Capital Power (TSE:CPX) executives used the company’s fourth-quarter and year-end 2025 earnings call to highlight what CEO Avik Dey described as “relentless execution” across acquisitions, asset optimization, and development, alongside a year of higher cash flow driven largely by the company’s expanding U.S. flexible generation portfolio.
Strategic execution: acquire, optimize, develop
Dey said 2025 demonstrated the company’s strategy “in action,” pointing to several milestones: the acquisition of 2.2 gigawatts (GW) of generation capacity through its PJM transaction, contract optimization across 2 GW of contracted capacity, upgrades and expansions totaling 385 megawatts (MW) across the fleet, and advancement or completion of 300 MW of new capacity to grow the renewable portfolio.
Commercial optimization: recontracting and hedging focus
Management emphasized commercial optimization as a key lever for improved returns, citing a shift in customer behavior as power demand rises. Dey said contracting discussions are increasingly “anchored in cost of replacement” rather than historical “recovery of costs,” which the company believes supports stronger margins and longer-duration contracting.
The company highlighted two major recontracting actions:
- MCV recontracting: Dey said the new long-term contract extends to 2040, adds 10 years of incremental contracted cash flow, and is expected to increase facility adjusted EBITDA by approximately CAD 100 million annually on a full-year basis—an 85% increase over current contract pricing for the whole facility.
- Arlington Valley recontracting: To begin 2026, Capital Power completed an extension of the summer tolling agreement through 2038. Management said this secures 13 years of contracted revenue, includes a 35 MW upgrade, and resets pricing at 140% above the existing contract.
Dey also detailed the portfolio’s contract structure, describing 12 GW of total capacity comprised of 4.8 GW long-term contracted between 2032 and 2047, 2.4 GW of medium-term contracts expiring between 2026 and 2031, and 4.8 GW of merchant capacity, primarily in Alberta and PJM. He said the company’s forward focus is on extending duration across the merchant and medium-term portfolio “when pricing is attractive,” while continuing to hedge merchant generation to manage near-term risk and preserve longer-term upside.
Financial results: adjusted EBITDA and AFFO rose in 2025
Interim CFO Scott Manson reported adjusted EBITDA of CAD 1.58 billion for full-year 2025, up CAD 237 million, or 18%, versus 2024. AFFO was CAD 1.07 billion, up CAD 242 million, or 29% year-over-year.
Manson attributed higher adjusted EBITDA primarily to increased contributions from the U.S. flexible generation segment, reflecting the June 2025 acquisition of Hummel and Rolling Hills and a full-year contribution from La Paloma and Harquahala, which were acquired in February 2024. He also cited lower emission costs in Canada following the repowering of Genesee in late 2024 and lower corporate expenses following a 2024 reorganization.
These improvements were partially offset by lower contributions from the Canadian renewables segment following a sell-down transaction completed in December 2024. Manson said the AFFO increase reflected higher EBITDA and lower current income tax expense, partly offset by higher finance expense tied to increased borrowings to fund growth.
Net income was lower than 2024, which Manson said primarily reflected non-cash items, including unfavorable unrealized fair value changes on commodity derivatives and emission credits, higher depreciation and amortization on acquired or newly placed-in-service assets, and the absence of prior-year divestiture gains.
2026 outlook and capital plans
Manson said the company is reaffirming 2026 guidance provided at its Investor Day. He said the outlook is supported by full-year contributions from 2025 acquisitions, structural improvements carried forward, and “conservative market assumptions supported by disciplined hedging and capital allocation.”
Management also noted sustaining capital in 2026 is expected to be higher than historical levels. Manson said the increase is planned and “not catch-up spending,” but rather proactive investment to maintain reliability, protect cash flows, and support long-term earnings durability. He pointed to the MCV recontracting as an example of commercial optimization that requires investment to extend asset life, noting the contract extends through the facility’s 50th year of operation. Despite higher sustaining capital expenditures, he said the company expects to continue generating strong AFFO and supporting the dividend within its targeted payout ratio.
In addition, Manson reiterated comments from Investor Day that the company sees opportunities within its existing asset base—requiring “little to no growth capital”—that could grow adjusted EBITDA by up to CAD 1 billion per year, primarily through resetting contracts at higher pricing and capturing rising merchant power prices in Alberta and PJM. He said recontracting at MCV and Arlington Valley “materially de-risks a significant portion” of that potential.
Q&A: Genesee, M&A, PJM policy, and Alberta load growth
During the analyst Q&A, management addressed several topics:
- Genesee grid capacity unlock: Responding to a question about potential “uprates,” Dey said it is not an uprate but rather unlocking volumes already available that are subject to a maximum capacity limit on the grid. He said the company has an engineering solution and expects those volumes to be unlocked toward the back end of 2026.
- Acquisition focus and contracted floor: Dey said the company is committed to maintaining its investment-grade rating and highlighted a 60% contracted floor, noting the company is near 75% contracted “today.” He said Capital Power is not evaluating acquisition opportunities in Alberta and is focused on U.S. generation or assets that increase overall contractedness, while staying above the 60% floor.
- MCV data center offtake discussions: Asked whether the process has been opened to other parties, Dey said it has not and that the company continues to work with its partners and advance the initiative.
- Additional recontracting potential: Dey said it is “safe to assume” the company is actively evaluating multiple recontracting opportunities, citing U.S. plants with contracts expiring between 2029 and 2031, including Freddie, La Paloma, and Decatur, while not committing to specific outcomes or timing.
- PJM market design and REP process: Dey said a key risk for generators would be “bifurcating the market” between existing and new generation through a different pricing regime, and he discussed the importance of the existing cap and floor. He also said Capital Power would evaluate opportunities to capture 15-year PPAs with investment-grade counterparties under the REP process, whether for new builds or expansions.
- PJM customer outreach: Dey said the company is not yet having active customer conversations specifically tied to the REP process, describing it as still in PJM’s court while generators consult on the framework. Separately, he said the company has been actively marketing capacity for long-term offtakes for capacity and energy.
- Gas-fired M&A environment and Apollo MOU: Manson described the M&A market as robust and said the Apollo partnership could expand Capital Power’s opportunity set while supporting an investment-grade profile. Management said it is making progress on agreements and will update when appropriate, while noting it can advance the Apollo MOU and pursue other work in parallel.
- Alberta data center load framework: Dey said Alberta is becoming more attractive for new load, including data centers, though he cautioned the pace of public announcements may not match market expectations. He said the company’s focus is monetizing Genesee through selling power and securing long-term PPAs with creditworthy counterparties. He also said phase II’s key issue is how grid connection costs are borne, distinguishing it from phase I.
The call ended abruptly during a question about Alberta’s levy on new data center investments due to an apparent connection interruption, and management then concluded the call.
Capital Power also announced a leadership update: Kevin MacIntosh will join as incoming CFO. Dey said MacIntosh brings more than 30 years of finance leadership experience in the global energy industry. Manson will support onboarding and transition until the end of April 2026.
About Capital Power (TSE:CPX)
Capital Power Corp is a North American power producer whose principal activities are developing, acquiring, and operating power plants. Through its subsidiary, Capital Power owns and operates a portfolio of natural gas, coal, wind, solar, and solid fuel energy generating facilities. These are located throughout Western and Central Canada and the U.S. Capital Power’s natural gas and coal facilities, specifically its Genesee and Shepard sites, account for most of its electric capacity and cash flow production.
