Thank you for standing by. This is the conference operator. Welcome to Capital Power's First Quarter 2021 Results Conference Call. As a reminder, all participants are in listen mode only and the conference is being recorded today, April 30, 2021. I would now like to turn the call over to Mr.
Randy Ma, the Director of Investor Relations. Please go ahead.
Good morning and thank you for joining us today to review Capital Power's Q1 2021 results, which we released earlier this morning. Our Q1 report and the presentation for this conference call are posted on our website at capitalpower.com. Joining me on the call are Brian Bageo, President and CEO and Sandra Haskins, Senior Vice President, Finance and CFO. We will start with opening comments and then open the lines to take your questions. Before we start, I would like to remind everyone that certain statements about future events made on this 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 of 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 Q1 2021 MD and A.
I will now turn the call over to Brian Baszile for his remarks starting on Slide 4.
Thanks, Randy, and good morning. I'll start off with the highlights of the Q1 and comment on our 2021 outlook. We delivered strong Q1 results that exceeded our expectations. This was the Q1 where all generation in Alberta Power market was by commercial market participants following the expiry of the balancing pool PPAs. The strong quarterly results confirm the Alberta power market is truly robust.
Earlier this month, we executed an innovative 15 year renewable energy agreement Labatt Brewing Company for the Enchanted Solar project that I'll cover off in more detail shortly. With a strong Q1 and higher Alberta forward prices for 2021, we are forecasting our 2021 financial performance will be modestly above the top end of our annual adjusted EBITDA and AFFO guidance ranges. We also continue to make solid progress on our approximately $1,700,000,000 in growth projects. I'll also provide an update on our various CO2 reduction initiatives. Turning to Slide 5, as mentioned, We've entered into an innovative partnership with Labatt for the Enchance Solar project.
It is a 15 year renewable energy agreement The virtual PPA is for 51% of the electricity from the Echan Solar project That covers all of the electricity requirement for Labatt's Canadian operations. Approximately 1 quarter of the RECs will come directly from Enchanted Solar In 3 quarters, we'll be packaged with REC sourced from Eastern Canada to closely align with Labatt's operations footprint. The 75 Megawatt Enchanted Solar project is expected to begin commercial operation in the Q4 of 2022. When we announced the project in November 2020, our original guidance was $11,000,000 in adjusted EBITDA and $12,000,000 in AFFO on average based on the federal carbon tax. Overall, the agreement with Labatt will strengthen I'll now turn the call over to Sandra.
Thanks, Brian. I'll begin my comments by going over the Alberta Power market on Slide 6. Extreme cold temperatures in February set a new daily record for demand and contributed to a high average power price of $95 per megawatt hour in the quarter compared to a $67 per megawatt hour average in the Q1 of 2020. In the Q1, our trading desk captured an average realized price of $77 per megawatt hour that was 24% higher than a year ago. The positive outlook for the Alberta power market is being reflected in higher For our Alberta commercial portfolio, our base oil generation is 30% hedged in 2022 at an average contract price in the mid-fifty dollars per megawatt hour range.
For 2023 and 2024, we're 24% and 10% hedged, effectively at an average contract price in the mid-fifty dollars per megawatt hour range for both years. This compares to current forward prices of $63 per megawatt hour for 20.22, dollars 54 for 2023 and $51 in 20.24. Moving to Slide 7, I'll review our financial results for the quarter. Overall, financial results in the Q1 were strong. This includes revenues and other income of $554,000,000 up 4% compared to the Q1 of 2020, largely due to the higher revenues generated from all three units at Genesee.
Adjusted EBITDA of $303,000,000 was 29% higher than a year ago. Higher adjusted EBITDA for the Alberta Facilities benefited from a higher realized power price of $77 per megawatt hour compared to $62 per megawatt hour in Q1 of 2020. The higher price in the quarter was partially offset by lower generation during periods of milder temperatures in January March that resulted in lower demand. The results for the U. S.
Contracted facilities reflects a full quarter of contributions from Buckthorn Wind that was acquired on April 1, 2020 and Cardinal Point that began commercial operations on March 16, 2020. 1st quarter results include the impacts from the February winter storm in the U. S. That caused some disruptions primarily to our Buckthorn Wind facility in Texas. The net impact for this facility is a positive $8,000,000 to adjusted EBITDA and AFFO.
These are updated numbers on the impacts of the winter storm and replaces the preliminary estimates that we disclosed in late February. Also mentioned in that news release, during the peak days of the storm, our trading desk physically flowed power around North America that contributed another $6,000,000 to adjusted EBITDA. Net corporate expenses were As a result of repowering of Genesee 1 and 2, which was announced in late 2020, we generated $159,000,000 in AFFO That was 35% higher than a year ago. AFFO per share of $1.49 was up 33% from the Q1 of 2020. I'll now turn the call back to Brian.
Thanks, Sandra. Turning to slide 8, I'll review our Q1 performance versus our 2021 annual results. Average availability was 96% in the Q1 that included a major planned outage at Decatur. The 93% annual target reflects major planned outages for Shepherd in the 2nd quarter and Genesee II in the 4th quarter. Sustaining CapEx was $18,000,000 in the Q1 compared to the $80,000,000 to $90,000,000 annual target.
We recorded 30 $3,000,000 in adjusted EBITDA in the Q1 versus the $975,000,000 to $1,025,000,000 target. And we generated $159,000,000 of AFFO in the Q1 compared to the $500,000,000 to 550 1,000,000 target range. As mentioned, based on our current forecast, we expect adjusted EBITDA and AFFO to be modestly above Our growth targets are highlighted on Slide 9. We continue to make progress on all of our renewable projects. This includes developing and constructing 7 renewable projects on budget and on time for commercial operations starting in the Q1 of this year to the Q1 of 2022.
Construction on the repowering of Genesee 1 and 2 is expected to begin in the Q3 of this year with in service dates targeted in late 2023 for Genesee 1 and in 2024 for Genesee 2. As in previous years, we have a target of $500,000,000 of committed capital for growth. It is aligned with our strategy of growing our renewable assets and or acquiring Midlife contracted natural gas assets. Turning to slide 10, I'll provide an update on the various CO2 reduction initiatives that we have underway. Carbon Corp, the legal entity for C2CNT recently won the NRG COSEA Carbon X Factor Award.
It was one of the 2 Canadian companies that were honored for creating excellent products. The development and marketing of the Genesee Carbon Conversion Center and Carbon Nanotubes is well underway, With an expected operational date in mid-twenty 22, the first phase of the GC3 will produce 2,500 carbon nanotubes per year from carbon emissions of Genesee III. We are also developing plans to apply carbon capture, Utilization and storage technology at Genesee 1 and 2. Expected federal and provincial funding will support this initiative, which should deliver 3,000,000 tonnes of annual carbon emission reductions. These CCUS initiatives support our goal of contributing to a low carbon Energy Future.
In closing, I'll provide an update on the executive team as shown on Slide 11. Darcy Truffin, our Senior VP of Operations, Engineering and Construction will be retiring at the end of June. Darcy has been with Capital Power for 12 years and has continually delivered outstanding performance and operations And have successfully managed the development and construction of all of our growth projects over the past decade. I'd like to publicly thank Darcy for his tremendous contribution to Capital Power. Steve Owens, who is currently VP will be promoted to Senior VP, Construction and Engineering effective June 1.
This is an example of our robust internal succession planning. At the same time, Brian DeNeve will take on a new role as Senior Vice President of Operations, relinquishing his commercial and business development responsibilities. Chris Kopecky will add business development and commercial to his responsibilities I will be the Senior VP of Chief and Chief Legal Development and Commercial Officer. Prior to joining the executive leadership team last Chris led our U. S.
Business development team in Boston. Kate Chisholm, Sandra Haskins, Jackie Filipiak will continue in their current roles. I'm confident this executive team will continue delivering value for our shareholders. I'll now turn The call back over to Randy.
All right. Thanks, Brian. Shauna, we're ready to start the Q and A session.
Thank you. We will now begin the question and answer session. Our first question comes from David Quezada from Raymond James. Please go ahead.
Thanks. Good morning, everyone. First question here, just on The outlook for the Alberta power market, obviously, this is the Q1, as you mentioned, with the balancing pool PPAs But we also saw very supportive weather. Just wondering if you could provide any kind of qualitative commentary on how the dispatch might have been different in the quarter As opposed to when the balancing pool PPA is in place, yes, any comments around that would be helpful.
Yes. Thanks, David. As we saw even coming Through late last year, the anticipation of the balancing pool exiting the market had an impact. We saw A lot of supply response starting with retirements and mothballing. And now that we're into 2021, we are seeing All assets being managed in a commercially optimization approach and that has led to the higher prices that we expected that we would see.
In Q1, we did have periods of mild weather, but certainly in February when We had extreme cold weather. You did see periods of very high prices. So I think that the market dynamics have unfolded the way we would have That they would in this post PPA environment.
Excellent. Thank you. Appreciate that. And then maybe just one on The plans to add carbon capture at Genesee 1 and 2, appreciate it's probably early days, but any color you can provide on What the capital cost might be there and how the province or the federal and provincial funding support
would play in? So we're looking at a project in the order of magnitude of about 1,600,000,000 That again results in about 3,000,000 tons of carbon being essentially buried a year. So it's a very significant volume. In terms of the federal funding and provincial participation, I think you've probably seen in the press some fairly significant dollars being tossed around in terms of potential support for These kinds of initiatives, the way it's starting to play out a bit and again extremely Preliminary, as you may know, there's about to be a 90 day consultation period to actually work out some of the mechanics and directions, led by the federal government. But some of the early indications are that something like the U.
S. 45Q may be A way to approach it whereby you get a tax credit for every ton of carbon that's essentially buried And that it may well be that it could actually be paid out as well, not only from a tax credit perspective. There's also some consideration for significant support from the Canadian Infrastructure Bank as well. And then of course some of the traditional approaches of making applications both federally and provincially for various kinds of support associated with Carbon capture and utilization. And I should also add that it's also there's also some considerable Cord anticipated for Hydrogen Technology as well.
That's great color. Thanks, Brian. I'll get back in the queue.
Our next question comes from Rob Hope from Scotiabank. Please go ahead.
Yes. Good morning, everyone. Just in terms of the Buckthorn dispute, can you just kind of walk us through the potential avenues and timing Of when that could be resolved? And just to confirm the $8,000,000 benefit that you saw in Q1, You received the cash on that net debt flow through the cash flow statement?
Thanks. Yes, as far as the timeline, there's no certainty around when that will unfold. We expect that There's a good chance that that will be settled within this year, but still to be determined. As far as the cash flow, yes, We are paying in accordance to what we view as being the appropriate number. So that has flown through appropriately through the statements.
All right. Appreciate the color. And then just a follow-up question for me. So we saw updated Disclosure on hedging for 'twenty two and beyond and you have kind of increased some hedges there. Are you also Increasing your hedge profile for the rest of 2021 and maybe could you give some kind of color on what that shape looks like just so we can kind of Triangulate what modestly above the 2021 guidance looks like?
Yes.
As you You may recall up until last year, we didn't give any indication of our change in hedge position as we came through the year. Last year was a bit of an anomaly given that it was Pandemic year. So, but what I can say is that we continue to layer on hedges when we see that the price is appropriate to do so. As you know, we came into the year fairly unhedged and that was by design and that's played out in our favor. And so we continue to Use the same approach when we're looking at stepping into more hedges.
As far as liquidity, there has been an increase in liquidity that we've seen in this year and even going out a little bit further, so those opportunities are there. But once again, It's all relative to our price view.
And actually, sorry, one more follow-up. Has your price view changed so far this year, just seeing Has the dynamics in the Alberta Power market have changed? Or is it still kind of what you presented at kind of Q4 and at the Investor Day?
Yes. I think what we had at Investor Day was below what we're seeing here. It does have some shape to it, but generally there has been a slight lift From what we took as maybe an optimistic yet somewhat conservative view at that point in time given where the forwards were, but Things have played out to be more favorable than what we had used at Investor Day.
All right. Thanks for the color. Appreciate it.
Our next question comes from Patrick Kenny from National Bank Financial. Please go ahead.
Thank you. Yes, good morning, everybody. Just wondering first if you could walk us through the accelerated recognition of coal compensation revenue just as it relates to Repowering Genesee, what the increase in quarterly revenue might be going forward? And does this actually change the actual Annual cash amount to be received by the government between now and 2029?
Yes. Thanks, Pat. So the amount that we receive each year in cash is $50,000,000 and that doesn't change. So we'll continue to see those payments And that's reflected in AFFO at $50,000,000 per year. On adjusted EBITDA, The coal comp recognition is amortized over the period that you're actually burning coal.
So because we announced to be off coal in 2020 3, we do recognize those payments. At the same time, so we're depreciating the assets that are underlying that compensation. So that's where you get the accelerated recognition that goes through the income statement and impacts adjusted EBITDA. So we currently have on a quarterly basis, we recognize about 31,000,000 of off coal compensation compared to last year, which was $11,000,000 So it's about a $20,000,000 increase per quarter.
Okay. That's very helpful. But no change, like you said, to the cash inflows on an annual basis. Okay.
No, that's correct.
Excellent. And then maybe just to circle back on the Buckthorn dispute there. And you haven't taken a provision on the $18,000,000 exposure. So just Maybe you could provide a little bit more color as to why you feel so confident in your position. I appreciate it's probably Sensitive to talk about, but perhaps you can just point to something to give us confidence in There may not be an unfavorable ruling down the road or some sort of recognition of that $18,000,000
Absolutely. From an accounting perspective, when the outcome is more likely than not that you'll be successful, then you would recognize And in our view, the contract uses very plain language in terms of which reference point should be used to establish pricing. And based on that, we feel very confident in our position as being correct. The counterparty's position Of using a different settlement point is generally consistent with the reference point outlined in our contract, Except for periods where you would see extreme differences in supply demand like the weather event drove In Texas in February. So typically, there wouldn't be a difference between the reference point in the contract And the counterparty's position, but during the February storm, it was quite a different outcome.
But in our view, It's very plain language in the contract and therefore we feel very confident in our position.
Okay. Thanks for that, Sandra. And then I might have missed it in the disclosure, but just curious if you utilized any of your carbon offset credits In Q1 or were was there a similar deferral as there was back in Q4?
The carbon offsets all have an expiry timeline on them, which is a 7 year life. And given that we have a number of credits in inventory that we This year, we expect that we'll be using the full allotment of offsets this year. So yes, we did continue to use them in the Q1.
Okay, great. And last one for me if I could. Just if you could provide a little bit of a funding plan update here for the Incremental $500,000,000 that you're looking to commit to this year, do you expect to be able to finance that fully with debt? Perhaps you're looking at partnerships or would you lean more towards asset sales or equity options at this point?
Yes, it's going to depend on how we commit that capital. If it's something that is in the development Realms and we do have a number of options depending on what that spend profile looks like. As we look at our current funding We have seen a real flattening of our spend profile. So we had anticipated that a lot of the development For the current projects would be incurred this year and in fact that's sort of been pushed out somewhat with a deferral From Mitsubishi on repowering being the key driver there, also having higher internally generated cash flow. So at this point, we haven't even Tapped into our credit facilities to fund the current development, so it gives us more capacity to look at incremental Committed capital.
In the case of an acquisition, it would depend on the size and timing of it, and that's where we might be More likely to look at asset recycling or some other avenue of financing. So it really depends on the nature of the transaction.
Right. Okay. That's great, Sandra. Thank you. And looks like you're off the hook, Brian.
Have a great weekend.
Our next question comes from Mark Jarvi from CIBC Capital Markets. Please go ahead.
Thanks. Good morning, everyone. I wanted to touch on the Genesee assets just in terms of a couple of things on the cost and on the revenue. It seems like The realized price is a little higher than the spot price. Just curious if that's sustainable based on how your bidding behavior is going to be going forward?
And then on the cost side, it looks like Fuel and O and M are north of $50 a megawatt hour. Is there something that normal in the quarter, something that the hedges, maybe just help us on the cost side of things as well,
Sorry, Mark, you're looking at the O and M costs at Genesee year over year?
Yes, like Genesee 1 through 23, if you just kind of bundle together, I guess, just go from revenue and then the GAAP to EBITDA, just look at what that spread is And divide by the generation, just those that sort of cost per megawatt hour is kind of gone up dramatically year over year. I'm just trying to understand if it's Fuel cost, carbon cost, but also maybe some impacts of settlement of hedges or anything like that,
that goes into that those numbers? Yes.
I think when you look at the generation at those three facilities, it's down from prior years. So there would be a high level of fixed Costs in there, if you're looking at full O and M and operating costs, so your cost per megawatt hour would go up, if you're looking at it in that basis.
And then just on the realized pricing being, I think, marginally above where the Spot price average in the quarter, is that something you think you can continue to achieve based on how you're going to use those assets going forward and for a little bit more economically holding when possible?
Yes. I think what you are seeing is that there is less generation or more, as you say, Less being bid in, if you will. And so I expect that that probably will be the dynamics going forward.
Okay. And then when you think about the renewable projects you have in hand and then more projects potentially in Alberta on the renewable side, When you're thinking about the base case and underwriting those projects, like what is sort of the underlying assumptions between how much return you need to get from the merchant price versus much faith you have in the current tier and carbon prices going higher? And what do you think your philosophy is? And then maybe contrast what you think you might be seeing from Other developers out there in terms of how hard they're going to push on economics around the value of carbon credits going forward?
So, in terms of the value of carbon credits going forward, I think there's a number of The elements that we look at and that is of course when we're out looking for longer term contracts To support projects that otherwise would be merchant and we're comfortable from that perspective, we're not willing to give up a lot of After you've adjusted for risk, we're not willing to give up a lot of value Yes, in order to secure a contract. What we rely on is a combination of Solid construction, obviously, and development of projects. But in addition to that, and I think as evidenced in the Labatt Steel, We do have different levers and different knowledge of markets and so on that we can draw on that Others who are competing for contracts may not be able to. And also Just our ability in the province to have other power generation that we can rely on In terms of providing customers with sort of a complete package and an ability To provide power 24 hours a day regardless of whether the sun is shining or the wind is blowing. There's a lot that we're able to do in pull levers that others may not.
So we see that there isn't a need For us to sort of go to any sorts of extremes to ensure that we get contracted facilities. As indicated, since we embarked on those projects, the carbon price has Gone up, the value of those projects by definition likewise would go up and as has implicitly Power prices in the longer term associated with rising carbon prices. So they sit quite well from an economic position. Having said that, so R is the environment for continuing to gain and we are very active in pursuing additional Contracts for long term commitments associated with our renewable facilities.
Okay. And then when some of the comments on carbon capture and government support, Obviously, there's an angle of reducing your emissions intensity, but there's also you probably see put capital work, want to make a return on that. I see. Do you have a sense at this point yet on in terms of how much capital you might be willing to put To work in terms of CCUS versus how much would come from federal government support? And then like how do you think the trade off of
So when we look at the project and again, it's early days, but we think of it pretty much as Similar to a merchant facility, just simply because you're counting on to some degree commodity prices And so on and so forth. So we started looking at returns in that quarter of magnitude as opposed to lower end contracted returns. As we look at different avenues of potential government support, That obviously reduces risk. And so that depending on the nature of the support, Then that can bring down our return expectations. And if it was a fully Guaranteed commodity prices by the government and significant other bells and whistles, Yes, it could get down to almost a contracted rate of return.
So that's sort of the normal economics. And we have started and I think you've seen in some of our narrative that we will start and we're working it out this year Ways in which we can in our business decisions incorporate the ESG implications. Having said that, at this point and I would say in the timeframe for this decision, It would have, I would say, a modest impact. I mean, certainly, it's a very good thing To reduce the carbon footprint. The other thing that we would have in mind and difficult to quantify Is the overall fact that as we've indicated earlier Genesee 1 and 2, we've looked at it And the repowering based on a 20 year outlook and the returns You've seen are based on that 20 year outlook.
But we've also indicated that the physical life of those facilities are probably 35 years. And certainly, with carbon capture associated with those facilities that greatly extends the economic Life of those facilities or at least an economic life that we can count on. So there's a lot of very significant moving pieces around this initiative, but we absolutely expect that it for us To move forward with it, it will be adding to the bottom line. It will make sense in a Conventional sense, but would also certainly make sense for the organization from an ESG perspective.
Got it. And the last question, just on Enchanted, you talked about sourcing some credits in Eastern Canada. So those are 3rd party? And I guess just What sort of I suspect they aren't, maybe I'm wrong on that, but if they are third party, what's the risk in terms of around procurement Of reps in the market in terms of liquidity sourcing going forward?
Don't I mean for obvious reasons because maybe this is the first that many of you have heard about it or that kind of activity. We're not overly keen on too much disclosure around that, but we don't anticipate that there's much risk Around the acquisition of credits to cover that Labatt position.
Okay. Thank you.
Our next question comes from Ben Pham from BMO. Please go ahead.
Hi, thanks. Good morning. I had a question
on your
Coblebar facilities. Looking at the production and the strong pricing During the quarter, didn't look like you ran your Clover Park facility that much during the quarter despite strong pricing. What's happening there? Is it more coal plants economically withholding that the clover bars can't clear At the high prices, they're bidding or is and how does Clover fit now in your portfolio? You used to run those clients pretty hard When you see pricing conditions like this?
Yes. During periods where we would utilize Cloverbore Moore, there's volatility in price and we have a hedge position. What we saw in Q1 is that All of our coal facilities were had high availability and therefore we ran those facilities and didn't have to run feedback the way that you may have seen it utilized in periods where we were more hedged. So those opportunities really reflect sort of the overall supply in the market, as well as our Portfolio position.
Okay. So you still see Clover's still strategic overall for the exit? Yes, that's correct. Okay. Maybe on my second question on carbon capture, I mean, we We've been through a couple of cycles of this too before and you've worked on some of these various technologies.
I mean what's maybe can you tell us What's different at this time versus before?
One of the major elements is that we are and the country is looking at A profile of escalating and material carbon prices, which is not what we had seen before. So that obviously has a significant implication. Also you have a more concerted effort By both the federal government and the provincial government to meaningfully bring down carbon emissions. So for example, What we're talking about with Genesee 2 and 3 pardon me, 1 and 2 in terms of carbon capture associated with it The dollars is actually about a third of the current federal expectation of carbon reduction In the power sector, from what is what they would have expected to otherwise happen. So there's a strong intent to not Demonstrate technology and see where it goes and evolve it in time, there is a drive By both the federal and the provincial government to reduce emissions by 2,030.
This isn't a large There is a real drive to put real financial support behind making these projects move forward. And So for example, our timeframe associated with an expedited process of moving this forward is We could be putting carbon in the ground in 2026. There is a little bit of an urgency here Beyond from both the provincial and the federal government to actually move forward with these technologies. The other thing that's very different is that there's been a lot of work done and we've done a lot. And as you pointed out historically, we've put about With some government funding associated with it, about $50,000,000 into carbon capture and storage potential development.
So we're Quite knowledgeable in the area. Our cost of preliminary studies is a couple of $1,000,000 in feed Studies is before internal costs somewhere around $5,000,000 So as opposed to what historically people think of as The $30,000,000 or $40,000,000 touch for being able to have these projects developed. So I would say there's This isn't a case of let's develop the technology and see where it goes and what the potential is, which is, I would say, the prior Direction of the federal and provincial government going back a few years to we actually have to reduce carbon and we have to put money behind it In order to do it.
All right. That's very useful. Thank you. And I'm not sure Darcy's on our call best wishes And retirement and congratulations on everybody else in our appointments. Thank you.
Thank you. I'll pass that on to Darcy.
Our next question comes from John Mould from TD Securities. Please go ahead.
Thanks. Good morning, everyone. I'd like to just start with gas fired or potential gas fired acquisitions. The Trudeau government's increased its 2,030 Emissions reduction targets, the Biden administration has articulated some pretty ambitious targets, probably with a tough legislative path. But how do these Increased decarbonization ambitions and foreign your thinking on potentially acquiring midlife strategically located gas fired assets?
So obviously, we have to see how some of this plays out. And as you said, the Biden administration and what they In terms of targets, particularly as it affects the power industry are fairly aggressive. So, and the Republicans have a very, very different view. So what comes out at the end of the day, we expect to be some sort of compromise in the middle. I mean, what we do see as very Positive is the fact that both parties in the United States are very keen on technology and on Technologies like carbon capture and storage.
So, what we see particularly with large facilities like the ones we have like Decatur As technologies are evolving and will evolve in time where there's a high Possibility or probability that one of these technologies can be associated with our facilities and Reduce carbon from that perspective. When we look at new opportunities, certainly we'll be thinking about the Potential for carbon capture and storage and carbon utilization. I think the other thing to point out is a little bit of the rationale as to why we look at midlife natural gas. Chanel, as to why we look at midlife natural gas assets is that if you take a natural gas plant that Say a 30 year life or 40 year life, somewhere in that range. These assets, When we buy them end up with sort of a 10 to 20 year timeframe, our future and You tack that on to today, that doesn't we don't have other than potentially Genesee 12, We don't have any assets that actually natural gas assets that without repowering or other significant investments Would move it to a 2,050 timeframe.
So again, that's part of the general Lower risk approach associated with pursuing midlife natural gas assets. So we do We continue to monitor technology and I think as we've said, we're looking to apply technology to Genesee 1 and 2 and learn from it And also watch what's evolving with other technologies and then potentially Apply Harpen Reduction Technologies to the Goraways and to the Decatur's and to the Arlington's as we move forward. Okay, great. Thanks for that context.
And then maybe moving to your Alberta renewables pipeline, you've had success with Strathmore and your latest solar projects in terms of announcing those as merchant and then contracting those corporate buyers. Just Wondering if you can give us a sense of what your potential earlier stage pipeline in Alberta looks like right now and what the timeline could look like for making
We are in Alberta, we're continuously looking at renewable projects. And our success In moving projects forward and contracting and so on has sort of increased The lineup of people wanting to talk to us in terms of junior developers with potential opportunities. So There's a lot of opportunities out there for Capital Power. Having said that, they're all not necessarily good projects. So that continues.
We also are looking at some of the projects and relationships that we control. And one of the things that we're monitoring and watching is the degree to which we're seeing Projects and contract possibilities evolve. One of the things as you may recall that Pushed us to move forward on the Enchanted project was the fact that Strathmore was Already filled up. And so, we're monitoring that as well. So we expect that outlook To be very positive and to be very fruitful for Capital Power in the relatively near term.
So to make a long story short, Wouldn't be surprised at all if we move forward on another renewable project in Alberta this year. Okay, great. I'll leave it there.
Thanks for taking my questions.
Our next question comes from Andrew Kuske from Credit Suisse. Please go ahead.
Thanks. Good morning. I appreciate some of the enhanced disclosure on your embedded renewables business. And I guess the question really drives to Some others have structurally separated this business. But historically, you've always taken the view of having this really under one roof.
Has anything really changed in your opinion from the past to where we are with the disclosures now?
I mean, Andrew, I think as you know, and as we've Discuss over the years, we continually look at that. That's always whether it was the quick spin offs It took place for high yield organizations and so on and so forth through time. It's something that's Always there and always something that we should be actively considering. As we go through it and have fresh eyes On it, as how the world is evolving. What ends up happening is you've got You certainly get the benefit on the renewable side, but you also would be variances on the thermal side, a little bit of a lower multiples obviously.
And given their sizes of the two businesses at this point, don't really see that as being practical. And If you look at it in terms of a relationship of dropping down assets and so on and so forth, one of the things So the size drives is that you continually have to look at consolidation from an overall risk Perspective and from a rating agency perspective, which drives a gain, some limitation on How far you could push a renewable entity in terms of its investment potential and the degree to which it could actually Throw off cash for Capital Power. So at this point, the sun and the moon and the stars are Aren't lined up for that kind of a play, but again, we continually look at it and size does matter for sure.
Okay. That's helpful context on things. And maybe just focusing perhaps on the sun, when you think about Southport and Roxborough Effectively going offline, is there anything you can do with the physical footprint there, in particular? You've got grid connectivity and so is there solar that you could put On-site, I mean, I know there's some physical limitations with the sites, but is there anything you can do To really optimize the footprints you have given some of the renewables initiatives in the state?
So, When you look at the physical footprint of Roxboro, it's really too small to do anything. It's a regular sort of industrial size. There's no real excess land there. So from a renewable perspective, it isn't A good sight. Although as you say, from a connectivity to the grid and so on, it's got some positive attributes.
When you look at Southport, it's actually property leased from Duke.
And even
though it's a bigger footprint, Still isn't big enough to really to establish a significant renewable project. Again, it's just too small. So and again, complicated by the fact that it's actually leased from Duke.
Okay, very helpful. Thank you.
Our next question comes from Maurice Choi from RBC Capital Markets. Please go ahead.
Thank you. I just want to pick up on your question about size as well as Tying back again to an earlier comment about the sale of potential assets. Obviously, It sounds like there is a lot less urgency now in terms of potentially selling certain renewable assets, which was the comment made back in the Investor Day. And Brian, you alluded to how if you did sell the renewables, the size of the company might be a little too small. Just to understand what is the target size that you're thinking of in your mind?
And along with that, How do you approach, I guess, the thesis between capital recycling versus gathering assets for our size?
Well, I think the when one just sits back and says, so how do you actually realize the value associated With the renewable assets, I think as Sandra has commented a number of times, those would be the assets Those are the ones where we think that there may be a little bit more value than the value reflected in the market With us holding it. So that realization, we think is a way of again recognizing the value of the renewable assets From a shareholder perspective, so those would be the primary candidates. And as we look at need to raise capital, It is definitely in the wheelhouse of something that we would be actively looking at every time we consider raising capital. Again, where they are in the market today, the values in which renewable assets are achieving, It's again definitely in our wheelhouse to be looking at recycling those assets as an avenue of ongoing I think we've commented in the past that as we move forward and we see Increasing renewable opportunities, it's entirely possible that part of our approach to the renewable business is to Develop and build beyond, I'll say, our ability to currently finance and get into a cycle of Consistently and systematically recycling renewable assets, realizing that value to So to fuel further growth and further size in the organization.
So we recognize that the potentially Recycling renewable assets is a significantly positive value proposition.
And I guess recognizing all those comments going back again to the size, it sounds like you're not quite there yet. Is that one where you want to double or triple your size before you go on a more active capital recycling approach? Or are we Close to the mark now.
No, actually, if you look at significantly recycling Renewable assets is something that right now as you know with $1,700,000,000 of spend in front of us, although it's as Sandra said, it's smoothed out a bit and so on. We saw significantly more renewable opportunities developing in Canada and United
States, in
the near to the medium term, you might see a fairly active Renewable recycling program just because we're able to capture that value for shareholders And restocking it and growing it, there are some degree of limitations to how quickly we could grow to the That we can develop and build beyond that, an excellent model is to be recycling that Capital and actually accelerating our growth despite the fact visibly it looks like we're Selling assets that we otherwise could have held on to. It actually could significantly fuel our growth.
That makes sense. And just to finish up on a slightly different topic, and this is about Your carbon nanotubes, it sounds like there is obviously appropriate support for CCUS projects like yours here in Canada. And if I tie together many of the comments you made today about existing gas assets and potential future acquisitions of gas assets, A lot of those depend on your success relating to C2CMT. So could you share with us if there's any other obstacle or any obstacle left We've got to C2CNT be that technology or even a commerciality of the products?
So C2CNT is certainly and I think there's significant Opportunities around C2CNT, but I think we've said all along that is one of the Avenues of reducing the carbon exposure, everything from the simple trading, which is how we prefer not to Reduce our carbon exposure because that doesn't actually reduce your risk to where we're physically reducing carbon coming out of the stack Such as CCUS or C2CNT or ultimately reducing carbon on some other avenue, but not necessarily associated right at our facilities. So when we look at that profile and where C2CNT fits, It's in time we'd expect to have invested or participated in a number of carbon reduction Applications to be able to reduce our carbon profile. With C2CNT, as we look at it, It continues to have a robust outlook, although I think as we've cautioned the actual, I'll call it, the Significant escalation in utilization and acceptance will not be immediate just simply because There's usually on the very large applications an interface technology challenge to overcome such as cement As we've talked about in the past, that by the way is moving along and the tests are promising from that perspective. And so we Again, we see that moving forward.
So again, C2CNT continue to see it as Very promising and robust and will add a significant amount of shareholder value in time and mitigate some of our carbon risk, But it's not the only answer. Even in that space, you may find in time that we are looking at other So there's again, there's a lot of significant potential associated with it. And but in the general space, We're looking at a whole range of different kinds of technology to mitigate carbon.
Great. Thank you very much.
Our next question comes from Najeeb Baidund from Industrial Alliance Securities. Please go ahead.
Hi, good morning. Just wanted to go back to the topic of developing versus selling renewables for a second. Besides spinning off the renewables portfolio or select asset sales, I'd like to hear your thoughts on what are some of the other avenues you're considering To potentially recognize
the full value of those assets versus what
is being attributed to them in the market today?
So one of the things and one of the approaches as opposed to fully outright selling the assets is to We work with, say, a financial player and jointly developing assets That are sort of well beyond our ability to finance and in addition to getting our proportionate share of The economics also gaining fees associated with operating the facilities and so on. There's other approaches to elevate the value of the assets. In the longer term, when you're in a position where You've got more on the development and construction side than you can Reasonably financed, then it opens up actually a number of different Opportunities and ways to increase the value around those assets beyond just a simple sale And or partnerships with ongoing partnerships on the development side or just So there's a number of different ways in which value can be realized associated with them.
Appreciate those comments. Are there any updates that you can provide us on the island generation re contracting? Just wondering when you expect to be able to finalize that initiative?
There's really no change in BC Hydro's ability to move forward on the execution of those kinds of contracts. And it's not just island generation. There's a number of other facilities in British Columbia that are Just being held up for, I'll call it, technical reasons. So again, not sure when that will end, but We'll continue to receive assurance from BC Hydro that they absolutely need the asset. And The question isn't if, it's just when.
Okay, got it. And I just have one last question on And really sort of corporate partnerships or relationships and what kind of opportunities that opens up for you. I'm just wondering if you can talk about how the agreement with LAVAT has maybe informed Your approach to corporate contracting and if you could talk about any opportunities that you see with Other sort of corporate customers in Canada or the U. S. To access renewable energy?
So, you put all the bats together with the other one that we announced earlier this But still haven't indicated that who the off taker is. Those are very good contracts. And what we have found that unlike the early renewable contracts that were available in the United States and Although we aren't a direct counterparty in some of those, but some of our wind facilities in the United States are actually backed Through a third party by sort of the Amazons or Googles, etcetera. So we get some insight from that perspective as well. And it's gone from where it's kind of a simple contract of renewables entering into an energy portfolio of large organizations to where they've become more and more sophisticated And they're looking for more and more elements around the contracts, more Drilling down more into the energy side and I would just say that whole drive is becoming More mature from the customer perspective.
It's sort of I mean, if you think of it simply, it's gone from A procurement organization part of the organization like supply chain to We have more committed and focused resources on energy procurement who are have greater expertise. So That market is maturing and they're asking for more and they're looking for more creativity in the solutions. And For example, the discussion with Labatt's was over a number of months, a large number of months to get the agreement that works Best for them and best for us. We think that maturity in the market, although it takes more time, As I said earlier, we've got more levers. We've got more things that we can bring to the table than many of the other People were competing with the contract.
So we think that immaturity is actually helpful to us. So, and we expect that that kind of maturity on the buyer side will continue to evolve. And again, that evolution is very positive for us. So for example, in the labat steel, It's targeted to cover their demand for the overall Canadian side of their business. And in fact, the renewables getting broadly sourced to kind of emulate where the demand is.
If you looked at a contract say 2 years ago or 3 years ago, you wouldn't have nearly that degree of sophistication. So Again, it's a continually changing market, but we think that evolution is to our advantage.
Appreciate all that great color. Thank you.
This concludes the question and answer session. I would like to turn the conference back over to Mr. Randy Ma for any closing remarks.
All right. Thanks, Shauna. If there are no more questions, we will conclude our conference call.