Capital Power expands with $1.1B U.S. gas plants acquisition

EDMONTON – Capital Power Corp. (TSX:CPX), an established Canadian energy company, has significantly expanded its operational capacity with the acquisition of two major US natural gas-fired power plants for $1.1 billion. The strategic purchase includes Arizona’s Harquahala and California’s La Paloma facilities, marking a substantial move by Capital Power to position itself as one of North America’s leading electricity generators.

The deal, partially financed by global investment giant BlackRock Inc (NYSE:)., reflects Capital Power’s ambition to enhance its standing in the power production sector. The financial structure supporting this acquisition comprises a C$300 million public offering and a C$100 million private placement with Alberta Investment Management Corp., a prominent pension fund manager in Alberta.

With the addition of these plants, Capital Power’s generation capacity has increased by 1.6 gigawatts. This growth elevates the company to the rank of the fifth-largest gas-fired power entity on the continent. The integration of Harquahala and La Paloma into Capital Power’s portfolio is expected to improve the company’s adjusted funds from operations metric starting from the first year post-acquisition.

The transaction showcases a balanced partnership approach, co-financed by BlackRock through a mix of public and private funding instruments. The public-bought offering of C$300 million complements the C$100 million private placement, providing a robust financial foundation for the strategic expansion.

Capital Power’s move resonates with industry trends where energy companies are actively seeking to scale up their operations and enhance their market presence through acquisitions. This latest expansion is poised to offer Capital Power a competitive edge in the energy market, as it now operates one of the largest gas-fired generation portfolios in North America.

InvestingPro Insights

Our InvestingPro data shows that Capital Power Corp. has a market cap of 52.25M USD and trades at a P/E ratio of 16.83. The company’s revenue for the last twelve months as of Q2 2023 was 130.79M USD. However, revenue growth has been slowing down recently, with a decrease of -34.72%.

InvestingPro Tips highlight that CPX has consistently increased its earnings per share and has raised its dividend for 10 consecutive years, which may be a factor of interest for potential investors. Despite some analysts revising their earnings downwards for the upcoming period, the company is still expected to see net income growth this year.

It’s worth noting that InvestingPro’s fair value for CPX is 21.9 USD, suggesting potential for growth from its previous close price of 16.8 USD.

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