Capital Power (TSE:CPX) reported record third-quarter adjusted EBITDA as stronger contributions from its U.S. flexible generation fleet and Canadian operations more than offset weaker results at its La Paloma facility.
Adjusted EBITDA for the third quarter of 2026 rose to C$553 million, up C$76 million from the prior-year period. CFO Kevin MacIntosh said the result reflected the strength of the company’s diversified portfolio, with Hummel Station and Rolling Hills benefiting from stronger PJM power prices and summer demand.
Funds from operations, or AFFO, declined to C$306 million from the prior year despite the EBITDA increase. MacIntosh attributed the decline primarily to higher sustaining capital expenditures, including maintenance across Alberta assets, rotor replacements at Rolling Hills and Harquahala, and planned work at Hummel Station and Rolling Hills. Higher net finance expense and current income taxes also weighed on AFFO.
2026 Guidance Reaffirmed
For the first nine months of 2026, Capital Power generated C$1.308 billion in adjusted EBITDA, an increase of C$142 million year over year. AFFO for the period was C$788 million, down C$34 million, although results included C$174 million of Clean Technology Investment Tax Credits recognized during the second quarter for eligible Canadian renewable projects.
The company reaffirmed its full-year 2026 guidance ranges of C$1.565 billion to C$1.765 billion for adjusted EBITDA and C$890 million to C$1.10 billion for AFFO.
However, Capital Power raised its forecast for sustaining capital expenditures to between C$350 million and C$370 million, from a previous range of C$290 million to C$330 million. The higher outlook reflects unplanned outage work within the U.S. flexible generation fleet and the decision to move a planned outage from 2027 into the fourth quarter of 2026.
MacIntosh said a significant share of the additional costs relates to insurable events, and that expected insurance recoveries in 2026 and 2027, along with concessions from original equipment manufacturers, should “meaningfully offset” the cash effect.
Contracted Base and Embedded Growth
President and CEO Avik Dey said approximately 75% of the company’s EBITDA is supported by long-term contracts. Historically, those contracts have carried weighted average terms of roughly nine to 11 years, while 80% to 90% of contracted EBITDA is tied to investment-grade counterparties. More than 70% of contracted EBITDA is with utilities or system operators, he said.
The company has contracted nearly 2 gigawatts of capacity since 2025, including projects that have entered service, at what Dey described as materially higher prices and with an average contract life of about 15 years.
Capital Power sees up to C$1.25 billion of incremental annual adjusted EBITDA potential above its 2026 base. The estimate includes:
- C$400 million to C$550 million from re-contracting and uprates involving roughly 3 GW of capacity.
- C$375 million to C$700 million of merchant upside tied to Alberta and PJM power prices across approximately 5 GW of capacity.
Dey said the opportunity requires no new equity issuance, no new project debt and limited growth capital. The company has also hedged more than 40 terawatt-hours of power in PJM and Alberta for 2027 and later years.
Management said the majority of the C$1.25 billion opportunity is expected to be captured before or during 2030, though certain higher-priced recontracting arrangements begin after that year.
Development, M&A and Equipment Supply
Capital Power said it is advancing roughly 180 MW of solar capacity toward commercial operation in 2026 and 2027, while uprates at Arlington Valley and Hummel are expected to be completed in 2027. Portfolio generation totaled about 14.5 TWh during the quarter, up 8% year over year, with 60% produced by U.S. assets.
Dey said the company sees approximately 3 GW of capacity available for contracting as legacy agreements begin to expire in 2029, including potential upgrades at existing facilities. The company is also pursuing opportunities to develop and contract new generation at its existing sites for utilities and large-load customers.
On mergers and acquisitions, Dey characterized 2026 as a relative pause for single-asset transactions, citing limited assets coming to market during the second half of the year. He said Capital Power expects the market to become more active in 2027 and will focus on opportunities with embedded operational and commercial upside, particularly in PJM and potentially MISO and WECC.
The company does not have an imminent plan to begin a normal course issuer bid, MacIntosh said, although it continues to monitor the potential for share repurchases.
Genesee and Data-Center Demand
Dey highlighted the Genesee site in Alberta as a potential location for future generation and large-load development, citing its land base, access to transmission, water, pipeline infrastructure and fiber connections. He said Capital Power is in active discussions about potential power solutions for customers at the site as Alberta progresses its Phase 2 process for bringing new capacity forward.
Management expects further clarity on Alberta’s Phase 2 framework in the coming weeks or low single-digit number of months.
In PJM, Dey said the company continues to see bilateral contracting activity and is evaluating multiple opportunities. He said new capacity solutions for large customers could include combustion turbines, combined-cycle generation and storage, with storage also supporting grid reliability.
Capital Power increased its 2026 dividend by 2%, its 13th consecutive annual increase. MacIntosh said the rate was set at the low end of the company’s stated 2% to 4% annual dividend-growth range through 2030, preserving flexibility to fund growth opportunities.
About Capital Power (TSE:CPX)
Capital Power (TSX: CPX) is a growth-oriented power producer with approximately 12 GW of power generation at 32 facilities, plus battery energy storage across North America. We prioritize safely delivering reliable and affordable power communities can depend on, building lower-carbon power systems, and creating balanced solutions for our energy future.
