May 8, 2009 - EDMONTON - EPCOR Utilities Inc. (EPCOR) today announced its plans to create Capital Power Corporation, a power generation company that will be permanently headquartered in Edmonton.
Capital Power Corporation and its subsidiaries (Capital Power) will acquire all the power generation assets and related operations of EPCOR, including its 30.6% interest in EPCOR Power LP, and be responsible for a portfolio of approximately 3,300 megawatts (MW) of owned and/or operated power generation capacity at 31 facilities in Canada and the United States. It will fund its development by directly accessing capital markets as required.
EPCOR will continue to provide regulated power transmission and distribution, water, and wastewater services to more than one million customers in Western Canada, including Edmonton.
Capital Power plans to develop and build power plants across North America and continue the commercialization of near-zero emission power generation technologies, including Integrated Gasification Combined Cycle (IGCC) and Amine Scrubbing.
EPCOR may eventually sell all or a substantial portion of its ownership interest, subject to market conditions, its requirements for capital and other circumstances that may arise in the future, with proceeds from share sales to be reinvested in EPCOR’s growing utility infrastructure businesses, including water, wastewater, power transmission and power distribution.
As a first step, EPCOR is planning an Initial Public Offering of common shares of Capital Power representing approximately 25% of the power generation business. A preliminary prospectus for the offering is expected to be filed with securities regulators in Canada.
“This is great news. We are here today as a result of our success in power generation and water development. Over the past ten years, EPCOR has grown from operating five power and water plants to more than 50, and both lines of business are continuing to develop growth opportunities that require significant capital,” said Don Lowry, who will remain EPCOR’s President & CEO following the transaction.
“The launch of Capital Power will create an independent power generation business headquartered in Edmonton,” Lowry continued. “It also enables us to focus on EPCOR’s growth as a leading developer and operator of regulated water, wastewater and wires infrastructure. This initiative is a natural evolution that creates two strong stand alone businesses and allows both to continue to grow and generate shareholder value.”
On April 17, 2009, EPCOR’s sole shareholder, the City of Edmonton, delegated to EPCOR’s Board of Directors the authority to establish Capital Power. As a result of this decision, Edmonton will have another head office and become home to two significant enterprises, providing the citizens of Edmonton with enhanced long-term employment opportunities.
EPCOR’s regulated power and water customers will see no changes in service or costs as a result of this restructuring, and the City of Edmonton’s access to electricity remains secured by long-term contracts.
EPCOR Executive Vice President and Chief Operating Officer Brian Vaasjo will be named President and CEO of Capital Power. He will be joined at Capital Power by approximately 1,000 of EPCOR’s 3,000 employees. Capital Power will be governed by a majority independent Board of Directors.
“We are committed to building one of North America’s most respected, reliable and competitive power generators,” said Vaasjo. “Capital Power will have an experienced management and operating team, and a track record of operating a diverse portfolio of power technologies, including coal, natural gas, and renewables.”
EPCOR anticipates that the closing of the initial public offering of Capital Power shares will be completed in mid-2009, and has engaged TD Securities Inc. and Goldman Sachs Canada Inc. to act as joint-bookrunners. Employees will move to Capital Power at closing, with transition arrangements in place between the companies to ensure continuity of operations and services.
This news release contains certain statements that constitute forward-looking information within the meaning of applicable securities laws (“forward-looking statements”). Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of EPCOR, or developments in EPCOR’s business or in its industry, to differ materially from the plans, expectations, forecasts, projections, estimates or intentions expressed or implied by such forward-looking statements. Forward-looking statements include all disclosure regarding possible events, conditions or results of operations that is based on assumptions about future economic conditions and courses of action. Forward-looking statements may also include, without limitation, any statement relating to future events, conditions or circumstances. EPCOR cautions you not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Forward-looking statements relate to, among other things: the pursuit and timing of an initial public offering of Capital Power; the completion of the related corporate reorganization to establish Capital Power; structure and terms of the proposed transaction to establish, fund and govern Capital Power; the assets to be held and projects to be administered by Capital Power following completion of the corporate reorganization; sources of funding with respect to developments by Capital Power; Capital Power’s plans with respect to developing and building power plants; EPCOR’s intention to divest its interest in Capital Power over time; EPCOR’s use of proceeds from the sale of Capital Power shares; EPCOR continuing to provide other non-power generation services; services or costs to be provided to customers of EPCOR; the City of Edmonton’s access to electricity; the identity of directors or officers of Capital Power; EPCOR’s entitlement to nominate directors to the board of Capital Power; the level of employment at EPCOR or Capital Power and in Edmonton; maintenance of credit ratings at certain levels, the credit risk profile of EPCOR and impacts on EPCOR’s lenders; EPCOR’s and Capital Power’s financial strength; terms of future debt; Capital Power’s anticipated dividend policy; the duration of the location of Capital Power’s head office; changes in operations of the power generation business to be transferred by EPCOR to Capital Power; growth of EPCOR’s and Capital Power’s businesses; regulatory environment; EPCOR’s objectives to provide a stable dividend to the City of Edmonton; ongoing ownership of EPCOR by the City of Edmonton; collective agreements and union relations; construction, tenancy and name of EPCOR Tower; supply contracts in support of the power generation business; decommissioning of the Rossdale Integrated Utility site; and the ability of Edmontonians to participate in the initial public offering. These forward-looking statements are based on certain assumptions and analysis made by EPCOR in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. Whether actual results, performance or achievements will conform to EPCOR’s expectations and predictions is subject to a number of known and unknown risks and uncertainties that could cause actual results and experience to differ materially from EPCOR’s expectations. The material factors and assumptions underlying these forward-looking statements, and such risks and uncertainties include, but are not limited to: unanticipated delays in completing the corporate reorganization; the decisions of the regulatory bodies with oversight over EPCOR’s business; the decisions of the Edmonton City Council; EPCOR’s assessment of commodity and power markets; EPCOR’s assessment of the markets and regulatory environments in which it operates; general capital markets conditions; operation of EPCOR’s facilities; power plant availability and performance; unanticipated maintenance and other expenditures; availability and price of energy and other commodities; demand for electricity; electricity load settlement; regulatory and government decisions including changes to environmental, financial reporting and tax legislation; currently applicable and proposed tax laws will not change and will be implemented; proposed legislation or changes to legislation will be implemented as proposed and as scheduled; weather and economic conditions; competitive pressures; construction; availability of labour and management resources; performance of counterparties, partners, contractors and suppliers in fulfilling their obligations; an extended period of economic decline; unanticipated delays in construction on projects; increased extraction costs for coal; availability and cost of financing; foreign exchange rates; management’s analysis of applicable tax legislation; proposed environmental regulations will be implemented; interest rates, related credit spreads and mortality rates for the new notes exchanged for ABCP and the market for such new notes; ability to implement strategic initiatives that will yield the expected benefits; and other risks and uncertainties detailed from time to time in EPCOR’s filings with Canadian provincial securities regulators, including EPCOR’s 2008 Annual Information Form dated March 13, 2009, its annual audited consolidated financial statements as at and for the years ended December 31, 2008 and 2007 and associated management discussion and analysis, each available at http://www.sedar.com/. Forward-looking statements are based on management's current plans, estimates, projections, beliefs and opinions, and EPCOR disclaims any intention and assumes no obligation to update any forward-looking statements.
This news release does not constitute an offer to sell securities, nor is it a solicitation of an offer to buy securities, in any jurisdiction. All sales will be made through registered securities dealers in jurisdictions where the offering has been qualified for distribution. This news release does not constitute an offer of securities for sale in the United States and the securities referred to in this news release may not be offered or sold in the United States absent registration or any exemption from registration.
About EPCOR
EPCOR’s wholly-owned subsidiaries build, own and operate power plants, electrical transmission and distribution networks, water and wastewater treatment facilities and infrastructure in North America. EPCOR, headquartered in Edmonton, Alberta, has been named one of Canada’s Top 100 employers for nine consecutive years, and was selected one of Canada’s 10 Most Earth-Friendly Employers in 2008.
For further information:
The following backgrounders and visual materials are included with this release:
Backgrounder # 1:
Power Generation Business
Backgrounder # 2:
EPCOR Profile
Backgrounder # 3:
General Questions & Answers
Backgrounder # 4:
Edmonton Questions & Answer
Backgrounder # 5:
Simplified View of the Planned Corporate Structure
Visuals attached:
Capital Power Logo