Transcript CSE 2012 Investor Presentation

CORPORATE OVERVIEW
Building a Diversified Infrastructure Company
March 2014
Corporate Snapshot
Developer, owner & operator of high quality infrastructure assets
Mission & Vision
Our mission is to provide investors with an attractive total return from responsibly managed long-term investments in
core infrastructure in Canada & internationally. Our vision is to be a Canadian leader in owning and operating diversified
infrastructure businesses that benefit the communities we serve, the people we employ, and our investors.
Investor Information
Common shares outstanding
92,853,970
Preferred shares outstanding
3,000,000
2016 convertible debentures outstanding
42,749
2017 convertible debentures outstanding
27,428
Class B exchangeable units
TSX symbols
3,249,390
CSE; CSE.DB.A; CSE.PR.A; CPW.DB
Market capitalization
Institutional ownership
Common share dividend
Current yield
1 - Market capitalization is based on the closing price of the common shares on March 18, 2014 and includes Class B exchangeable units issued by a subsidiary of CSE.
2
~$385M
~35%
$0.30 per share annualized
7.5%
Our Portfolio
Utilities & power infrastructure investments
Notes:
* CSE holds a 50% interest in Bristol
Water.
** CSE holds a 33% interest in
Värmevärden.
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*** CSE’s investment in Chapais
consists of a 31.3% interest in one of
two classes of preferred shares, a
24.8% interest in Tranche A and B
debt, and a 50% interest in Tranche
C debt.
Utilities Platform
Expect growing cash flow & dividends
Regulated or contractual businesses that provide essential community infrastructure
PROFILE
Includes 50% interest in Bristol Water, a
growing regulated utility in the United
Kingdom & a 33% interest in Värmevärden,
a district heating business in Sweden.
KEY STATS
Bristol Water
₤389M
RCV as at
March 31, 2013
C$520M
26%
Size of capital
expenditure program
for 2010-2015
RCV growth over 20102015 compared with
industry average of 8%
.
.
Värmevärden
317 KM
10
Length of
distribution
network
Number of
communities the
business operates in
.
.
639 MWth
Heat production
capacity
.
FUTURE GROWTH
►
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Future investments could include electricity
transmission or distribution, or gas utilities
Power Platform
Contractually defined cash flow
Power generation facilities with a clean energy profile & long-term contracts,
& a pipeline of wind power projects
PROFILE
Includes operating gas-fired, wind,
biomass, hydro & solar power generation
facilities & a pipeline of contracted wind
power projects in Canada.
KEY STATS
439MW
Net megawatts
of installed
capacity across
Canada
79MW
70
Net capacity of current
wind development
project pipeline
Number of employees
directly engaged in
operation &
development of power
portfolio
.
.
►
Currently constructing two wind projects expected to
be completed in 2014
.
FUTURE GROWTH
►
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Continue to seek traditional & renewable power
investment opportunities, including operating &
development-stage projects as well as re-powering
opportunities.
Behind the Numbers…
…Drinking water for 1.2 million
people
…Clean electricity to power about
220,000 households
…Heat distributed within 10
communities with combined
population of 170,000
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A History of Growth
Adjusted EBITDA1,2,3
In $ millions
In $ millions
Revenue2,3
In $ millions
Total Assets2
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1 – Excludes internalization costs.
2 – Figures presented for 2004 to 2009 reflect Canadian Generally Accepted Accounting Principles (GAAP)
3 – Adjusted EBITDA is defined on page 16.
A History of Diversification
Adjusted EBITDA1 by Country
4%
17%
33%
5%
39%
57%
78%
63%
4%
2011
2012
2013
2013 AFFO1 by Business & Country2,3
1 – Please refer to slides 16 and 17 for definitions of Adjusted EBITDA and AFFO, respectively.
2 - Chart illustrates contribution for the businesses and excludes corporate component.
3 – Excludes internalization costs.
.
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Canada
Sweden
UK
Growth Strategy
Focused on building across four pillars
Power
Utilities
P3
Transportation
• Traditional
• Renewable
• District heating &
cooling
• Waste to energy
• Water
• Gas (transmission &
distribution)
• Electric
(transmission &
distribution)
•
•
•
•
•
•
•
•
Courts
Hospitals
Schools
Transportation
Trillions of dollars of investment needed
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Roads
Rails
Airports
Ports
Growth Strategy
Focused on core markets within OECD
North America
Canada
United States
Europe
United Kingdom
France
Germany
Sweden
Norway
Finland
Denmark
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Australasia
Australia
New Zealand
Effective, Responsive Partner
Committed to corporate citizenship
“Erie Shores Wind Farm is generating more
than just clean, renewable energy here in
Bayham. It is generating interest and
excitement that has translated into tourism
dollars for our local businesses, generating
revenue for the municipality in the form of
taxes, generating profits for our farmers
through their annual lease payments and
generating a sense of community identity
and pride.”
- (Former) Mayor Lynn Acre, Municipality of
Bayham
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“Cardinal Power’s consistent, reliable steam and air
supply over the past 15 years has allowed our
facility to succeed in challenging times.”
- Marc Harcus, Plant Manager, Casco Inc. – Cardinal
“We are indeed fortunate to have Cardinal Power located
in our community and continue to find them to be a
generous and involved corporate citizen.”
- (Former) Mayor Larry Dishaw, Township of
Edwardsburgh/Cardinal
Health & Safety
A company-wide priority
“A key value of Capstone is to foster a professional, safe work environment where our people
have the tools and resources to excel and be successful. There is nothing more important than
the well-being and safety of our employees and those who work with us.”
- Michael Bernstein, President & Chief Executive Officer
GOALS
GUIDING PRINCIPLES
►
Achieve zero accidents at our
businesses & instill an industry-leading
safety culture.
►
Our businesses are expected to build & encourage a
proactive health & safety culture that is open,
cooperative, constructive and collaborative.
►
All accidents or near misses are
preventable.
►
►
Identify the root causes of all incidents.
All employees must take direct responsibility for their
own personal safety as well as that of their colleagues
and others.
►
As part of our continuous improvement culture, all
businesses must strive to learn from historical
incidents, take appropriate & timely action to prevent
recurrence, & track results over time.
►
Assess the businesses’ health & safety
performance quarterly & annually.
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In 2013, the Cardinal gas
cogeneration facility achieved its
17th consecutive year with no
lost-time injuries
In 2013, the Whitecourt biomass facility was
awarded a Certificate of Recognition by Alberta’s
provincial government, reflecting high safety
standards and programs at the facility.
Why Invest?
Focused on delivering
High quality, diversified & low risk
portfolio of infrastructure businesses
providing essential services
Substantial investment in Bristol
Water, a perpetual business we
expect to generate growing cash
flow
Sizable contracted power portfolio,
including accretive wind projects
Strong operating performance supports
stable, long-term cash flow for
shareholders
Our mission is to provide investors with an attractive
total return from responsibly managed long-term investments
in core infrastructure in Canada & internationally
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Contact
155 Wellington Street West
Suite 2930
Toronto, Ontario M5V 3H1
T: 416-649-1300
Email: [email protected]
Website: www.capstoneinfrastructure.com
Notice to Readers:
This presentation is not an offer or invitation for the subscription or purchase of or a recommendation of securities. It does not take into account the
investment objectives, financial situation and particular needs of any investors. Before making an investment in the Corporation, an investor or
prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial
circumstances and consult an investment adviser if necessary.
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A
APPENDIX: DEFINITIONS
Non-GAAP Performance Measures
Definitions
This presentation contains figures that are performance measures not defined by International Financial Reporting Standards (IFRS).
These non-GAAP and additional GAAP performance measures do not have any standardized meaning prescribed by IFRS and are,
therefore, unlikely to be comparable to similar measures presented by other issuers. The non-GAAP and additional GAAP measures
used in presentation are defined below.
Earnings before Interest Expense, Taxes, Depreciation and Amortization (EBITDA)
EBITDA is net income (loss), including that net income (loss) related to the non-controlling interest (“NCI”) and interest income and
net pension interest income excluding interest expense, income taxes, depreciation and amortization. EBITDA represents Capstone’s
continuing capacity to generate income from operations before taking into account management’s financing decisions and costs of
consuming tangible capital assets and intangible assets, which vary according to their vintage, technological currency, and
management’s estimate of their useful life. EBITDA is presented on the consolidated statement of income.
Adjusted EBITDA
Adjusted EBITDA is calculated as revenue less operating and administrative expenses and project development costs plus interest
income and dividends or distributions received from equity accounted investments. Amounts attributed to any non-controlling interest
are deducted. Adjusted EBITDA for investments in subsidiaries with non-controlling interests are included at Capstone’s proportionate
ownership interest. The reconciliation of Adjusted EBITDA to EBITDA is provided below.
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Non-GAAP Performance Measures
Definitions (continued)
Adjusted Funds from Operations (AFFO)
Capstone’s definition of AFFO measures cash generated by activities of infrastructure business investments which is available for
dividends and general corporate purposes. For wholly owned businesses, AFFO is equal to Adjusted EBITDA less interest paid,
repayment of principal on debt income, taxes paid, scheduled repayment of debt principal, preferred share dividends and maintenance
capital expenditures. For businesses that are not wholly owned and cash generated by the business is only available to Capstone
through periodic dividends, AFFO is equal to dividends received. Also deducted are corporate expenses and dividends on preferred
shares.
AFFO is calculated from Adjusted EBITDA by:
Deducting:
- Adjusted EBITDA generated from businesses with significant non-controlling interests
Adding:
- Dividends received from businesses with significant non-controlling interests
- Scheduled repayments of principal on loans receivable from equity accounted investments
Deducting items, for businesses without significant non-controlling interests:
- Interest paid
- Income taxes paid
- Dividends paid on the preferred shares included in shareholders’ equity
- Maintenance capital expenditure payments and
- Scheduled repayments of principal on debt, net of changes to the levelization liability up to repayment on June 6, 2012.
Payout Ratio
Payout ratio measures the proportion of cash generated that is available at corporate that is declared as dividends. The payout ratio is
calculated as dividends declared divided by AFFO.
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APPENDIX: BIOGRAPHIES
Biographies
Michael Bernstein
President and Chief Executive Officer
Michael Bernstein has served as President and Chief Executive Officer of Capstone Infrastructure Corporation since April
2009 and was formerly the President of Macquarie Infrastructure and Real Assets Canada Ltd. and a Senior Managing
Director of the Macquarie Group.
From May 2005 to April 2009, Mr. Bernstein served as head of Infrastructure and Utilities Advisory for Macquarie Capital
Markets Canada. From 1996 to 2005, Mr. Bernstein was a senior executive with CIBC World Markets’ Power & Utilities
investment banking group where he provided advisory and M&A counsel to a range of corporate and government clients
and played an integral role in numerous successful IPOs and capital raisings.
Mr. Bernstein has extensive experience in the Canadian infrastructure and utilities sector, having been involved in a wide
range of significant projects and transactions. These include: advising on the concession for Autoroute A-25, Quebec's
first public-private partnership (P3) project; working on the $4.25 billion agreement to refurbish and restart the Bruce A
nuclear facility; advising Borealis Infrastructure Management on its acquisition of Teranet Income Fund; and working with
the Province of Ontario on the restructuring of Ontario Hydro.
Born and raised in Montreal, Mr. Bernstein holds a BA in Economics and Philosophy from Dartmouth College, an MBA
from the University of Western Ontario and the Chartered Financial Analyst designation. He is also the Vice Chairman of
the Association of Power Producers of Ontario and serves as a board member of Youth-in-Motion, a charitable
organization that helps youth to make meaningful life and career decisions.
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Biographies
Michael Smerdon
Executive Vice President and Chief Financial Officer
Michael Smerdon serves as Executive Vice President and Chief Financial Officer of Capstone Infrastructure Corporation,
a role he has held since August 2009. He was formerly a Managing Director of Macquarie Infrastructure and Real Assets
Canada Ltd.
Mr. Smerdon joined the Macquarie group in 1998, where he managed and oversaw the acquisition and operation of
diverse infrastructure assets in Canada and the United States. From 1998 to 2002, Mr. Smerdon served with Macquarie’s
infrastructure advisory group where he advised governments and the private sector on a number of transportation and
electricity projects including toll roads, electricity distribution, aviation services, parking facilities and rail infrastructure.
More recently, Mr. Smerdon served as a key member of the senior management team of New York-based Macquarie
Infrastructure Partners Inc. (MIP), which manages two infrastructure funds totalling US$5.5 billion of investor capital. His
responsibilities included managing Macquarie’s North American port investments as well as capital raisings for Macquarie
Infrastructure Partners II. Prior to his role with MIP, Mr. Smerdon was responsible for managing a number of Macquarie’s
infrastructure businesses, including the Detroit-Windsor Tunnel, Atlantic Aviation, Leisureworld and Parking Company of
America Airports, among others, where he directed business planning, financial and operational reporting, capital
structure management, and risk management and governance, including serving on each business’ board of directors.
Mr. Smerdon holds a Bachelor of Commerce degree from the University of British Columbia and a Master of Business
Administration degree from the Richard Ivey School of Business at the University of Western Ontario. He also holds the
Chartered Financial Analyst designation.
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Biographies
Stu Miller
Executive Vice President, General Counsel & Secretary
Stu Miller serves as Executive Vice President, General Counsel and Corporate Secretary of Capstone Infrastructure and
was formerly the Managing Director and General Counsel of the Macquarie Group’s private equity and infrastructure and
specialized funds division in Canada.
Prior to joining Macquarie, Mr. Miller was the Executive Director, Corporate Services and Compliance of Fairmont Hotels &
Resorts Inc. and was a Partner in the corporate finance and M&A group of McCarthy Tétrault LLP, a leading Canadian law
firm.
Mr. Miller holds a combined MBA/JD degree from Osgoode Hall Law School and the Schulich School of Business and has
extensive experience in corporate finance, M&A, corporate governance and securities law. He is also a past recipient of
the “Tomorrow’s Leader” Award at the National Post’s Canadian General Counsel Awards.
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Biographies
Jack Bittan
Senior Vice President, Business Development
Mr. Bittan is responsible for Capstone Infrastructure Corporation’s (TSX: CSE) business development initiatives. Mr. Bittan
was formerly a Managing Director of Macquarie Canadian Infrastructure Management Limited and Chief Financial Officer
of Macquarie Essential Assets Partnership (MEAP), an unlisted infrastructure fund, where he directed day-to-day
operations, strategic planning, transactions and reporting. As a Senior Vice President of Macquarie Infrastructure and
Real Assets Canada Ltd., he was responsible for the evaluation and management of infrastructure investments in North
America.
In his seven years with Macquarie, Mr. Bittan played an integral role in the acquisition and operation of diverse
infrastructure businesses in Canada and the U.S., including regulated utilities, renewable energy, transportation and social
infrastructure. He also led Capstone Infrastructure Corporation’s acquisitions of Clean Power Income Fund, Amherstburg
Solar Park, Värmevärden (Swedish district heating portfolio) and Bristol Water. Mr. Bittan has served on the board of
directors of several infrastructure and utility businesses including AltaLink, Access Roads Edmonton and Sea to Sky
Highway and is currently a director of Bristol Water and Värmevärden.
Mr. Bittan holds an Honours Bachelor of Science degree and a Master of Management degree from the University of
Toronto. He is also designated as a Chartered Accountant (Ontario) and Certified Public Accountant (Colorado).
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Biographies
Rob Roberti
Senior Vice President, Power Generation
Rob Roberti is responsible for overseeing Capstone Infrastructure Corporation’s gas cogeneration, wind, hydro, biomass
and solar power generation businesses, including strategic planning, operational initiatives and enhancements, and
finance. From 2007 to 2011, Mr. Roberti served as a Senior Vice President of Macquarie Infrastructure and Real Assets
Canada Ltd. Mr. Roberti’s responsibilities also include identifying and assessing new investment opportunities for the
Corporation in the power infrastructure sector, including renewable energy.
Mr. Roberti was previously the Chief Financial Officer of Clean Power Income Fund, which was acquired by Capstone
Infrastructure in 2007. He has extensive finance and project development experience in the power sector, particularly in
renewable energy. As Principal of VERDE Finance Inc. (2005- 2007), an independent consulting firm offering financing
solutions in the field of green energy, his clients included Clean Power Income Fund, The Ontario Power Authority, The
Quantum Leap Company and Boreas Wind Partners. During this time, Mr. Roberti also served as the financial sector
representative on the Independent Electricity System Operator (IESO) Technical Panel.
Prior to establishing VERDE Finance, Mr. Roberti served as Manager, Financing and Development with Regional Power,
an operator and developer of hydroelectric projects across Canada. From 2000 to 2003, Mr. Roberti was Director, Project
Finance at Probyn & Company and Treasurer of Clean Power Income Fund, playing a pivotal role in the establishment and
initial public offering of the fund.
Mr. Roberti holds a Bachelor of Commerce from the University of Toronto. He is a member of the Canadian Institute of
Chartered Accountants and the CFA Institute. He has been a volunteer member of the Toronto Atmospheric Fund
Investment Committee since 2006.
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Biographies
Jens Ehlers
Senior Vice President, Finance
Jens Ehlers is a Senior Vice President with Capstone Infrastructure Corporation (TSX: CSE) where he is responsible for
financial reporting and treasury management. He was previously a Senior Vice President with Macquarie Infrastructure
and Real Assets Limited.
Mr. Ehlers is a seasoned professional with 20 years of experience in financial analysis and management, reporting,
strategic planning and risk management for both private and public entities in the financial services sector. He previously
served as Vice President, Planning and Performance Measurement with Home Trust Company, a TSX 300 company with
more than $10 billion in mortgage assets under administration, where he was responsible for financial planning and
reporting. From 1993 to 2006, he held increasingly senior roles with Assuris, which administers an insolvency protection
plan for life insurance policyholders, including five years as Vice President, where he directed all investment activities,
oversaw technology-based productivity improvements and served as a key industry liaison.
Mr. Ehlers holds a Bachelor of Commerce degree in Finance and Computer Science from the University of Toronto. He
also holds the Chartered Accountant and Chartered Financial Analyst designations.
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Biographies
Sarah Borg-Olivier
Senior Vice President, Communications
Ms. Borg-Olivier is Senior Vice President, Communications for Capstone Infrastructure Corporation (TSX: CSE) where she
leads the company’s strategic investor relations, public and employee communications initiatives. She was formerly a Vice
President of Macquarie Infrastructure and Real Assets Canada Ltd.
Prior to joining Macquarie in 2006, Ms. Borg-Olivier was Director, Communications for a dual-listed biotechnology
company, where she increased the company’s U.S. investor base and executed a corporate rebranding. From 1999 to
2003, Ms. Borg-Olivier was Executive Vice President at The Barnes Organization, where she was responsible for providing
strategic investor relations counsel to a diverse client base spanning the retail, high technology, real estate, energy and
manufacturing sectors.
Among her volunteer activities, Ms. Borg-Olivier has led numerous corporate fundraising and volunteering initiatives with a
range of organizations, including Habitat for Humanity and United Way. Ms. Borg-Olivier holds an Honours Bachelor of
Arts in International Relations from the University of Toronto and has been a member of the Canadian Investor Relations
Institute (CIRI) since 2002. She currently serves on the CIRI Ontario Chapter Board of Directors and holds the Certified
Practitioner of Investor Relations (CPIR) designation.
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