Capital Power Corporation

Good day, and thank you for standing by. Welcome to the Capital Power Q124 analyst conference call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised today's conference is being recorded. I would now like to turn the call over to your speaker today. Roy Arthur, please go ahead.

Thank you, Kevin. Good morning, and thank you for joining us today. to review Capital Power's first quarter 2024 results, which we released earlier. Our first quarter report and presentation for this conference call are posted on our website at capitalpower.com. Leading today's call, we have Avik Day, President and CEO, along with Sandra Haskins, our SVP, Finance and CFO. Avik will commence with a high-level update of our overall business, followed by Sandra, who will delve into the financial highlights of the quarter. After Avik's closing remarks, we will welcome questions from the analysts as part of Q&A. Before I start, I'd like to remind everyone of certain statements about future events made on the call are forward-looking in nature and are based on certain assumptions and analysis made by the company. Actual results could differ materially from the company's expectations due to various risks and uncertainties associated with our business. Please refer to the cautionary statement of forward-looking information on slide 3 or our regulatory filings available on CDAR. In today's discussion, we will be referring to various non-GAAP financial measures and ratios also noted on the disclosure. These measures 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 other similar measures used by other enterprises. The measures are provided to complement the GAAP measures which are included in the analysis of the company's MD&A. Reconciliations of non-GAAP financial measures to their nearest GAAP measure can be found in the 2023 Integrated Annual Report. I'd like to acknowledge that Capital Power's head office in Edmonton is located within the traditional and contemporary home of many Indigenous peoples of the Treaty 6 region, the Métis Nation of Alberta, Region 4. We acknowledge the diverse Indigenous communities that are in these areas and whose presence continues to enrich the community and our lives as we learn more about the Indigenous history of the lands in which we live and work. With that, I will turn it over to Abik for his remarks.

Thanks Roy, and good morning everyone. During the first quarter of 2024, while we experienced some challenges in our Alberta commercial business, we also achieved some notable wins across our three strategic areas of focus as we continue our journey to power change by changing power. From a delivering reliable and affordable power standpoint, we generated nine terawatt hours of power across our strategically positioned fleet of assets. We closed two significant and diversifying transactions that reposition us as a leading North American IPP. And from an operational standpoint, we made a significant amount of investment in our existing assets across our fleet with seven turnarounds for a total of $34 million of capital spent, consistent with our budget for the year. When it comes to building new generation, we have achieved a significant milestone as we are commissioning simple cycle at unit one of the Genesee complex, which takes the unit off coal. In total, we are advancing 560 megawatts of incremental capacity on development projects across our portfolio. Lastly, we continue to pursue the creation of end-to-end solutions for our wholesale customers. For example, in January, we announced we entered into an agreement to jointly assess the development and deployment of grid-scale small modular reactors, otherwise known as SMRs, with Ontario Power Generation to provide clean, reliable nuclear energy for Alberta. Moving on, we would like to provide an update with respect to our Genesee repowering project. Page 6 lays out an overview of the three-stage process to implement the repowering. As I mentioned, for Unit 1, we are now in the process of commissioning simple cycle. During the commissioning phase, unit dispatch will be driven by project needs rather than the economics, meaning that simple cycle output will range between 0 and 411 megawatts. For Unit 2, we anticipate commissioning to begin in the second quarter for completion in Q3. Simple cycle commissioning is an important milestone as it marks that we are 100% off coal. In the fourth quarter, we aim to commission combined cycle on both Unit 1 and 2. Finally, in the first half of next year, we anticipate ramping both units up to 566 megawatts each, bringing us to the end of the Genesee repowering project. As we move through each subsequent stage, our carbon intensity will continue to decline, which at completion will be 0.36 tons of CO2 per megawatt hour, representing a 60% drop from our legacy units, making Genesee the most efficient combined cycle unit in Canada. From a cost perspective, we are updating our estimated cost range to $1.55 billion to $1.65 billion up from $1.35 billion previously indicated. The change in cost is driven by increased costs related to outages required for tie-in and ongoing productivity challenges. Inclusive of the cost increases, The project continues to generate returns that exceed our equity return hurdles. Despite the challenges associated with the project timeline and costs, we remain very proud of our work on the Genesee Repowering Project. Allow me to provide you three key reasons why. Firstly, from a capital power perspective, this advances us toward our strategic areas of focus. providing reliable, affordable, and clean power. Additionally, the project represents the single largest decrease in emissions among any project we have undertaken while generating attractive returns. Secondly, from an industry perspective, this project is leading the way in resetting the regional power merit curve prompting retirement of older generating units and investments in more efficient generation. The result is a larger, more efficient, flexible natural gas supply that supports greater renewable capacity than would otherwise be possible while maintaining grid reliability. Lastly, from a consumer perspective, this represents the largest decarbonization event in Alberta's history. and is a testament to this province and the energy-only market's ability to lead with respect to decarbonization of carbon-intensive industries. Ultimately, it cements our position as a leading power producer in a key Canadian growth market and provides a foundation that will fund our future growth, optimization, and diversification efforts across our portfolio. During the first quarter, we closed two acquisitions that we announced in November of last year. As we have indicated in the past, we are focused on core markets with strong fundamentals and a commitment to decarbonization. California and Arizona are great examples of this where the long-term outlook for these assets remains quite strong. In California, we are seeing strong capacity pricing out towards the end of the decade, which reinforces our thesis for acquiring flexible natural gas generation assets. Our Q1 results already reflect the increased diversification from the newly acquired assets, despite not providing a full quarter contribution. As shown on the pie chart at the bottom left of page eight, our US business represented a third of our EBITDA for Q1 2024, in contrast to approximately 16% in the same period in 2023. Given our pro forma capacity is now weighted 50-50 in Canada and US, we expect to see this contribution increase further during the remainder of the year. As we move forward, we will provide more updates regarding the re-contracting of these assets. In addition to Genesee repowering, we wanted to briefly touch on some of our other major projects. Regarding CCS, after a detailed review of the project, we have concluded that the economics for CCS at the Genesee site do not meet our targeted risk return thresholds. As such, we are discontinuing pursuit of the 2.4 billion Genesee CCS project. However, we do view CCS technology as being viable. This is a result of our thorough work, including extensive technical review of the post-combustion CCS value chain from capture through sequestration, including types of solvent and components that can optimize the process. A lot of the learnings here are applicable to CCS anywhere, so we will continue to evaluate potential CCS projects. Notably, through a grant awarded by the Michigan Public Service Commission, we are conducting a CCS feasibility study at Midland Cogeneration, the largest natural gas-fired combined electrical energy and steam energy generating plant in the US. In Ontario, we announced a meaningful and positive update with respect to the anticipated capital cost of our projects we are pursuing there. Our project capital costs will be about $600 million combined for our East Windsor expansion and battery storage projects at York and Goreway. At this time, we do not anticipate any changes to the timing of completion for these projects. Lastly, on the renewables front, Halkirk II Wind and Maple Leaf Solar remain on schedule. With respect to Halkirk 2 wind, we recently announced we have signed a virtual power purchase agreement with Saputo Inc., meaning this asset is essentially fully contracted. Overall, we are encouraged by the progress we have been able to make across our strategic areas of focus. Since the announcement in March at the IPSA conference, we have received a number of questions regarding the proposed regulatory changes in Alberta, and we would like to address them now. There were two proposed changes announced. One, the MSA's interim rules set to take effect July 1st of this year, and two, the ESO's proposed restructured energy market set to take effect post the expiry of the interim rules. Regarding the interim rules, this consists of market power mitigation, meaning an offer cap after a reference unit is deemed to have reached a predefined return threshold and a supply cushion mechanism which allows the ASO to compel long lead time units to be online and available for dispatch. Broadly speaking, we understand and remain supportive of the interim rules as we believe these provide a circuit breaker that can provide peace of mind for Albertans with respect to the price and reliability of power. In our view, the interim rules do not represent a significant change to the near to medium term pricing outlook, given the two gigawatts of incremental supply that is coming online in 2024 in Alberta. Regarding the restructured energy market, as an independent power producer, we're making significant long-term investments in Alberta's energy future. And so the details of the restructured electricity market will be critical. As such, we will be proactively engaging in consultation with a focus on the REM. However, I would like to point out that we were highly encouraged by Minister Newdorf's remarks at the IPSA conference in March, wherein he expressed a commitment to the energy-only market and the importance of providing investor certainty. I will now hand it over to Sandra to provide a financial update.