Analyst Actions: Credit Suisse Says Acquisitions, Developments Can Boost Capital Power's Growth

Introducing the 2012 Guidance and Dividend Reinvestment Plan. "Investor day and 2012 guidance: Capital Power ( CPX ) 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 share."

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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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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