Best Smidcap Ideas: Multiple Points of Exposure to Electricity Demand Growth

Research evidence excerpt

Best Smidcap Ideas: Multiple Points of Exposure to Electricity Demand Growth

a final agreement is not reached, a termination fee

will be paid to CPX. The ESA does not constrain CPX's ability to proceed with a co-

located data centre at the Genesee site in the future. We estimate that a $20/MWh

pricing uplift for 250 MW equates to ~$44mm of additional EBITDA (or ~$2.30/shr of

equity value using a 10x multiple, discounted from 2028).

AESO's June 24 update will provide further details on Alberta's approach to "bring

your own generation" and connecting data centres to the grid (link to our June 19

report on AESO's slide deck, which was released June 18). We view clarity on

timelines, generator types, and generation to load ratios as the most relevant outputs

from this update. We believe CPX remains an attractive potential counterparty for

large loads. CPX is one of only two large-scale generators in Alberta and owns what

we understand to be the most efficient gas-fired generating units in the country. We

estimate that the impact of a potential PPA, assuming a $20/MWh pricing premium

on 500MW of annual output, would equate to $88 million of additional margin.

Applying a 10x multiple to this revenue and discounting it from 2029 at 10% would

imply ~$4.40/share of additional equity value. CPX continues to work to unlock the

G1+G2 capacity above the 466 MW "Most Severe Single Contingency" (AESO's cap

for exports to the grid from a single unit). Assuming resolution of this export

constraint, ~Genesee's 400 MW of spare capacity could maintain optionality for a co-

located data centre or offtake agreement if a grid allocation can be secured (likely

through the BYOG process).

PJM's base residual auction results for 2028/2029 will be released on July 14. This