Introducing the 2012 Guidance and Dividend Reinvestment Plan.
"Investor day and 2012 guidance: Capital Power (
) held a rather well attended investor day in Toronto. The company
also announced their 2012 guidance. Capital Power's guidance
includes: (a) normalized EPS range of C$1.50 to C$1.70; (b) cash
flow per share range of C$3.90 to C$4.30; (c) assuming Alberta spot
power prices average C$74/MWh; (d) fund from operations of C$380m
to C$420m; (e) 91% plant availability; and, (f) CPX introduced a
Dividend Reinvestment Plan (DRIP). The 2012 normalized EPS guidance
compares to ours at C$1.68 and the Street at C$1.466 (range of
C$1.08 to C$2.10). We believe the Street will increase their EPS
figures closer to the mid-point of guidance of C$1.60. per
Shifting Focus from Acquisitions to Development Opportunities.
"The company's growth in 2011 was primarily driven by the
acquisitions of three New England plants (totaling roughly 1,000MW
of generation capacity) and the Halkirk Wind project. Somewhat
consistent with other companies, CPX believes increased competition
for contracted assets logically shifts the focus to development
opportunities and away from acquisitions. We believe CPX faces a
reasonably large (albeit manageable) development pipeline in
various regions in Canada and the US."
Acquisitions + Developments = Growth. "CPX's financial fortunes
are substantially tied to power pricing in Alberta. Over the
longer-term, we view CPX as well positioned for ongoing capacity
growth. We anticipate CPX to growth with a balanced combination of
acquisitions and organic developments."
Valuation: "Our Outperform rating and target price of C$28.00 is
obtained from multiple approaches, including: a 17.0x P/E multiple
on our 2012 estimate; a target dividend yield of 4.5%; an adjusted
9.0x EV/EBITDA multiple; and, a discounted cash flow. We reiterate
our Outperform rating."
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