Capital Power shows solid quarter and close to dividend increase

  Capital Power released it's first quarter results and showed solid figures for adjusted EBITDA and net cash flows.Net cash flows were $143 million versus $99 million for 2016 for a 44% increase.While adjusted EBITDA was $172 million compared to $143 million in 2016 for a 17 to 18% increase.Although revenues were down somewhat.There were several reasons for the increases. 
         Reasons for a Good Quarter  
     First it had 1000 more gigawatt hours  of electricity generation(5026gwh) or 25% more.Secondly the spot price of electricity in Alberta rose from $22 per MWh in 2017 to $35 in 2018. And the average forward price is in the mid-$50 per MWh range.Although most of Capital Power output is under contract to the spot price not the forward price.Capital Power's contract price is the average spot price over the life of the contract.With 500MW more output soon to be in operation by late 2018. Also demand  for power is likely to increase in 2018 as oil prices are starting to move up again.This is only partly offset by Genessee coal outages in 2018.As we say"the train is pulling out of the station".     
                                        

My Last Blog

I did a blog in Blogdaleupsome on 14/11/2017(click here for details) and in it I stated that the funds from their medium term note of $450 million and their preferred share issue of $150 million could be used to build another project.Now they have started to build Cardinal Point wind farm.It also said that up to $60 million from their 2017 acquisition (Decatur Energy) would be contributed to adjusted EBITDA.And lastly CPX was on track to hit $560 to $580 million of adjusted EBITDA in 2018.It was mentioned that Capital Power has already committed to a 7% dividend increase or from $1.67 to $1.79 per share in 2018.This has proven to be quite accurate. 

The Rest of 2018

CPX should have about 500MW more of contracted output in 2018;the chief asset will be Cardinal  Point wind farm.Furthermore this blog expects the price of oil to remain in the $70 s for the rest of 2018.With coal plants coming offline it is possible to see an average spot price of  power of $38-$40 per MWh.And look for an announcement of another new wind farm on their Alberta land acquired in 2017.As a consequence this blog expects adjusted funds from operations to be $400 million and adjusted EBITDA to be about $600 million.In addition, CPX could  buy up to another 1 million shares under their normal course bid.This would put e.p.s. at $1.45 per share and could push the stock price to $26 per share  at least as predicted in my earlier Blogdaleupsome blog.It will also get some momentum from the previously announced 7% dividend increase in the second or third quarter.

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