintenance and asset management for which it will receive an annual management fee.

The net purchase price of the acquisitions attributable to Capital Power is expected to be $1.1-billion (U.S.) (approximately $1.5-billion), subject to working capital and other customary closing adjustments. The acquisitions are each expected to close in the first quarter of 2024, subject to the receipt of regulatory approvals and the satisfaction of other customary closing conditions.

Following the closing of the acquisitions and accounting for Capital Power's previously announced acquisition of the Frederickson 1 generating station, the company's flexible and reliable gas-fired generation fleet is expected to be the fifth largest in North America and have a balanced geographic footprint across Canada and the United States on a net operating capacity basis. The acquisitions are consistent with Capital Power's strategy to acquire contracted gas-fired generation assets that are strategically positioned within their markets and create additional growth opportunities for both the company's gas-fired and renewable generation businesses. Capital Power will leverage its deep knowledge and experience in plant operations to commercially optimize these assets and help drive long-term value as part of its broader fleet.

The acquisitions reflect an attractive entry valuation of 4.8 times 2024E adjusted EBITDA (earnings before interest, taxes, depreciation and amortization), below the historical average of transactions Capital Power has announced in the same asset class. The acquisitions are expected to generate average annual adjusted EBITDA of approximately $265-million for the 2024 to 2028 period and are estimated to be, on average, 8 per cent accretive to adjusted funds from operations per share over the same period, based on expected permanent financing.

"Capital Power's acquisition of La Paloma and the partnership in Harquahala's gas generation assets marks a significant milestone in our strategic growth," said Avik Dey, president and chief executive officer of Capital Power. "These plants are well positioned to bolster our current portfolio and align with our commitment to providing reliable, affordable power solutions that support a balanced approach to the energy transition. This acquisition further unlocks an interesting market opportunity in WECC, where we can play a leading role in supporting the shift to low-carbon energy solutions through offering reliable generation while we grow our own renewables fleet. Lastly, this transaction underscores our dedication to delivering long-term value to our shareholders and advancing our position as a leader in the power generation sector."

"We are pleased with how this strategic investment fully aligns with our financial objectives. The acquisition of La Paloma and the partnership in Harquahala offer an attractive entry point in the WECC market, are immediately accretive, and maintains our investment-grade credit ratings and balance sheet strength," said Sandra Haskins, senior vice-president, finance, and chief financial officer of Capital Power.

"We are excited to partner with Capital Power for the acquisition of Harquahala, an efficient natural gas-fired power plant, which benefits from a contract for 100 per cent of the plant's capacity through 2031 with an investment-grade utility," said Mark Florian, head of BlackRock's diversified infrastructure group. "This acquisition is consistent with our strategy of partnering with high-quality operators to acquire and manage contracted critical infrastructure that is essential to meet the growing demand for efficient, affordable and reliable energy."

"AIMCo is pleased to participate in this private placement, which provides our clients with a compelling opportunity to invest in a high-quality company that is pursuing robust growth, diversification and decarbonization strategies," said David Tiley, managing director, public equities, at AIMCo.

Net proceeds from Capital Power's concurrent $400-million subscription receipt offering, as further outlined below, are expected to fully address the planned discrete equity financing for the acquisitions. The remaining financing requirements are expected to be addressed via senior and hybrid debt financing at the corporate level, subject to market conditions. Capital Power's contemplated financing plan preserves its strong balance sheet and financial flexibility.

Subscription receipt offering

The company has entered into an agreement with a syndicate of underwriters led by TD Securities Inc. and National Bank Financial Inc. to issue 8,231,000 subscription receipts, on a bought deal basis, at an issue price of $36.45 per subscription receipt, for total gross proceeds of approximately $300-million. The company has granted the underwriters an overallotment option to purchase, in whole or part, up to an additional 1,234,650 subscription receipts at the offering price to cover overallotments, if any, exercisable at any time and from time to time until the date that is 30 days following the closing of the offering. If the overallotment option is exercised in full, gross proceeds from the public offering will be approximately $345-million. Additionally, the company will issue, at the offering price, 2,745,000 subscription receipts to AIMCo on a private placement basis, for gross proceeds of approximately $100-million. The subscription receipts sold pursuant to the private placement and the underlying common shares (defined below) will be subject to a statutory hold period of four months from the closing date of the private placement. TD Securities is acting as sole agent and sole bookrunner on the private placement. Each subscription receipt will entitle the holder thereof to receive, without payment of additional consideration or further action, upon the first to close of the acquisitions, one common share of Capital Power.

In addition, while the subscription receipts remain outstanding, holders will be entitled to receive cash payments per subscription receipt equal to dividends declared by Capital Power on each common share. Such dividend equivalent payments will have the same record date as the related common share dividend and will be paid to holders of subscription receipts concurrently with the payment date of each such dividend. The dividend equivalent payments will be made regardless of whether or not the acquisitions are completed. If both of the acquisitions are not completed prior to April 30, 2024, or in certain other events, then the subscription price for the subscription receipts will be returned to holders of subscription receipts, together with any (i) unpaid dividend equivalent payments or (ii) if no dividend equivalent payment is payable prior to such occurrence, any pro rata interest on such funds and such holder's pro rata share of the interest that would have been earned on the initial underwriters' fee payment as if such payment had been held in escrow as part of the escrowed funds and not paid to the underwriters.

The gross proceeds of the public offering and the private placement, less the portion of the underwriters' fee that is payable on closing of the public offering and the applicable commitment fee with respect to the private placement, will be held in escrow and, after payment of applicable fees and expenses upon the first to close of the acquisitions, are intended to be used by Capital Power to finance a portion of the purchase price for the acquisitions. In the event that only one of the acquisitions is completed, the balance of the proceeds from the public offering and private placement may be used by the company to repay, redeem or refinance existing indebtedness, including indebtedness under the company's credit facilities, or for general corporate purposes.

The public offering will be offered in all provinces and territories of Canada by way of a prospectus supplement dated Nov. 22, 2023, to Capital Power's base shelf prospectus dated June 10, 2022. Completion of the public offering and private placement are subject to certain conditions, including receipt of all necessary approvals, including the approval of the Toronto Stock Exchange. The closings of the public offering and private placement are anticipated to occur on or about Nov. 28, 2023. The closing of the private placement is conditional on the concurrent closing of the public offering and closing of the public offering is conditional on the concurrent closing of the private placement.

The above is a summary of the public offering. For further information, please refer to the term sheet filed on Capital Power's SEDAR+ profile and the prospectus supplement qualifying the offering of subscription receipts, which will be filed on SEDAR+.

Update on timing of 2024 guidance release

Capital Power intends to announce its 2024 guidance in January, 2024, and guidance for adjusted EBITDA, AFFO and capital expenditures will be presented on a pro forma basis to reflect the acquisitions, the recent acquisition of Frederickson 1 generating station and organic growth investments. Additionally, Capital Power will host its investor day in Edmonton, Alta., on May 7 and 8, 2024. Further details about the La Paloma and Harquahala assets will be shared at the investor day event.

Teleconference call

Analysts, investors and members of the media are invited to take part in a webcast on Monday, Nov. 20, 2023, at 2:45 p.m. Mountain time (4:45 p.m. Toronto/Montreal/New York).


TD Securities and J.P. Morgan are acting as financial advisers and Winston & Strawn LLP and Simpson Thacher & Bartlett LLP are acting as legal advisers to Capital Power and BlackRock with respect to the acquisitions. PEI Global Partners LLC is acting as sole financial adviser and White & Case LLP is acting as legal adviser to CSG Investments.

Territorial acknowledgment

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 territory and Metis Nation of Alberta Region 4. The company acknowledge 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. The company's 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.

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