Capital Power Q2 Earnings Call Highlights

Key Points

• Q2 performance improved: Adjusted EBITDA rose to C$351 million, up C$29 million year over year, while AFFO increased to C$328 million. Capital Power reaffirmed its 2026 guidance of C$1.565 billion–C$1.765 billion in adjusted EBITDA and C$890 million–C$1.01 billion in AFFO.
• Portfolio upside increased: Management raised its estimate of embedded annual adjusted EBITDA upside to approximately C$1.25 billion from C$1 billion, driven by recontracting opportunities, PJM and Alberta merchant pricing, and facility uprates.
• Data-center demand is creating new opportunities: Capital Power signed a 10-plus-year agreement to supply Meta with 250 MW in Alberta beginning in late 2028, converting merchant generation into contracted cash flows without new capital investment. Genesee is also being evaluated for additional data-center capacity.

Capital Power TSE: CPX said its second-quarter results reflected higher generation, contributions from its expanded PJM platform and continued commercial optimization, while management raised its estimate of annual adjusted EBITDA upside embedded in its existing portfolio to approximately C$1.25 billion.

President and CEO Avik Dey said the company sees growing demand for reliable power in Alberta, particularly from data centers and established industrial customers. He pointed to a recently announced agreement to supply Meta with 250 megawatts of capacity and energy in Alberta beginning in the second half of 2028 for a term exceeding 10 years.

The agreement converts existing merchant generation into long-duration contracted cash flows without capital investment and does not encumber specific assets, Dey said. The portfolio-level structure preserves further commercial optimization opportunities at the company’s Genesee facility in Alberta.

Quarterly Results and Guidance

Capital Power reported second-quarter adjusted EBITDA of C$351 million, up C$29 million from the second quarter of 2025. The increase was primarily driven by contributions from the expanded PJM portfolio, partly offset by lower results in the U.S. flexible generation segment due to planned maintenance outages and lower capacity revenues, as well as higher corporate expenses tied to strategic initiatives.

Adjusted funds from operations, or AFFO, rose C$93 million year over year to C$328 million. Chief Financial Officer Kevin MacIntosh said AFFO benefited from higher adjusted EBITDA and recognition of Canadian Clean Tech investment tax credit grants associated with Halkirk Wind and Ontario battery energy storage projects.

The company filed final claims for those tax credits during the second quarter and expects to receive part of the funds in 2026, with the remaining amount anticipated in the first half of 2027. The benefits were partly offset by higher sustaining capital spending for Alberta maintenance and U.S. flexible generation activity, plus higher finance and income tax expenses.

For the first half of 2026, adjusted EBITDA increased C$66 million to C$755 million, while AFFO rose C$29 million to C$482 million.

Capital Power reaffirmed its full-year 2026 guidance, including:

• Adjusted EBITDA of C$1.565 billion to C$1.765 billion;
• AFFO of C$890 million to C$1.01 billion; and
• Sustaining capital expenditures of C$290 million to C$330 million.

MacIntosh said the planned maintenance spending is intended to support the long-term reliability and value of the fleet. During the quarter, Capital Power completed 66% of its planned outage days for the 2026 maintenance cycle.

Embedded EBITDA Opportunity Raised

Management increased its estimate of annual adjusted EBITDA upside embedded in the existing portfolio from approximately C$1 billion, outlined in December, to about C$1.25 billion. MacIntosh said the higher estimate reflects progress on recontracting and greater confidence in Alberta merchant power pricing.

Of the total opportunity, approximately C$400 million to C$550 million relates to contracted upside, primarily from U.S. flexible generation assets as legacy contracts expire between 2029 and 2032, as well as uprate opportunities at natural gas facilities. Another C$375 million to C$700 million is tied to merchant upside in PJM and stronger Alberta pricing expectations.

Management said the improvement was not solely a mark-to-market exercise. MacIntosh said the company has seen productive recontracting discussions and greater customer recognition of rising costs of new entry, while the Meta contract also helps de-risk a portion of the merchant portfolio.

Portfolio Growth and Contracting

Capital Power generated 10.1 terawatt-hours across its fleet during the quarter, up 12% from a year earlier, with 60% of generation coming from U.S. assets. The company also said capacity uprates in its WECC and PJM portfolios are expected to add roughly 45 MW in 2026 and another 25 MW in 2027.

North Carolina Solar remains under construction, while the East Windsor project is nearing completion and commissioning is underway. MacIntosh said schedule slippage at the Maple Leaf and Hornet solar projects was minor and that the projects were largely tracking budget, despite some cost pressure.

Dey said Capital Power continues to pursue contracting, development and potential acquisition opportunities across North America. In PJM, he highlighted the company’s Hummel facility in Pennsylvania and Rolling Hills site in Ohio, where Capital Power sees opportunities for bilateral contracts, wholesale activity and future expansion.

The company’s partnership with Apollo is actively evaluating multiple potential transactions, Dey said, though no deal has yet been completed. He said Capital Power remains disciplined, seeking assets with identifiable upside from upgrades, recontracting or other optimization opportunities that meet its accretion thresholds.

Alberta Data Center Opportunity

Dey said Genesee remains one of the company’s most attractive sites for potential data center development. He said the facility’s incremental capacity above 466 MW could qualify under Alberta’s Phase II Bring Your Own Generation framework and could potentially be part of a bridging solution.

Capital Power has tested Genesee units above 600 MW and continues to work with the Alberta Electric System Operator on solutions that could increase available capacity, according to Dey. The company is holding multiple discussions regarding the future development of the site but did not identify specific customers or projects.

Management also emphasized the need to balance data center development with grid affordability, reliability and community engagement. Dey said the company has focused on working with operators, regulators and customers rather than pursuing behind-the-meter opportunities that could create broader affordability and reliability concerns.

Capital Power increased its dividend by 2% for 2026, marking its 13th consecutive year of dividend increases. MacIntosh said the company continues to target annual total shareholder returns of 13% to 15%, supported by cash-flow growth, disciplined capital allocation and a growing dividend.

About Capital Power (TSE:CPX)

Capital Power TSX: CPX is a growth-oriented power producer with approximately 12 GW of power generation at 32 facilities, plus battery energy storage across North America. We prioritize safely delivering reliable and affordable power communities can depend on, building lower-carbon power systems, and creating balanced solutions for our energy future.

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