September 16, 2009

Capital Power Files Business Acquisition Report

Report Includes Second Quarter Financial Results and Updated Outlook

New casino games – Capital Power Corporation (Capital Power, or the Company) (TSX:CPX) today announced the filing of a Business Acquisition Report (BAR) in connection with its acquisition of substantially all of the power generation assets previously owned by EPCOR Utilities Inc.  The report includes Capital Power’s 2009 second quarter and six month financial results and an updated outlook. A copy of the BAR is available on the company’s website at or on SEDAR at

As described in Capital Power’s prospectus dated June 25, 2009 (the Prospectus) in connection with the Company’s Initial Public Offering (IPO), consideration for the acquisition of the Company’s assets consisted of approximately $1,364 million in cash and 56.625 million exchangeable limited partnership units of Capital Power L.P. (CPLP), representing a 72.2% partnership interest in CPLP. The acquisition was effective July 1, 2009.

While the acquisition was not completed until the third quarter of Capital Power’s fiscal year, the BAR includes pro forma consolidated financial information for the second quarter and six months ended June 30, 2009. For the purpose of the pro forma consolidated statements of income, the pro forma consolidated statements of income in the BAR presents the effects of the completion of the IPO and related reorganization as if they had been completed on January 1, 2008.

Operational and Financial Highlights(1)
Three months ended
June 30
Six months ended
June 30
(millions of dollars) 2009 2008 2009 2008
Electricity generation (GWh) 3,492 2,875 7,160 6,230
Generation plant availability (%) 93% 84% 95% 89%
Revenues $537 $686 $1,246 $1,319
Gross margin(2) $250 $247 $449 $483
Adjusted EBITDA(2) $148 $149 $265 $302
Funds from operations(2) $28 $49 $109 $119
Historical net income (loss) $2 ($18) $56 $17
Pro forma net income(3) $11 N/A $30 N/A
  1. The operational and financial highlights in this press release are derived from and should be read in conjunction with the financial statements and other information contained in the BAR.
  2. Gross margin, adjusted Earnings before interest, taxes, depreciation and amortization (EBITDA), and Funds from operations are non-GAAP financial measures and do not have standardized meanings under GAAP, and therefore, may not be comparable to similar measures used by other enterprises. Reconciliations to these non-GAAP financial measures to net income in the case of gross margin and adjusted EBITDA, and cash provided by operating activities in the case of funds from operations are included at the end of this press release.
  3. Adjusted for IPO-related changes to capital structure, fair value and public company costs as detailed in Note 3 to the Unaudited Pro Forma Financial Consolidated Statements of Income for the six months ended June 30, 2009 contained in the BAR.

“Our second quarter results reflect weak power prices in the Alberta market, which are a function of low natural gas prices and strong availability of power generation units in the province,” said Brian Vaasjo, President and Chief Executive Officer of Capital Power. “Alberta power prices averaged $32 per megawatt hour in the second quarter of 2009 compared with $108 per megawatt hour in 2008. This underlines the importance of our strategic focus to maintain a balance of contracted and merchant facilities.”

Despite the weak pricing environment, Capital Power’s year-over-year performance in the second quarter with respect to gross margin and adjusted EBITDA was essentially flat. This reflected a number of positive and negative variances, as described in the BAR report. Notable among these was a decline from the year earlier period in the contribution from the Company’s Alberta commercial plants, while the contribution from contracted facilities and the EPCOR Power L.P. (EPLP) increased.


Alberta forward power prices declined in the first half of 2009 and are expected to remain low in the near term, mainly due to low natural gas prices. Consistent with the second quarter results, lower power prices are expected to reduce adjusted EBITDA, excluding fair value adjustments, and cash flow from operations for the remainder of 2009, as approximately 53% of the Company’s Alberta commercial portfolio is exposed to the spot market. The remaining 47% has been sold forward at an average price in the mid-$60/MWh range. The Alberta commercial plants represent approximately approximately 40% to 50% of adjusted EBITDA, before unrealized fair value New online casinoschanges, excluding the non-controlling interest in EPLP.

For 2010, approximately 80% of the Alberta commercial portfolio position has been sold forward at an average price in the mid-$60/MWh range, which should reduce the exposure to decreases in power prices. For 2011, the Alberta commercial portfolio’s open position is expected to increase to approximately 60% to 65% of the total portfolio, which could introduce more variability in adjusted EBITDA and cash flow, depending on changes in power prices. The average contracted price is in the low $70/MWh range for the generation sold forward in 2011. The Company will continue to monitor commodity price forecast movements and undertake transactions to optimize the portfolio and limit exposure to price movements.

The sensitivity to an increase/decrease of $1/MWh in the Alberta power price, assuming all other factors are held constant, is estimated to be an adjusted EBITDA increase/decrease of approximately $1 million for the remainder of 2009, $1 million for 2010 and $4 million for 2011. The increased sensitivity in 2011 is due to the open position on the Keephills 3 facility and the expiration of certain Alberta wholesale and commercial and industrial customer contracts.

The Company also outlined in the “Outlook” section of the BAR various factors that are expected to impact its results for the remainder of 2009 and for 2010.

“Looking forward, Capital Power has a strong balance sheet, a modern and efficient fleet, a diversified portfolio of assets, long-term contracts including power purchase arrangements, and an investment-grade credit rating,” added Mr. Vaasjo. “This represents an ideal foundation from which to expand our current operating platform and participate in the recovery of natural gas and power prices.”

Webcast of Analyst Conference Call

Capital Power will be hosting a conference call with analysts on September 17, 2009 at 9:00 am (MDT) to discuss the BAR. Interested parties may access the live webcast on the Company’s website at An archive of the webcast will be available on the website.

About Capital Power

Capital Power is a growth-oriented North American independent power producer, building on more than a century of innovation and reliable performance. The Company’s vision is to be recognized as one of North America’s most respected, reliable and competitive power generators. Headquartered in Edmonton, Alberta, Capital Power has interests in 31 facilities in Canada and the U.S. totaling approximately 3,300 megawatts of generation capacity. Capital Power and its subsidiaries develop, acquire and optimize power generation from a wide range of energy sources.

Forward-Looking Statements

This news release contains New casino sitesforward-looking statements, including “forward-looking statements” within the meaning of applicable Canadian and United States securities laws, as it relates to anticipated financial performance, events and strategies. Such forward-looking statements include, without limitation, statements regarding: (i) expected lower power prices and the impact for the remainder of 2009; (ii) anticipated reduction in exposure to decreases in power prices in 2010; (iii) expected increase in the Alberta commercial portfolio position in 2011 and its effect on operating results; (iv) the Company’s intention to monitor commodity price forecast movements and take action to optimize the portfolio and limit exposure; (v) estimated sensitivity of a change in power prices for the final six months of 2009, 2010 and 2011; and (v) factors that form the foundation from which the Company may expand its operating platform.

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 and expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements include, but are not limited to: (i) the operation of the Company’s facilities; (ii) power plant availability, including those subject to acquired PPAs (iii) the Company’s financial position and credit facilities (iv) the Company’s assessment of commodity and power markets; (v) the Company’s assessment of the markets and regulatory environments in which it operates; (vi) weather; (vii) availability and cost of labour and management resources; (viii) performance of contractors and suppliers; (ix) availability and cost of financing; (x) foreign exchange rates; (xi) management’s analysis of applicable tax legislation; (xii) the currently applicable and proposed tax laws will not change and will be implemented; (xiii) currently applicable and proposed environmental regulations will be implemented; (xiv) counterparties will perform their obligations; (xv) renewal and terms of PPAs (xvi) ability to successfully integrate and realize benefits of its acquisitions (xvii) ability to implement strategic initiatives which will yield the expected benefits; and (xviii) the Company’s assessment of capital markets and ability to complete future share offerings.

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 risks and uncertainties include, but are not limited New online casinosto risks relating to: (i) operation of the Company’s facilities (ii) power plant availability and performance; (iii) unanticipated maintenance and other expenditures; (iv) availability and price of energy commodities; (v) electricity load settlement; (vi) regulatory and government decisions including changes to environmental, financial reporting and tax legislation; (vii) weather and economic conditions; (viii) competitive pressures; (ix) construction; (x) availability and cost of financing; (xi) foreign exchange; (xii) availability and cost of labour, equipment and management resources; (xiii) performance of counterparties, partners, contractors and suppliers in fulfilling their obligations to the Company; (xiv) developments in the North American capital markets; (xv) compliance with financial covenants; (xvi) ability to successfully realize the benefits of acquisitions and investments; (xvii) the tax attributes of and implications of any acquisitions; and (xviii) other factors and assumptions discussed in the section entitled Risk Factors in the Prospectus and in other documents filed with provincial securities commissions in Canada. If any such risks actually occur, they could materially adversely affect the Company’s business, financial condition or results of operations. In that case the trading price of the Company’s common shares could decline, perhaps materially. Readers are cautioned not to place undue reliance on any such New casino sitesforward-looking statements, which speak only as of the date made. Forward-looking statements are provided for the purpose of providing information about management’s current expectations, and plans relating to the future. Readers are cautioned that such information may not be appropriate for other purposes. 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.

Non-GAAP Financial Measures

The Company uses (i) gross margin, (ii) adjusted EBITDA, (iii) funds from operations, and (iv) funds from operations excluding non-controlling interests in EPLP as financial performance measures. These terms are not defined financial measures according to Canadian GAAP and do not have standardized meanings prescribed by GAAP, and therefore may not be comparable to similar measures used by other enterprises. These measures should not be considered an alternative to net earnings, cash flow from operating activities or other measures of financial performance calculated new online casino no deposit bonusin accordance with Canadian GAAP. Rather, these measures are provided as additional information to complement those Canadian GAAP measures by providing further understanding of the Company’s results of operations from management’s perspective.

Gross margin and adjusted EBITDA

Capital Power uses gross margin and adjusted EBITDA to measure the operating performance of plants and groups of plants from period to period. A reconciliation of gross margin and adjusted EBITDA to net income is as follows:

(unaudited, $ millions) Three months
ended June 30
Six months
ended June 30
2009 2008 2009 2008
Revenues $ 537 $ 686 $ 1,246 $ 1,319
  Energy purchases and fuel 287 439 797 836
Gross margin 250 247 449 483
  Deduct (add):
  Operations, maintenance, and administration 102 98 184 181
Adjusted EBITDA 148 149 265 302
  Deduct (add):
  Depreciation, amortization, and asset retirement accretion 43 46 89 91
  Foreign exchange losses (gains) 2 (3) 2 10
  Gain on sale of power purchase arrangement and related transactions (30) (34)
  Net financing expenses 63 50 127 101
  Income taxes 7 6 12 11
  Non-controlling interests 31 68 9 106
Net income (loss) 2 (18) 56 17
Funds from operations and funds from operations excluding non-controlling interests in EPLP

Funds from operations and funds from operations excluding non-controlling interests in EPLP Capital Power uses funds from operations to measure the Company’s ability to generate funds from current operations and measures its interest in cash flows by excluding the non-controlling interest in EPLP’s cash flows. A reconciliation of funds from operations and funds from operations excluding non-controlling interests in EPLP to cash provided by operating activities is as follows:

(unaudited, $ millions) Three months
ended June 30
Six months
ended June 30
2009 2008 2009 2008
Funds from operations excluding non-controlling interests in EPLP $ 2 $ 33 $ 64 $ 77
  Funds from operations due to non-controlling interests in EPLP 26 16 45 42
Funds from operations 28 49 109 119
  Change in non-cash operating working capital 34 (7) (20) (10)
Cash provided by operating activities 62 42 89 109

Changes in working capital are primarily made up of intercompany payables and receivables between the Company and EPCOR and are not representative of how working capital would be managed by the Company on a stand alone basis. Therefore, the Company uses funds from operations as its primary operating cash flow measure.

(unaudited, $ millions) Three
Funds from operations for the period ended June 30, 2008 $    49 $    119
Higher Genesee PPA availability incentive income 27 42
Higher adjusted EBITDA from EPLP 11 2
Lower Genesee 1,2 and 3 maintenance expenses 16 26
Lower (higher) current income taxes (2) 8
Higher financing expenses (13) (26)
Lower adjusted EBITDA from other portfolio activities (8) (2)
Higher administration expense, excluding EPLP (19) (22)
Lower Alberta commercial plants electricity margin (21) (25)
Other (12) (13)
(Decrease) (21) (10)
Funds from operations for the period ended June 30, 2009 28 109