July 12, 2022

Capital Power and Manulife Investment Management announce the acquisition of the Midland Cogeneration facility in the United States

US$894 million acquisition of Midland Cogeneration Venture accretive to adjusted funds from operations by 7%

best new online casino – Capital Power Corporation (“Capital Power” or “the Company”) (TSX: CPX) announced today that it has partnered with Manulife Investment Management on behalf of the Manulife Infrastructure Fund II and its affiliates to acquire 100% of the interests in MCV Holding Company, which owns Midland Cogeneration Venture (“Midland Cogen”). The 1,633 megawatt (MW) natural gas combined-cycle cogeneration facility is being acquired from OMERS Infrastructure Management Inc. and its co-investors (“OMERS”) for a total of US$894 million, including the assumption of US$521 million of project level debt. The transaction is expected to close in the third quarter of 2022, subject to regulatory approvals and other customary closing conditions.

Under the 50/50 joint venture with Manulife Investment Management, Capital Power and its joint venture partner will each contribute approximately US$186 million subject to working capital and other closing adjustments. Capital Power will finance the transaction using New casino gamescash on hand and its credit facilities and will not need to access the equity markets to finance the transaction. Capital Power will be responsible for operations and maintenance and asset management for which it will receive an annual management fee.

“We are pleased to partner with Manulife Investment Management on the acquisition of Midland Cogen, which is consistent with our strategy of acquiring mid-life contracted natural gas assets that are strategically positioned within their power markets,” said Brian Vaasjo, President and CEO of Capital Power. “The transaction provides immediate adjusted funds from operations (AFFO) accretion and is supported by highly contracted cash flows to 2030 and 2035 from long standing counterparties. Located in Michigan, it is the largest gas-fired cogeneration facility in the United States and combined with its excellent reliability history and operating flexibility, Midland Cogen is a critical asset to support grid reliability during the transition to renewables and is extremely well-positioned for recontracting beyond 2030.”

“On the strength of the contracted cash flows from this acquisition, we are increasing our annual dividend growth guidance to 6% through 2025 from the previous 5%. Subject to Board approval, this will include a 6% dividend increase for 2022 and represents our ninth consecutive year of dividend increases,” stated Mr. Vaasjo.

“We are proud to grow our relationship with Capital Power – a partner with tremendous operational and asset management expertise,” said Scott Kushner, Managing Director, Infrastructure Investments at Manulife Investment Management. “As the electric grid continues to further integrate renewable assets, Midland Cogen serves as a flexible, responsive and stable asset that is critical to serving electricity customers in Michigan. We are pleased to bring this type of investment to our clients as part of their diversified infrastructure portfolio.”

Acquisition highlights

  • Financial projections (Capital Power’s portion): average adjusted EBITDA of US$59 million per year (ranging from US$85 million in 2023 and declining to US$45 million in 2027) and an average AFFO of US$35 million per year during the 5-year period from 2023 to 2027.
  • Accretive transaction: based on the expected financing, the 5-year average accretion for AFFO is expected to be CAD$0.38 per share reflecting a 7.0% increase.
  • Long-term contracts with high quality counterparties:
    • Consumers Energy (rated Baa1 / A- / A-) – power purchase agreement for 1,240 MW of capacity to 2030.
    • Corteva Agriscience (rated NA / A- / A) and Dow Silicones (rated Baa2 / BBB / BBB+) – steam and electricity purchase agreements to 2035.
  • Merchant capacity: approximately 15% (243 MW) of uncontracted capacity is available to sell into the MISO Zone 7 market.
  • Large site provides development opportunities: located on 1,200 acres leased from Consumers Energy. Current layout and additional space allow for additional turbines, battery installation or a hybrid opportunity.

Overview of Midland Cogen facility

  • Nameplate capacity: 1,633 MW (electric), 1,500 kpph (steam)
  • Location: Midland, Michigan
  • Commercial operation date: 1990
  • Equipment: utilizes 12 General Electric (GE) Type 11 NMC gas turbine generators and one GE steam turbine
  • Availability: nearly 100% PPA availability since 2010 (excluding scheduled total plant outages conducted once every 7 years)
  • Natural gas source: Consumers and Great Lakes Gas Transmission Co.
  • Interconnection: interconnected through Michigan Electric Transmission Company in MISO Zone 7 market in Michigan, which is expected to see significant legacy coal retirements and accelerating renewable deployment

Non-GAAP Financial Measures and Ratios

The Company uses (i) 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, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA) and (ii) AFFO as financial performance measures.

The Company also uses AFFO per share as a performance measure. This measure is a non-GAAP ratio determined by applying AFFO to the weighted average number of common shares used in the calculation of basic and diluted earnings per share.

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 New casino sitesmeasures used by other enterprises. These measures should not be considered alternatives to net income, net cash flows from operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to complement GAAP measures in the analysis of the Company’s results of operations from management’s perspective.

See Non-GAAP measures and ratios in the Company’s first quarter 2022, and year-end 2021 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 MCV Holding Company includes expectations regarding: (i) financing plans, (ii) transaction close timing, (iii) financial impacts including expected AFFO and adjusted EBITDA contributions and accretion in AFFO and AFFO per share (iv) positioning for potential re-contracting of Midland Cogen following contract expiries in 2030 and 2035, and (v) updated dividend growth guidance through 2025, and (vi) future site development opportunities.

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 Midland best new online casinoCogen facility 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 Midland Cogen 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 MISO 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 as well as the receipt and timing thereof of required regulatory approvals, (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 Midland Cogen facility, (viii) limitations inherent in the Company’s review of the Midland Cogen facility, and (ix) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s 2021 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 wholesale power producer with a best new online casinostrategic focus on sustainable energy headquartered in Edmonton, Alberta. We build, own, and operate high-quality, utility-scale generation facilities that include renewables and thermal. We have also made significant investments in carbon capture and utilization to reduce carbon impacts and are committed to be off coal in 2023. Capital Power owns approximately 6,600 MW of power generation capacity at 27 facilities across North America. Projects in advanced development include approximately 385 MW of owned renewable generation capacity in North Carolina and Alberta and 512 MW of incremental natural gas combined cycle capacity, from the repowering of Genesee 1 and 2 in Alberta.

About Manulife Investment Management

Manulife Investment Management is the global brand for the global wealth and asset management segment of Manulife Financial Corporation. We draw on more than a century of financial stewardship and the full resources of our parent company to serve individuals, institutions, and retirement plan members worldwide. Headquartered in Toronto, our leading capabilities in public and private markets are strengthened by an investment footprint that spans 18 geographies. We complement these capabilities by providing access to a network of unaffiliated asset managers from around the world. We’re committed to investing responsibly across our businesses. We develop innovative global frameworks for sustainable investing, collaboratively engage with companies in our securities portfolios, and maintain a high standard of stewardship where we own and operate assets, and we believe in supporting financial well-being through our workplace retirement plans. Today, plan sponsors around the world rely on our retirement plan administration and investment expertise to help their employees plan for, save for, and live a better retirement.