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Analyst Actions: Credit Suisse Neutral on Capital Power, Target at $24

Preliminary view: "Capital Power Corporation's headline and normalized Q4 2012 EPS were C$0.19 and C$0.23, respectively. The figures missed our C$0.39 estimate, the Street's C$0.36 and the C$0.32-C$0.39 range. Two significant events hindered the results: (a) a C$10m net pre-tax loss on a heat rate option; and, (b) Quality Wind's lower than expected production (27% capacity factor versus 47% projected) that reduced operating margins by roughly C$6m. Of note, 2013 financial targets include normalized EPS of C$1.20-C$1.40 versus our C$1.41 (similar to the Street). The two notable events cast a shadow in the weak power market and will likely result in near-term share price weakness. Given the long-cycle nature of most of our coverage universe, we do not place undue emphasis on quarterly results."

Selected highlights: "Notable points included: (a) Q4 2012 average plant availability was 89% versus 87% in Q4 2011; (b) CPX's Alberta portfolio is 49% contracted for 2013 at mid-C$60s/MWh, 37% in 2014 and 31% in 2015 at prices in the mid-C$50s/MWh; (c) Q4 2012 production was 4,078GWh versus Q4 2011 at 3,780GWh; and, (d) Q4 2012 Alberta average realized price was C$65/MWh which was lower than the Q4 2011 of C$75/MWh and the spot prices of C$79/MWh in Q4 2012.

Conference call details: CPX will hold the Q4 2012 results conference call on March 4th at 11:00am (eastern)."

Valuation: Our Neutral rating and target price of C$24.00 is obtained from multiple approaches, including: an 17.0x P/E multiple on our 2013 estimate; a target dividend yield of 5.3%; an adjusted 8.0x EV/EBITDA multiple; and, a discounted cash flow. We reiterate our Neutral rating

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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