Capital Power Corp. executives are confident the company's entrance into the PJM Interconnection LLC market through the recent acquisition of two gas-fired power plants will fuel long-term growth and diversify its portfolio.
Edmonton, Alberta-headquartered Capital Power on April 15 announced a C$3 billion deal to acquire the 1,124-MW Hummel Station in Shamokin Dam, Pennsylvania, and the 1,023-MW Rolling Hills Generating plant in Wilkesville, Ohio, from LS Power Equity Advisors LLC, an affiliate of independent power producer LS Power Development LLC.
"The addition of Hummel and Rolling Hills to our portfolio also increases diversification of cash flows and lowers market-specific risks, with no single market representing more than 30% of our total pro forma capacity of 11.8 gigawatts once the transaction closes," Capital Power President and CEO Avik Dey said April 30 in a first-quarter earnings call. "In addition, this transaction diversifies our merchant generation capacity outside of Alberta and creates additional opportunities to contract with commercial counterparties and access new demand centers."
The transaction is expected to close in the third quarter. Dey told analysts that the company is focused on finalizing the deal and integrating the assets into its existing operations, but did not rule out continued acquisition activity.
"We will continue looking at opportunities. But make no mistake, the priority for this year will be to one, close the transaction, and two, integrate these two assets, in particular, because we're in a new market," Dey said.
Dey mentioned the Electric Reliability Council of Texas Inc. as a market the company would evaluate for possible acquisition opportunities. The company said it is continuing to invest in natural gas-fired generation, pointing to natural gas power growth in the United States and the need to meet datacenter demand.
Through the transaction, Capital Power will become one of five North American independent power producers with over 10 GW of natural gas capacity, according to the company.
"This supports our thesis that natural gas-fired assets are critical to reliability, provide opportunity for growth and creation of shareholder value in various market conditions," Dey said when the proposed acquisition was announced.
Capital Power is funding the transaction through a mix of corporate debt, cash on hand and a discrete common offering consisting of C$667 million in common equity and a concurrent private placement with Alberta Investment Management Corp.
Dey pointed to Constellation Energy Corp.'s planned $26.6 billion purchase of independent power producer Calpine Corp. as a "significant market signal" in the merger and acquisition space.
Results
Capital Power reported adjusted EBITDA of C$367 million, compared to the year-ago result of C$279 million. The S&P Capital IQ consensus normalized EBITDA estimate for Capital Power in the first quarter of 2025 was C$316.38 million.
In the first quarter, Capital Power generated 9,555 GWh of electricity, a 746-GWh increase from the year-ago quarter.
The company reported net income of C$150 million, compared to C$205 million in the year-ago quarter.
