Capital Power : 2024 Q1 Report

interests in New Harquahala Generating Company, LLC (Harquahala), which owns the 1,092 MW Harquahala natural gas-fired generation facility in Maricopa County, Arizona (the Harquahala Acquisition and together with the La Paloma Acquisition, the Acquisitions).

Under the newly established 50/50 partnership, Capital Power and BlackRock are each responsible for funding 50% of the cash consideration for the Harquahala Acquisition. Capital Power is responsible for the operations and maintenance and asset management for which it will receive an annual management fee.

La Paloma and Harquahala are critical infrastructure assets, which support the reliability of California and Arizona's electricity grids and add further growth opportunities in the attractive WECC market while balancing the Company's geographical footprint across North America. La Paloma is contracted under various resource adequacy contracts through 2029 with multiple investment grade utilities and load serving entities. Harquahala is 100% contracted under a tolling agreement through 2031 with an investment grade utility.

The Acquisitions are expected to generate average annual Adjusted EBITDA of approximately $265 million (US$197 million) for the 2024-2028 period and are estimated to be, on average, 8% accretive to AFFO per share over the same period.

The purchase price of the Acquisitions attributable to Capital Power was $1.5 billion (US$1.1 billion), subject to working capital and other customary closing adjustments. The Acquisitions were partially funded by a $400 million subscription receipt offering and $850 million medium term notes offering.

Updates to Genesee Repowering project

On January 16, 2024, the Company updated our Genesee repowering timelines. Commissioning of simple cycle Unit 1 occurred in the first quarter of 2024 and Unit 2 is expected to be completed in third quarter of 2024. During the commissioning phase, unit dispatch will be driven by project needs rather than economic dispatch therefore output during commissioning of simple cycle will range between 0 and 411 MWs. Combined cycle for Unit 1 and Unit 2 is expected to be completed in Q4 2024 and output will range between 0 and 466 MWs during commissioning. Both units are expected to reach 566 MWs in the first half of 2025. Due to incremental costs related to outages required for tie in and ongoing productivity challenges, the project is expected to come in at the updated cost of $1.55 to $1.65 billion.

Partnered with Ontario Power Generation to advance new nuclear in Alberta

On January 15, 2024, the Company announced that it had entered into an agreement with OPG to jointly assess the development and deployment of grid-scale SMRs to provide clean, reliable nuclear energy for Alberta.

Pursuant to the agreement, the two companies will examine the feasibility of developing SMRs in Alberta, including possible ownership and operating structures. SMRs are being pursued by jurisdictions in Canada and around the world to power the growing demand for clean electricity and energy security.

Capital Power and OPG will complete the feasibility assessment within two years, while continuing to work on the next stages of SMR development.

Subsequent Event

Discontinuation of $2.4 billion Genesee CCS project

Capital Power is discontinuing pursuit of the Genesee CCS project. Through our development of the project, we have confirmed that CCS is a technically viable technology and potential pathway to decarbonization for thermal generation facilities including Genesee. However, at this time, the project is not economically feasible and as a result we will be turning our time, attention, and resources to other opportunities to serve our customers with balanced energy solutions. Capital Power looks forward to exploring CCS at Genesee and certain assets in our North American fleet in the future as economics improve.

Analyst conference call and webcast

Capital Power will be hosting a conference call and live webcast with analysts on May 1, 2024 at 9:00 am (MT) to discuss the first quarter financial results. The webcast can be accessed at: https://edge.media- server.com/mmc/p/sdxtbcnm/.

Conference call details will be sent directly to analysts.

An archive of the webcast will be available on the Company's website at www.capitalpower.com following the conclusion of the analyst conference call.

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Non-GAAP Financial Measures and Ratios

Capital Power uses (i) earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from our joint venture interests, gains or losses on disposals and unrealized changes in fair value of commodity derivatives and emission credits (adjusted EBITDA), and (ii) AFFO as financial performance measures.

Capital Power also uses AFFO per share as a performance measure. This measure is a non-GAAP ratio determined by applying AFFO to the weighted average number of common shares used in the calculation of basic and diluted earnings per share.

These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP and, therefore, are unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, net income attributable to shareholders of Capital Power, net cash flows from operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to complement GAAP measures in the analysis of our results of operations from management's perspective.

Adjusted EBITDA

Capital Power uses adjusted EBITDA to measure the operating performance of facilities and categories of facilities from period to period. Management believes that a measure of facility operating performance is more meaningful if results not related to facility operations are excluded from the adjusted EBITDA measure such as impairments, foreign exchange gains or losses, gains or losses on disposals and other transactions, unrealized changes in fair value of commodity derivatives and emission credits and other items that are not reflective of the long-term performance of the Company's underlying business.

A reconciliation of adjusted EBITDA to net income (loss) is as follows:

1. Total income from joint ventures as per our consolidated statements of income (loss).
2. Includes finance expense, depreciation expense and unrealized changes in fair value of derivative instruments from joint vent ures.

Adjusted funds from operations and adjusted funds from operations per share

AFFO and AFFO per share are measures of the Company's ability to generate cash from its operating activities to fund growth capital expenditures, the repayment of debt and the payment of common share dividends.

AFFO represents net cash flows from operating activities adjusted to:

• remove timing impacts of cash receipts and payments that may impact period-to-period comparability which include deductions for net finance expense and current income tax expense, the removal of deductions for interest paid and income taxes paid and removing changes in operating working capital,
• include the Company's share of the AFFO of its joint venture interests and exclude distributions received from the Company's joint venture interests which are calculated after the effect of non-operating activity joint venture debt payments,
• include cash from off-coal compensation that will be received annually,
• remove the tax equity financing project investors' shares of AFFO associated with assets under tax equity financing structures so only the Company's share is reflected in the overall metric,
• deduct sustaining capital expenditures and preferred share dividends,
• exclude the impact of fair value changes in certain unsettled derivative financial instruments that are charged or credited to the Company's bank margin account held with a specific exchange counterparty, and
• exclude other typically non-recurring items affecting cash from operations that are not reflective of the long-term performance of the Company's underlying business.

A reconciliation of net cash flows from operating activities to adjusted funds from operations is as follows:

1. Included in other cash items on the condensed interim consolidated statements of cash flows to reconcile net income to net cash flows from operating activities.
2. Excludes unrealized changes on interest rate derivative contracts, amortization, accretion charges and non-cash implicit interest on tax equity investment structures.
3. Includes sustaining capital expenditures net of partner contributions of $5 million and $3 million for the three months ended March 31, 2024 and 2023, respectively.

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4 Reflects current income tax expenses of $1 million for the three months ended March 31, 2024 related to other non-recurring items recognized in prior periods.

Forward-looking Information

Forward-looking information or statements included in this press release are provided to inform the Company's shareholders and potential investors about management's assessment of Capital Power's future plans and operations. This information may not be appropriate for other purposes. The forward-looking information in this press release is generally identified by words such as will, anticipate, believe, plan, intend, target, and expect or similar words that suggest future outcomes.

Material forward-looking information in this press release includes disclosures regarding (i) status of the Company's 2024 AFFO and adjusted EBITDA guidance, (ii) forecasted 2024 depreciation, (iii) the timing of, funding of, generation capacity of, costs of technologies selected for, environmental benefits or commercial and partnership arrangements regarding existing, planned and potential development projects and acquisitions (including the repowering of Genesee 1 and 2, La Paloma and Harquahala acquisitions, and Halkirk 2, (iv) the financial impacts of the La Paloma and Harquahala acquisitions, and (v) the timing of the nuclear feasibility assessment between Capital Power and Ontario Power Generation.

These statements are based on certain assumptions and analyses made by the Company considering its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate including its review of purchased businesses and assets. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity, other energy and carbon prices, (ii) performance, (iii) business prospects (including potential re-contracting of facilities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations and (v) effective tax rates.

Whether actual results, performance or achievements will conform to the Company's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results and experience to differ materially from the Company's expectations. Such material risks and uncertainties are: (i) changes in electricity, natural gas and carbon prices in markets in which the Company operates and the use of derivatives, (ii) regulatory and political environments including changes to environmental, climate, financial reporting, market structure and tax legislation, (iii) disruptions, or price volatility within our supply chains, (iv) generation facility availability, wind capacity factor and performance including maintenance expenditures, (v) ability to fund current and future capital and working capital needs,

1. acquisitions and developments including timing and costs of regulatory approvals and construction, (vii) changes in the availability of fuel, (viii) ability to realize the anticipated benefits of acquisitions, (ix) limitations inherent in the Company's review of acquired assets, (x) changes in general economic and competitive conditions and (xi) changes in the performance and cost of technologies and the development of new technologies, new energy efficient products, services and programs. See Risks and Risk Management in the
   Company's Integrated Annual Report for the year ended December 31, 2023, prepared as of February 27, 2024, for further discussion of these and other risks.

Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the specified approval date. The Company does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in the Company's expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.

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Territorial Acknowledgement

In the spirit of reconciliation, Capital Power respectfully acknowledges that we operate within the ancestral homelands, traditional and treaty territories of the Indigenous Peoples of Turtle Island, or North America. Capital Power's head office is located within the traditional and contemporary home of many Indigenous Peoples of the Treaty 6 region and Métis Nation of Alberta Region 4. We acknowledge the diverse Indigenous communities that are located in these areas and whose presence continues to enrich the community.

About Capital Power

Capital Power is a growth-oriented power producer committed to net zero by 2045, with approximately 9,300 MW of power generation at 32 facilities across North America.

We prioritize delivering reliable, affordable and decarbonized power that communities can depend on, building decarbonized power systems needed for tomorrow, and creating real net zero solutions for customers. We are powering change by changing power.  

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CAPITAL POWER CORPORATION

Management's Discussion and Analysis

This Management's Discussion and Analysis (MD&A), prepared as of April 30, 2024, should be read in conjunction with the unaudited condensed interim consolidated financial statements of Capital Power Corporation and its subsidiaries for the three months ended March 31, 2024, the audited consolidated financial statements and the 2024 Performance Targets, Our Strategic Focus and Business Report sections of the Integrated Annual Report of Capital Power Corporation for the year ended December 31, 2023 (the 2023 Integrated Annual Report), the Annual Information Form of Capital Power Corporation dated February 27, 2024, and the cautionary statements regarding Forward-Looking Information which begin on page 9.

In this MD&A, any reference to the Company or Capital Power, except where otherwise noted or the context otherwise indicates, means Capital Power Corporation together with its subsidiaries.

In this MD&A, financial information for the three months ended March 31, 2024 and March 31, 2023 is based on the unaudited condensed interim consolidated financial statements of the Company for such periods which were prepared in accordance with Canadian generally accepted accounting principles (GAAP) and are presented in Canadian dollars unless otherwise specified. In accordance with its terms of reference, the Audit Committee of the Company's Board of Directors reviews the contents of the MD&A and recommends its approval by the Board of Directors. The Board of Directors approved this MD&A as of April 30, 2024.

Q1-2024 MANAGEMENT'S DISCUSSION AND ANALYSIS | CAPITAL POWER 8

FORWARD-LOOKING INFORMATION

Forward-looking information or statements included in this MD&A are provided to inform our shareholders and potential investors about management's assessment of Capital Power's future plans and operations. This information may not be appropriate for other purposes. The forward-looking information in this MD&A is generally identified by words such as will, anticipate, believe, plan, intend, target, and expect or similar words that suggest future outcomes.

Material forward-looking information in this MD&A includes expectations regarding:

• our priorities and long-term strategies, including our corporate, and decarbonization strategies;
• our company-wide targets and plans specific to climate-related performance, including reduction of emissions and our pathway to net zero by 2045;
• our 2024 performance targets, including facility availability, sustaining capital expenditures, AFFO and adjusted EBITDA;
• future revenues, expenses, earnings, adjusted EBITDA and AFFO;
• the future pricing of electricity and market fundamentals in existing and target markets;
• our future cash requirements including interest and principal repayments, capital expenditures, dividends and distributions;
• our sources of funding, adequacy and availability of committed bank credit facilities and future borrowings;
• the timing of, funding of and costs of, generation capacity of, costs of technologies selected for, environmental and sustainability benefits, commercial and partnership arrangements regarding existing, planned and potential development projects and acquisitions (including phase 2 of Halkirk Wind, the repowering of Genesee 1 and 2, the upgrade at Goreway and York Energy, Goreway Battery Energy Storage System (BESS), York Energy BESS, East Windsor expansion, Maple Leaf Solar project, Bear Branch Solar and Hornet Solar);
• the financial impacts of the La Paloma and Harquahala acquisitions;
• future growth and emerging opportunities in our target markets;
• market and regulation designs and regulatory and legislative proposals and changes, regulatory updates and the impact thereof on the Company's core markets and business; and
• the impact of climate change, including our assumptions relating to our identification of future risks and opportunities from climate change, our plans to mitigate transition and physical climate risks, and opportunities resulting from those risks.

These statements are based on certain assumptions and analyses made by the Company in light of its experience and perception of historical trends, current conditions, expected future developments, and other factors it believes are appropriate including its review of purchased businesses and assets. The material factors and assumptions used to develop these forward-looking statements relate to:

• electricity and other energy and carbon prices;
• performance;
• business prospects (including potential re-contracting of facilities) and opportunities including expected growth and capital projects;
• status and impact of policy, legislation and regulations;
• effective tax rates;
• the development and performance of technology;
• foreign exchange rates; and
• other matters discussed under the Performance Overview, Outlook and Risks and Risk Management sections.

Whether actual results, performance or achievements will conform to our expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results and experience to differ materially from our expectations. Such material risks and uncertainties are:

• changes in electricity, natural gas and carbon prices in markets in which we operate and the use of derivatives;
• regulatory and political environments including changes to environmental, climate, financial reporting, market structure and tax legislation;
• disruptions, or price volatility within our supply chains;
• generation facility availability, wind capacity factor and performance including maintenance expenditures;
• ability to fund current and future capital and working capital needs;
• acquisitions and developments including timing and costs of regulatory approvals and construction;
• changes in the availability of fuel;
• ability to realize the anticipated benefits of acquisitions;
• limitations inherent in our review of acquired assets;
• changes in general economic and competitive conditions, including inflation and recession;

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