Capital Power increases it's Dividend

      On October 25 Capital Power released it's third quarter report and like the train in the caption above it is still chugging along at a good speed.So it's main performance indicator adjusted EBITDA increased from $148 million in Q3 2016 to $158 million in Q3 2017- a 7% increase.However this has been obtained by a 97% generating capacity but only a low spot price for power and only a slight recovery in the price of oil.CPX has also gotten $600 million in new funds with two new financings - a $450 million medium term note and $150 million in preferred shares.Much of this capital is still available for acquisitions. Firthermore, much of the increase in adjusted EBITDA has occurred chiefly because of their astute new acquisitions earlier in the year.
           Financial Details
             the third quarter
       There was a net loss of  $5 million in Q3 compared to net income of $66 million in 2016.But this is an accounting not a performance measurement.Net cash flows for the quarter were $120 million compared to $105 million in 2016.However adjusted funds from operations was $134 million or up 60% from $79 million in 2016.More financial details on the first half are available in my blog on Blogdaleupsome of August14,2017.
            nine months

      Net income for 9 months was $154 million or $1.30 per share compared to $83 million in 2016 or $.71 per share.While net cash flows went from $306 million in 2016 to $297 million in 2017.But adjusted funds from operations increased from $251 million to $272 million in 2016 and more importantly adjusted EBITDA increased from $376 million to $397 million for a 5% increase.
              Other Financial Analysts
   Several other financial analysts have given a lukewarm rating on CPX because in their minds net income was below street estimates.They have focused on net income instead of adjusted EBITDA.It has consistently been this blog's position that adjusted EBITDA is the best measure of performance.It is true that net income missed estimates but this is an  accounting measurement only.Arbitrary deductions have been made for depreciation, amortization,income taxes and dividend payments.These deductions are quite important for an utility because it  declares large amounts of depreciation charges and has large income tax payments one year and tax  deferrals the next.If the investor looks at adjusted EBITDA then Capital Power has met estimates.Based on the trend in Q3 Capital Power is on track to hit $560 to $575 million of adjusted EBITDA for 2017.That means that e.p.s is about $5.50 per share instead of $.91 per share as Qtrade and Yahoo Finance have shown.Although free cash flow is considerably less;it was big enough to increase the dividend by 7% and another 7 % expected in 2018.
                        2018 is looking good

 This train looks different than the one above as does CPX. Capital Power has modernized including acquiring Decatur Energy in Q1 which will increase adjusted EBITDA by $60 million in 2018.It also added two wind projects that are financed by revenue swaps costing little to CPX and raised $600 million ready for new projects or acquisitions.This blog sees Capital Power as a bargain in 2017 but investors may be waiting for the price of oil to move up more.It would be hard to imagine CPX not being at $26 per share at least in January,2018.        use Blogdaleupsome for analysis of Cdn. utilities ; use Blogdaleupsome to rank Cdn. utilities