Capital Power and Manulife Investment Management Complete Acquisition of Midland Cogeneration Plant
EDMONTON, Alberta, Sept. 23, 2022 (GLOBE NEWSWIRE) — Capital Power Corporation (TSX: CPX) (“Capital Power”) and Manulife Investment Management, on behalf of Manulife Infrastructure Fund II and its affiliates, have announced today that they have successfully completed the acquisition of a 100% interest in MCV Holding Company, which owns Midland Cogeneration Venture (“Midland Cogen”), a 1 633 megawatts. The acquisition was previously announced on July 12, 2022.
Midland Cogen was acquired from OMERS Infrastructure Management Inc. and its co-investors for US$894 million, subject to working capital and other closing adjustments, and includes the assumption of US$521 million US dollars of debt at the project level. Under the 50/50 joint venture with Manulife Investment Management, Capital Power and its joint venture partner each contributed approximately US$186 million. Capital Power financed the transaction using cash on hand and its credit facilities. Capital Power will be responsible for the operation, maintenance and management of the assets for which it will receive an annual management fee.
Located in Michigan, Midland Cogen is the largest gas-fired cogeneration facility in North America, is a critical asset to support grid reliability during the transition to renewables, and is well positioned given anticipated market conditions. , for renewal beyond 2030. It currently operates under long-term contracts through 2030 and 2035 with quality counterparties.
For Capital Power, the acquisition provides an immediate increase in adjusted funds from operations (AFFO), with the 5-year average increase expected to be US$0.30 per share, representing an increase of 7.0%. Financial projections include an average adjusted EBITDA of US$59 million per year (ranging from US$85 million in 2023 and decreasing 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.
Non-GAAP financial measures and ratios
The Company uses (i) earnings before net finance expense, income tax expense, depreciation and amortization, write-downs, foreign exchange gains or losses, finance expense and amortization expense of its joint venture interests, gains or losses on disposals and unrealized changes in the fair value of commodity derivatives and emission credits (adjusted EBITDA) and (ii) AFFO as measures of financial performance.
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 GAAP financial measures and do not have any standardized meaning prescribed by GAAP and therefore are unlikely to be comparable to similar measures used by other companies. These measures should not be considered substitutes for net income, free cash flow from operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to supplement the GAAP measures in the analysis of the Company’s results of operations from a management perspective.
See the Company’s Second Quarter 2022 Non-GAAP Measures and Ratios and 2021 Year-End MD&A for further discussion of these measures and reconciliations of Adjusted EBITDA and AFFO to net income and net cash flow from operating activities, respectively.
Certain information contained in this press release is forward-looking within the meaning of Canadian securities laws with respect to anticipated financial and operational performance, events or strategies. Forward-looking information or statements are provided to inform shareholders and potential investors of the Company of management’s assessment of Capital Power’s future plans and operations. This information may not be suitable for other purposes. Forward-looking information in this press release is generally identified by words such as intend, anticipate, believe, plan, intend, target and expect or similar words that suggest future results.
Important forward-looking information contained in this press release with respect to the acquisition of MCV Holding includes expectations regarding: (i) financial impacts, including expected contributions to AFFO and Adjusted EBITDA and growth of AFFO and AFFO per share, and (ii) Midland Cogen’s -contracting positioning following contract expirations in 2030 and 2035.
These statements are based on certain assumptions and analyzes made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it deems appropriate, including its review of the Midland Cogen facility and its reassessment. contracting opportunities. Important factors and assumptions used in making these forward-looking statements relate to: (i) electricity and other energy prices, (ii) expected performance of the Midland Cogen facility, (iii) opportunities for renewal of wholesale market and contracts, (iv) the status and impact of policy, legislation and regulation, and (v) effective tax rates.
Whether actual results, performance or achievements will be consistent with the Company’s expectations and projections is subject to a number of known and unknown risks and uncertainties that could cause results and actual experience differ materially from the Company’s expectations. These important risks and uncertainties are: (i) changes in electricity prices on the MISO electricity market, (ii) changes in market prices of energy commodities and the use of derivatives, (iii) regulatory and political environments, including changes in environmental, financial, market reporting, tax structure and legislation and the receipt and timing thereof of required regulatory approvals, (iv) the availability and performance of production facilities, including equipment maintenance, (v) ability to fund current and future capital and working capital requirements, (vi) changes in market prices and fuel availability, (vii) the 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 MD&A for further discussion of these and other risks.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of endorsement specified. The Company neither undertakes nor accepts any obligation or undertaking to issue updates or revisions to any forward-looking statement to reflect any change in the Company’s expectations or any change in events, conditions or circumstances about which a such statement is based, except as required by law.
About Capital Power
Capital Power (TSX: CPX) is a growth-oriented, strategically focused North American wholesale power producer in sustainable energy headquartered in Edmonton, Alberta. We build, own and operate high-quality, large-scale generation facilities that include renewable and thermal energy. We have also made significant investments in carbon capture and use to reduce carbon impacts and are committed to going coal free by 2023. Capital Power has approximately 7,400 MW of power generation capacity in 28 facilities in North America. Projects in advanced development include approximately 385 MW of renewable power generation capacity held in North Carolina and Alberta and 512 MW of additional natural gas-fired combined cycle capacity from the Genesee 1 and 2 resupply in Alberta.
About Manulife Investment Management
Manulife Investment Management is the global brand for the global wealth and asset management business of Manulife Financial Corporation. We draw on more than a century of financial stewardship and all the resources of our parent company to serve individuals, institutions and pension plan members around the world. Headquartered in Toronto, our industry-leading capabilities in public and private markets are bolstered by an investment footprint that spans 19 geographies. We complement these capabilities by providing access to a network of unaffiliated asset managers around the world. We are committed to investing responsibly in our business. We develop innovative global frameworks for sustainable investing, collaborate 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 pension plans. Today, plan sponsors around the world rely on our expertise in pension plan administration and investment to help their employees plan, save and live a better retirement. Not all offers are available in all jurisdictions. For more information, please visit manulifeim.com.
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