CPX-CA: Initiating at Equal Weight, C$70 PT

Research evidence excerpt

CPX-CA: Initiating at Equal Weight, C$70 PT

xQ. We anticipate

~50-60% adj. EBITDA cash conversion. We do not assume capital allocation (acquisitions / buybacks) in

our model estimates, but note the adjustment in our AFFO/share conversion (i.e. 50% cash allocation

to buybacks); resulting in a 10%+ AFFO/sh CAGR thought 2030.

CPX is a Toronto Exchange Listed IPP with a portfolio of assets split ~50:50% across Canada and

United States. CPX’s fleet totals ~12 GW of generation capacity across ~35 facilities. The portfolio

is heavily weighted toward gas-fired assets (~88%) complemented by a smaller mix of renewables

and battery storage (12% respectively). Importantly—especially for European Investors—CPX fleet

does not have any coal burning generation which was a major hindrance for European investors during

our week-long marketing tour, as we discussed the IPP coverage (no coal echoed throughout our

meetings). CPX has favored an acquire-and-optimize strategy, emphasizing asset optimization and

contracting upside over new development, to the current 12GW total with the acquisition of Hummel

and Rolling Hills in PJM. CPX generation capacity is ~51% contracted, and contracted percentage and

stability has been a central piece of their story with contracted percentage on a weighted basis of total

assets leading other IPP’s.

That said, the already high contracted percentage, the majority of which are LT deals, limits the

visibility of upside to current positioning with the current fleet. NT recontracting opportunities are

somewhat limited with contracts on avg. expiring around 2036 and some into the late 2040s/early

2050. It is not that recontacting opportunities do not exist for CPX. In fact, ~1.7GW are expected