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Introduction & Market Context
Capital Power Corporation (TSX:CPX) delivered strong financial results in the first quarter of 2025, with significant year-over-year growth in key metrics and strategic expansion of its portfolio. The company’s shares have shown positive momentum, up 2.39% to $51.94 as of April 30, 2025, reflecting investor confidence in its growth strategy.
The company is capitalizing on robust fundamentals in natural gas power generation, which has been growing at approximately 5% CAGR in the U.S., significantly outpacing the broader power sector’s growth of about 0.5%. This positions Capital Power well in a market that continues to rely on flexible generation assets alongside renewable expansion.
Quarterly Performance Highlights
Capital Power reported impressive financial results for Q1 2025, with Adjusted EBITDA reaching $367 million, representing an $88 million or 31% increase year-over-year. Adjusted Funds from Operations (AFFO) grew to $218 million, up $76 million from the same period last year. However, net cash flows from operating activities declined to $210 million, a decrease of $124 million compared to Q1 2024.
The company generated 9.6 TWh of power across its portfolio during the quarter and completed 43% of its planned outage days for the year, positioning it well for continued operational performance through 2025.
As shown in the following financial performance summary:
All four of Capital Power’s business segments contributed to the strong quarterly performance, with particularly robust growth in the flexible generation segments. U.S. Flexible Generation led with a 42% year-over-year increase in Adjusted EBITDA, while Canadian Flexible Generation grew by 16%. The renewables segments also showed positive momentum, with U.S. Renewables increasing by 11% and Canadian Renewables by 1%.
This balanced growth across all segments demonstrates the strength of Capital Power’s diversified portfolio:
Strategic Portfolio Diversification
A centerpiece of Capital Power’s growth strategy is its recently announced PJM acquisition, which significantly enhances the company’s U.S. presence and creates greater portfolio diversification. Following this acquisition, no single market will represent more than 30% of Capital Power’s portfolio, reducing regional concentration risk.
The acquisition increases Capital Power’s U.S. capacity from 48% to 57% of its total portfolio, while enhancing key operational metrics. The U.S. Flexible Generation portfolio will see capacity increase from approximately 4.0 GW to 6.2 GW, with improvements in heat rate, average age, and capacity factor.
The following chart illustrates how the PJM acquisition transforms Capital Power’s geographic diversification:
Capital Power’s President and CEO Avik Dey emphasized the strategic importance of this acquisition: "The PJM acquisition improves our existing portfolio in multiple ways, enhancing our operational metrics while providing greater geographic diversification."
Detailed Financial Analysis
Capital Power’s revised reporting structure now segments the business by technology and geography, providing greater transparency into performance drivers. The company’s portfolio now consists of:
- U.S. Flexible Generation: 6 facilities with ~4.0 GW of current net capacity
- Canada Flexible Generation: 9 facilities with ~4.2 GW of current net capacity
- U.S. Renewables: 6 facilities with ~0.6 GW of current net capacity
- Canada Renewables: 9 facilities with ~0.8 GW of current net capacity
The company highlighted that its business model remains resilient amid market uncertainties, with approximately 90% of its Adjusted EBITDA contracted or hedged with A-rated counterparties. This provides significant revenue visibility and stability.
As illustrated in the company’s resilience strategy:
Capital Power has maintained a strong balance sheet while pursuing growth, preserving its BBB- / BBB(low) credit ratings from S&P and DBRS, respectively. The company completed its largest equity financing in history, raising $667 million in common equity, including a private placement with AIMCO.
Growth Initiatives & Forward Outlook
Beyond the PJM acquisition, Capital Power is advancing several growth initiatives. The company is progressing approximately 350 MW of flexible generation in Ontario and 300 MW of new renewables projects in Alberta and North Carolina.
A notable emerging opportunity is in the data center space, where Capital Power is leveraging approximately 13,000 acres of surplus land in Alberta with potential for 1.5 GW of load. The company is undertaking detailed engineering work and has entered the AESO interconnection queue in 2024.
The data center strategy is illustrated in this overview:
For 2025, Capital Power has provided guidance for Adjusted EBITDA between $1,340-$1,440 million and AFFO between $850-$950 million. The Q1 results represent approximately 27% of the midpoint of the annual Adjusted EBITDA guidance and 24% of the AFFO guidance, positioning the company well to achieve its full-year targets.
The company’s progress against 2025 guidance is shown here:
Capital Power’s strategic priorities for 2025 focus on four key areas: contract optimization (including data centers), uprating and expanding existing facilities, acquisitions to expand the flexible generation portfolio, and development to grow the renewables portfolio.
CFO Sandra Haskins noted during the presentation: "Our Q1 performance demonstrates the strength of our diversified business model and positions us well to deliver on our 2025 guidance."
The company also announced its 11th consecutive dividend increase of 6% in 2024, maintaining its payout ratio within the target range of 30-50%, reflecting confidence in sustainable cash flow generation.
Capital Power continues to balance investments in flexible generation with renewable growth, positioning itself as a provider of reliable, affordable power while advancing its decarbonization strategy, including assessing the feasibility of Small Modular Reactors (SMRs) in Alberta in partnership with OPG.
Full presentation:
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