Capital Power increases generating capacity by 40%
Capital Power had a very good month of June.They began commercial operation of their 178 MW wind project called Bloom Wind in Kansas on June1.They also closed the acquisition of their 795 MW combined- cycle facility in Alabama.Lastly they closed the acquisition of two 5MW waste heat generation facilities in British Columbia.In total they added almost 1000 MW of new generating capacity in the month of June.They also added another 267 MW of capacity earlier in 2017. This total additions are about 40% of their 3200 MW capacity in 2016.Generally speaking ,additions of capacity are highly correlated with additions of earnings.If generating capacity increases by 40% then you might expect earnings to increase by 25 to 35%.In this case it will be less.
Operational Mathematics
The Bloom Wind project was completed using innovative financing called a 10 year proxy revenue agreement.This is one of the first revenue proxy agreements that has been used.This blog understands that this means that ownership of Wind Bloom for CPX is earned by allowing all revenues to be transferred to the financier for a 10 year period.There will be little profits in year one with heavy overhead costs but plenty in year 10.
The Decatur combined- cycle plant has been completed by means of a 7,375,000 issuance of subscription receipts which raised $183 million.Presumably the rest ($265 million) is raised by a promissory note or subordinated convertible units.No mention is made of financing for the two waste heat generation plants but they both have a 20 year power purchase agreement.So they may have been paid for out of cash with their revenues coming back in year one.The Decatur operation and likely the British Columbia operation will be accretive to earnings in 2017.
An estimate of Earnings
Capital Power will not get any revenues nor earnings from ,Wind Bloom,their wind project in 2017.However they say that adjusted funds from operations for their Decatur combined-cycle plant will be $.18 per share.As debt gets paid off the earnings will rise even further in 2018.Adjusted funds from operations will be $3.50 to $3.90 per share for 2017.This will make the P/E ratio of less than 9 times.And this low multiple for a solid utility stock will push CPX to $30 a share,especially with a 7% increase in their dividend in 2017.The increase in the dividend will cost about $10 million and be paid for by their projects that closed in June. use Blogdaleupsome for analysis of Cdn. utilities; use Blogdaleupsome for utility forecasts; use Blogdaleupsome for forecasts of stock prices
The Bloom Wind project was completed using innovative financing called a 10 year proxy revenue agreement.This is one of the first revenue proxy agreements that has been used.This blog understands that this means that ownership of Wind Bloom for CPX is earned by allowing all revenues to be transferred to the financier for a 10 year period.There will be little profits in year one with heavy overhead costs but plenty in year 10.
The Decatur combined- cycle plant has been completed by means of a 7,375,000 issuance of subscription receipts which raised $183 million.Presumably the rest ($265 million) is raised by a promissory note or subordinated convertible units.No mention is made of financing for the two waste heat generation plants but they both have a 20 year power purchase agreement.So they may have been paid for out of cash with their revenues coming back in year one.The Decatur operation and likely the British Columbia operation will be accretive to earnings in 2017.
An estimate of Earnings
Capital Power will not get any revenues nor earnings from ,Wind Bloom,their wind project in 2017.However they say that adjusted funds from operations for their Decatur combined-cycle plant will be $.18 per share.As debt gets paid off the earnings will rise even further in 2018.Adjusted funds from operations will be $3.50 to $3.90 per share for 2017.This will make the P/E ratio of less than 9 times.And this low multiple for a solid utility stock will push CPX to $30 a share,especially with a 7% increase in their dividend in 2017.The increase in the dividend will cost about $10 million and be paid for by their projects that closed in June. use Blogdaleupsome for analysis of Cdn. utilities; use Blogdaleupsome for utility forecasts; use Blogdaleupsome for forecasts of stock prices
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