CANADIAN COMPANY REPORT 7
CanadianCompany Report: The Capstone Infrastructure Corporation
Thelisted Canadian company under consideration is the CapstoneInfrastructure Corporation (CIC). It has a long history forming alink between investors and asset projects. The company operates andowns a variety of infrastructures such as power plants, heatingplants, water distribution utilities in Canada, The United Kingdom,and Sweden. Currently CIC’s book value of all the assets theycurrently own and operate is $1.1 billion. The figures on the TorontoStock market indicate the company has a market capitalization valueof $342 million price earning of 7.95, the most recent dividend paidto investors was $0.30, a divided yield of 8.17%, a 7.56% return oninvestment, a 14. 35% return on equity, and total revenue of $367million. The company’s intrinsic value ranges from $4.0 to $6.5 ofthe existing amount of revenue streams remain the same.
Mostof CIC’s income comes from operating power plants in its primarymarket in Canada. Apart from operating a gas co-generation plant witha capacity of 156 MWe in Cardinal, Ontario, they also generate powerfrom alternative sources such as waste biomass, hydro, solar, andwind in the same plant. CIC increased its market share of the energymarket by buying more shares in the Renewable Energy Developers, Inc. The all-share agreement was worth $70 million causing an increase ofthe company’s wind plants by 95 MW and development projects that itwill qualify to contract by 79 MW. CIC runs their power plantsthrough fixed-price power purchase agreements (PPAs) in which theoff-taker has the contractual obligation to buy all the powergenerated. The company acquired over half of the ownership of BristolWater, a licensed British company that supplies water to over 1.2million people that reside in the city of Bristol, England. TheCompany also owns a third of Värmevärden, a company that runsheating facilities in seven of Sweden’s districts with a totalcapacity of 639 MWth.
CapstoneInfrastructure Corporation’s core business
CIC’score business is to generate energy and sell it through powerpurchase agreements. The number of power generation of plants thecompany operates is more than the utility plants. The power plantsthat CIC operates to generate power for sale include:
TheCardinal Gas Co-generation Plant- Itbegan operating in 1994. According to the Company’s website, theplant uses sustainable technology that is responsive to environmentalconcerns to generate electricity from natural gas using Siemens gasturbines. CIC sells the electricity generated from the Cardinal plantto the Ontario Electricity Financial Corporation through a PPA. Thesteam produced from the plant is sold to Ingredion Canada Company, acompany that refines corn, at contracted rates. Ingredion is near CICand, therefore, there are minimal operational costs to supply thesteam to its facilities. In 2012, CIC announced that the CardinalPlant’s Siemens turbines attained the highest level of operationalhours: 150, 000 hours, which they attributed to preventivemaintenance.
TheErie Shows Wind Farm-The wind farm is located north of Lake Erie in Ontario. It has 66wind turbines of the General Electric design and generators. Theelectric energy produced from the wind farm is collected anddistributed by 34.5 Kv lines that in turn takes it to Port BurwellSubstation, where the power voltage in increased so that it can bedistributed different customers on the regional grid. The OntarioPower Authority is the final buyer of all the power produced from theErie shows through a power purchasing agreement with CIC. The Eriewind Farm power generation contributes 4.8 per cent of the total windpower capacity of Ontario.
TheSechelt hydro Power facility-The facility is in Sechelt Creek, an Alpine smooth river flow to thePacific Ocean. The facility has Pelton turbines and generator sets.The facility converts the fast-moving water to electric energy thatis then transmitted to BC hydro grid through a 300-meter transmissionline. In 2005, the facility was recognized by the International HydroAssociation by being awarded the prestigious Blue Planet Award forthe efforts by CIC to ensure that power generation at the plant isenvironmentally sustainable.
TheWhitecourt Power Facility-Located in Alberta, the Whitecourt power facility is the emblem ofCIC’s investment in biomass power generation. The facility has asteam turbine and a generator that are converts waste from wood toelectric power. The wood waste is burned to produce very hot gasesthat generate the steam to turn the turbine and generator. TheWhitecourt biogas facility was the first power generation station toget the federal government’s EcoLogo certification program , whichis given to power generation facilities as a recognition of theircompliance with environmental standards and practices.
TheAmherstburg Solar Park-The Amherstburg solar park is one of CIC’s mega solar projects thatuses photovoltaic technology to generate 20 MW power from solarenergy. It has a single-axis Tracker T20 proprietary system that isdesigned to collect and store solar energy up to 30 per cent moreefficiently than the normal solar installations in Canada.
Thepower generations plants discussed above are not all of CIC’s powerplants, but the main ones in each category. The company also providesthe utility services, but the generation of electric power usingdifferent modern technologies is their core business.
TheCompany’s main competitors
CIChas many top competitors on the local and international market. Theinteresting aspect of the company’s competitors is that most ofthem have the capacity to reach the same market size as it hasmanaged to growth over the years. CIC’s main competitors include:
Brookfield Renewable Energy Partners LP-It has market capitalization of $459 million and a dividend yield of 6.2 per cent. It is a strong competitor in the North American market.
Northland Power Inc- North Power is mainly a competitor for the local market with a great potential for growth. It has a market capitalization value of CAD 3,540 and a divided yield of 1.3 per cent.
Algonquin Power & Utilities Corporation- the Company is also CIC’s major competitor on the local market because it deals in nearly all the products that it offers on the market. It also operates a number of power plants that contribute immensely to the energy grid.
TransAlta Renewables Inc. – TransAlta has a huge presence in the Canadian energy market. The company is currently among the most recognized companies in providing renewable energy and also generating energy through sustainable technologies.
Pattern Energy Group Inc. – Pattern Energy has a formidable market presence in North America. As far as providing sustainable energy solutions is concerned, Pattern Energy is a strong competitor to CIC.
Innergex Renewable Energy Inc- Innergex is generates energy using sustainble technologies like CIC. Market analysts consider Innergex as one of CIC strong competitors in the energy sector on the local market.
Abusiness initiative that undertaken by the company within the lastten years
Forthe last ten years, Capstone has been involved in expanding itsinvestment in the Bristol water. By 2012, Capstone had invested up to50 per cent equity in the water utility after meeting regulatoryrequirements. Bristol Company treats, stores, and distributes waterto the residents of Bristol and its environs. It is an unregulatedcompany that supplies water in England and whales. Since then, thecompany has registered impressive results in operational performanceand has a lot of potential to expand in the market. The mainobjectives that CIC intended to achieve by investing in Bristolwaters include:
Diversify its product base- Bristol operates is in a market where it is allowed to be operate as an unregulated monopoly. Thus, the company can recover its operating costs and increase the return on investments.
Expand its market reach to Western Europe- Bristol waters represents one of the major involvements of CIC in the utilities sector. CIC is traditionally known for energy generation in Canada. Exploiting the utilities market in England and Whales was a strategic decision since the company has increased the value of its capital as well as its profitability.
Increase its capital value-Investing in the Bristol Water company has turned out to be a strategic way of improving the company’s value capital due to high returns at a low cost than investing in the traditional energy industry. The company’s productivity also improved over the years as shareholders continue to earn more dividends from company investments.
CapstoneInfrastructure (2016). Available athttp://www.capstoneinfrastructure.com
CapstoneInfrastructure (2016). Solar:Amherstburg Solar Park.Available athttp://www.capstoneinfrastructure.com/OurBusiness/PowerInfrastructure/OperatingFacilities/Solar/AmherstburgSolarPark
CapstoneInfrastructure (2016). CapstoneInfrastructure Corp.Available athttp://www.rotmanassetmanagement.com/capstone-infrastructure-corp/