Capital Power (TSX:CPX) Is Down 5.4% After Announcing US$3 Billion U.S. Gas Venture Plan

• Earlier this month, Capital Power announced it had signed a memorandum of understanding with Apollo Funds to create an investment partnership targeting up to US$3.00 billion of equity for acquiring merchant U.S. natural gas generation assets, with Apollo Funds contributing up to US$2.25 billion and Capital Power up to US$750 million.
• The arrangement would see Capital Power operate any acquired plants, earn management and performance fees, and apply its operating platform to improve asset performance and potential returns while retaining a 25% to 50% working interest in each deal.
• We’ll now explore how this planned US$3.00 billion U.S. natural gas acquisition partnership could influence Capital Power’s existing investment narrative.

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Capital Power Investment Narrative Recap

To own Capital Power, you need to believe in its ability to grow cash flows from a diversified North American generation fleet while keeping balance sheet risk in check. The Apollo Funds MOU could reinforce the near term growth catalyst of earnings expansion from U.S. merchant markets, but it also adds execution and capital allocation risk if large gas acquisitions strain financing or underperform expectations.

The recent York and Goreway battery storage projects entering long term contracts with Ontario’s IESO are a useful contrast to the Apollo partnership, highlighting Capital Power’s mix of contracted renewables and merchant thermal growth. While the batteries add more predictable, contracted EBITDA, the U.S. gas initiative leans into merchant exposure where power price volatility, financing costs, and asset performance will matter far more for shareholders.

Yet even with this growth push, investors should be aware that interest coverage remains tight and...

Read the full narrative on Capital Power (it's free!)

Capital Power's narrative projects CA$4.1 billion revenue and CA$521.7 million earnings by 2028. This requires 5.0% yearly revenue growth and a CA$92.3 million earnings decrease from CA$614.0 million today.

Uncover how Capital Power's forecasts yield a CA$75.46 fair value, a 22% upside to its current price.

Exploring Other Perspectives

Three members of the Simply Wall St Community value Capital Power between CA$57.14 and CA$197.99, underscoring how far apart individual views can be. Against that spread, the new Apollo partnership’s U.S. merchant gas focus highlights how differently investors may weigh growth potential against added earnings volatility and financing risk, so it is worth comparing several independent viewpoints before forming your own.

Explore 3 other fair value estimates on Capital Power - why the stock might be worth over 3x more than the current price!

Build Your Own Capital Power Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Capital Power research is our analysis highlighting 3 key rewards and 4 important warning signs that could impact your investment decision.
• Our free Capital Power research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Capital Power's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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