Capital Power Corp

Good morning and thank you for joining us today to review Capital Power’s fourth quarter and 2020 year end results, which we released earlier this morning. Our 2020 Integrated Annual Report and the presentation for this conference call are posted on our website at capitalpower.com.

Joining me on the call is Brian Vaasjo, President and CEO; and Sandra Haskins, Senior Vice President, Finance and CFO. We will start with opening comments and then open up the lines to take your questions.

Before we start, I would like to remind everyone that certain statements about future events made on the call are forward-looking in nature and are based on certain assumptions and analysis made by the company. Actual results could differ materially from the company’s expectations due to various risks and uncertainties associated with our business.

Please refer to the cautionary statement on forward-looking information on slide 2. In today’s discussion, we will be referring to various non-GAAP financial measures as noted on slide 3.

These measures are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP, and therefore are unlikely to be comparable to similar measures used by other enterprises. These measures are provided to complement the GAAP measures, which are provided in the analysis of the company’s results from management’s perspective.

Reconciliations of these non-GAAP financial measures to their nearest GAAP measures can be found in our 2020 Integrated Annual Report. I will now turn the call over to Brian Vaasjo for his remarks starting on slide 4.

Thanks, Randy, and good morning. 2020 was an excellent year for Capital Power, which included tremendous growth in renewable development and significant announcements on repowering and our off coal strategy.

With respect to growth, we committed approximately CAD1.7 billion dollars in capital for seven renewable projects and the repowering of Genesee 1 and 2. The renewable projects included five solar development projects that have confirmed our competitive capability in solar development, which more than doubles our renewable development opportunities in North America.

We’ve completed the Repower Genesee 1 and 2 units will be the most efficient lowest GHG emitting natural gas combined cycle units in Canada. They will provide tremendous long term value.

These units will also be capable of 30% hydrogen firing at COD with the potential for 95% hydrogen at nominal additional capital costs. As part of our commitment to sustainability, we've accelerated our plan to be off coal to 2023, which is six years early.

We are also investing in utilization technology with our increased ownership in C2CNT. Our financial results in 2020 were generally in line with our guidance which resulted in an AFFO dividend payout ratio of 40%, which is below our long term target of 45% to 55%.

Overall, solid progress was made in 2020 on our decarburization strategy. Turning to slide 5, I'll review our 2020 performance versus our annual targets and Sandra will provide more details on our financial performance in our comments.

Average facility availability of 95% significantly exceeded that 93% target. This was driven by excellent operational performance on top of the deferral of planned outages due to COVID-19 driven by excellent operational performance on top of the deferral, and of planned outages due to COVID-19.

The sustaining CapEx is CAD73 million was below the CAD90 million to CAD100 million target, mainly due to the deferral of various capital projects to 2021, most notably at Genesee driven by COVID. We generated CAD955 million in adjusted EBITDA which was slightly below CAD960 million midpoint of the guidance range.

AFFO of CAD522 million would be above the midpoint of the guidance range excluding the CAD6 million impact of the Line Loss Rule Proceeding. For our construction targets, Cardinal Point Wind exceeded targets as it was completed early and came in below the low end of the targeted budget range in US dollars.

The Whitla Wind 2 project is tracking on budget and is on schedule for COD in the fourth quarter of this year. And as I mentioned we exceeded our CAD500 million growth capital target by committing approximately CAD1.7 billion to seven renewable projects and the repowering of Genesee 1 and Genesee 2.

Overall we reached a solid operation and solid operational and financial results despite the COVID-19 pandemic. Moving to slide 6, which illustrates our continued growth in renewables, our seven renewable development projects will add a total of 427 megawatts when completed later this year and in 2022.

The three North Carolina and Strathmore solar development projects have long term PPAs of 20 and 25 year terms respectively. And we continue to pursue contracts for Whitla win two and three and the Enchant solar project.

In total the seven projects are expected to contribute an annualized adjusted EBITDA of CAD70 million. Our generation mix are shown in the pie charts on this slide.

In 2020 our renewable assets contributed 27% of our total adjusted EBITDA which is expected to increase to 34% in 2025 based on the seven announced renewable projects, natural gas facilities generated 43% of adjusted EBITDA in 2020 and this is expected to increase to 66% in 2025 including the repowering of Genesee 1 and 2 and 100% gas utilization at Genesee 3, there'll be a significant shift in our generation mix as we transition off coal in 2023. I'll now turn the call over to Sandra.

Thanks Brian. I'll start with a review of our Alberta commercial portfolio optimization activities.

On slide 7, our trading desk continues to create value by capturing realized power prices above spot power prices in Q4 2020, the average realized power price of CAD56 per megawatt hour was 22% higher than the average spot price of CAD46 per megawatt hour, at the end of 2020 our base load generation is 29 % hedged for 2021 at an average contract price in the low CAD60 per megawatt hour range, for 2022 and 2023, 27% and 21% hedged at an average contract price in the CADmid-50 per megawatt hour range for both years, since the end of September of last year the outlook for the Alberta power market has improved, at that time forward prices were in the low CAD50 dollar per megawatt hour range for 2021 and 2022. Current forward prices are now CAD70 per megawatt hour for 2021 and CAD61 per megawatt hour for 2022.

Turning to slide 8; I'll discuss our fourth quarter results. The fourth quarters of 2019 and 2020 had non-cash accounting adjustments related to the off coal compensation payments.

In 2019, there was CAD140 million of coal compensation recognized in Q4 compared with CAD18 million in 2020. The year-over-year decrease of a CAD122 million is largely a result of the one-time recognition related to the G3, K3 swap in 2019 and impacts revenues and other income adjusted EBITDA and basic earnings per share in the fourth quarter and full year results.

In the fourth quarter of 2020 the Alberta government confirmed increase in carbon pricing under the tier regulation. As a result, we deferred the utilization of our Alberta emission offset inventory to maximize their value in higher carbon tax years.

The higher emission costs incurred a CAD15 million reduces adjusted EBITDA and a AFFO for 2020. Looking at our financial results on a year-over-year basis revenue and other income in the fourth quarter were CAD516 million down 24% compared to Q4 2019.

Adjusted EBITDA of CAD220 million in Q4 2020 is down 38% compared to 2019. In addition to the items already noted adjusted EBITDA was lower for the Alberta assets due to mild weather in the fourth quarter.

In fact that was the second warmest November since 1950. The mild weather and strong winds reduced the utilization of our gas plants.

AFFO of CAD86 million reported in the quarter reflects $6 million for the first of three payments related to the Milder line loss ruling. AFFO was down CAD128 million from last year due to similar items that impacted adjusted EBITDA.

On slide 9, I'll review our 2020 annual financial performance versus 2019. Revenues and other income of CAD1.9 billion were slightly below 2019 and as already mentioned reflects the accounting recognizing change of off coal compensation payments.

Adjusted EBITDA was CAD955 million down 7% compared to 2019, primarily due to the contributions from asset additions that were offset by the Arlington Valley toll decrease and the off coal compensation recognition. We generated AFFO of CAD522 million which was down 6% year over year while AFFO per share was CAD4.96 per share compared to CAD5.32 per share in 2019.

AFFO was in line with our guidance to be near the midpoint of CAD525 million before the CAD6 million line loss payments. I'll now turn the call back to Brian.

Thanks, Sandra. I'll conclude with a recap of our 2021 annual targets starting on slide 10.

Our average availability target is 93% which is the same target as 2020 and includes a major planned outages at Genesee 2, Decatur and Shepard. Our sustaining CapEx annual target is CAD80 million to CAD90 million.

The adjusted EBITDA target is CAD975 million to CAD1.025 billion, where the midpoint of the range is 4% higher than 2020. Finally the AFFO target of CAD500 million to CAD550 million is unchanged from 2020.

The positive outlook in the Alberta power market reinforces our financial guidance. Our growth targets are highlighted on slide 11, this includes developing and constructing seven renewable projects on budget and on time for commercial operations starting in the fourth quarter of this year to the fourth quarter of 2022.

We're also proceeding with a repowering of Genesee 1 and 2 after issuing full notice to proceed on the project in December 2020. The repowered units will be completed in 2023 and 2024 and as in previous years.

We’ve a target of CAD500 million of committed capital for growth that is aligned with our strategy of growing our renewable assets and/or acquiring mid-life contracted natural gas assets. Turning to slide 12, I'll conclude by mentioning that we released our 2020 integrated annual report this morning, some of the key highlights of this report include our progress towards our ESG goals, acceleration of our path to a lower carbon future from repowering and being off coal in 2023 six years early and our ongoing commitment to innovation with C2CNT and the Genesee Carbon Conversion Center.

I'll now turn the call back over to Randy.

All right, All right thanks Brian, Therese we’re ready to take questions.

Thanks, good morning everyone. My first question here just on the topic of renewable energy credits and I guess with the backdrop of a potentially rising federal carbon tax I'm just wondering how you think the value of those is going to change going forward and how that affects your view of potentially even increased I guess merchant renewable development in Alberta.

Good morning so certainly the increasing profile of carbon tax in the province will definitely increase the I'll call it the economics of merchant wind facilities and solar facilities in the province. So we do expect that they’ll - there will be a significant increase in renewable build in the province over say the next decade or so in which again we expect to participate in it fully, in terms of its impact on price because there's two things there is - and of course the stated price CAD30 this year and CAD40 dollars next year - sorry CAD40 this year you know what you see happening is that that doesn't necessarily translate into what is the market price.

And so for example you know you can see prices in a year when say the carbon credit posted price was CAD30 you could see prices actually trading as low as you know in the high or the low 20s. So there is definitely a market out there and now as there is more and more credits available you know it does certainly have an implication on the market value, having said that the way the credits work in Alberta is from time to time the credit allowance for new projects is reset based on the overall carbon intensity in the market and that's approximately 50% today.

As things like our repowering and other things go forward you will see the - the entitlement around new renewable projects actually going down consistent with the change in intensity in the overall Alberta grid. So there is a number of factors in play.

But we think it will continue to be a fairly robust carbon credit market.

Great. Thank you for that color.

That's - that's helpful. Just maybe just one more for me.

Obviously you've had some really good success on the solar side of things. And I'm curious about how you're looking at things in the US today.

How are you seeing things I guess progress with maybe some earlier stage solar developments. Would you consider looking at acquiring a development portfolio.

And I guess just any thoughts on how the - I guess the more supportive administration in the US affects how you see things moving forward?

So we certainly think the Biden administration and early - early indications that though there will be a more robust environment for building renewables in the United States and in particular an increasing appetite for solar. In terms of how we see it and how we intend to participate, we're continually looking for sites for ourselves to develop sites in earlier stages of development with typically smaller developers and certainly would look at a portfolio of development assets we’re pretty much open to.

Any opportunity depending on our source and the economics around that particular site. So, again we have a history particularly on the wind side of doing all three of what I just described and certainly we'd be doing that on the solar side as well.

Excellent. Thank you for that.

I’ll get back into the queue.

Thank you and good morning. My first question relates to the 2021 guidance.

As you said you’ve reaffirmed the guidance, but can you discuss some of the major moving parts around this decision, specifically as it relates to the more positive outlook in Alberta, given the recent surge in pricing at solar, as Sandra alluded to higher power prices and what if any EBITDA headwinds you may have given the recent events in Texas?

Yeah so as far as 2021 guidance goes, we're very encouraged with what we're seeing happen with pricings as you've noted. So seeing the market for post PPA very, very much in line with what we would have expected to see in terms of behavior.

So we're pleased to date but you need to sort of balance out what you're seeing with prices with the megawatts generated. So we will be doing our forecast on our normal timeline and have an update to guidance as we come through the quarter, but certainly very pleased with what we're seeing to date.

With respect to Buckthorn, we did incur some modest physical damage at Buckthorn as well as that blue bloom, we now have access to the equipment but are in the early stages of services I think as to where we fit contractually so it will be a few days before you know we started to know what the financial impact of that will be, the order of magnitude will not be you know in line with what others have reported. So you know on the upside of that, we were able to export energy down into the states during sort of the peak days of that storm.

So we see that as being a bit of a modest - modifying factor with respect to those impacts.

Thanks and just to clarify with regards to your comments on Texas around it, it sounds like directionally it's negative but not material -- be that compared to the overall EBITDA and all your guidance.

Yeah it's not material for sure relative to what we've seen to-date. So we don't have a number at this point but as I said there was some positives as well as was the impacts that we've seen in and from our understanding of weather patterns of kind of past our site, so we figure we're now in a position where we can look to come up with what the what the impact is but definitely non-material and not seeing that as an impact on guidance at this point.

Thanks and my second question relates to your funding plan. Obviously if indeed cash flows from Alberta become a little bit more strong compared to your initial outlook that obviously offers you financial flexibility.

But could you update us on your thoughts on asset recycling specifically as it relate to your comments on Investor Day that certain renewable energy projects could be potential candidates for monetization.

Yeah that remains to be true. So since Investor Day, we now have a revived cash flow profile in terms of our spending on repowering and it does reduce the amount of spend this year because of our contract with the supplier with Mitsubishi.

So in the process of looking at that. But to your point yeah, asset recycling is still something that we - we look at in - in place of equity.

Given that you know we do feel that there's a significant value that is not realized in - in our renewable portfolio. So given our success in securing those projects we do see that selling down projects would be a very viable option.

So we'll continue to look - look at that. But as I mentioned you know at this point we haven't started to see any material spend occur.

And therefore we wouldn't be looking to come to market. So we can continue to forecast what the impact of a stronger pricing in Alberta means for it for our overall financing plan.

Thanks. Good morning, everyone.

Maybe you updated some of the hedging for the full year. Are you able to share a outlook for Q1 in particular in terms of your openness and ability to capture some of these higher prices we've seen in recent weeks?

Yeah. So typically we wouldn't give our position within the year in terms of how we've been hedged certainly what we've seen in Alberta in February has been very high, high pricing.

Last week we actually hit a new record high in demand for - for the province. So seen some very high pricing that's gone along with the very cold weather that we’ve been seeing.

So but we wouldn’t comment on what our hedge position was within the year by on a quarterly or monthly perspective.

Okay. And then with respect to the AFFO guidance, I don't believe you as have hedged the line loss really impact in the 2021 guidance, that seems like there's still some uncertainty around timing and settlements from those, but to just give a sense right now when you might have clarity what the range of our potential payments could be and unfolds and good start to the year year how that line loss ruin cash payments might impact where you get to on your AFFO range?

Yeah, so with AFFO and the line loss ruling, so we didn't have it built into our 2020 guidance and the result so uncertainty last year around how many payments may fall in 2020 versus 2021 at one point we thought we might see two payments last year and one this year. As it turns out we did have the one payment last year of CAD6 million.

In 2021, we have baked in the additional two payments in our guidance. So there'll be another I believe it’s around CAD11 million or CAD12 million, which will make one of those payments in February, the other one is in March.

So at this point we feel that the line loss payments are moving around anymore, so we did pay CAD6 million of the CAD18 million last year and the other two payments will be made in Q1 of this year and that is included in the guidance that we have provided.

Okay, great. And then, can you guys give any updated clarity in terms of the timing of the major outages indicator Shepard due to any kind of moved around and can you kind of zeroes in on which quarters those will fall in?

Yeah. So I don’t have the quarterly split for those, but they haven’t moved around in terms of we expected cost or timelines but I can get back to you on that Mark if that works.

Okay. Thanks.

That’s all I had for my questions. Thank you.

Good morning, everyone. A follow-up question on the Alberta power market.

Since December or since January 1, we have seen kind of bidding and offer control move back to owners. Can you just comment on how you're seeing the dispatch curve as well as the economic bidding in the market and whether or not you are seeing what will characterize as, what kind of more economic bidding over all in 2021.

And I guess that's probably more prior to the cold snap. And also has the volatility seen there, also been in line with expectations.

Yeah. So it is early days, as you state and we are going through a cold snap which is an unusual time, but yeah we are very pleased with what we've seen so far and that it does align with our expectations in terms of how people would be bidding and responding in a more rational commercially responsible manner as opposed to the days when [indiscernible] lines was held by the balancing pool.

So yeah, we do see things as being in line with expectations as you as you’ve outlined.

Okay. And then a follow-up there, We’ve actually seeing some strengthen in gas too as well, as you transition your fleet more towards gas and away from coal, how do you think about natural gas supplies in that exposure there?

Yeah. So it’s one where we look at what our expected utilization is in the year and then we would look to hedge that.

So in the current year, the majority of our gas exposure has been - been hedged at an attractive pricing and so we would continue to hedge out. And we do have positions that go out a number of years.

So we'll continue to lag into hedges on our natural gas burn exposure.

Hi, good morning, everybody. I just wanted to follow-up on the decision to defer some carbon offset credits in Q4.

I just wanted to confirm if you expect to utilize those credits in 2021 or should we expect a similar strategy, defer some of those credits until you get clarity on the carbon tax moving up to potentially $170 per tonne?

Yeah. So our 2021 guidance had already expected that we would be utilizing offsets as permitted under the regulations.

So the deferral that we did from 2020 does allow us to have more inventory as we go into 2022 and then 2023 before our exposure becomes less on - on a volume basis with repowering. But certainly as you said if - if here where could be in lockstep with the federal plan then we would see carbon taxes grow even higher.

And the value of those offsets the increase of each year comes with it a step up in carbon pricing. But the deferral just allows us to have more inventory in 2022 and 2023, whereas 2021 isn't impacted and therefore the decision not to use them last year doesn't change our guidance for 2021.

But it does mean that, that is extended out to those future years. And as you noted, we could see carbon price eventually move up to the $170.

I guess just to clarify Sandra, if you do defer your carbon credit inventory on a quarterly basis sort of in line with Q4 if that ends up being the run rate through 2021. You're still comfortable with your EBITDA guidance range at this point.

Yes. That’s correct.

Okay. Great.

And then just move over to the integrated report here and you have some attractive emission reduction targets by 2030. But just curious if you have any thoughts around business mix say more near term.

Call it middle of the decade after Genesee is repowered. Just given you, you’ll be off coal by then.

Do you have any internal targets on a percentage of EBITDA coming from renewables or non-fuel sources like hydrogen. I've been that 2024, 2025 range.

No, no. Go ahead, Sandra.

Yeah. So we haven't set targets specific to fuel type beyond 2025.

We look at opportunities to deploy our capital and in the types of generation that we've iterated before. As far as renewables or mid-life gas.

But see that we will be within our ESG targets. So that becomes part of the criteria that we would look at.

But as far as fuel mix, we do sort of forecast out to that mid-decade based on the projects that we currently know are in the hopper. But as far as incremental growth after that, we don't have a set target in terms of an annual mix I can also add that you know we eat in setting those targets and in terms of our indications that we’re on track to meet those targets there is no you know either hydrogen or significant carbon capture in storage within those numbers, having said that you know we’re you know right now actively looking at both utilization of hydrogen and carbon capture and storage as it relates to our Genesee facilities.

So you know I wouldn't say that that we wouldn't at some point in time have significant carbon mitigation impacting on both the targets and our actual results but you know it's a little bit early at this point in time to speculate on where that might be going but to say that we are now very actively looking at you know those two technologies from that standpoint or in relation to our Genesee research facilities in particular the repower Genesee 1 and 2.

Okay and then just maybe last cleanup question if I could just wanted to square up the investment growth target for 2021, still looking to secure an additional CAD500 million of growth on top of what you have on the go today which appears to be I think CAD1.7 billion over the next few years, just curious how much of that target for 2021 might already be spoken for, if any.

So actually none of its spoken for you know we obviously you know we've got a lot of construction on the go. We've got a lot of activity, we did you know in setting that target A lot of activity.

In setting that target, we did do a full assessment of what our opportunities are out there, but also assess both our financial and our physical capability of being able to execute on whether it would be an additional build or whether it would be an acquisition. And we're comfortable that if an appropriate opportunity or opportunities come by on either the natural gas acquisition side or on the new build renewable or potentially a renewable acquisition that we're in we're in position and have the capability that we can execute on it.

So I felt that keeping a CAD500 million committed capital target was reasonable under the circumstances.

Okay. That's great.

Thank you.

Thank you. Good morning.

I guess there's a broader question and it really just relates to some of your counter parties and just their view on contractions and maybe how that's evolved over the course of last year. And really if we can focus maybe on Q4 and then so the year-to-date on how maybe their attitudes have changed a bit.

There's obviously a PPA system rolled off. We saw a lot of market volatility for a variety of reasons.

You mentioned independent strategies of how they become more market oriented versus under the PPA framework. And so any color you have on that and just how your counter-parties and prospective counter parties are really behaving a fundamental differences?

So obviously on the US side, there is growing optimism that that will continue to be good economic opportunities for counter parties growing optimism that will continue to be good economic opportunities for counter parties to gain long term access to renewable energy. So that plays into it a little bit.

But we haven't really seen any sort of disruption in the market. And we don't really because it's going from kind of a robust environment to a robust environment.

The expectation was that there'd be a significant trough with a potential continuation of the Trump administration. And then in fact, I think it will be more the case of the avoidance of the trough.

From the Canadian perspective and in particular in Alberta, we're not seeing a big difference in people's expectations or in appetite. There continues to be a lot of interest in a number of large power consumers in terms of gaining long term contracts for renewable energy.

As we indicated at the Investor Day, we had a number of ongoing conversations going in to respect of contracting. And those kind of those conversations continue to be there and continue to move forward.

So not a lot of change yet, but well we do expect in the longer term there will be again more and more contracting available on the renewable side.

That's very helpful and then maybe just specific to Alberta. How do you think about just your market positioning on contract versus merchant and open exposure on a near-term basis, and then on a longer term basis?

How do you think what's the sweet spot for you?

So certainly, we see them in the merchant renewable market in Alberta has been positive and creating a good value for our shareholders. And we do also see that having it contracted as much as practical is also good.

It ends up being where we see the best trade-offs. We wouldn't sacrifice significant economics in order to gain a contract.

On the other hand, one does recognize that the move to a contract you do typically give up at least a forecast EBITDA from a merchant perspective, in the long run I think we generally favor again with a fair trade-off of economics and security of cash flow. We would typically rather have more contracted than not.

So there definitely is a preference for us to be more contracted. But again not willing to give up a lot of economics to gain those contracts.

Okay. Thank you.

Hi. Thank you.

Good morning. I wanted to follow-up on Buckthorn in Texas.

You mentioned there's some physical damage, could you clarify that a bit more. Is it some compromising on the blades you had replace some of the blades.

And then what are your thoughts of in general now observed the last five days in a market does it improve your appetite for the market what are gas-fired generation or renewables are you feeling maybe that's not the market that you want to expand anymore.

Yes so as far as the physical damage as I said we just gotten access to the sites and are looking at that we’ve damage to a set of stairs at Bloom and you know I've seen on blades so it's of that that nature you know as far as the market you don't see this as being necessarily a highly reoccurring event. So you know certainly will we'll take a look at look at things but no, no immediate shift in strategy or thinking at this point as a as a result of this weather driven event.

Okay so you feel you've got a good sense I don't know what the conditions are improving now -- you got a good sense of how your financial cash is structured as your contract for differences and ability to manage the revenues and the hedge portion of it.

Yeah I think that's you know as I said it's contractually we’re assessing where we are not in a presentation to really comment on that at this point, it will be a few days but you know we don't expect a large exposure there relative to what you're hearing in the market, so it’s something that we'll be able to comment on at a later point more fully.

Okay great and maybe on Alberta then, update your hedge position, what’s the thought process of not moving higher on your hedge position given where pricing is right now on the forward curve CAD70.

Yeah so there's a few things I think when we came into the beginning of the year you know you did see milder temperatures in January. So there's less opportunities now that we're seeing prices settle.

We are continuing to add hedges to the book as we see opportunities to do so at prices that are in line with our expectations. So continue to hedge out the book as we move forward.

But there are more megawatts. And therefore, liquidity isn't necessarily a strong.

But now that we've seen prices continue to move up even as we've gone through January and February. We'll share these key positions as we see those opportunities.

Okay. And then that has your view changed then long term $55 prices when you think what you've seen so far this year and for better higher carbon tax.

Yeah. We would expect that as carbon taxes increase about will be reflected in higher power prices as well as you move forward.

At this point, we see the CAD40 has been confirmed for 2021. The sheer program has not indicative that what it would be in 2022 and forward.

But to the extent that it is lost up with the federal program. It expects to go to CAD50 and then increase by CAD50 a year after that.

You will see that reflected in power prices. So units that are in the margin will bid that in at with their cost and that will set the price then in the market.

Okay. And then my last question here, you put out the pretty detailed ESG is staying over quite a data there as we push in forward what renewables.

I’m wondering how do you balance really the -- maybe the perception pursue reality and 5 generation, when you look at, building that, that portion of your business that against renewables here where profit capitals low, that’s where the most of the money is going. So how do you balance it over next two years in your mix?

how do you balance it over the next two years in you mix?

Well, I think, if you look at the mix of capital expenditures over the next couple of years, actually most of this going towards natural gas i.e., Genesee 1 and Genesee 2 repowering and you’re quite right, when you compare the returns on natural gas assets and the returns associated with the renewable asset, the returns are higher and as we look forward and look at our overall mix of natural gas and renewables, we do have to strike a bit of a balance between significant increases in cash flow and so on and support a dividend, with a stable base of long term renewable contracts that again generate good, relatively low risk cash flows but it is -- at this point continues to be a little bit of a balancing act. And depending on changes in economics and perception, and we do expect events like what’s happening in the US might create some increasing interest in natural gas.

Interestingly enough if you look at this statistics, go basically what saved the US from actually having a much, much greater disaster coal plants performed extremely well. So its incidents like this that actually show the real dynamics and the need for dispatchable energy the resiliency of dispatchable energy.

So again we saw little bit of -- with California, actually over the last couple of years, increasing over the last couple of years, so an increasing sense of a need for dispatchable natural gas, so certainly believe coal is limited, but these events can result in an increasing interest in natural gas, which would create again a little bit more compression on returns for a company like ours or looking at new natural gas asset opportunities. So overall you know a little bit uncertain, but do definitely as we go forward we need to continually think about the balance between you know higher return natural gas assets and a lower return renewables.

Thanks. Good morning.

Maybe just like to start with dispatch during the recent and I guess ongoing cold snap in Alberta. And I appreciate you know you may not want to see too much of a dispatch decisions, but it looks like overburden run much in January.

And one of your Genesee units was maybe running below where we might have expected earlier this month just given the pricing environment. Is there any context you're able to provide on whether the weathers had any impact on coal fuel availability or any other operational factors and might have constrained dispatching your Alberta thermal fleet thus far in the quarter?

There was no issue of availability of our facilities. They are fully capable of operating.

So what you saw was more the overall bidding approaches and strategies associated with the Alberta market that Sandra was discussing earlier.

Okay. Great.

That's helpful. And then maybe just one last one on C2CNT you said you are taking your stake up to 40% as expected, can you provide an update on where they are at in the cement testing cycle and what milestones you are anticipating from that entity open for over the coming year.

So from the C2CNT perspective we do. I mean as I indicated they have finished the X Prize process.

They continue though and one of the surprises to us and to them was there continues to be some very significant reporting requests technical requests coming that is consuming a significant amount of the C2CNT’s time. So it has slowed, and which has impacted you know all across the board.

When you think of the timing of testing cement and so on and so forth, that was always in the latter stages of having the facility at Sheppard operating and in process. So likewise the testing on the cement side slowed as well.

So it's ongoing, it's happening as we speak. And having said that there's no I'll just comment around just the details of the cement testing.

There's two different phases of that. One phase is where you're actually testing what they call mortar, so small samples you know not in the lab but you know a little bit bigger scale than what you're thinking of in terms of the laboratory.

So there's been extensive testing done from that perspective. And it now moves to significant larger scale testing at, you know at a typical cement plant site.

And so that's the process that's taking place right now. So again it was slowed up as well, but continues to be you know generally as expected in terms of the evolution of the C2CNT development.

Hi. Good morning.

Just wondering, if you can give us an update on where you see opportunities to invest in new or different types of technologies. I appreciate, you’ve increased your spec in C2CNT, but it is a small investment within your portfolio right now.

So just wondering, if you can talk about other opportunities, be it in batteries, carbon capture or hydrogen that you're considering and maybe some color on how much capital you'd be comfortable deploying into a earlier stage opportunities?

So you know as we've always said, the answer to carbon mitigation, you know on a global basis is sort of the answer is all of the above in terms of the technology. You know when we look at the technologies that we would deploy, if it is all you know essentially on does it make commercial sense and does it make sense for capital power facilities.

Now certainly up until the investment in repowering Genesee 1 and 2 we had a bit of different perspective on carbon mitigation at the Genesee facility you know certainly C2CNT hold some promise for -- there were some modest mitigation but you know certainly the fact that you know they were you know coal or dual fuel facilities you know impacted in terms of our long term view as to know whether for example in the longer term you put hundreds of millions of dollars into mitigating their carbon profile, certainly it was the repowering that changes that view. So as I said earlier we're looking at mitigating the carbon exposure for those facilities, then do believe at some point you know there will be something in place that will mitigate the carbon emissions from those facilities, the issue is you know what is the technology and what is the timing as we're looking at it you know and today we're actively looking at whether it makes sense from a hydrogen perspective or whether it makes sense from you know I'll call it a more traditional carbon capture and storage perspective and again we're doing that work now and do expect that you know at the end of the day, we’ll start you know some degree of technical more in-depth technical analysis on one or both of those technologies as we move forward I think the one thing to recognize about this point in time is that you know firstly for carbon storage typically enhanced oil recovery or just simply I call it bearing that the carbon.

Alberta is ideal. It's got the geology, whether it would be caverns that have been empty of oil or whether it be aquifers much, much deeper.

Alberta has the geology to actually support very extensive carbon storage. So we're in the right province and then as you've been hearing both in the United States and in Canada, there's huge, huge expectations around carbon capture and storage.

It's seen as one of the ways in which we'll meet our carbon objectives maybe a little bit of a stretch for it for 2030. But certainly in the longer term, it will be a necessary part of the mix.

And we expect you know the Genesee facilities to be part of that. So again, timing's a little bit uncertain.

But there is tremendous amount of anticipated government support for these kinds of initiatives going forward. So how much would we risk say per se, I wouldn't.

I mean to put it more clearly, I wouldn't expect that we would be they all say developing a technology around hydrogen or around carbon capture and storage. I think what you would find us doing is looking at established or near established technologies and the application into Genesee 1 and 2 or in some circumstances you know Genesee 3 as well.

So we will be looking more at the fundamental preliminary engineering studies and then we want to feed studies. And then ultimately, to a projection of just sort of the normal transition of a project as you would expect.

But “investing in R&D”, you might at some point see a modest investment, you know maybe you know in the same order of magnitude of C2CNT which has been quite modest but you wouldn’t see or at least I wouldn't expect a significant investment in R&D is more - the implementation of actually established technologies.

If there are no more questions we will conclude our conference call. Thanks again for joining us this morning and for your interest in Capital Power, have a good day everyone.