Corporate Responsibility Report 2013

Strategy & Risk Management

Corporate strategy

Throughout 2013, we remained focused on executing a strategy designed to create value throughout the business cycle. Our corporate strengths are the pillars supporting our strategy and our vision to be one of North America’s most respected, reliable, and competitive power producers.

“2013 was a successful year as we exceeded our earnings and cash flow financial targets while completing a number of initiatives that prepare Capital Power for the future. At a high level, our strategy remains the same — Capital Power will provide investors with a stable and growing contracted cash flow base, with upside exposure to the Alberta power market.”
- Brian Vaasjo, President & CEO

Our corporate strategy

Capital Power’s vision continues to be being one of North America’s most respected, reliable, and competitive independent power producers. We will achieve this vision by adding shareholder value through operational excellence and a disciplined growth strategy.

Our corporate strategy comprises a business strategy, which sets out how we will become an increasingly competitively-priced power producer, and a financial strategy, which is designed to provide consistent access to low-cost capital.

Strategies for managing risk, achieving a level of diversification by region and fuel type, ensuring safety, and becoming a desirable employer are key elements of our corporate strategy.

Our corporate strategy is assessed annually by management, in consultation with our board of directors, to ensure it remains effective. As market conditions warrant, refinements and enhancements are made. The board of directors annually reaffirms and approves the strategy.

Management also submits an annual corporate plan to the board of directors for review and approval. The plan outlines management’s objectives and initiatives to execute the strategy and is used to formulate departmental plans throughout the organization.

Delivering on strategy

We continued to deliver on our business strategy in 2013.

  • Operational excellence was achieved, while we selectively pursued growth opportunities that aligned with our investment criteria.
  • An appropriate balance of merchant and contracted facilities was maintained in the markets identified in our business strategy.
  • We completed construction of a wind-power project in Ontario and announced a letter of intent with ENMAX to pursue a joint arrangement to develop, construct, own, and operate the Genesee 4 & 5 facilities.
  • We successfully closed on the sale of our three U.S. Northeast plants with net proceeds from the divestiture used to fund our investment in the Shepard Energy Centre.

Our corporate strengths

  • A modern fleet with proven operating history
  • A solid platform for growth
  • Cash flow from long-term contracts that provide stability in meeting financial obligations
  • Financial strength with access to capital
  • A diversified portfolio in North American markets

Key elements of our strategy include:

  1. Our Vision: Become one of North America’s most respected, reliable, and competitive power generators.
  2. Geographic focus. To manage overall portfolio risk and generate growth, Capital Power will maintain an investment focus in merchant assets in the Alberta market only and will seek to develop contracted opportunities across North America.
  3. Technology focus. A technology focus that includes developing and operating a limited number of power generation technologies, which builds expertise in operations, maintenance, and construction, and fosters better supplier relationships.
  4. Investment-grade credit rating. Maintaining an investment-grade credit rating through stable cash flows derived from a mix of contracted and merchant cash flows and through a moderate business risk profile. This also allows Capital Power to access low-cost capital throughout the business cycle and provides shareholders with a dividend competitive with our peers.

New generation 

Between now and 2015, Capital Power will commission two power generation assets:

  • A 270-MW wind farm in Ontario, K2 Wind*, which is being built and operated as a joint venture with two other partners. It will be commissioned in 2014.
  • An 800-MW natural-gas-powered facility in Alberta, (Shepard Energy Centre), which is being built in partnership with ENMAX. It will be commissioned in the fourth quarter of 2014 and operated by ENMAX.

We continue to analyze opportunities to acquire or develop power generation assets in our target markets. In the next few years, we will focus on natural gas and renewable generation assets in Canadian and U.S. markets and on developing a natural-gas-fueled generation facility in Alberta (Genesee 4 & 5), which will be commissioned later in the decade.

* Capital Power owns 90 MW of K2 Wind.

Construction of the 800 MW Shepard Energy Centre located in southeast Calgary continues to track on schedule and below budget, with commercial operations targeted in early 2015.

Creating for the future

Researching technology

We supported clean power research and initiatives through our involvement with the Centre for Clean Coal/Carbon and Mineral Processing Technologies — a $21-million teaching and research centre in the University of Alberta’s Faculty of Engineering.

Developing wind power

In 2013, we added 105 MW of wind power with the successful commissioning of Port Dover & Nanticoke Wind in Southern Ontario. Capital Power now has a total of 437 MW of wind power in our fleet.

We receive approximately $1 million per year from the Government of Canada through the Wind Power Production Incentive program, which was created to encourage the development of wind energy capacity. The incentive is approximately $0.01 per kilowatt hour of production from our Kingsbridge Wind Power Project. Eligible recipients can receive the incentive on the first 10 years of production.

Kingsbridge I Wind Power generates renewable energy for Ontario.

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