Good morning, everyone. I'm Randy Moll, the Director of Investor Relations for Capital Power. Welcome to our 11th Annual Investor Day event here in Toronto. This event is being webcast, so I'd like to welcome the listeners participating on the webcast. Earlier this morning, we issued a news release that outlined some of the highlights that we will be discussing today.
We hope that you find the information presented today helpful in understanding the Capital Power story. Before we begin, let me cover off the standard disclaimer regarding forward looking information. Certain information in today's presentation and responses to questions contain forward looking information. I ask that you refer to the forward looking information disclaimer at the end of the presentation as well as our disclosure documents filed on SEDAR for further information on the material factors and risks that could cause actual results to differ. I'll start off with an introduction of the management team that are here today.
We have Brian Vazjo, President and CEO Kate Chisholm, Chief Legal and Sustainability Officer Brian DeNeve, Senior Vice President, Finance and CFO Darcy Truffin, Senior Vice President, Operations Engineering and Construction and Mark Zimmerman, Senior Vice President, Corporate Development and Commercial Services. We also have Jackie Polypiak, who heads up our Human Resources department. So this is the agenda for today. We'll start off with presentations by Brian Darcy and Mark and Brian DeNeve and then we'll take a mid morning break around 10:20. Then we'll finish off with Kate and Brian Bageo.
And then we'll go to Q and A for about half an hour. And then after the break, we have our guest speaker, Doctor. Stuart Licht, the founder of C2CNT, will present on the innovative technology of transforming carbon into carbon nanotubes. And Brian Vazjo will talk about the commercialization of C2CNT. Finally, we hope that you can join us for lunch afterwards.
Okay, I'll pass it over to Brian to start things off.
Thank you, Randy. Good morning, ladies and gentlemen, and especially those who are tied in this morning electronically. Welcome to our 11th Annual Investor Day. As our news release outlined, we have a lot of exciting developments for next year and beyond that we'll be discussing with you today. I'll actually start off with where we left off last year.
This slide highlights the major theme of last year, 5 years of delivering results. Those 5 years started in 20 13 when we went through a significant repositioning of the company. Our focus areas were AFFO per share, renewables, natural gas assets, contracted EBITDA and diversification. I could go through a very similar discussion as I did last year. It however would be repetitive.
The conclusion, another year of strong delivery. However, I do believe there is a very significant message in that. Capital Power is delivering shareholder value year in year out without changing strategy, without going into new countries, without going into new businesses. What will be clearer after today's discussion is that we are getting better and better at what we do. Last year, I also discussed how we think investors should view Capital Power.
The message was sticking to our strategy and delivering on that strategy over the short and long term. This year, I'd like to add another dimension to how investors should think about us at Capital Power. Although I can say our basic strategy has not changed over the past 6 years, our strategy and tactics have evolved modestly. This was largely because we've been very focused on anticipating the future and evolving to be sustainable and prosperous in that future. Two examples are our focuses on operational excellence and growth.
Looking at operational excellence, if you go back to about 2013, we spoke about a track record of 6 projects being completed on time and on budget. And we were working towards moving from being 3rd quartile from an operating performance perspective. We developed an approach of increasing performance, reducing costs while reducing risks. We achieved results well beyond our expectations, which we shared with you annually through to 2017. In 2016, we commenced the GPS program to reduce emissions at Genesee by 11% whether in coal or whether in natural gas service.
As of today, as Darcy will describe, we are well into the top quartile. We announced this morning that the final stages of GPS will achieve a 12% reduction at Genesee by mid-twenty 21, while at the same time, we're finishing our capability to burn 100% natural gas. Genesee III will have the lowest CO2 emissions profile per megawatt hour than any other comparable plant in North America. When burning 100% natural gas, the entire Genesee complex will have the lowest CO2 emissions per megawatt hour of any converted plant or potentially converted plant in North America. While the completion of Whitla 1 or with the completion of Whitlaw 1, we've completed 5 more projects on time and on budget or better.
What we thought we had to do in 2013 to be competitive from an operations and construction perspective, I now believe has brought us to a point of being a true competitive advantage. Tomorrow, we'll continue down a path of actually creating real shareholder value from operational excellence, as Darcy will describe. Part of that is under the Ops 2,030 initiative and continuous innovation, which will keep us on the leading edge of operational excellence and retain the competitive advantage we enjoy today. Or how we've executed on growth. In 2013, we commenced a strong focus on growing our contracted cash flow from approximately 30% of EBITDA in order to support dividend growth and our credit ratings.
We indicated that path was through disciplined execution on renewables and natural gas generation opportunities. We now have reached our goal of 2 thirds contracted EBITDA through Genesee 1 and 2 coming off contract. We achieved this in large measure through prudently investing over $5,000,000,000 since 2013. We've had great success over these past 6 years from our natural gas acquisitions. Mark showed you a scorecard last year about how we've done in regards to those acquisitions.
He's updated that and it's an even better story this year. Mark will also share with you a report card on renewables and how we've done in respect of our renewables projects over the last year, and we're equally proud of that. Contributing to that pride is a completion last week of Whitlaw I early and on budget. Looking forward to tomorrow, we'll continue to have a significant component of our cash flow from long term contracts. We'll continue to invest in wind and eventually solar as we move forward as well as eventually storage.
As both Mark and Kate will discuss, our natural gas strategy, especially linked to the development of carbon capture and storage, continues to be very robust. Our operating, construction and commercial expertise will deliver this future without strategic turmoil. Lastly, I want to comment on how we are, have and expect to be positioned from an ESG perspective. For almost 2 decades, CO2 has been prominent in our thinking. When we proposed Genesee 3 2 decades ago, we were volunteering to offset its carbon footprint to a natural gas equivalent.
Early in this decade, we had developed the largest carbon credit position in the province, not just by trading, but by supporting technologies in a variety of businesses. As of this last July, we've set emissions targets, which Kate will describe further in a few moments. We are actually reducing CO2 emissions. We've always prided ourselves on social responsibility. We have a tremendous safety track record achieving the CEA President's Safety Award for the past 6 years.
We are a leader in diversity at senior leadership levels. We do well from a governance perspective, everything from the Board Outreach program, which started 3 years ago, to ESG performance targets making up 20% of our executive compensation, to moving forward rapidly on integrated reporting. Kate will go into more detail, but these are not all new initiatives just to make us look good from an ESG perspective. ESG perspective. These are elements that have been evolving in our organization and will continue to evolve.
We believe we are a leader and we will continue to be so. ESG can be added to the list of elements Capital Power has been delivering on. And the overall this overall performance over time has resulted in delivering shareholder value. From 2013 to this week, Capital Power shareholders have enjoyed an average 19% per year total shareholder return, significantly outperforming both the TSX and the utilities index. All in all, an excellent record, which warrants investment.
I will now turn it over to Darcy.
Well, thank you, Brian, and good morning. Over the years at Investor Day, I've talked about some of the competitive advantages we have in construction, engineering and operations. Today, I'm going to reinforce those aspects and speak specifically about our sustained excellence in operations, how operations has and continues to create new value with existing, with developed and with acquired assets, and I'll provide you with updates on both our Whitwell I and Cardinal Wind projects. From an overall fleet perspective, we continue to achieve excellent plant availability and have averaged 95.5% with our fleet since 2014 inclusive of this year. 2020 will be an unusual year as both Arlington and Decatur have steam turbine overhauls and with that the plants will be dark.
So for 2020, we're projecting availability of 93%. However, post 2020, we see a return to the 95 plus percent availability figures. From a renewables perspective, we are very pleased with the overall performance of our fleet and are continuing to average over 97% availability. We recently did some benchmarking with our thermal fleet. We got data from NERC, a lot of data and we went through and through that what we were able to determine is we were actually in the top decile with fleet performance.
So very proud of that. Now I've spoken about our proactive maintenance culture over the years I've been here, but I very much believe in that because it's fundamental to our success. A forced outage can cost 1,000,000 and 1,000,000 of dollars in direct repairs and in lost revenue. So having a robust maintenance program and maintenance culture is a must. And we continue to look at upgrades and improvements.
And for example, over the last 2 years, we've upgraded our maintenance software and we're just finishing rolling it out and to the entire fleet and it's a real strength now to have that. And with that, we've tied it in with our safety. And so there's a natural link then with safety and maintenance. And on risk, over the years we've taken numerous measures to mitigate and manage risk from key critical spares to agreements on some of our high risk equipment. And I would note that on insurance, we are actually claims free for the last 6 years.
Few operators can say that. And with that, we have a great relationship with our insurers. They know our plants inside out and their rates reflect the lower risk that they view of Capital Power. And lastly, we're very proud of safety our safety performance. As Brian mentioned, we have been recognized by the CEA for the past 6 years with their President's Award.
We have consistently demonstrated that safety and operations performance go hand in hand. Now later on this morning, Mark's going to run through the overall commercial performance of our major gas acquisitions. Over the next two slides, I'm just going to take you through what operations is working on with Mark's team to add value from an operations side to these acquired assets. Now firstly, we review all of our assets with a long term lens. So on those that we acquire, it means that we have or we may have allowed to spend some money in the early years to bring them up to our standards.
The first step for operations after the acquisition is the initial integration and most of the activities are typical to any operation, but there are 2 key differences with capital power. The first is, we have a central operations philosophy and the other is our cultural integration that we believe is equally as important. So all the plants we have acquired have been operating on a decentralized basis. At Capital Power, we feel we are much stronger, more successful and have much less risk if all of our plants operate through a central office. It starts with us first integrating the plant into how we work and to the company tools and standards.
And we introduce them to our support group, which at Capital Power, we possess a wide cross functional group of specialists and technical experts that the plants would not normally have internal access to. From engineering and operation support like turbine specialists, water chemistry, boiler and HRSGs, high voltage to cross functional support, virtually all of the plant's needs can be filled from within capital power. Now the cultural part of the integration is the longer process. It starts with us communicating that our intentions are to own the plant for the long term, treating our employees fairly and making them feel that they are part of the company. And then we do the things like leadership and board visits.
Brian Vaz do it as an example, he visits our thermal plants at least twice a year and tells them how things are going and how they're doing. And really what we want them to do is understand that they are part of Capital Power and wear the colors of the company with pride. And once everything is operating as it should, we identify operation opportunities to optimize in order to create additional value. This can be operational in terms of how they actually do the work or it can be technically as to physically how we can improve the equipment and the systems that they have. So how are we doing?
Well, from a plant perspective, performance wise, we are tracking ahead of availability objectives with the exception of Decatur, which because of the upgrade we did to the CT, one of the CTs, the combustion turbines this year, it's slightly down. But everything else is tracking extremely well and Decatur will be after the outage running it is running extremely well. This summer, for example, in Arlington, the plant had its best record performance ever in its history at 99.9 percent availability. Now consistently demonstrating that our plants are reliable, they are efficient and they are well run are key parameters that our off takers look at when dispatching. And these are the same factors we believe they will also look at when it comes time to recontracting.
Now from a cost perspective, again, while we may find the outlying odd outlying expenditure, I'm confident that year over year we will meet and beat all of our operational business plan objectives. So how do we do that? Well, one of the advantages I mentioned earlier is that we have that internal team of specialists versus 3rd party contractors and consultants that the plants previously used. So there is a savings there, but it's more than just labour. It's the expertise being provided.
Having an in house turbine specialist, for example, saves us literally 100 of 1,000 of dollars a year. We also have a very strong supply chain group that provides much better buying and uses company leverage and a fleet sharing philosophy versus the buying and warehousing that the plants have typically done on their own. And from a sustaining capital perspective, we have a central projects group that implements the company processes priorities, ensures we attain the necessary paybacks and executes according to plan. Now reining in capital expenditures to only those things that add value or are required to maintain performance or safety, as we have demonstrated consistently over the many years, is add savings. Now regarding adding value, at Decatur, we saw an opportunity last year to substantially improve the asset value and make it more attractive by modifying the combustion turbines.
We made the first upgrade earlier this year as I mentioned and it has been extremely successful. The plan is to upgrade the other 2 CTs by the end of 2021, ultimately adding 100 megawatts and improving substantially the heat rate. At York, we are in the process of increasing the plants peak firing capability by 14 megawatts and are working to substantially extend the wear life of the CTs. At Arlington, there are several major initiatives we are working on to add value. Now Mark's team saw an opportunity at time of acquisition to increase the plant's utilization significantly, almost doubling the plant's capacity factor.
To do so meant we had to double the plant's water evaporation capacity. But first, rather than doubling it, what we did is we improved the efficiency and the existing water discharge we reduced by 20% or more. And we are now proceeding to the construction of another evaporation pond, but this time it's only half of what the existing is. And as commercial got more into the details of expanding the plant's utilization, it became clear that there would be further benefit if we could alter the plant's dispatch capabilities. To accomplish this, normal engineering solutions would have cost about $4,000,000 1 of our senior engineers came up with a solution, it cost us $250,000 so real value added for that plant.
And also at Arlington, we're working on an energy storage system that will enable us to chill water off peak and use that additional cooling on peak, and thereby reducing its parasitic load. Another area that is growing in importance as we grow our critical mass is our planned outage costs. As a result, we've done some restructuring internally, we're already seeing results and we believe this is an area that we can significantly improve on over the next few years. Now regarding ops 2,030, well firstly in our short 10 year history, Capital Power has established a track record for innovation through optimization and performance improvements. Beginning in 2013, we embarked on a journey to optimize our plants from a cost and reliability perspective.
That program was a huge success and delivered approximately £50,000,000 in improved EBITDA from our existing assets. We also made major reductions in our sustainable capital spend. And then in 2016, as Brian mentioned, in response to the new carbon tax, Capital Power embarked on a 5 year carbon intensity reduction program called Genesee Performance Standard or GPS, which we believe is unique anywhere in the world. That program is in its final stages and has and will be a major success. So today, I'm presenting our new program, It's called Ops 2,030 and it's about creating the sustainable plant of the future.
We envision a 10 year program that continues the optimization of our fleet through the use of technology, digitalization and other innovation. All of you know that in your own worlds, new technology is pushing the boundaries of what is possible. Capital Power wants to be leaders in the power plant transformation and retain our competitive advantages. There are 3 focus areas and each have large opportunities for improvement as technology evolves from extended parts wear to higher plant efficiencies and outputs to new ways of doing operations and maintenance. The opportunities are significant.
Included in our 2020 plan are several ops 2,030 projects that will enhance our plans, projects like the Arlington Energy Storage that I previously mentioned. We are in the process of developing a 10 year roadmap for ops 2,030 and build and we'll be building those objectives in our long term plan, just like we've done with past initiatives. Now from a data perspective, to put things in perspective, we collect approximately 1,000,000 bits of data every hour. We intend to restructure how this data is collected across the fleet such that this in future this data will be used in a proactive manner for maintenance. Another significant area for cost improvement is on our parts wear.
I can cite 2 examples at our plants today where through technology we are looking to extend the wear by 30%. Now there are all sorts of other changes we see coming with digitalization and technology. Some and again, some of that is already creeping into our current work. The renewables group is actually about a year ahead on their ops 2,030 journey versus the rest of the fleet. A remote operation centre has already been set up and a software system commissioned and we are already seeing positive results.
Now while all of our wind farms are covered by service agreements, it is our intention to get much more involved with these assets. And as we grow our renewables fleet and grow our database, we will expand our technical capability. This will enable us to further optimize both the operations and long term maintenance of these assets. And we are doing many other things to improve these assets. In some locations, however, we are restricted because of the nature of the offtake.
But where we can, we are looking at software upgrades to improve turbine performance, aerodynamic upgrades, blade repair aids and other innovations to improve wind capture. The transformation of Genesee is well underway on a number
of fronts.
On Genesee Performance Standard, GPS and it's I just want to follow the bouncing ball. When we first brought it out, as Brian mentioned, in 2016, it was at 11%. Last year, I came in here and I said 10% and that we would be reducing our capital spend as a result. But since then, we've worked hard and we've actually found a way to increase our improve or increase our carbon intensity reduction to 12% and that's through the addition of new rotor on G3. And we've and for the dollars, so our capital costs have gone up to $45,000,000 but now we're projecting 12% reduction of carbon.
And when you do the math and you look at 2022, that 20 that 12% equates to $38,000,000 in annual savings, which is substantial. So as Brian mentioned, the performance of Genesee, but specifically if we look even at G3, G3 itself will be the lowest emitting plant coal plant in all of North America. And as we move to gas, as Brian mentioned, those percentage reductions they carry forward, so huge benefit over the life of the remaining life of those assets. Now today, we announced that we are proceeding with 100% dual conversion of G3 in addition to the previously announced dual fuel conversions of G1 and G2. Now creating dual fuel capability cost effectively on a supercritical like G3 has been a bit of a challenge, but we finally got there.
We have delayed the G3 outage subsequently from the fall of 2020 to the spring of 2021, so that we will be able to do this conversion and as well install the high efficiency rotor in the G3 unit. Now not only does that rotor upgrade allow us to reduce CO2 emissions, we get an extra 7 megawatts output. We are planning to do all three of these fuel conversions during our normal outage durations, which I think demonstrates the competitive advantages we have with in house engineering and construction expertise. And lastly, on our outages, over the past few years, we have started to lengthen the periods between our major overhauls on various modules of the steam turbines and generators. And this optimization has not impacted availability.
On outage cycles, however, our high availability we attribute to our 2 year cycles. But as we move to higher gas use, we expect to see lower boiler erosion and at that point we will likely extend the outage periods to a longer cycle. Now we announced today the successful completion of Whitlaw 1, 1 month ahead of schedule. In order to win Whitlaw 1 against a very strong field of tenders, we took a different approach to building Whitlaw. That strategy paid off.
Our engineering and construction teams took charge of all aspects of the design and construction of that project and we were successful. Earlier this year, we reported that we were going to be slightly over budget. I am pleased to advise that with the early complete earlier completion date and with things like completing the turbine systematically to start generating revenue early ahead of commissioning, we have been able to bring this project in on budget. So another successful development for Capital Power. On Cardinal Point, it is also proceeding very, very well and we are forecasting it to be complete by the planned March 2020 date and it is also tracking to finish on budget.
So in summary, from an operations perspective, capital power continues its strong year over year performance, optimization and finding new value is embedded in operations and new assets are providing lots of opportunity for new value creation. Capital Power is embarking on a new tenure program to transform its assets to the sustainable plants of the future through the use of digitalization and new technology. At Genesee, numerous initiatives and changes are underway that are transforming this major asset. And in new developments, Capital Power continues its track record with the successful completion of Whitlaw 1 and the forecast successful completion of Cardinal Point in Q1 of 2020. Capital Power is delivering responsible energy for tomorrow.
Thank you. And I'll now pass it over to Mark.
Thanks, Darcy, and good morning, everyone. So for the last year, and Darcy just mentioned it, we've been referencing responsible energy for tomorrow. What do we really mean by that? Simply put, we're building a power company for the future. And we do that by delivering growth.
As you all know, we're in the middle of an exciting transformation in our industry. And with any transformation, some uncertainty can arise, but it also provides a real opportunity for us to capitalize on. In this environment, though, critical that our goal is to remain nimble and resilient, ready to navigate that uncertainty and capture those opportunities. By doing so, we'll continue in our growth plans and extend our track record of consistent and stable returns. Today, I'll explain how our disciplined strategy in our portfolio of assets are uniquely positioned us for steady returns and growth in any environment.
Specifically, our advantaged portfolio contains great assets that are strategically positioned in markets with strong fundamentals. Our high performance teams have a solid track record of creating value through portfolio management, optimization and integration. And we see a bright future ahead with ample opportunities to continue our disciplined growth path. By executing our plan, our portfolio characteristics will continue to evolve and strengthen, becoming more diversified geographically into sustainable technologies and contracted cash flows. So since 2013, we have doubled our EBITDA,
but
it has not come from sticking with what we had done in the past, rather it has come from an intentional move with disciplined execution. As a result, we've been evolving our generation portfolio fuel mix and have geographically diversified our operations. We are proud of the last 6 years and we are confident in our future. By continuing to do what we have been doing, we envision a future where we will meet or exceed our past performance. When we step back and look at our portfolio of assets, it has a number of key characteristics.
It's competitive, young and efficient as many of our newest acquisitions and construction projects have a remaining life of greater than 20 years. The majority of our portfolio is strategically located in markets that rely on their capabilities for grid reliability. It has low volatility as most are substantially contracted as we have focused on contracted M and A opportunities and originate long term offtake arrangements for development projects. With the operational and commercial talents for our people, our assets are reliable as we maintain, as Darcy have said, and continue to look for ways to make them more efficient. And finally, we have diversified our risk to any one market by owning assets in different regions.
By doing so, we reduce the political market fundamentals and environmental risks. Overall, our assets offer optionality and are well positioned. Our gas assets are strategically positioned, efficient and flexible. Our wind assets are located in relatively strong wind regimes. Our coal fleet will soon be dual fuel.
And I should note, we did have some trouble representing that on this slide. So to clarify, in essence, Genesee 1, 2 and 3 are capable of co firing today. They'll become 100% gas fired capable during the dual fuel period starting in 2021 and will be only gas capable starting in 2,030. In short, we ran out of bubbles and colors, but hopefully I've explained the transition here. When we dig a little deeper into the strategic positioning of our assets, I would offer some of the specific observations.
In Alberta, we have wind with high capacity and capture factors geographically dispersed to mitigate correlation effects with other wind farms due to their location. We have both sufficient gas assets that are low in the merit curve as well as peaking gas facilities that can optimally monetize Vonage volatility. With our current announcement on dual fuel capability at Genesee, we've increased our optionality even further going forward. And as other coal units that are high on the dispatch curve, they will get pushed out by new generation well before our units do. Our thermal sites are also close to load centers, Edmonton and Calgary with access to low cost gas and large transmission corridors.
Further, there's an opportunity for us to mitigate some carbon exposure through offsets and by building renewable developments such as Whitla 2. In Ontario, Goreway is one of a handful of large clean natural gas generators located in the high value Greater Toronto area. It is very efficient and sits low in the dispatch curve and can capture operating reserve revenues. York and East Windsor are also located in the same high value areas. East Windsor is located close to Ontario's Southwest wind production region and York, like Gorway, is also in the high value Greater Toronto Area region.
Both facilities are quick start units that provide valuable flexibility to the ISO and can run when the system operator needs to balance the system due to unforeseen circumstances such as wind forecast uncertainty. All of our facilities have access to major gas storage and transportation infrastructure and have secure fuel supply. This portfolio provides real value to Ontario that is difficult to replicate and we believe should be recontracted and even expanded. Indeed, we currently represent approximately 45% of the installed high value flexible thermal generation in the GTA. In the U.
S. South, we have relatively efficient units that can fill in for coal retirements. As an example, Arlington is right beside Phoenix, a large growing demand center as it is difficult to build new gas in these regions due to cost as well as gas moratoriums, accelerating renewables penetration and coal retirements will increasingly require gas generation to provide stability to the overall system. As a result, we see a high likelihood of re contracting here as well. And finally, in the U.
S. Midwest, although low growth is more muted than in the past, there are companies looking to contract renewables such as technology companies and companies looking to build data centers leading to demand for renewable output. Strong wind regime also makes for competitive wind projects, especially as the coal projects retire. The markets are liquid and allow for contracting of renewable projects. This positions us very well for further renewables growth in this area.
Diving a little deeper into Alberta,
we see
a positive outlook for the unique Alberta market and the associated power price expectations. The demand growth outlook is 1% to 2% combined with a decline in baseload supply. As we look forward, we expect a similar environment as we've seen in the past and within which we have succeeded. From a market perspective, we are seeing high spark spreads continue due to low gas prices and high carbon prices. Our gas units are relatively efficient and are positioned to thrive in this environment.
Further, our dual fuel initiative, which will allow us to use 100% of either fuel, combined with our swap for 100% of G3, provides us the flexibility and optionality to enhance revenue along with better reliability. When this bullish environment is combined with the superior execution of our team, we deliver and have demonstrated a proven track record of success. In Alberta, we have continued to economically grow while proactively managing our assets and successfully optimizing our portfolio revenue. And this has been applied into other jurisdictions in which we operate. Origination is becoming an increasingly important complement as we contract with aggregators for both power and environmental commodities and look to secure commercial and industrial offtake arrangements.
Our commercial management activities have provided additional certainty of cash flows to Arlington and we continue to work closely to capture capacity and heat rate improvements while engaging in re contracting negotiations. Our M and A efforts are focused to stay in the deal flow in order to capture high quality opportunities in a disciplined way. And finally, the market skills developed can be applied to optimization opportunities while capturing synergies and effective integration. These competitive advantages are critical and will be maintained as we continue to expand our portfolio. And we see the results of these efforts in the recent results of our newest additions.
Because of these competencies, our 4 major acquisitions are generally meeting and exceeding our original investment decision expectations. These assets are now fully integrated and we continue to further optimize and enhance. And as we continue to apply our capabilities to future operations, we'll continue to enhance overall returns. And as Brian mentioned, a similar story appears when we look at our recently added renewable fleet. While we have some had some setbacks on quality due to terrain and capacity factors, which we are addressing with technical solutions by working with Vestas and exploring operational solutions, our other efforts have been meeting and exceeding our original investment case.
Like our acquisitions, our teams are in place to continue to work the assets in order to surface even more value as we move forward. A specific example of this post integration optimization is Decatur. We are in the process of spending USD60 1,000,000 to upgrade our combustion and turbines. The upgrade will provide us 100 megawatts of additional capacity and the fuel efficiency improvements from the upgrades will flow through to Decatur. In addition, we have been busy working on negotiating a toll extension and are in advanced discussions, which we expect to announce either later this year or into Q1 2020.
Our current expectation is that the combination of these elements take us to meeting and exceeding our original business case. In addition, we have announced this morning that we will proceed with the second phase of Whitlaw. Whitlaw II is an approximately 97 megawatt expansion of Capital Power's Whitlaw Phase 1 project at an expected cost of $165,000,000 It is located in Alberta, 60 kilometers southwest of Medicine Hat and will begin commercial operation in Q4 2021. We continue to pursue commercial and industrial offtakes. The project will realize synergies from Phase 1 such as shared infrastructure like the transmission operations and maintenance building and take advantage of our Alberta market expertise.
With this project, we continue to diversify our portfolio in Alberta. And while we continue to work our assets and growth initiatives, we are also attuned to ever evolving outlook in the power generation sector. The growth in U. S. Renewables will continue as costs are increasingly competitive and appealing to society.
We expect a similar profile in Canada. Equally important is that gas facilities are projected to be a meaningful and growing component of the grid as illustrated on this slide and reinforced by many other reputable long term projections. In short, gas provides a cleaner replacement for coal generation that is being retired. It is reliable technology to fill the need for baseload generation and provides the flexibility to cover for variable renewables that can cause system issues. Therefore, our outlook for growth remains the same, more renewables including solar and wind, more gas to help incorporate those renewables into the grid.
This future perspective is a view shared by many others, including the likes of Bloomberg New Energy Finance, who are one of the more bullish entities on the penetration of renewables into the North American grid. Even they acknowledge and I quote, the U. S. Electricity sector continues to replace aging coal and nuclear with cheaper renewables and gas, which becomes the premier source of power generation. So to summarize, coal and nuclear retirements will lead to a significant gap in the supply mix that will likely be filled by cleaner economic technologies such as wind, solar and gas.
The proliferation of renewables will require reliable and flexible capacity for the system, stability and reliability, which will require gas technologies for the foreseeable future. Low gas prices and high barriers to entry make strategically placed existing gas assets very advantageous. So within this environment and as we look forward, we'll continue to build on that success of our past. With respect to greenfield developments, we'll continue to assertively pursue the development of our remaining development sites. We will also be looking to refill our opportunity pipeline of sites through structured relationships or outright purchases of operating and development portfolios.
While we do see a potential slowdown in the U. S. Wind development due to possible elimination of tax incentives, we are bullish on wind development over the long term. We also continue to look at solar. While project level returns are lower than we would like, we continue to explore ways to make it economically work for us while maintaining competitiveness.
To maintain our solar options, we have made a modest investment in inverters to maintain the available safe harbor tax attributes necessary for us to remain competitive. We also remain alert to emerging technologies as we continue to look at other technologies that are complementary to our existing fleet, including storage and carbon capture utilization and storage. And one such example of such initiative is C2CNT, which we'll be having a special presentation on later today. We also continue to look at acquiring strategically placed midlife contracted gas assets. And rest assured, while we've looked at numerous projects over the last couple of years, we have maintained the discipline to only execute on those projects that provide the strategic and economic attributes that align with our strategy.
It is a combination of all these activities, which give us confidence that we will be able to deploy CAD500 1,000,000 a year into our target markets and technologies. So what should you expect from us at a minimum for the next year? Continue to deploy the approximately $500,000,000 into materially contracted gas and renewable opportunities, part of which will be in the form of at least one additional renewable development site or project, pardon me, and we will remain in the deal flow to be aware of any strategic gas or renewable opportunities to capitalize on. So I'll end where I did last year as we look to our aspirations by 2,030. When we bring it all together, you can continue to expect a few things from our growth initiatives.
A sustainable fuel mix that is focused on efficient and flexible gas facilities, wind and other new technologies, including solar, CCUS and batteries continued growth of contracted and re contracted cash flow a diverse footprint across North America that allows us to navigate unforeseen events in any one market and continued increases in cash flow, which allow us to sustain business expansion and support dividend growth. Ultimately, our disciplined growth will continue to support increasing returns to shareholders. Thank you. And I'll turn it over to, I think, you're next, Brian.
Thanks, Mark. So good morning, everybody. There'll be 4 or actually 3 key messages I'll be delivering from the finance perspective. The first is that our growth in AFFO per share continues to support our growing dividend guidance as we move forward. Capital Power continues to generate sufficient discretionary cash flow to fund the $500,000,000 of growth that Mark alluded to without needing to access the equity market And we'll continue to manage our balance sheet in a manner that will support investment grade credit rating.
Each year I review our financial strategy. It hasn't changed but just to reiterate, there's 4 principles. The first is to maintain a consistent growing dividend over time within AFFO payout ratio of 45% to 55% and provide dividend stability through contracted cash flow. The second principle is to maintain a competitive cost of capital through maintaining investment grade credit rating, which also allows us to access to capital markets when needed through various business cycles. It also is a great signal to investors about the stability of the dividend as we move forward.
The 3rd plank is managing financing risk to again maintain investment grade credit rating through properly laddered debt maturities and effective management of our interest rate exposure, foreign exchange exposure as well as counterparty risk. And finally, building on what Mark had mentioned, ensuring economic discipline and growth through adherence to target return expectations that supports our target growth in AFFO per share. Just to expand a bit on the contracted position of our portfolio, with the expiry of the Genesee 1 and 2 PPAs at the end of 2020, we will still have 2 thirds of our EBITDA under long term contract. And this slide illustrates the remaining terms of those PPAs. We're currently in discussions with BC Hydro on island generation and also on Decatur in terms of extending those contracts.
And for both of those, hope to hear or be in a position to announce, as Mark said, either by the end of this year or early next year in terms of the status of those discussions. One of the things that's important to note is with the re contracting of those two assets, our next major re contracting doesn't come up until the end of 2025 with the Arlington facility. Turning to capital allocation, we basically look at our capital allocation starting at the top is our adjusted funds from operations. We allocate approximately half of it to dividends back to common shareholders and dividend growth and the other half to investment and growth opportunities. But when you look at the growth opportunities, there is a hierarchy we look at as an organization.
As Darcy went through, there's a number of opportunities both from the operations side and commercial side to improve the performance of our existing assets. Those investment opportunities typically generate returns that far exceed our target leave with returns for growth projects. And the examples like Darcy mentioned is increasing the capacity and capability units, increasing their efficiency. What we're seeing happen is that the amount of investment we're putting back into our assets has been increasing over time. And almost $100,000,000 is targeted for next year.
And that higher investment in our existing fleet, we expect will continue at higher levels as we move forward. Looking second on the list, we have our growth projects And as Mark laid out, we've been very successful both in terms of acquisitions and development projects and being able to exercise our competitive advantages on both those types of growth opportunities. Typically, however, we will prioritize development projects to extent they're available over acquisitions, but we always are mindful and we'll be monitoring for those acquisitions that are good fit strategically. Finally, the final level is share buybacks and debt repayment. Our strategy is basically that we'll only entertain repurchases or debt repayment to the extent proper growth opportunities are in the immediate future.
So you've seen us over the last several years when we've had excess cash and sufficient dry powder to maintain our growth strategy, look at buying back shares or paying down debt. The split between the two is all driven by ensuring we maintain the strength of our balance sheet and investment grade credit rating. So it's been a busy year on the finance side. We've raised $1,200,000,000 of capital in 2019 and I'm extremely proud of our team in terms of the success we've had this year as well as fantastic support from the banking community, some of the representatives are here in the room today. But when you look back, we started out accessing the Canadian debt market with a 7 year term.
That was sort of down the fairway, but we weren't too excited about that one in terms of how it turned out. We then went with the acquisition of Goreway, which we announced and went to market to raise some common shares and some preferred and largely driven by the large size of that acquisition of nearly $1,000,000,000 Following that, we completed private debt placement in the U. S. And had a very strong response there with terms of 10, 12 and 15 years. And certainly we felt that that signaled to the Canadian debt
market the appetite to invest
in longer term went back to the Canadian market just recently here for CAD275 1,000,000 at a 10 year term and at a rate of 4 point 424%. So we've been able to extend the term of the debt. It's certainly reflective of the confidence fixed income investors see in Capital Power's outlook over the longer term and at the same time of course reducing our overall financing costs. So definitely a very good story over the past year. This is a graph we've put up probably for a number of years and continue to speak to.
Mark had a slightly different version of it, but decided we would refresh our traditional one also here. And we like the different colors on it. But also it really highlights the fact that we have a brick by brick approach, we like to call it to growth. We feel that allows measured and disciplined growth and it has served us well since 2012. As you can see, as we scroll forward to 2020, we see that continued expansion of EBITDA coming from a full year of Goreway in addition to the EBITDA from Cardinal Point and completion of the Whitla Wind Facility.
So in terms of guidance for 2020, as you saw in our press release earlier today, Capital Power is guiding to 525,000,000 of target AFFO. And just building up from starting in last year's Investor Day, we not last year's Investor Day, sorry, let me back up. Our target guidance following the Goreway acquisition was 510,000,000 and so just the evolution to the CAD525 1,000,000 the first thing we do is normalize for the 2019 Arlington Toll. So the Arlington Toll covered a larger number of months than the current toll. So we spoke to this a year ago at Investor Day like we always expected that reduction of $40,000,000 in AFFO, so that's the first step to get us what we call a normalized AFFO target of £470,000,000 We expect our current tax expense will be higher in 2020.
That's just driven by basically in 2019, we do have the accelerated CCA off Whitla, given it was completed this year and some other loss carry forwards that are more effective from a tax perspective in terms of AFFO than what we will be doing in 2020. So that's about a CAD15 1,000,000 downward move. Slight change in CapEx year over year. And then we see the positive lifts relative to 2019. So the first is continued strengthening in the Alberta market.
This is driven by again the strong pricing that Mark spoke to, but as well fairly attractive natural gas market from our perspective in terms of lower fuel costs for our facilities and that gets enhanced of course as we move to dual fuel capability at the Genesee facilities. Also, when we look at the Alberta uplift, we are seeing continued strong capacity factors at our peaking gas facilities in the province. Of course, the other factor I've already spoken to is completion of Whitlaw, Cardinal Point, which will add €25,000,000 of AFFO. And then finally, the full year of Goreway, which is an additional $30,000,000 So that takes us to the $525,000,000 guidance for 2020. So just turning to 2019, our guidance at Investor Day a year ago was $460,000,000 dollars to $510,000,000 We then subsequently revised that guidance, lifting it by $25,000,000 following the Goreway acquisition.
Based on actuals through October and our projections for the last 2 months of this year, we are now lifting that guidance to $535,000,000 to $555,000,000 So that very strong results this year, a lot of it driven by great returns we're seeing in the Alberta market, but also strong performance across our fleet and assets. So in terms of 20 20 with the $525,000,000 of adjusted funds from operations, it breaks down to about 40% will go to common share dividends and that includes the 7% dividend increase that we intend for mid year of next year. The balance of the cash flow, which will be about $315,000,000 we refer to it as discretionary cash flow, will be available for deployment into growth initiatives. So this leaves us with AFFO payout ratio of 40%, which remains well below our long term target of 45% to 55%. So generally, we're continuing to see our AFFO per share.
Growth is exceeding our dividend growth, resulting in a very healthy payout ratio. It's also important though of course to look at the guidance on the FFO per share basis, given we did issue some equity last year, but netting off of course some of the share buybacks we did this year. So in terms of our guidance for 2020, it's $4.98 on an AFFO per share basis, which is a 12% increase over the normalized AFFO per share in 2019. And again, that normalized number of $446,000,000 that's taking out the $40,000,000 of Arlington uplift we experienced in 2019. So looking out and given the continued growth we've had in contracted assets as an organization, For 2022, we're providing guidance, extending our guidance to increase the dividend, but we have reduced it from 7% to 5%.
The reduction in the guidance is driven by the low interest rate environment, which has put downward pressure on returns we can expect from growth opportunities as we move forward. We do believe though in this current interest rate environment 5% is an appropriate long run target for the organization. Now certainly if we see a recovery in interest rates or increasing returns, that may be a factor we'll consider down the road. So generally, as I mentioned, our discretionary cash flow supports at least €500,000,000 of growth investment without needing to access the equity market. So just some high level math of that is the growth opportunities that Mark's teams are pursuing generally will throw off an EBITDA multiple of approximately 10,000,000 so 50,000,000 of EBITDA per year.
When we translate that into an AFFO number, it's £38,000,000 which results in 7% AFFO per share growth without needing to raise equity. Now that's growth just off our $500,000,000 investment. Of course, what the organization is also doing is as Darcy was describing optimizing the value of our existing assets. So when you add that, we expect long run, as Mark said, to be more around 9% AFFO per share growth, which more than covers of course that 5% dividend growth guidance. So when we look forward to 2020, we anticipate we'll be coming back to the Canadian debt market for approximately 200,000,000 dollars And in addition, we will be putting in place tax equity investment with Cardinal Point, which will be announced early next year.
So together that raises about $400,000,000 of financing in conjunction with our funds from operations. When you look at those dollars and the uses of that cash flow, of course, we have our common and preferred share dividends, debt repayment, which will be primarily our credit lines, but also a debt maturity we have in November of next year. The anticipated investment in C2CNT, this is the investment to increase our interest to 40% in that technology. Enhancement CapEx, those projects that we're doing at Decatur, Arlington, dual fuel capability at Genesee will total €95,000,000 in 2020. We have growth CapEx of CAD150,000,000 which includes the completion of Cardinal Point as well as some anticipated initial investments to safe harbor some solar equipment and also in terms of the initial investments in the commercial scale C2 CNT facility at Genesee.
Now of course, we have a CAD 500,000,000 target of committed capital over and above this. It isn't reflected here, but of course, we're well positioned with our balance sheet to be able to fund that growth. And then lastly, as we talked about sustaining maintenance CapEx of 95,000,000 So as we typically do, we've updated our Alberta commercial portfolio position. So just to remind everybody, this is the EBITDA that is basically subject to merchant pricing in the Alberta market, currently represents about 20% of our overall EBITDA. When we roll into 2021 with the expiry of the G1, G2 PPA, it will increase to about 1 third of our EBITDA.
In terms of percentage of our baseload length sold forward, we're currently sitting at 63% in 2020. This is somewhat lower than what we typically have experienced at this point as we've rolling into the prompt year. A lot of that was driven by very low liquidity in the Alberta market in the first portion of 2019. As you can see, forward prices remain very robust. In Alberta, At the end of November, we were at $58 for 20.21 $54 for 2022.
So certainly pricing that reflects the cost of a new build, new generation and also as Mark showed, both forwards and 3rd party forecasts reflect that price level on a go forward basis. So in terms of our credit metrics, we monitor of course very closely those metrics that have been articulated by DBRS and S and P. When we look forward to 2020, we feel very comfortable being able to maintain those targets and maintain the investment grade credit rating as we roll forward. So in terms of our debt maturity schedule, you can see the new debt that has been raised this year in terms of the $300,000,000 going out to 2026, the U. S.
Private placements in the lighter gray bars and then the $275,000,000 of 10 year debt. And that lengthening term of our debt, as you can see, has very much pushed out our debt maturity schedule, which is again, as I mentioned earlier, reflects the increased confidence in the long term outlook for Capital Power. So we're happy to see that our dividend yield has dipped low 6% again. One of the things I'd like to emphasize on this graph is if you go back to December of 2014, we were almost at 5% dividend yield and that was with a portfolio that was very much more concentrated in we believe we believe we're still trading high relative to where our dividend yield should be. In this interest rate environment, we feel it should be back down at least around the 5% level and certainly that's a catalyst we see for our share price on a go forward basis.
Now just turning to guidance for 2020, we did want to spend a bit of time with a bit more detail on a few areas. So the first one is on sustaining CapEx. And one of the things that's happened, as you're aware, we completed the K3 G3 swap with TransAlta. And what this has meant is that, of course, we're responsible for 100% of the maintenance and sustaining CapEx for Genesee III, whereas we had 50% before and 50% of Keephills III. Now those outages were always staggered year over year.
Of course, now when we have 2 outages at Genesee, which will be the case in 2021, you now see a spike in our sustaining and maintenance CapEx. So when you roll through the next several years, we have for 2020, we have an increase in our sustaining CapEx, which is due to the Arlington outage, major outage there. That gets us to $95,000,000 in 2020. When we look forward to 2021, as I mentioned, we're going to have 2 outages at Genesee and those outages are of course the normal maintenance outages, but during those time, we'll also be taking the opportunity as Darcy said to implement dual fuel capability as well as rotor upgrades. So that increases our sustaining maintenance CapEx there by $30,000,000 and takes us to about $120,000,000 for 2021.
However, when we roll forward to 2022, we'll be back down to 1 Genesee unit on outage, so that reduces it by $30,000,000 but in addition, we'll be through the Decatur and Arlington major outages, so we'll be back down to approximately $70,000,000 in 2022. And when you look longer term, basically you'll see our maintenance sustaining CapEx sort of averaging in that $85,000,000 to $95,000,000 level. However, those years where we have 2 Genesee outages, it'll be higher, one it'll be lower, but that just gives you a sense of the profile as well as the long run sustaining maintenance CapEx for the organization. Now one thing I do want to just clarify is that dollars spent on like dual fuel capability at Genesee, we don't view that as sustaining maintenance CapEx. We view that as effectively growth CapEx because it's enhancing the capability of the asset, so that wouldn't be included in the sustaining CapEx numbers.
So as in previous years, we've provided some guidance around modeling EBITDA on U. S. Wind projects. So consistent with that theme, here's Cardinal Point. Of course, the very high front loaded EBITDA is a result of the production tax credits and makers that the tax equity investor sees.
So we consolidate these investments on our balance sheet, but that EBITDA is really that front loaded EBITDA is really just reflecting the tax benefits that flow to the tax equity investor. From Capital Power's perspective, we see that pre tax cash flow, which we see around £10,000,000 and then as the PPA term ends, we'll see because it's a very low contract price, we will see some uptick in terms of our financial returns on the project. So the other element I just wanted to touch on was the shape of our AFFO in 2020. So our AFFO actually has a very large element in Q3. So almost 45% of our AFFO we're projecting will come from Q3 and there's a number of factors that drive that.
The first reason is majority of our scheduled outages incur in the first half of the year. The second thing is we received the off coal compensation payment, that CAD50 1,000,000 is in Q3. The 3rd element is that Q3 is typically the highest margins in the Alberta market. The reason being is we have fairly healthy electricity prices due to the cooling load in the province, but also very low natural gas prices. So that drives the higher margins on our commercial portfolio in Alberta in Q3.
And then finally, we do have contracts that are more heavily weighted to Q3 in terms of the shape and profile. So on a go forward basis, we're going to be providing this breakdown just to give everybody a sense of how we see the allocation of AFFO throughout the year. So to wrap up, it highlights continued strong balance sheet to support our investment grade credit rating and to be able to fund $500,000,000 of growth without having access to equity market. We're still tracking well below our long run payout ratio of 45% to 55%. Very good outlook in terms of re contracting those the Decatur and Island generation facilities And finally, confirming our dividend guidance of 7% growth through 2021, but then extending the guidance of 5% through 2022.
Thanks.
All right, thanks, Brian. We're slightly ahead of schedule, so we'll take a break, let you refresh your coffees and start again at 10:30.
Capital Power has been on its sustainability journey for a very long time. Doing the right thing has always been part of our DNA. The only part of sustainability that's new to us is broadcasting it. We've long believed that sustainable sourcing and responsible energy production will make us a supplier of choice. This is why we volunteered to have Genesee III comply down to the emissions level of a combined cycle plant long before regulation required it.
And it's why we've been playing in the CCUS space since 2,005 when we began our first gasification study. We also believe that our employees are our most important resource and have striven for a long time to be an employer of choice. And we know that being welcomed in the communities in which we operate expedites permitting and minimizes operation disruptions. Today, I'm going to tell you about some new initiatives and remind you of some existing initiatives that all fit together to make Capital Power a strong ESG investment. So what's new this year in sustainability at Capital Power?
Well, to answer that, turn your imaginations with me, if you will, to a world in which demand for electricity has grown due to electrification and democratization, Renewables have been built out to the maximum possible wherever possible. Batteries are widely used to elongate the benefits of intermittent renewables. Cost to consumers and reliability of power generation is maintained by natural gas and without emitting carbon dioxide, even in China, India, Africa and other places where reliance on thermal generation is unlikely to abate in the foreseeable future. We at Capital Power believe that the quickest, most efficient and most likely way for the world to meet our collective Paris targets is not to aim exclusively to go to 100 percent renewables as soon as possible. We believe we'll only be able to realistically confine climate change to 2 degrees or less by proliferating technology to remove carbon from natural gas generation so we can use it as well.
In Canada, the provinces of British Columbia, Manitoba and Quebec are very lucky. They're blessed with rich hydro resources. Alberta, Saskatchewan, Ontario and the Maritimes are not. Different regions are blessed with different natural resource mixes and so their approaches to climate mitigation must accordingly differ. This is not a political statement, just a realistic fact.
My favorite example to illustrate the importance of natural gas to power generation is Alberta during the month of February 2019. I hope many of you weren't there. It was our coldest February in 50 years and renewables were available less than 5% of ours. In many hours, there wasn't a single kilowatt of reliable power. In other words, Alberta needed to meet 100 percent of its load in those hours with non renewable energy.
Many well intentioned people would suggest that we should abandon fossil fuel and aim to fulfill such a need with batteries. So just for fun, I asked my team to calculate what February 2019 would have looked like if Alberta was using only renewables and batteries based on the actual renewable capacity factors in that month. Bearing in mind that the Alberta pool price currently averages around $0.055 per kilowatt hour. As you can see from this slide, using the renewable battery mix for just 24 hours would raise prices to $0.08 per kilowatt hour. For a full week, the price would rise to $0.56 per kilowatt hour and consumers would pay $2.24 per kilowatt hour for a month like February.
Importantly, that's the energy price alone. It does not include any portion of the transmission build that would be necessary to deliver that result. Many other regions are similarly constrained like large parts of the U. S, Europe, Asia, Africa and India. This is why the world needs an all of the above solution to conquer climate change.
I know Mark spoke to you about this earlier, but it's a pretty important point. Even in California, which is arguably the greenest most forward thinking U. S. State and one with a very, very strong solar resource this holds true. This slide comes from the California ISO and it depicts a portion of time in March of 2019.
I chose that particular time period because the average temperature in California in March is 9 degrees Celsius at night and 19 degrees at midday. So it's not too cold and there's not too much air conditioning load, just mild sunny weather. The yellow spots are the daily periods when solar is available. The purple is natural gas and the gray is all the imports, which are primarily natural gas as well. You can see that California uses natural gas to fill in the gaps left by renewables because of natural gas's low cost and flexibility.
And by the way, for the same good reasons depicted in these slides, so do BC Hydro, Manitoba Hydro and Hydro Quebec. Besides continuing to need natural gas for supply shaping purposes, we also believe that assuming we can render it into a non emitting resource, there are additional considerations that will make it desirable over the long term. It takes up less space and uses less arable land, It's low cost for consumers. Its flexible dispatchability enables the system to assimilate the maximum renewable capacity while also ensuring reliability. It's easily integratable on a low short term and no long term emitting basis where supply is available.
And this is precisely why so many government climate plans including the EIA, the U. N. Intergovernmental panel on climate change and Canada in our own pan Canadian framework are increasingly reflecting the importance of CCUS to the world's climate change fight and specifically mid century decarbonization goals. Our investment in C2CNT, which you'll hear much more about later this morning, is only one example of what's possible with carbon conversion. Carbon conversion differs from other forms of CCUS like storage or sequestration and utilization for EOR and other purposes because it takes the captured carbon and converts it into valuable so they don't pose the risk of later release of the carbon.
If you're lucky, like C2CNT, you can also create carbon benefits downstream. There's a lot of uber cool work being done on carbon conversion right now and the materials produced by it very widely, including everything from jewelry and vodka to graphene and carbon nanotubes, textiles, methanol for fuel and feedstock uses, polymers and plastics for 3 d printing, sodium bicarbonate or baking soda and the manufacture of stronger lighter car parts, plain skins, boats and trains. Of course, you've probably all heard by now of Lush Cosmetics' famous carbon soap. CCUS will play an essential part of the world's cleaner energy future. Here is a description of Capital Power's road to Paris at a high level.
This is the first time we've shown you how our work in CCUS and our natural gas portfolio will follow a logical linear pathway in support of mid century decarbonization. This is really important write this down. Note that 2,500 tonnes of carbon nanotubes can be produced from 10,000 tonnes of captured carbon and those 2,500 tonnes of nanotubes will avoid 2,000,000 tonnes of carbon in the production of cement. The downstream benefits in aluminum production are 3 times higher. We believe this strategy is both responsible and resilient.
We also continue to assert ourselves as a neighbor of choice in all of the communities in which we operate. Examples of the ways in which we walk this talk include: Thank you to Scotia who noted in 2018 that we devote more to community investment than our peers on the basis of percentage of revenue. We mandate all senior plant management to become the face of capital power in the local community, developing relationships and participating in the community. And by the way doing this increases plant staff engagement as well. We were also the 1st in Ontario to compensate adjacent neighbours of our wind farm landowners, a practice which we have continued to follow elsewhere.
Others have now started to imitate this practice, which we interpret as a grand compliment. We'll also obviously continue to work on becoming an employer of choice that can recruit and retain top talent in all of our relevant fields. Now this is also the first time we've announced specific targets for our sustainability program. They're ambitious and they are the right thing to do, while also clarifying how investors and other stakeholders can expect capital power to ensure responsible, reliable power for decades to come. Capital Power's TCFD 2.0, which will be published as promised last year in February of 2020 will incorporate more detail regarding the risks and opportunities to Capital Power's business from climate change and specifically how resilient our corporate strategy is expected to be.
As also promised, our 2019 year end disclosure will integrate transparent ESG and financial reporting into one place where investors can understand exactly how Capital Power plans to do well by doing good. Now the only area of achievement on this slide I haven't yet touched on is the G part, where I think we're also doing very well. In this respect, please note that as of 2020, fully 20% of our executive short term incentive pay will be based on meeting ESG targets. So we are literally putting our money where our mouths are. Of course, there's a lot more ESG information about Capital Power that will be made transparent in our year end report.
And with that, I'll turn it back over to Brian to wrap things up. Thank you ever so much for your attention.
Thanks, Kate. As we do every year, we provide annual priorities and targets that we speak to each and every quarter thereafter. This year, the nature of our annual targets are unchanged from 2019. Looking first at our operational targets, For availability, we are on target for 95% in 2019. 2020 drops temporarily to 93% as a result of planned outages associated with growth and enhancement capital programs.
Our sustaining capital expenditures are trending within the target range for 2019. The 2020 target range is $90,000,000 to $100,000,000 up $10,000,000 from 20 19. Turning to our financial targets, adjusted EBITDA for 2019 is expected to come in at the higher end of the target range, $870,000,000 to $920,000,000 For 2020, the adjusted EBITDA range is from 935,000,000 dollars to $985,000,000 Adjusted funds from operations for 2019 is estimated to come in between $535,000,000 $555,000,000 This is well above our target range of $485,000,000 to 535,000,000 dollars Our AFFO target range for 2020 is $500,000,000 to 550,000,000 This is an increase of 12% over the 2019 midpoint of $470,000,000 normalized for the Arlington toll. In addition to the significant amount of work being done for our existing assets, our targets for growth are similar to prior years. We have a committed growth capital target of $500,000,000 similar to the last few years.
Completion of the Cardinal Point Wind project on budget and on time and continuing the advancement of Whitla II for construction in 2021 are both 2020 targets. We expect an additional renewable project to be advanced in 2020. I'll conclude by getting back to how should investors think about Capital Power. First, we have a solid 6 year track record of growth yielding AFFO per share of 13%, dividend growth of 7% and average annual total shareholder return of 19%. This is consistent with our guidance of 7% for 20202021.
Our 5% dividend growth guidance for 2022 is reflective of changing costs of capital. We are forecasting exceeding the AFFO range for 2019 and normalized AFFO growth 12% for 2020. With the improvements in Alberta, our excellent long term outlook and continuing record of results year after year, we believe there should be a further improvement in our dividend yield. In summary, Capital Power represents an attractive investment opportunity. Thank you.
Okay. Thanks, Brian. We're happy to take your questions. If you could use the microphone before asking your question and also to identify yourself.
Any questions?
Rob Hope, Scotiabank. Maybe can you just comment some additional thoughts on Whitlaw too, whether or not you're going to keep that merchant or if you are looking for some long term contracts there as well as kind of what realized pricing you think you can get on the merchant facility that's wind in South Eastern Alberta as well as kind of the amount of green magnitude or green attributes you're going to spit off there?
Thanks, Rob. So maybe I'll unbundle the questions a little bit. First off, much of the benefits or the economics that we're seeing from Whitelog II itself aren't just solely the off take. There's great offsets that we'll have to mitigate some of the compliance obligations we have in relation to our carbon footprint in Alberta. There's also some tax benefits in the form of accelerated tax depreciation that will help us as well.
So even at that starting point, not 100% of the economics are solely exposed to the merchant curve. That being said, we are continuing in a number of different discussions with a variety of commercial and industrial folk and there is interest in buying those green attribute sort of generation. But they have yet gotten to a point where they're willing to commit over the long term for some of those elements. We're very encouraged, but they're not there yet. So we would expect some amount.
All that being said, because of the attributes that we've been getting for our own benefit, both tax and carbon compliance, we are prepared to move ahead and have this thing constructed because we also see great synergies that are available to us when combined with our Whitlam 1 facility. And so all in the package remains very appealing. If we ultimately get to where we have it contracted up, all the better.
Questions at the front here.
Robert Quonner, BC. Just around the outlook in the lower returns, can you just first talk about what are your IRR hurdles at this point and compare that to where they were before? And then as you think about the 5% dividend growth for 2020, you also talked though about those lower returns generating 7% AFFO growth. And if you can do some of your optimizations, you might be up at 9%. So why are you looking at the 5% growth?
Or is there something else where you're kind of provisioning for some of the contract runoffs at the same time?
Yes. So in terms of return expectations, certainly it varies depending on the nature of the opportunity. But our levered return targets are sort of in the 10% to 12% range right now. Previously, if we look back, it was more around 11% to 13%, 11% to 14%. So that reflects that downward movement in the cost of capital.
In terms of the 9% versus the 5%, it's not so much the re contracting. It's more we do realize that even though we have a very young fleet, we are going to reach a point where some of those assets will retire. So certainly, what you'll see happen of course is our payout ratio will continue to decline because of that gap, but at some point we do want to be mindful of the fact that some of those assets will eventually be retired and that gives us the ability then to continue the dividend growth through those retirements.
I can just ask one other question. Just on Decatur, you mentioned that you expect to meet or exceed your recontracting assumptions. Can you talk directionally about what you're expecting? Were you expecting it to be flat? Or is there something
[SPEAKER CARLOS GOMES DA SILVA:] I'll hand that over to Mark.
Let me push the right button here first. Given where we're at in the negotiations, we're very confident that we'll be able to be in a position to announce something here shortly. But as you can imagine, many of the details of that are quite sensitive. I would say that we aren't looking for a wholesale step down immediately. There will be some shaping elements that will come into play in respect to the contract or the recontract period.
We'll, of course, be able to describe that much more fully once we draw to a conclusion, bring it out, but we're not looking for a material year over year change.
Actually, could I add just a comment to that? Just a point of clarification, I think what Mark actually said was that and I don't mean just now, but when he was speaking earlier, I believe his comment was around the business case, the original business case, not the recontracting. So I don't believe Mark said that the recontracting was better than our expectations, but the overall business case. And recognize also that we're adding another 100 megawatts to the plant and as an overall bundle, overall, it's meeting and exceeding our business case, not the specifics of consideration of recontracting.
John Moll, TD Securities. Maybe just starting with the dual fuel at Genesee and how that plays in with where the carbon price is maybe going. And I know we're still waiting for some finality there with the federal price and whether that is going to pass get through the Supreme Court, etcetera. But assuming we're moving to $50 price in a couple of years, how much do you see Genesee burning coal as a percentage of its output in that environment? And I know we're going to hear more about the nanotube side of things, but how relevant is that plan to potentially enabling more coal firing down the road?
So in terms of gas consumption at the Genesee facility, certainly with $30 carbon pricing, which is currently at, I think we're going to be in around the range of 40 percent of the fuel will be coming from natural gas. Certainly, if we do see ultimately that price increase, it's going to be pushing more natural gas through the plant. And that's one of the things with the dual fuel is providing us that capability to mitigate the impact of higher carbon prices.
Can I add to that, Brian? Yes. You raised the carbon tax issue equally, and important to keep in mind is the price of the natural gas commodity as well. And it had been quite low given the bottleneck that we had seen on transportation. There was some steps taken by the industry in TransCanada to temporarily adjust to wells and we had seen a rise in gas price.
But that volatility in the gas price will also be factoring very much into that equation.
And then maybe just one other question on your growth targets. In your news release, you mentioned you referenced €500,000,000 of growth, not explicitly contracted, although that's in your slide deck. And you also referenced renewable developments and not wind like you have in the past. So I guess, are you seeing more of a line of sight to potential solar developments? Can you talk a bit about that more?
And potential for more renewable opportunities on the merchant side in Alberta beyond the Whitla announcement from today?
So maybe I'll give a stab at some of that. We are we're conscientiously saying renewables in the sense of both wind and gas. We would expect in the U. S. Over the next couple of years that there may be a bit of a slowdown on the wind side.
Many expect that as the PTCs expire, the same level of price support isn't there and so the price of wind goes up a little bit. That being said, you're seeing an increasing penetration of solar into many resource plants that are out there, many states, etcetera, that want to see greater utilization of solar. We have participated in solar in the past. We feel we have the competencies to participate in that in the future. But we would acknowledge that is one of the areas that we see some pressure on returns as there seems to be a lot of money that is directed to that, especially for longer term in service solar opportunities.
Straight up, those returns are fairly skinny, but we are actively exploring if there's other ways, whether structurally or through other arrangements and joint ventures, if there's a way we can get to having those solar opportunities be economic for us. The final point would be, we did make an investment in some inverters because as part of that need to be competitive in solar on the offtake, there was also those tax subsidies that were out there. So we wanted to ensure that we get some of that safe harbor equipment inside that can maintain the competitiveness for us. It is a pretty fungible commodity, though, that we it's not solely utilized in just one type of installation. It can be spread around.
So we want to maintain that competitive while we figure out how we can best play in the space. Over the long term, we would expect it would be both wind and solar and other technologies.
So just to add one thing to Mark's response is our target returns on solar are the same, virtually the same wind development. So we're not going to be chasing returns, lower returns on solar. As Mark said, we're finding ways that we can develop and build those projects and generate the same shareholder value that we have with the wind developments we've done.
Question on the side.
Mark Jarvi from CIBC. Maybe extending I think there was a question along the lines of more merchant as well in the last question. But just as you hit 2 thirds contracted, that target is important for credit metrics and credit agencies. What's sort of the appetite again for more merchant or gas contracts, maybe aren't fully contracted as you think about maybe not just so much as pursuing contracted, but just total return optimization?
Kind of
a part and part on the balance sheet side. I'll let Mr. Neve speak to that. But you did mention on the gas commodity side, we are fully aware of the exposure increasing exposure that we have on the gas side As we have more and more gas utilization, we've been very active in also managing and mitigating what that fuel exposure is, especially for that fuel exposure that isn't a flow through component into the price ultimately, I. E, the fuel that we're exposed to on our side.
We are actively managing that. In addition, our future requirements, we have addressed at Genesee in terms of access to the necessary fuel that we'll need as we move forward with our dual fuel plans. In terms of the overall balance sheet though in the rating agency, Brian, maybe you want to Yes.
We have reached that threshold where with G1, G2 coming off PPA, we're going to be above the twothree. So certainly, that was the prime objective. But what I would say is we're going to be very diligent to make sure we remain above that 2 thirds. We are not going to be doing anything that will jeopardize that ratio. But certainly, given that we have now reached that point, we also want to be mindful of the risk reward trade off we see on various opportunities.
So certainly, we'll be evaluating and taking that into account. But I think the most important thing to stress is that, that 2 thirds is very important to us and it's something that will be sustained as we go forward.
And then just maybe there was comments around opportunities in Ontario longer term. I know the ISOs talked about maybe blood and extend and opportunities. Maybe you could just talk about sort of time lines you think for deploying capital and what kind of projects that would be in scale and scope?
So it's interesting when you take a look at the new integrated resource plan they have, especially factoring in the nuclear refurbishments and the retirements that may be ongoing, it starts looking like a fairly sizable GAAP, negative reserve margin might be developing, which would require new capacity to be developed or transported in. And we start seeing that, I think it's in the neighborhood of 1.5 to 2 gigawatts in the '23, 'twenty four sort of timeframe. What excites us about that opportunity is both facility and our Goreway facility, we do have the infrastructure in place, the excess land. So to the extent they move towards having part of that solution provided in the form of additional gas fired generation, we would look to participate in any sort of RFP that comes out of that. Once you get past that time frame, there's also another block that may be coming forward depending upon load growth given the given the strategic location of both Corway and York within the GTA and the challenges in siting new greenfield plants and or increasing transportation into the GTA.
We think both of those plants are well positioned to be competitive in either of those rounds. Net net, it's probably a bit of time off 4 or 5 years or beyond, but it does look very promising.
If I could just go back on merchant comment or the question, and just to be clear, as Brian commented, we'll be very diligent in looking at risk reward balances as it relates to merchant and contracted. But just to be clear, we wouldn't be looking at merchant any place but Alberta. We wouldn't you wouldn't expect to see all of a sudden investment in PJM or because we thought we may have had some room on the merchant side. It's really focused on the province of Alberta and the opportunities we see there.
Question?
Yes. Pat Kenny, National Bank. Just looking at the forward prices on Slide 29, it doesn't look like there's any step down in the curve in 2023. Just wondering if that's reflective of your views, given the Suncor plant coming on? And if so, maybe walk us through why you think the market can absorb that incremental supply?
So I'll kick it off and Mark will add of course as he sees fit.
And Brian will clarify what we both
say. One of the things that was a big positive was when Suncor clarified that facility coming in, in the second half of 2023. So and certainly, I think Darcy's team would confirm that's probably the best timing that they will achieve given what they're doing. So that allows quite a bit of time of load growth to end of the PPAs that all the supply is going to be in the hands of the end of the PPAs that all the supply is going to be in the hands of commercial entities that will be making decision on whether it makes sense for older facilities to continue to operate them or whether to mothball them or shut them down. So that is dramatically different than what we experienced, of course, in the 2016, 2017 period here in Alberta.
So we see in 2023 virtually no impact because of the timing of the add. 2024, some slight downward pressure. But of course, then we believe we'll have 1% to 2% load growth in Alberta that will then absorb that. But again, more importantly is you'll see a response on the supply side, which you didn't in the past. So we think that bodes well in terms of long term prices for the province.
And then maybe just as a follow-up on with Whitla II under development and maybe tying into some of Kate's comments around the ESG front. Can you just confirm if you're looking at developing the batteries and the energy storage in conjunction with the wind projects? Or I guess what's the outlook and the timing for the cost to come down that it makes economic sense to bring those into the projects?
So we've been actively engaged in discussions with a number of battery suppliers out there and looking at the economics and do look at opportunities to incorporate that in other developments, whether that be with wind or solar or natural gas plants for that matter. I would observe that it seems to be getting closer where things can make more economic sense. And there is an increasing societal appetite that is out there. That is also encouraging. To this point, We have not proceeded to a great depth to bring our project like that forward, but it does seem that the stage is being set at a bundled solution could be very attractive to a number of offtake parties and it's also getting to the point where it's very comparable to other solutions they may have.
Thanks.
We'll take a question in the middle there.
Hi. Excuse me, Ben Pham, BMO Capital Markets. I just want to make sure on the contract targets twothree. So I know that's where you're going to with Gen Z1 and 2 coming off. You mentioned you want to be above that.
But I guess for a company that's trading at a discount to peers and really you're paying a pretty healthy dividend and there's some growth, Isn't it really an urgency to really get that contracted portion to 80% or more just kind of where you are right now? And if you're up twothree, does that contemplate any change of leverage or payout ratios when you kind of think about that on a sustainable basis?
So in terms of payout ratio, I don't think there's anything that gets changed because of the contracted percentage. Certainly for us, the 45% to 55% again is aligned with that strategy to have sort of half our capital going to sustaining a growing dividend and half being available for growth opportunities that we put to work. There certainly there's benefits to having a high contract percentage. So certainly that right now with 20% of our EBITDA being merchant, certainly a very stable portfolio. What we want to make sure though that is how it all ties in again to our credit rating.
And certainly, we want to make sure, again, we're going to sustain that 2 thirds and certainly having a percentage above that is prudent. So but again, as we move forward, as Brian mentioned, most of our growth is focused on contracted because it is growth outside of Alberta. So as things unfold, certainly, we would expect that percentage to continue to increase, just naturally based on where our growth focus is and the fact that we will only be doing merchant in the Alberta context. And to be frank, there's with Suncor moving ahead with our cogen facility, that's going to take up a lot of the need for new supply as well as Sundance 5 being repowered. So, but again, you have to see how these markets evolve and unfold.
But I think you can be pretty confident that balance of probabilities would be that contracted percentage will increase over time.
Okay. Can I ask then on the dual fuel strategy? What's the thought process on the end goal 2030? Is it new CT units you're adding on or repowering? And then just to that, like I don't know if Kate knows or somebody else, just with ESG funds, do they view that dual fuel as still coal still because you're still you can switch back and forth?
I know it's a nuance there, but just curious about that as well.
You'll notice that we didn't present the dual fuel as a sustainability target and that's because you can switch back and forth. It will have significant improvements over in the decade between 2,030 2020 and 2030 on our emissions profile at Genesee, but we're not presenting that as a sustainability win. Although the government and there are lots of parties who view it as a social win because of the jobs that will be preserved and the insurance against high natural gas prices for consumers.
Just the end goal on the 2030 new CCT you're repowering.
So currently, once we reach 2,030, we'll no longer be burning coal at that point. So, we'd look at those facilities just continuing forward at 100% natural gas on a simple cycle basis. Having said that though, lots of work internally to evaluate repowering those facilities, similar to what TransAlta is doing at Sundance 5. So certainly, that's work that continues to be underway within the organization. And it wouldn't be surprising to see that we could very easily reach a similar conclusion and at some point, as we roll towards 2,030, make an announcement that we're moving to repowering 1 or more of those units.
Yes. I might add to that, Brian. It's to have the existing infrastructure in place, the buildings, the water, the transmission does provide a real competitive advantage versus many other new greenfield opportunities. So the brownfield potential, which not only applies on this facility, but many of our others, is also a significant future value that that's all that perhaps is not fully appreciated.
Question on the side here.
Andrew Casper, Credit Suisse. A bit of a multipart question that relates to the volatility in the power market in Alberta that we're going to see in next couple of years. And you yourselves have mentioned that you're not as contracted right now just given the volatility expectations. You've had really good capture of vol over the years just historically we're going to look at a lot of different data. But when you start to think about just the market behaviors, how does that change your portfolio optimization strategies from what you've had in the past to the future?
Maintenance, how does that change on a go forward basis? And then how should the underlying value that we think about that portfolio being worth at this greater vol, does it translate into lower multiple?
So maybe I'll take a stab at the first part just in terms of the market itself. We do expect greater levels of price volatility to start coming back into the Alberta marketplace. In fact, there's been a few days over the course of the last month where we did hit triple digit as some units have come off, etcetera. But I would reinforce what Brian had said earlier, now that, that capacity is increasingly and will be fully more in commercial hands, add to the uncertainty connected with what the pricing environment was going to be in a capacity market, where carbon tax is going to be at, whether it was a federal program or the TIER program, the balancing pools activities in respect of that. As that all starts to diminish, I think that's why you're seeing a more bullish forward curve starting to emerge.
We haven't yet seen liquidity come back because I think a lot of those guys have really benefited from floating in the market over the last few years with the lower spot prices. But as that starts to migrate up, we would see between the volatility and liquidity that our guys should be able to maintain that sort of performance that they've been able to achieve in the past in terms of an absolute price that you see on that chart of ours. And Brian is going to clarify for me here.
No, I just in terms of you had asked another part of the question is, does change the way we sort of operate and think about things? And some recent work that we had done, because it's important to understand, are you paying for availability and do you need to? Would you be better off having a lower availability and lower maintenance costs, etcetera? And our recent work, and it's consistent with what we've always said, is that availability and the way those units operate are actually going to be more important in the future than it has been in the past few years. So the work that Darcy and his folks are doing in terms of ensuring that those units are available and at very high levels is extremely important to our financial or to the financial benefits of the Alberta market going forward.
All
right. Question at the front here.
Yes. Rob Hope, Scotiabank. Just a clarification on your 2020 guidance and then I'll get a question on Genesee. The uplift in Alberta of $25,000,000 that's off the old guidance that you didn't prior to the update from today. Is the expectation that 2020 looks pretty similar to 2019?
I think if you go back to our view of 2019 at Investor Day a year ago, it's certainly 2020 is higher better higher margins on our Alberta portfolio relative to 2019. And I think as we've gone through the year and Mark's team has optimized around the trading side, it closed the gap between the 2. And you've seen that with our succeeding guidance in 2019. So certainly, that's moved closer together, but still, we'd still see 2020 being healthier.
Okay. And then just looking at the 2021, any updated thoughts on kind of any impact on the PPAs on G1 and G2 rolling off if there's going to be an uplift or down lift
there? Yes. It really is going to come down to what we're able to lock in for prices in 'twenty one. As Mark mentioned, liquidity has been slow to recover, but it is recovering. And as the chart I showed earlier, we've hedged quite a bit in 2022, interestingly enough.
But 'twenty one, we've seen a lot of volatility and our trading group has taken advantage of that. So actually buying and then selling, and that's pushed up the capture price. At the end of the day, if we capture in sort of the high 50s on our Alberta portfolio, We should be close to maintaining the EBITDA off those assets as we go through the transition of the PPAs.
Question right on the side there. Go ahead.
Yes, thanks. David Quezada, Raymond James. A quick follow-up here on just the re contracting. Can you just give us any thoughts on the case for recontracting at Ireland and directionally what you expect to happen there? And then maybe some early thoughts on Arlington as well?
The discussions thus far have been more along the lines of the absolute need for those facilities and the observation that they have been running a lot more than they have been historically and hence the importance. But then we quickly get into the discussion of not only the recontract price, but the recontract term. And that's where the art really comes in because we also have to factor in what are flow throughs, what are on their account, our account, etcetera. Very early days on the island side. Overall returns, one would expect to be similar on a go forward basis.
But to have any more granularity at this point, given that it's really a triangulation of all those variables, is difficult pinpoint. We would expect a similar sort of thing with Arlington as we have those discussions. It is needed. It's providing great value. On the off season, we've now got another counterparty that does like to tap into it.
When we get to a point of having those recontracting discussions, again, it will be not only term and price, but what sort of elements are our account versus theirs. Overall, though, we still think the economics keep circling out to similar what they have been historically.
Great. Thank you.
Any further questions? Okay, if not, I'll pass it over to Brian to start us off on the C2 CNT discussion.
So I'll just make a couple of comments while we're shuffling and Stuart's joining me on stage. So Kate has described in her discussions the strategic reasons why Capital Power has invested in a venture like C2CNT. In fact, I have stated to a number of you over the last year or so that I believe that this technology has a potential to move the dial on climate change by itself. In 2018, Capital Power made a direct investment in C2CNT, an entity which owns all the nano carbon intellectual property Doctor. Licht and his team had developed, is developing and will develop.
Capital Power is committed to a 9% interest, but we expect to increase our interest to 40% through the exercise of options through 2020. Through this 40% ownership interest, in addition to participating in, of course, the grade technology, will benefit from the continued production at the Sheppard development site as well as the future commercial arrangements C2CNT enters into with 3rd parties. In time, we'd expect that C2CNT may enter into some direct investments in other facilities. We are excited to announce the next year we'll start the development of the Genesee Carbon Conversion Center. This will be the world's 1st commercial scale production of CNTs directly from carbon.
We will permit the site early next year for 7,500 tons per year of production. Phase 1 will be targeting 2,500 tons per year. Construction should commence mid-twenty 20 with completion sometime in 2021. Capital cost is expected to be between 20 $1,000,000 $25,000,000 As the note indicates, the bottom of on the bottom of these two slides, Both the increase in ownership and proceeding with the Genesee Carbon Conversion Center are contingent on technology being successful. An investment in new technology is speculative by its nature.
We are, however, very bullish on this opportunity. Of course, Capital Power will go through further detailed due diligence at the time of making additional financial commitments. And before I introduce Professor Licht, I would like to comment that in what you see in terms of our projections in our outlook for 2020, we've included the capital necessary to move forward on both the investment and in terms of the Genesee Carbon Conversion Center. We have not included any financial results or any uptick associated with that. And part of that goes to the fact that there's different financial commercial negotiations that are going to be taking place over the next year.
And certainly having any kinds of indications as to what we think or what would be coming out of C2CNT is commercially not wise at this point in time. So there are no implications other than, of course, the capital included in our 2020 outlook. So with that, I do have the pleasure of introducing Doctor. Stuart Licht. Doctor.
Licht's research focuses on providing technical solutions to climate change. The research introduces and scales up a new chemistry to transform the greenhouse gas, carbon dioxide, into the strongest material known, carbon nanotubes. Stuart Licht is Professor of Chemistry at George Washington University. Professor Licht's C2CNT team is currently competing as a finalist in the Carbon X Prize competition to form the most valuable product from carbon dioxide. Professor Licht is an electrochemist with over 400 papers and patents focused on sustainability.
He served as program director in the Chemistry Division of the U. S. National Science Foundation, is a fellow of the Electrochemical Society and recipient of numerous industry and societal research awards. Mr. Licht helped establish fundamental chemical principles of the field of photoelectrochemistry as well as some of the highest efficiency solar cells.
He has broadened the foundation of understanding of environmental electrochemical phenomena ranging from carbon capture, degeneration collection, microelectrochemistry, chemical speciation, analytical chemistry, energy conversion and water purification. So with that, Doctor. Stuart Licht.
Thank you very much, Brian. And it's my pleasure to be working in partnership with Capital Power. It's more than it's even more than a synergistic relationship. It's a warm relationship, and it's been very, very constructive. Also, thank you very much today for taking the time to participate in Capital Powers' Investors Day.
We're faced with what seems to be an insurmountable challenge. Carbon dioxide emissions are making the planet less habitable through climate change. On the other hand, the continuation of civilization, the advancement of civilization depends on a continuous source of electricity, an expanding source of electricity. We at C2CNT think we can reconcile these two challenges, that they're not an insurmountable challenge. Our mission is to transform anthropogenic carbon dioxide into valuable carbon nanomaterials to incentivize reduction of this greenhouse gas and pioneer a nano carbon economy to save the planet from the impacts of climate change.
And I'd like to focus for a minute on this concept of a nano carbon economy. We're trying to be the instigators of a revolutionary shift in the economy. In the 1940s, we had this shift to a plastics economy. And you remember the famous line from The Graduate, plastics. I believe that someday virtually every material in this room can be from carbon nanomaterials to be made with better properties, stronger or more conductive or lighter weight.
And that these materials can be made from carbon dioxide, truly a nano carbon economy. C2CNT's revolutionary technology transforms CO2 directly into valuable carbon nanotubes, nano onions, graphene and ultra strong carbon structural materials at a fraction of the cost of current manufacturing processes. The left hand slide shows a carbon nanotubes, one of our products, our principal product made from carbon dioxide. The scale of that scanning electron microscopy image is on the order of overall 3 or 4 human hairs in diameter. And here we have a collection of our carbon nanotubes.
The middle photograph is a transmission electron microscope image. It zooms in on one of those carbon nanotubes and looks at the tube. You can see in the cross tubes and looks at the tube. You can see in the cross section the open center, the tubular nature of it. You can see the walls.
And if we zoom in even further on the right hand side, on the left hand side, excuse me, of that photo am I saying that right? On the left hand side of that photo we can see the individual components of the walls of those carbon nanotubes. Graphene is a substance which is 2 dimensional. It's very, very strong. It's based on specific carbon bonds.
If we take that graphene and we roll it up into a cylinder, we give it a three-dimensional strength. And if we take those cylinders of different diameters and have one inserted in the other, we have the strongest material on the planet. And carbon nanotubes have the highest tensile strength of any material measured to date. Next slide, please. The C2CNT process has some important features, features that are unusual.
It soaks up CO2 like a sponge, has a high affinity for CO2. And the CO2 is then transformed directly into a portfolio of carbon nanomaterials. This tremendous affinity for carbon dioxide allows us to not only capture carbon dioxide directly from a high CO2 stream, perhaps an ethanol plant for the ethanol and fuels, which are fermentation, nearly pure CO2, to a moderately high CO2 stream, like a cement plant, 30% or so CO2 in the stream to a low but significant CO2 stream, such as the 4% to 5% CO2 in a natural gas power plant flue gas. But even more than that, the C2CNT process is highly immune to impurities, and it can accomplish without concentration of the CO2, direct air capture. And so we can capture CO2 directly from the air or from flue gas.
The carbon nanotubes we make and the other carbon nanomaterials can be tailored for a wide variety of applications. Some of these applications are suggested. Illustration. We can make things like bodies for transportation vehicles, for planes that are much lighter than the current carbon composites, which are based on carbon fibers, carbon nanotubes. An order of magnitude even stronger, and therefore lighter weight.
We can make the cables for bridges. We can make the cement for bridges much, much lighter. Indeed, in terms of cables, carbon nanotubes have been described as one of the few materials that has the possibility to achieve that dream of a space elevator that Arthur Clarke discussed years ago. It's the only material probably strong enough to accomplish that. But we don't have to stop just at bodies and structural materials.
We've shown that our carbon nanotubes made from carbon dioxide store more body made from our carbon nanomaterials and higher body made from our carbon nanomaterials and higher battery storage capacity based on our carbon nanomaterials. And finally, while there was a nice discussion a few minutes ago of some of the wind technologies, of course, we can make the blades for the turbines, the wind turbines, lighter, bigger, larger, which would allow to another cost reduction in wind generated electricity. Next slide, please. C2CNT is one of 5 finalists in the NRG COSEA Carbon X Prize natural gas track. It's a $10,000,000 competition for turning CO2 emissions into valuable products.
The winner converts the most carbon dioxide into products with the highest value, determined by how much CO2 per day is converted, range between 2 to 5 tonnes, and the net value of the product. The competition is hosted at the Alberta Carbon Capture Technology Center, the ACCTC. It's a unique facility built to demonstrate CO2 capture and conversion technologies. It's funded with support of governments of Alberta and Canada. And it's located at the Sheppard Energy Centre, co owned by Capital Power, N MAX.
And we were there, opening our doors for the first time in that cold February 2019, when did that was discussed a few minutes ago. Next slide, please. Well, how does the CO2 to carbon nanotube process work? This is a little animation with audio that I presented at the American Chemical Society. I think it's available on YouTube and also at the National Academy of Sciences, if you could just click once.
In this process, we placed 2 electrodes in molten carbonate bath here, it's shown as lithium carbonate. The lower electrode is the cathode where reduction occurs. We apply electrical current. In the electrical current, the lithium carbonate is split into carbon and lithium oxide at the lower electrode. And at the upper electrode, it simply forms oxygen, releases oxygen gas.
Now this lithium oxide formed along with the carbon at the lower electrode is very special because it allows us to bubble in CO2. CO2 continuously acts with lithium oxide, renews the lithium carbonate, so the electrolyte is never consumed. The net reaction is quite simple. Carbon dioxide goes to carbon plus oxygen, and a beautiful carbon grows on the lower electrode in time. Solid carbon grows on the cathode as carbon dioxide is consumed.
Now this carbon is formed at full kilomic efficiency, low energy, very low energy, but much more than that. It's very special. The carbon is pure carbon nanotubes. With controlled electrolysis, we simply generate carbon nanotubes and oxygen from carbon dioxide. And with our proprietary process, we tweak.
We can have very strong control over these electrochemical conditions to vary that product, to make short or long carbon nanotubes, thin or thick walled, to make carbon nano onions, which are nested balls. Each ball is a graphene folded into a ball, one inside the other like nested Russian dolls to make graphene sheets. And each of these products is very, very valuable and has phenomenal physical chemical properties. Next slide, please. The known applications include as an additive to materials, textiles, batteries, electronics and other carbon materials.
Numerous applications for carbon nanotubes have been studied extensively, but current market price of over $100,000 per tonne make utilization uneconomic. Reducing the cost by an order of magnitude significantly increases the potential utilization. And let me emphasize the cost effectiveness of this technology. This is a new chemistry. But the technology is very similar to the way that aluminum is made, aluminum smelting.
Instead of taking a oxide of aluminum bauxite, and putting it into a molten electrolyte and applying electricity to make the aluminum. We take another oxide. We take carbon dioxide. We don't use any exotic materials. We don't use any noble metals.
And we also just dissolve that carbon dioxide into a molten electrolyte, apply electricity. And we make wonderful carbon nanomaterials at 1 electrode and hot oxygen at the other electrode. Next slide, please. The materials have wonderful properties and give us incredible opportunities to save downstream carbon dioxide. 1 tonne of carbon nanotubes added to several 1,000 tons of cement, or aluminum, or steel, or other structural materials like titanium, or magnesium.
It's greatly, greatly strengthens that material. When we make cement, for example, we can make a cement block of the same strength with much less cement. That savings allows us downstream at the cement plant to need to produce much less cement. With 1 tonne of added carbon nanotubes, we prevent the emissions. We don't have to produce approximately 1,000 tons of cement of 9 38 tons of cement.
This results in the savings of 8.40 tons of carbon dioxide. The savings are even greater with aluminum, because aluminum has an even more massive footprint in production than cement. Every ton of aluminum made emits about 12 tons of carbon dioxide. And so with each ton of carbon nanotube added to aluminum, we need a thinner aluminum block for the same strength. And we save some 4,000 tons of CO2 from the added ton of carbon nanotube and so forth.
Now this translates into massive markets. The market for structural materials is several 1000000000 tonnes of cement, several 1000000000 tonnes of steel every year. And this is just first market that we're addressing. There's of course additional markets and very exciting new textiles, very strong suits and uniforms, and a whole new fashion designers because we can hold up more weight than bulletproof suits, taserproof suits. But this will be the 1st market that we're addressing.
And more specifically, let's go to the next slide. We're addressing the cement market. There has been in the literature, in the scientific and engineering literature, an exponential growth and interest in these remarkably strong composites made by a very small amount of carbon nanotubes added to a larger amount of the cement or concrete. But none of these publications, none of these studies had a practical implication, because they had been working with carbon nanotubes that have a massive carbon footprint to make, that are energetically, that require a great deal of energy to make and are extremely expensive. C2CNT makes our carbon nanotubes from carbon dioxide.
And so we have a different approach, and we can realize very, very large greenhouse gas reductions. Next slide, please. Our first product is the concrete CNT composite admix. As shown in the illustration, a 3,000 ton block of cement of a certain strength is achieved with only 2,000 tons of concrete, but with added 1 ton of carbon nanotubes. This eliminates the production of that top thin block of concrete, that 1,000 tonnes or so concrete, that eliminates the 8 40 tonnes of carbon dioxide associated with that production.
And so the overall balance is very simple. At the Shepherd Energy Facility today, we take flue gas, we convert 4 tonnes of CO2 to 1 tonne of carbon nanotubes, and that 1 tonne of carbon nanotubes downstream in the cement plant eliminates another 8 40 tonnes of carbon dioxide. We are working with a strategic partnership with 1 of the world's largest producer of structural materials and aggregates and cement, Lehigh Hansen. And here, Lehigh Hansen, Alberta. They're conducting all internal and external testing of the concrete at their cost, and testing is actually underway.
We're also at My Research Labs at George Washington University, optimizing the nanotube for the concrete. And we're very, very fortunate to be tapped into them Lehigh's distribution network of the product. And marketing of the CN2 enhanced concrete in Alberta is early next year. Next slide, please. We think that our cooperation with Capital Power is directly addressing this and reconciling this challenge between the society's need for assessable electricity with the growing concerns of the CO2 emissions.
I'd like to thank you very, very much for your attention. I welcome your questions. Yes, please. Can you introduce yourself, too?
When we think about applying it in concrete, has there been any discussion about the standards, building standards that need to get changed to include this additive?
Yes. And that's why we've targeted specific products at the beginning. We're very fortunate to be working with Lehi Hansen with their expertise in this matter. And for this reason, our first product is a concrete ad mix. There are standards May 4.
The amount of additive is very, very low. The carbon dioxide is 0.05%. And so there already is existing the standard for this. There are other admixes with other materials. This is just a lower percentage.
And because the standards are in place, we anticipate that it will go through the standardization process very quickly.
Actually, maybe if I could just clarify that. In both Canada and the United States, for example, in Canada, it actually doesn't need express CSA approval simply because of where it's added to the process. And the same is in the United States. So on the chemical side or on the cement side, there are no regulatory approvals. It's the case simply Lehigh does their testing, gets comfortable with it, gets their customers comfortable with it, and then they move forward.
So it's more an engineering comfort with the materials on a case by case basis.
Yes, please. Hi.
There we go. It's Harold Holloway, TD. Just some just a basic question just because I don't understand sort of what comes out of the process. Is it I think you mentioned it was sheets and I guess or is it a mix like I'm just or is it just have how do you once you've created it, what does it look like? It's obviously it's a solid, but then how does it move along in the process after you've created it?
The carbon nanomaterials, in this case, the carbon nanotubes grow on the cathode as a big beautiful block of carbon, jet black block of carbon, which easily pops off of the cathode. That then is processed and into a powder form, basically grinding it up. And then we disperse it for distribution. And that's proprietary at this point. But I will say that the entire processing is non chemical, it's mechanical.
And it fits very smoothly into the distribution network of Lehigh Hansen. And so envision the product that's rolling coming up. Flue gas is coming in the front door of our plant and out the back door is the product ready to go on to this, to add to the cement trucks which are going on. Over here on your right. Yes, please.
It's Kelson Valley with CIBC. Question for you on parasitic load. I don't know if that's the right term because it's not a parasite you're actually creating a product. But how much load, if you were to consider it as parasitic load, given the electrolysis required to make the product?
It's extraordinarily low. It depends on your perspective though. We talked, it was mentioned earlier, that there was on the order of a $30 per tonne carbon levy, which is probably going up to $50 in place. The equivalent cost per ton of CO2 removed before we sell the carbon nanotubes is an order of magnitude less. The actual parasitic load is about 2 megawatts per ton of CO2 processed.
But we're not just removing that ton of CO2, We're removing that additional 800 or more tons or 4,000 in the case of aluminum tons of CO2 downstream from the production plants there. And so it's 2 megawatts power then per 1,000 tons of CO2. So it depends at what point you do the analysis. But in terms of the mitigation of the CO2 removed, it's incredibly low.
Maybe I could just add just one of the things that we're doing at the Genesee Carbon Conversion Center is that, as Doctor. Licht described, you get carbon and you get oxygen. So we'll actually be putting oxygen back into the boiler so that it increases the efficiency of the unit even further, reduces the emissions profile and in an indirect way reduces the parasitic load.
Yes. And it's much less sexy to talk about the oxygen, which is the other product. The carbon nanomaterials are great. But the hot oxygen gives us the opportunity to do what's called the oxy fuel process and to feed oxygen directly in for the combustion and to improve the efficiency of that.
Robert Kwan, RBC. Doctor. Licht, just want to ask or follow-up on the last answer you gave, because it's one thing to have a carbon tax, it's nothing to actually take the carbon out, which is kind of the exciting part of what you're doing. Is the cost is what you're saying the cost of actually taking the carbon out less than the $30 to $50 a tonne? Absolutely.
To a first order, to a straightforward analysis, today, aluminum costs $1500 to $2,000 a ton in the open market. That's approximately the cost of making the aluminum from getting the oxide and the bauxite from the ground, cleaning it, processing it, adding electricity, doing electrolysis. We're doing an electrolysis process. Our oxide is free. It's carbon dioxide.
It's the greenhouse gas, carbon dioxide. And so our costs are low.
And that's both the variable and the cost of the capital cost of constructing further?
Yes. So the CapEx is quite equivalent again. They're running a molten electrolysis process. And so as with them, these fire bricks and other materials to make kilns, we're running at about 200 degrees cooler Celsius than they are. They're running at 960 or running about 750 degrees Celsius.
We're working with a less much less noxious electrolyte. They have this, cryolite, this fluoride. Sorry if I get too technical. We're using just melted simple carbonates, seashells or calcium carbonate, for example. We're using inorganic carbonates.
And so we don't have any unusual CapEx costs.
And it's a very similar infrastructure. Okay, I'll finish. Your technology specifically, can you compare it to other carbon nanotube technologies that are out there? But also are you doing something different with the fibres that addresses and it's very early but there is some concern that carbon nanotubes may be a possible carcinogen?
The principal way that carbon nanotubes are made commercially now is by a technique called chemical vapor deposition, CBD. It has an extraordinarily high carbon footprint. I mentioned that 12 tons per tonne of aluminum, it's on the order of 100 of tonnes. It's electrically intensive. We jump forward because they're working with gases, we're working with the carbonates are pure material to be readily made into carbon nanomaterials in there.
We're working with liquids on a solid. There's a lot of reasons, but it's much less energetic. And so that's but that is the principal process. The juries out there, as you said, but I don't want to on the environmental impact of carbon nanotubes, but it looks good. There's a tremendous number of studies using carbon nanomaterials for medical delivery applications.
And so they're injecting them into people's bloodstreams. But it has to be much more heavily explored. However, our carbon nanotubes don't hit the environment. As I said, after we grind this up, we put it into a form that's ready for distribution. And there's this for the cement for this particular application.
And they're entirely enclosed within this material. And so there's no exposure of particular matter.
Actually, could I just make a couple of comments on your questions? And this is from the capital power perspective and in respect to the Genesee Carbon Conversion Center. So in terms of cost and just to sort of connect a couple of dots, today, the market value and therefore, implicit the cost of production is between $100,000 $400,000 a tonne. And I think as we've stated in the material and so on, I mean, we'll be bringing that down by at least an order of magnitude. So that's what opens up the commercial opportunities.
And in testing it in some areas like specifically cement, Those kind of numbers suggest very broad utilization. So those are numbers that make it work in a very, very broad sense. In terms of the issues of the potential for carbon nanotubes being a carcinogen. That's something that we've been looking at. And certainly, as we move forward with the Genesee Carbon Conversion Center, that will be a topic of discussion with Alberta Environment as to in the production, are there any risks?
But I think as Doctor. Licht described, in the production process, don't really see there's no dust, to put it another way. But nonetheless, we'll be going through that process. And if there's anything that we need to do to protect employees, we definitely will be doing it. And again, the jury is out a little bit in terms of the utilization in materials and so on.
And of course, with asbestos, asbestos was never an issue unless it becomes airborne. And there's a lot of work being done on just nanotechnology in general, not just carbon nanotubes. And so we're watching that closely. But as indicated, there's nothing yet that's been definitive that I said that's an issue. And certainly, in the various application, different, I'll say, mechanical realities would suggest to us initially that it's not an issue.
But having said that, part of the due diligence I was commenting on, we'll be looking at that more closely as well, for example, Lee Ihanssen in terms of in looking at it. But it's something that needs to be addressed, but we don't see that it is an issue that would impair their progress of moving forward.
And of course, these are pure carbon. And graphite, another allotrope of carbon, is just layered graphene sheets. And we're instead of rolling up the graphene sheets concentrically in these carbon nanotubes. And so the issue, the question is the nano nature, the small size of them. And again, we have to do the correct due diligence, but we're quite optimistic in that regard.
It's a good question.
Andrew Gay with Varischen Fund Management. Can you flesh out the relationship between C2, CNT and Capital Power just
a little more just in terms of who will be
commercializing the potential further developments? What employees, is it employees of C2C and T that are helping commercialize these further developments or Capital Power will take that lead and just how the economics are split between the 2?
Well, let me just say upfront that Capital Power has been the wind behind C2CNT's sales. And C2CNT has an independent employee base, which is growing quite rapidly. And the capital power is supporting with the 1st major rollout, the Genesee project, the general model in which the capital for implementing the larger and larger C2 CNT units. And we have to scale up rapidly if we want to take the needle on the CO2 levels. The companies that we license to in Capital Power is the 1st company we'll be licensed to, pays the capital for building the plant and we have a licensing arrangement with them where we the profits go back to C2CNT from that.
Maybe to add a little more flesh to that. So if you think of C2CNT today as owning and operating the facility at Sheppard, and the production capability of that will be reasonably significant by the time it gets to the end of the test period or near the end of 2020. And that, I believe, C2C and T as the expectation will continue and be where a significant amount of further research and development, etcetera, takes place. And just to be clear, capital power, other than being morally supportive, is not involved in the research and development side at all. We'll facilitate and help buying materials or things that we can do as a broader organization and have helped out in terms of hiring people for C2CNT in Calgary, but that is 100% C2CNT.
When you look at when you move to the Genesee Carbon Conversion Center, so that will be a facility that Capital Power will own and operate, but it will be under our licensing agreement with C2CNT. And it will be hopefully more favorable than other commercial arrangements they'll make with other parties. But as Doctor. Licht pointed out, the massive proliferation of this technology can best be achieved by licensing agreements. So I would speculate that with depending on the penetration in other areas and so on and so forth, I would expect there to be numerous licenses out for this technology being applied in different parts of the world fairly, fairly quickly.
Capital Power would hope to build additional facilities under license like Genesee as time goes forward. But we do not see us as an exclusive supplier of C2CNT to the market at all. We see ourselves as participating in that market and being sort of the first movers. But again, as Doctor. Licht described, his objective is to have this technology out there as rapidly as possible and reducing the carbon footprint, again, as quickly as possible and that can only be done through licensing agreements across the world.
Mark Jarvi from CIBC. A lot of good technology doesn't always move to market as quickly as people think and get commercialized. And so I can appreciate the avoided cost of carbon for capital power, but how do you build the business case to companies like cement companies in terms of how you price carbon nanotubes and make sure that you guys get your fair share
of the economics that you're giving them? Well, the business case is the value added of the carbon nanomaterial containing products that we roll out The added benefit is making various industries greener. There is a great deal of flexibility in the pricing because of the low cost of the process. And we will be building that in as we move forward. It's quite straightforward, a cost estimate.
If we are adding 0 0.1% of CNTs to aluminum and if the cost of aluminum is $1500 a tonne, we want to keep the we will price the carbon nanotubes such that we don't significantly change the price of the aluminum at all. And so, aluminum will be presented with its much stronger, that's much lighter weight, and at about the same cost. And that's how we'll be moving forward with our pricing as we look at it.
And when you put some of those preliminary numbers together with these people you engage with, are they on board with it or Yes. And then if you think back through the process of getting this to scale here now, maybe just going to walk us through some of the challenges you've had and as you work through now this next phase of commercialization, where do you see some of the sort of pinch points and challenges?
Well, the history is a series of remarkable adventures. We were in my laboratories, splitting carbon dioxide and molten carbonate since 2010. We've been publishing on that, doing that all the time. I'm fortunate to have a close cooperation with the National Science Foundation in the States. It brought into my facilities a bench top, one of the first bench top scanning electron microscopes.
And so the rapid pace that we've seen, incredible pace is because we can do a production run and immediately look at the product. And so as soon as we had that SCM in the lab, we suddenly discovered we weren't just carbon, we're making carbon nanotubes, we're making pure carbon nanotubes. Moving forward, the integration of the process will be very much benefited at Tennessee by the close cooperation with Capital Power. Right now, due to certain regulations in the Carbon X price that we're involved in, we are not sending the oxygen back to the plant. We are not tapping the flue gas at the temperature that we want.
They're trying to make a generic flue gas for all the Carbon XPRIZE teams. We're actually the only Carbon XPRIZE team that's using the flue gas. Everyone else is using concentrated CO2 from the flue gas because we can do that. We're very, very fortunate that we're the only Carbon XPRIZE team that moved forward on both tracks of the Carbon XPRIZE, making the most valuable product from the flue gas of a coal power plant and from a natural gas power plant. So we're perfectly situated to move ahead with the hybrid, the dual fuel feature of that Genesee is giving us.
And so I'm looking forward very much to this plan. It gives us even more options and it gives us expedited linkage as we make the larger facility.
Jeremy Rosenfield from Industrial Alliance. Just a question in terms of the scalability and what are some of the limiting factors as you move from the testing onto the whatever is going to be done at Genesee? At what scale can you actually produce carbon nanotubes? What are the limiting factors? Are there issues with water?
Are there issues with access to lithium ion?
So what are some of
the things that you have to look forward in terms of anticipating those obstacles as this ramps up?
Water is not a part of the process, other than in the final cement distribution stage. Scalability is part of the R and D that's ongoing. It's going ahead well. So for example, as we move up the Shepherd facility at the A8, Alberta Carbon Capture Technology Center facility from 100 tonnes to 2 50 tonnes CNT annually. We're going to take advantage of 3 dimensions.
The aluminum process that I spoke of is stuck with horizontal electrodes. The product that they make floats to the bottom, liquid aluminum, And that sits on the bottom electrode, which is horizontal. We don't have that limitation. We can use vertical electrodes. And so in our plant, we're building up.
We're making, so the scale up we can use bigger and bigger surface area electrodes. Just as with batteries, electrosynthesis is simply linearly related to the electrode size, electrode area, if you will. And that's the challenge. We have to supply a great deal of DC current. It's an electrolysis process.
That's how aluminum is made. There is an incredible opportunity at Genesee. Just outside the door of the Genesee plant is one of the few DC transmission power sites. They transmit their power by DC current. And so the DC is already there.
We don't even what we're using at Shepard is our own rectifiers to convert the AC to DC to there So there's some benefits too.
So maybe just in terms of talking about the Genesee site and some of the benefits and look at scaling. And maybe I'll just put my promoter hat on for a little bit and just comment that one thing that is not or that as you look through the material, and I think the chart on showing you how much work has been done in the cement industry, Not to the same degree, but there is a tremendous amount of literature, science work done in applying nanotechnology, nanotubes, nanomaterials to, as I say, there's a recent study out of India that applies it to aluminum, comes up with the same conclusions about adding to the strength of aluminum, doubling the strength of titanium. That's all science that's known. The inhibition of having these technologies move a little bit further and actually into significant production is simply cost, is just out and out cost. And when we look at whether this enterprise is going to be successful or not, I talked earlier about it being at least an order of magnitude reduction other products.
And we've got that confirmation from the cement industry. The issue is then or what where your questions are going to is, are you going to achieve in a cost and a scale that's going to make it happen, and when you look forward at Genesee. I would say when you look at the cost of production that Professor Licht is going through today at Shepherd, you could it is economic even if you don't scale that up. You just have a larger footprint, greater production area, and it's a little bit more labor intensive than it probably could be ultimately. And so there's a lot of scaling that will certainly help the economics, help the production.
But in terms of it being economic, I would say at the state it is today, it's economic. Anything else is upside. If there's no more questions, I'd like to thank you all for joining us this morning to talk about Capital Power, what we've been doing and where we're going and certainly appreciate you sharing in our excitement around C2CNT, where it's going, the whole issue of carbon capture, carbon conversion and the challenge that we're all facing in terms of greenhouse gas and climate change. And I think as we've outlined and commented on a number of times through this morning and in past years, it's a very serious issue to us. And we've been on a track of reducing emissions profile for a number of years.
And this is another step. And I think in 10 years, when we look back, we'll see this was an absolutely amazing step for not only the organization, but for carbon reduction on a much, much broader basis. So thank you very much for joining us this morning and keep buying those shares.