Welcome to Capital Power's 4th Quarter 2019 Results Conference Call. At this time, all participants are in listen only mode. Following the presentation, the conference call will be opened for questions. This call is being recorded today, February 24, 2020. I'll now turn the call over to Mr.
Randy Ma, Director of Investor Relations. Please go ahead.
Good morning, and thank you for joining us today to review Capital Power's 4th quarter and full year 2019 results, which we released earlier this morning. Our 2019 financial results and the presentation for this conference call are posted on our website at capitalpower.com. Joining me on the call are Brian Vazjo, President and CEO and Brian DeNeve, Senior Vice President and CFO. We will start with the 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 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 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 can be found in our 2019 MD and A. I'll now turn the call over to Brian Vazjo for his remarks starting on Slide 4.
Thanks, Randy, and good morning. 2019 was another outstanding year for Capital Power from a performance perspective. This included the $1,000,000,000 acquisition of the Gorway Power Station in Ontario that doubled our $500,000,000 annual growth target. We also completed the construction of the 202 Megawatt Whitla I project in Alberta. To finance growth, we successfully raised $1,200,000,000 in capital last year.
We assumed full control of the Genesee generating station by swapping our interesting KeyPhils III for Genesee III with TransAlta. We accelerated our dual fuel capability plans at Genesee to be completed by 2021, which involves substantially compressing the construction duration to fit into our normal planned outages. Our investment in C2C and T is part of our sustainability strategy supporting the development and deployment of carbon conversion technology. The testing of carbon nanotubes in concrete is ongoing. Accordingly, we continue to plan to exercise options to increase our equity interest in C2CNT from 9% to 40% by the end of this year.
Assuming the carbon nanotubes in concrete testing and preliminary marketing of the product is successful, we plan to start the commercial scale production of the nanotubes at the new Genesee carbon conversion center, which is expected to commence operations in 2021. We also had strong financial performance in 2019 where we met or exceeded our financial targets. This included generating a record year of AFFO with $555,000,000 which is $45,000,000 higher than the midpoint of our $485,000,000 to 535,000,000 dollars guidance range. Turning to Slide 5. I'll review our 2019 performance versus the annual targets.
Annual facility availability was 94% last year, which was slightly before below the 95% target. We reported $78,000,000 in sustaining CapEx, which was slightly below our target range of $80,000,000 to 90,000,000 Our reported adjusted EBITDA was $1,000,000,000 After removing the onetime impacts associated with the swap of interests in Genesee III and Keypills III, adjusted EBITDA would be $907,000,000 which was within the $870,000,000 to $920,000,000 guidance range. As mentioned, we had a record year of AFFO with $555,000,000 that exceeded the $485,000,000 to $535,000,000 guidance range target. I'll review the outlook for Alberta power prices on Slide 6. In 2019, the average power price was $55 per megawatt hour compared to $50 in 2018.
The higher power price in 2019 reflected the impact of higher natural gas pricing unseasonably cold temperatures coupled with baseload facility outages experienced during the Q1 of 2019 when average power prices were $69 per megawatt hour. We see a positive outlook for Alberta power prices on a current forward as seen in the current forward prices for 2020 to 2022. Forward prices are averaging $57 a megawatt hour. I'll now turn the call over to Brian Deneeve.
Thanks, Brian. I'll review the financial highlights starting on Slide 7. The Q4 2019 financial results were consistent with our updated expectations that we provided at our Investor Day in December. This included generating $555,000,000 in AFFO that was at the high end of our guidance range. In the Q4 of 2019, the average spot price was $47 per megawatt hour.
However, our trading desk captured an average realized price of CAD57 that was 21% higher than the average spot price. The $57 average realized price was also higher than the $52 realized price in Q4, 2018. As mentioned on our Q3 call, there were one time accounting impacts related to the transaction swap of the Genesee III and Keypos III assets that closed on October 1 that impacted both the Q4 and full year results. I won't go over these again, but there are details provided in our MD and A. Moving to Slide 8, I'll review our Q4 2019 financial results compared to the Q4 of 2018.
Revenues and other income were $683,000,000 up 101% compared to the Q4 of 2018 due to strong results from the Alberta Commercial and Portfolio Optimization segment and from the acquisition of Gorway in the Q2 of 2019. Adjusted EBITDA was CAD352 1,000,000 up 106% year over year. As noted in the footnote on the slide, adjusted EBITDA includes one time items associated with the swap of interest in Genesee III and Keypil Street. Excluding these items, adjusted EBITDA would be $230,000,000 higher. The higher adjusted EBITDA was largely driven by the acquisition of Gorway in the Q2 2019 and from strong portfolio optimization results.
Normalized earnings of $0.29 per share was slightly down compared to $0.30 per share in the Q4 of 2018. We generated $128,000,000 in AFFO that was up 60% year over year. AFFO per share was $1.22 was up 56% from the Q4 of 2018. Slide 9 shows our full year financial performance for 2019 compared to 2018. Revenues and other income were approximately $2,000,000,000 up 39% year over year.
Adjusted EBITDA was $1,000,000,000 up 40% compared to 2018. Excluding the one time items described in the footnote, adjusted EBITDA would be CAD 907,000,000 up 23% due to the additions of Arlington Valley, Gorway and New Frontier and stronger performance from the Alberta Commercial segment. Normalized earnings of $1.34 per share were up 20% compared to $1.12 in 2018. As mentioned, we generated $555,000,000 in AFFO that was up 40% year over year. AFFO per share was $5.32 was up 38% from 2018.
Overall, we had double digit increases in the key financial metrics. Turning to Slide 10, I'll provide an update on our commercial portfolio positions. Since the Q3 of this year, we've increased our 2020 hedge position from 53% to 72% at an average contract price in the mid $50 per megawatt hour range. For 2021, we're 3% hedged at an average contract price in the mid $60 per megawatt hour range. And for 2022, we're 11% hedged at an average contract price in the low $50 per megawatt hour range.
This compares to current average forward prices of CAD60 per megawatt hour for 2020, CAD57 for 2021 and CAD53 for 2022. I'll now turn the call back to
Brian. Thanks, Brian. I'll outline our financial targets for 2020 on Slide 11. These are the same as we shared with you in December. Our 2020 financial targets are based on 63% of the Alberta commercial baseload generation hedged at an average contracted price in the mid-fifty dollars per megawatt hour range.
They include our any impacts from the $500,000,000 of committed capital for growth. And as a reminder, there is a $40,000,000 reduction in AFFO from Arlington Valley's previous tolling agreement that expired in 2019. For 2020, we are targeting $935,000,000 to $985,000,000 in adjusted EBITDA. And for AFFO, we're targeting a range of $500,000,000 to $550,000,000 Slide 12 outlines our development and construction targets for 2020. We currently have 2 wind projects under construction.
The construction of our Cardinal Wind project in Illinois is nearly completed and is on schedule for commercial operations next month. The project is expected to be in the budgeted range in its U. S. Dollar functional currency. We're also proceeding with the 2nd phase of Whitla Wind in Alberta.
It is a 97 Megawatt project with an expected capital cost of $165,000,000 and expected to begin commercial operations in 2021. Turning to Slide 13. Later today, Capital Power will release its inaugural integrated annual report that combines our financial and ESG reporting together in one target. This report provides a comprehensive view of our priorities, performances and progress as well as insight into our strategy for creating long term value. We also conducted 3rd party limited assurance on some of our key sustainability indicators.
We have also released our 2019 Climate Change Disclosure Report, which is aligned with the recommendations of the task force for climate related Financial Disclosures, commonly referred to as TCFD. The report provides additional details on climate change governance, strategy, risk management and opportunities. In January 2020, we received an A- score from the CDP on their 2019 annual assessment, our highest score to date. For the first time last year, we also participated in CDP's water security assessment and received a B-. The water assessment looks at how companies are reducing risks and seizing opportunities for water security.
The B- is a strong score for a first time submission and a solid platform to build upon as we focus more on water management and disclosures. I'll conclude our presentation with an ESG slide on Slide 14. For Capital Power, 2019 was another outstanding year. Our strategy has been delivering value for our shareholders year after year. Underpinning our strategies has always been a strong commitment to sustainability.
I won't go over the ESG highlights noted on this slide, but you can see very good progress and recognition in all three areas of environment, social and governance. We also recognize the growing stakeholder interest in understanding climate related risks and opportunities, And I can assure you that sustainability is and will remain a very important part of our business. I'll now turn the call back over to Randy.
Okay. Thanks, Briar. Operator, we're ready to start the question and answer session.
Certainly. We will now begin the question and answer The very first question comes from Rob Hope with Scotiabank. Please go ahead.
Good morning, everyone. Maybe to start off, just want to touch on the sustainability and your thinking of allocation of capital there. When you're looking at future capital investments, how do you weigh, I would guess, your historical practice of buying midyear gas plants versus new renewables?
So generally speaking, when you look at renewables, they tend to have a much longer project life. Building a wind farm such as Whitla II is a 30 to 40 year life, whereas a midlife natural gas asset is considerably shorter. So the basic economics takes into consideration evolving trends associated with decarbonization. In addition to that, we continue to do some work considering the different discount rates that should be applied to those assets, which fully takes into account the changing trends in terms of overall capital attraction associated with either natural gas or with renewables. So we think we are taking into consideration at least the economic implications associated with the difference between natural gas assets and wind assets.
All right. So I guess it would be fair to say that you're quite happy continuing to invest in gas, but with a higher implied discount rate there?
Yes. And we've always said that our preference, if you're ending up with projects that look the same in terms of sort of adjusted economics returns, etcetera, that we would view the development of renewable assets more favorably.
All right. And then just moving on, can you update us on your recontracting initiatives and Decatur and what else is ongoing in the fleet?
So we currently have 2 recontracting discussions taking place, 1 with Decatur and the other one with Island Generation. And over the last couple of months, very significant progress has been made on both projects. And we are hopeful that we'll have something to announce on Decatur within the near future.
All right. And then just on Decatur, that was a pretty similar kind of messaging as the Investor Day. Is anything holding up or is it just taking longer to close everything off?
It's actually more associated with approval processes than it is actual kind of negotiations or working out terms and conditions.
All right. That's very helpful. Thank you.
Our next question comes from Maurice Choi with RBC Capital Markets. Please go ahead.
Thanks and good afternoon. Good morning where you are. First question, I guess, Brian, in relation to the announcement that you continue your role as CEO, to the extent that it matters to investors, may I ask what's changed your decision to retire this year? And in relation to that, should we view strategy as being largely to say moving forward?
So essentially, it ended up being very much a personal decision. And as I've been going through the last number of months and looking at the other activities that I would be getting involved in outside of Capital Power and through retirement, I was finding that I would tend to be almost as busy and came to the conclusion that certainly, if I was going to continue to be very active in a business and giving back to community life, I might as well go back to what I was very much enjoying and continuing to enjoy, which was the President and CEO of Capital Power. And the timing of it, basically, the Board had a vigorous process taking place in terms of the search. And it kind of came to a point where it was continuing to proceed, and it reached a point where I either needed to come to a decision and throw my hat in the ring or continue to on my plans for retirement. So from that perspective, January was when I approached the Board and said that I would be happy to continue in my role as CEO for another 3 years.
Thanks. And just to follow-up on that, strategy wise, I know we just had our Investor Day a couple of months ago. I suppose as you look across your 3 year contract, should we expect growth and diversification as part of your strategy moving forward or should we expect a little bit of a move or change moving forward?
So actually, it's the one of the things that really continue to excite me about Capital Power and its future was the ongoing prospects of growth that Capital Power has And certainly, the challenges going forward in terms of the growth, decarbonization, ESG, those are all challenges to capital power, which we are extremely well situated to meet. So that sort of excitement actually got greater and greater as I was looking at retirement, not less and less. So very enthusiastic about continuing on generally the same path as Capital Power has been on. Having said that, very responsive to the changes that we do expect will be taking place in the market.
And just to finish off, as you mentioned changes to the market, I wonder if you've had any recent discussions with the Alberta government with regards to the 2 ISO initiatives on market pricing sorry, pricing framework as well as market power. Obviously, some of the recommendations from ISO to the government were not made public. So I wonder if they reached out to you or vice versa?
Yes. The ISL guys have a process that's underway where they are engaging stakeholders. So we're involved in terms of providing our thoughts and feedback on those two items.
Our next question comes from John Mould with TD Securities. Please go ahead.
Thanks. Good morning, everybody. Firstly, maybe just starting on the nanotube front. I'm just wondering if
you can give us a
little more color on how that testing is progressing both at Shepherd and with Heidelberg's Canadian subsidiary?
So as I indicated, we the C2CNT continues to work with Heidelberg in terms of finding basically 2 different or in 2 different areas. One is around the actual production of an optimal carbon nanotube for concrete. And the other one is for the interface between the carbon nanotubes and concrete in terms of getting an appropriate distribution and considerable progress has been made on both. But it is an as expected an iterative process of continually optimizing. So I would say, generally speaking, it's going as expected.
Okay, great. And then just one question on the debt at Gorway. I think just looking at your financials, that 560 $590,000,000 is due in 2020. Is that just the refi in normal course with more non recourse project financing, excuse me, is that the plan there?
Yes. And actually, we've completed that extension out from the 2020 time frame. But that's yes, that's just normal course in terms of moving it out, doesn't it dramatically affect the cost of that debt.
Our next question comes from Patrick Kenny with National Bank Financial. Please go ahead.
Hey, good morning guys. Congrats Brian on your announcement. Just wanted to start off by asking about the recent announcement on Cascade and that plant coming online and what impact you might think that could have on the market kind of in the post-twenty 22 time frame?
So the certainly, if that plant was to proceed, there would be an impact on power prices in Alberta. But given Suncor's announcement to move ahead with their cogen facility at the end of 2023, our view that it's very unlikely that, that plant will proceed. The economics are going to be materially challenged if it was to be coming on at the same time as the Suncor cogen.
Okay. And maybe more in the near term here. So 72% hedged for 2020, only 3% 2021. It looks like the forwards are still in the kind of mid-fifty dollars range. So I just wasn't sure if that's a reflection of your view on forward prices potentially moving higher in 2021 or just lack of liquidity in the market?
No, it's lot of inventory in 2021 is driven by our view of fundamentals in the Alberta market, which we feel are very bullish and would anticipate prices will settle materially above where forwards are currently trading for that year.
Okay, great. And the last one, maybe just to follow-up on the sustainability report and looking across your portfolio of assets here, any assets that may not quite fit with your ESG story going forward and thinking about potential consolidation opportunity or noncore assets sales say at the Joffrey facility or any other assets that you think may not be a strategic fit from an ESG perspective?
So as we look across the fleet and the assets that we have, From an ESG perspective, certainly the facilities in North Carolina have, I'll call it, a more negative profile. And those the contracts are terminating next year. So we think that's taking a course that will, one way or another, have those facilities not in our fleet. As we look at the other assets, certainly, the Joffrey cogen facility is a good asset, efficient cogeneration facility, large one. We would, as always, consider either increasing our interest or reducing our interest on that facility depending on the other two partners.
When we look across the kinds of opportunities that might be out there on the natural gas side, certainly, there's a number of cogen facilities in the province that from time to time are rumored to potentially come to market and would certainly consider those from a contracted perspective and from a natural gas perspective. But again, as we look across our fleet, we the natural gas assets we have are very efficient and in fact becoming more efficient in our hands, very pleased with our move to taking our coal assets and moving them to dual fuel. And certainly, as we continue to look at those assets and as we've talked in the past, we always look at a range of opportunities associated with those assets. And certainly, the possibility of repowering is always there. So as we look forward, we have in our and we'll be ending up with a very, very efficient fleet of natural gas assets.
And there really aren't any weak ones there. Any ones that we would say from an ESG perspective are reasonably positive. So I think with the exception of the North Carolina assets, we're in a pretty good position. Having said that, that doesn't mean that at some point in time, we might not be looking at divesting various assets for a whole range of reasons, including demand for capital.