Capital Power increases power generation, earnings and dividends
Way back on July29 Capital Power released it's second quarter results but this blog only got to it today.That aside,Capital Power had a good second quarter.Plus it announced that it would have a 7% annual dividend increase to $1.92 per share.My blog on Wordpress called Econothon (May21,2019) predicted a 7% increase would likely be announced in Q2 and it was.This has been aided by a 15% increase in power generation and revenues. In addition,their CEO says in the report "it is on track to achieve results at the top end of the target range (guidance)".That should push the share price to the $33-$35 price as also predicted in that blog.
Second Quarter Highlights
Capital Power derives a large amount of it's revenues from western Canada,especially Alberta. And a considerable amount from coal generated power.But in recent years it has been diversifying out of Alberta and out of coal.To that end CPX acquired a 875 megawatt (MW) natural gas facility in Ontario.Plus they increased equity in C2CNT, a facility that transforms carbon into other products.And accelerated the transformation of Genessee I and II into dual-fuel feeds (gas and coal).Lastly they successfully raised $625 million from debt and common and preferred share offerings.However even with a 7% dividend increase the payout ratio for Capital Power is still only at 45% to 55% which is fairly conservative.More importantly e.p.s was $.93 compared to $.55 in Q2 2018 and $1.42 per share compared to $.85 for the first half of 2018.So it is on track to hit $3.10 to $3.45 per share for the year which will lower it's P/E ratio to the 8 to 10 times area.
Natural Gas Feedstock
CPX made a big acquisition in the Goreway facility in Ontario.And the CEO says "combined with our other Ontario natural gas assets, we have nearly 1,200 megawatts of capacity(in Ontario)".Furthermore Capital Power will finish it's natural gas conversion of Genesee 1 and 2 by 2021.This will almost completely reduce reliance on coal as a feedstock.And that will reduce costs as well as carbon emissions.
Summary
Capital Power has worked diligently to reduce it's dependence on coal and it has largely done so.It has moved towards using natural gas as a feed stock and this will help to reduce future costs.And the acquisition of Goreway has been a good strategic move;it uses natural gas and it is in Ontario.In addition, it will raise adjusted EBITDA immediately.The May21, 2019 blog forecasted a target price of $33-$35 for 2019 but the price peaked at $32.50.And now it has retreated to the $31 price range.This blog sees this as temporary because CPX e.p.s. are on track to hit $3.10 to $3.45 per share and this will reduce the P/E ratio to 8 or 9 down from it's present 11.25.This will bring the price back to my old target level of $33-$35.Capital Power may make another small acquisition but there will not likely be a sizeable equity issue. http://www.aimco.com/ https://www.zacks.com/
Second Quarter Highlights
Capital Power derives a large amount of it's revenues from western Canada,especially Alberta. And a considerable amount from coal generated power.But in recent years it has been diversifying out of Alberta and out of coal.To that end CPX acquired a 875 megawatt (MW) natural gas facility in Ontario.Plus they increased equity in C2CNT, a facility that transforms carbon into other products.And accelerated the transformation of Genessee I and II into dual-fuel feeds (gas and coal).Lastly they successfully raised $625 million from debt and common and preferred share offerings.However even with a 7% dividend increase the payout ratio for Capital Power is still only at 45% to 55% which is fairly conservative.More importantly e.p.s was $.93 compared to $.55 in Q2 2018 and $1.42 per share compared to $.85 for the first half of 2018.So it is on track to hit $3.10 to $3.45 per share for the year which will lower it's P/E ratio to the 8 to 10 times area.
Natural Gas Feedstock
CPX made a big acquisition in the Goreway facility in Ontario.And the CEO says "combined with our other Ontario natural gas assets, we have nearly 1,200 megawatts of capacity(in Ontario)".Furthermore Capital Power will finish it's natural gas conversion of Genesee 1 and 2 by 2021.This will almost completely reduce reliance on coal as a feedstock.And that will reduce costs as well as carbon emissions.
Summary
Capital Power has worked diligently to reduce it's dependence on coal and it has largely done so.It has moved towards using natural gas as a feed stock and this will help to reduce future costs.And the acquisition of Goreway has been a good strategic move;it uses natural gas and it is in Ontario.In addition, it will raise adjusted EBITDA immediately.The May21, 2019 blog forecasted a target price of $33-$35 for 2019 but the price peaked at $32.50.And now it has retreated to the $31 price range.This blog sees this as temporary because CPX e.p.s. are on track to hit $3.10 to $3.45 per share and this will reduce the P/E ratio to 8 or 9 down from it's present 11.25.This will bring the price back to my old target level of $33-$35.Capital Power may make another small acquisition but there will not likely be a sizeable equity issue. http://www.aimco.com/ https://www.zacks.com/
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