EPCOR to launch independent power generation business



    
    /NOT FOR DISTRIBUTION TO US NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE
    UNITED STATES/
    

    EDMONTON, May 8 /CNW/ - EPCOR Utilities Inc. (EPCOR) today announced its
plans to create Capital Power Corporation, a power generation company that
will be permanently headquartered in Edmonton.
    Capital Power Corporation and its subsidiaries (Capital Power) will
acquire all the power generation assets and related operations of EPCOR,
including its 30.6% interest in EPCOR Power LP, and be responsible for a
portfolio of approximately 3,300 megawatts (MW) of owned and/or operated power
generation capacity at 31 facilities in Canada and the United States. It will
fund its development by directly accessing capital markets as required.
    EPCOR will continue to provide regulated power transmission and
distribution, water, and wastewater services to more than one million
customers in Western Canada, including Edmonton.
    Capital Power plans to develop and build power plants across North
America and continue the commercialization of near-zero emission power
generation technologies, including Integrated Gasification Combined Cycle
(IGCC) and Amine Scrubbing.
    EPCOR may eventually sell all or a substantial portion of its ownership
interest, subject to market conditions, its requirements for capital and other
circumstances that may arise in the future, with proceeds from share sales to
be reinvested in EPCOR's growing utility infrastructure businesses, including
water, wastewater, power transmission and power distribution.
    As a first step, EPCOR is planning an Initial Public Offering of common
shares of Capital Power representing approximately 25% of the power generation
business. A preliminary prospectus for the offering is expected to be filed
with securities regulators in Canada.
    "This is great news. We are here today as a result of our success in
power generation and water development. Over the past ten years, EPCOR has
grown from operating five power and water plants to more than 50, and both
lines of business are continuing to develop growth opportunities that require
significant capital," said Don Lowry, who will remain EPCOR's President & CEO
following the transaction.
    "The launch of Capital Power will create an independent power generation
business headquartered in Edmonton," Lowry continued. "It also enables us to
focus on EPCOR's growth as a leading developer and operator of regulated
water, wastewater and wires infrastructure. This initiative is a natural
evolution that creates two strong stand alone businesses and allows both to
continue to grow and generate shareholder value."
    On April 17, 2009, EPCOR's sole shareholder, the City of Edmonton,
delegated to EPCOR's Board of Directors the authority to establish Capital
Power. As a result of this decision, Edmonton will have another head office
and become home to two significant enterprises, providing the citizens of
Edmonton with enhanced long-term employment opportunities.
    EPCOR's regulated power and water customers will see no changes in
service or costs as a result of this restructuring, and the City of Edmonton's
access to electricity remains secured by long-term contracts.
    EPCOR Executive Vice President and Chief Operating Officer Brian Vaasjo
will be named President and CEO of Capital Power. He will be joined at Capital
Power by approximately 1,000 of EPCOR's 3,000 employees. Capital Power will be
governed by a majority independent Board of Directors.
    "We are committed to building one of North America's most respected,
reliable and competitive power generators," said Vaasjo. "Capital Power will
have an experienced management and operating team, and a track record of
operating a diverse portfolio of power technologies, including coal, natural
gas, and renewables."
    EPCOR anticipates that the closing of the initial public offering of
Capital Power shares will be completed in mid-2009, and has engaged TD
Securities Inc. and Goldman Sachs Canada Inc. to act as joint-bookrunners.
Employees will move to Capital Power at closing, with transition arrangements
in place between the companies to ensure continuity of operations and
services.

    This news release contains certain statements that constitute
forward-looking information within the meaning of applicable securities laws
("forward-looking statements"). Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of EPCOR, or developments in EPCOR's
business or in its industry, to differ materially from the plans,
expectations, forecasts, projections, estimates or intentions expressed or
implied by such forward-looking statements. Forward-looking statements include
all disclosure regarding possible events, conditions or results of operations
that is based on assumptions about future economic conditions and courses of
action. Forward-looking statements may also include, without limitation, any
statement relating to future events, conditions or circumstances. EPCOR
cautions you not to place undue reliance upon any such forward-looking
statements, which speak only as of the date they are made. Forward-looking
statements relate to, among other things: the pursuit and timing of an initial
public offering of Capital Power; the completion of the related corporate
reorganization to establish Capital Power; structure and terms of the proposed
transaction to establish, fund and govern Capital Power; the assets to be held
and projects to be administered by Capital Power following completion of the
corporate reorganization; sources of funding with respect to developments by
Capital Power; Capital Power's plans with respect to developing and building
power plants; EPCOR's intention to divest its interest in Capital Power over
time; EPCOR's use of proceeds from the sale of Capital Power shares; EPCOR
continuing to provide other non-power generation services; services or costs
to be provided to customers of EPCOR; the City of Edmonton's access to
electricity; the identity of directors or officers of Capital Power; EPCOR's
entitlement to nominate directors to the board of Capital Power; the level of
employment at EPCOR or Capital Power and in Edmonton; maintenance of credit
ratings at certain levels, the credit risk profile of EPCOR and impacts on
EPCOR's lenders; EPCOR's and Capital Power's financial strength; terms of
future debt; Capital Power's anticipated dividend policy; the duration of the
location of Capital Power's head office; changes in operations of the power
generation business to be transferred by EPCOR to Capital Power; growth of
EPCOR's and Capital Power's businesses; regulatory environment; EPCOR's
objectives to provide a stable dividend to the City of Edmonton; ongoing
ownership of EPCOR by the City of Edmonton; collective agreements and union
relations; construction, tenancy and name of EPCOR Tower; supply contracts in
support of the power generation business; decommissioning of the Rossdale
Integrated Utility site; and the ability of Edmontonians to participate in the
initial public offering. These forward-looking statements are based on certain
assumptions and analysis made by EPCOR in light of its experience and
perception of historical trends, current conditions and expected future
developments and other factors it believes are appropriate. Whether actual
results, performance or achievements will conform to EPCOR's expectations and
predictions is subject to a number of known and unknown risks and
uncertainties that could cause actual results and experience to differ
materially from EPCOR's expectations. The material factors and assumptions
underlying these forward-looking statements, and such risks and uncertainties
include, but are not limited to: unanticipated delays in completing the
corporate reorganization; the decisions of the regulatory bodies with
oversight over EPCOR's business; the decisions of the Edmonton City Council;
EPCOR's assessment of commodity and power markets; EPCOR's assessment of the
markets and regulatory environments in which it operates; general capital
markets conditions; operation of EPCOR's facilities; power plant availability
and performance; unanticipated maintenance and other expenditures;
availability and price of energy and other commodities; demand for
electricity; electricity load settlement; regulatory and government decisions
including changes to environmental, financial reporting and tax legislation;
currently applicable and proposed tax laws will not change and will be
implemented; proposed legislation or changes to legislation will be
implemented as proposed and as scheduled; weather and economic conditions;
competitive pressures; construction; availability of labour and management
resources; performance of counterparties, partners, contractors and suppliers
in fulfilling their obligations; an extended period of economic decline;
unanticipated delays in construction on projects; increased extraction costs
for coal; availability and cost of financing; foreign exchange rates;
management's analysis of applicable tax legislation; proposed environmental
regulations will be implemented; interest rates, related credit spreads and
mortality rates for the new notes exchanged for ABCP and the market for such
new notes; ability to implement strategic initiatives that will yield the
expected benefits; and other risks and uncertainties detailed from time to
time in EPCOR's filings with Canadian provincial securities regulators,
including EPCOR's 2008 Annual Information Form dated March 13, 2009, its
annual audited consolidated financial statements as at and for the years ended
December 31, 2008 and 2007 and associated management discussion and analysis,
each available at www.sedar.com. Forward-looking statements are based on
management's current plans, estimates, projections, beliefs and opinions, and
EPCOR disclaims any intention and assumes no obligation to update any
forward-looking statements.

    This news release does not constitute an offer to sell securities, nor is
it a solicitation of an offer to buy securities, in any jurisdiction. All
sales will be made through registered securities dealers in jurisdictions
where the offering has been qualified for distribution. This news release does
not constitute an offer of securities for sale in the United States and the
securities referred to in this news release may not be offered or sold in the
United States absent registration or any exemption from registration.

    About EPCOR

    EPCOR's wholly-owned subsidiaries build, own and operate power plants,
electrical transmission and distribution networks, water and wastewater
treatment facilities and infrastructure in North America. EPCOR, headquartered
in Edmonton, Alberta, has been named one of Canada's Top 100 employers for
nine consecutive years, and was selected one of Canada's 10 Most
Earth-Friendly Employers in 2008.

    
    The following backgrounders and visual materials are included with this
    release:

    Backgrounder No. 1: Power Generation Business
    Backgrounder No. 2: EPCOR Profile
    Backgrounder No. 3: General Questions & Answers
    Backgrounder No. 4: Edmonton Questions & Answer
    Backgrounder No. 5: Simplified View of the Planned Corporate Structure
    Visuals attached: Capital Power Logo


    BACKGROUNDER No. 1

    Power Generation Business

    EPCOR's power generation business is to be transferred to Capital Power
following its establishment later in 2009. The information below gives effect
to such a transfer.

    Profile
    -------
    -  Headquartered in Edmonton, Alberta, Capital Power has interests in
       31 facilities across North America with approximately 3,300 MW of
       owned and/or operated installed power generation capacity, 470 MW of
       capacity owned through power purchase agreements (PPAs) and 448 MW of
       owned capacity under construction.
    -  Drawing on a 118 year heritage of innovation and reliability, Capital
       Power has experience developing, acquiring, operating and optimizing
       power generation from a diverse range of energy sources.
    -  Capital Power has a 30.6% equity interest in the EPCOR Power L.P.
       (TSX:EP.UN), and as Manager is responsible for operating its 20 U.S.
       and Canadian generating plants;
    -  Capital Power will focus on maintaining financial strength and
       flexibility, creating value from long-term contracts and portfolio
       optimization, and seeking to maintain an investment-grade credit
       rating and a stable dividend flow to shareholders.
    -  Capital Power's existing portfolio of approximately 3,300 MW is
       relatively young, with a capacity weighted average facility age of
       13 years. The Company's portfolio is diversified across three
       provinces and seven U.S. states.
    -  Capital Power's operating performance is exemplified by its
       facilities' three year average availability of 94%. Solomon Associates
       has consistently ranked the Genesee plant in the top quartile of its
       peer group on the measure of forced outages.
    -  Approximately 74% of Capital Power's generation capacity is sold
       forward through long-term contracts or PPAs, with an 11-year capacity
       weighted average remaining PPA life providing stable cash flows. In
       addition, 96% of the Company's PPA counterparties have
       investment-grade credit ratings, helping to limit the Company's
       exposure to counterparty risk.
    -  Capital Power has developed, constructed, and/or operated
       environmentally responsible power technologies including supercritical
       coal technology, combined heat and power, highly-efficient natural
       gas turbines used for both simple and combined cycle plants, recycled
       energy sources, and a range of renewable energy facilities relying on
       fuels such as hydro, biomass, wind, and landfill natural gas.
    -  Capital Power has constructed 6 facilities since 2002, and is
       currently managing construction at both the 200 MW Clover Bar Energy
       Centre expansion and the 495 MW Keephills 3 facility.

    Key Facts
    ---------
    -  Headquartered in Edmonton
    -  Approximately 1,000 employees
    -  Assets: Approximately $5 billion based
    -  Operations
         -  3,300 MW of owned and/or operated installed power generation
            capacity at 31 North American facilities
         -  94% power plant availability (3 year average availability)
         -  13,440 GWh power generated (2008)

    Ownership and Governance
    ------------------------
    -  EPCOR is planning an Initial Public Offering of common shares of
       Capital Power representing approximately 25% of the power generation
       business. EPCOR, which may eventually sell all or a substantial
       portion of its ownership interest, subject to market conditions, its
       requirements for capital and other circumstances that may arise in
       the future.
    -  Capital Power will be governed by a majority independent Board of
       Directors. EPCOR will be entitled to four nominees on the Board,
       which is expected to consist of at least eleven individuals.


    BACKGROUNDER No. 2

    EPCOR Profile

    Vision
    ------
    EPCOR's vision is to become a premier essential services utility in North
America, by growing its water, wastewater and wires infrastructure business.

    Profile
    -------
    
    EPCOR builds, owns and operates water, wastewater, electricity
transmission and electricity distribution infrastructure, providing regulated
power and water services to more than 1 million customers in Western Canada.
    EPCOR grows through acquisitions, new developments and the optimization
of existing operations. EPCOR is a leader in the development of Public Private
Partnerships, providing public sector clients with access to EPCOR's expertise
in innovative design, construction and technology.

    
    Key Facts
    ---------
    -  Headquartered in Edmonton
    -  Approximately 2,000 employees
    -  Operations
         -  More than 1 million customers
         -  7,215 GWh power distributed (2008)
         -  9,445 GWh power retailed (2008)
         -  125,307 Megalitres water treated in Edmonton Capital
            Region (2008)
         -  Owns 4 and operates 19 water facilities; operates 23 wastewater
            facilities in Alberta and British Columbia (current).
         -  Distributes 14% of Alberta's power consumption through 5,285 km
            of distribution and transmission lines (2008).

    Ownership and Governance
    ------------------------
    -  Wholly-owned by the City of Edmonton.
    -  Nationally-recognized for the quality of its corporate governance.
    -  Governed by a shareholder-appointed Board of Directors. No employees
       or elected representatives of the City on the Board.
    -  Board led by an independent Chairman; 12 of the 13 Directors are
       independent.


    BACKGROUNDER No. 3

    GENERAL QUESTIONS & ANSWERS

    1.  What is EPCOR's plan?

        EPCOR plans to create Capital Power, a power generation business to
        be permanently headquartered in Edmonton.

        Capital Power plans to acquire all the power generation assets and
        related operations of EPCOR, including its 30.6% interest in EPCOR
        Power LP, and be responsible for operating a portfolio of
        approximately 3,300 MW of owned and/or operated installed power
        generation capacity across North America.

        As a first step, EPCOR is planning an initial public offering of
        common shares of Capital Power, representing approximately 25% of the
        power generation business. EPCOR may eventually sell all or a
        substantial portion of its ownership interest, subject to market
        conditions, its requirements for capital and other circumstances that
        may arise in the future, with proceeds from subsequent share sales to
        be reinvested in EPCOR's growing infrastructure businesses.

        As a result of the plan, Edmonton will become home to two significant
        enterprises, one focused on power generation and the other on utility
        infrastructure and operations. A "golden share" will ensure that
        Capital Power remains headquartered in Edmonton.

    2.  Why has EPCOR decided to create Capital Power?

        The plan is the result of EPCOR's success in power generation and
        water development. Over the past ten years, EPCOR has grown from
        operating five power and water plants to more than 50. Both lines of
        business require significant additional capital to be able to realize
        opportunities.

        As EPCOR reduces its ownership interest in Capital Power over time,
        funds from the sale of Capital Power will be reinvested in EPCOR's
        regulated and contracted utility operations. The approach will make
        Edmonton home to two significant enterprises, one focused on power
        generation and the other on infrastructure.

    3.  Why would EPCOR be reducing its ownership over time?

        EPCOR's long-term investment focus is going to be on growth in
        regulated and contracted utility infrastructure, such as water,
        wastewater, power transmission and power distribution.

    4.  Why did EPCOR choose an IPO rather than another way of selling an
        interest in Capital Power?

        The IPO approach best matches EPCOR's interests, and enables it to
        permanently establish Edmonton as Capital Power's head office and
        guarantee that Capital Power maintains a minimum level of employment
        in Edmonton for a 25-year period.

    5.  What happens if this IPO can't be completed due to market conditions?

        We would assess our options at that time.

    6.  Are all of EPCOR's power generating facilities to be owned by Capital
        Power?

        Yes, all currently operating plants and those under construction will
        become part of Capital Power. The plan is that Capital Power will
        focus on power generation and related activities, while EPCOR will
        continue to focus on its 'wires and water' utility business.

    7.  Who will be running the new company?

        The CEO of the new company will be Brian Vaasjo. Brian is currently
        the Chief Operating Officer of EPCOR and President of EPCOR Power
        Services, the manager of the EPCOR Power LP. He has extensive history
        with the assets and public company experience.

    8.  How does the creation of Capital Power affect the status and
        management of the EPCOR Power LP, which is a publicly traded entity
        in its own right?

        The management responsibilities and financial interests move from
        EPCOR to Capital Power, but this change has no effect on status and
        management of the EPCOR Power LP. What is changing is the ownership
        of EPCOR's power-generating businesses, including:
        -  its owned and operated facilities, facilities under construction
           and participation in future projects;
        -  its PPAs; and,
        -  its 30.6 per cent interest in the EPCOR Power LP.

    9.  What will be the effect on local communities in which your facilities
        are located?

        We expect there to be no change in operations.

    10. What is Capital Power's anticipated head-count?

        We expect to begin operations with approximately 1,000 personnel,
        virtually all of whom will come from EPCOR.

    11. What is the impact on investors who hold bond, commercial paper or
        credit facility investments with EPCOR?

        The intent is to ensure any existing EPCOR bond holders' positions
        are the same as they were before the transaction. There are no
        expected changes to the credit ratings of EPCOR. This expectation is
        subject to the ratings service review. The credit risk profile of
        EPCOR is expected to improve over time.

    12. Does any debt get transferred to Capital Power?

        No third party debt is transferred to Capital Power. The intent is
        to establish back to back debt at terms equivalent to existing
        obligations. The intent is to ensure any existing bond holders'
        positions are the same as they were before the transaction.


    BACKGROUNDER No. 4:

    EDMONTON QUESTIONS & ANSWERS

    1.  Are there any impacts to customer rates or services provided by
        EPCOR?

        There is no impact to customer power, water or wastewater rates and
        service levels, and there is no change in how rates and service
        levels are regulated as a result of this reorganization.
        -  The City of Edmonton continues to set Edmonton's water and
           wastewater rates and to regulate the local water utility;
        -  The Province of Alberta continues to regulate rates and service
           levels for EPCOR's power distribution customers and regulated
           electricity (RRO) retail customers.

        Edmontonians get their power from Alberta's interconnected power
        grid and this will not change. EPCOR will continue to distribute
        power to Edmontonians through its wires business, and be the
        electricity retailer in Edmonton and the Fortis service territory
        for the Regulated Rate Option.

    2.  What is the anticipated impact on the EPCOR dividend to the City of
        Edmonton?

        EPCOR paid a dividend of about $130 million to the City of Edmonton
        in 2008. The plan is to maintain the existing dividend, and based on
        EPCOR's commercial success contribute to its further growth.

    3.  How will the "golden share" that keeps the power company in Edmonton
        work?

        Capital Power will initially create three classes of shares, one of
        which will be a "Golden Share" to be issued only to EPCOR. The Golden
        Share will be non-voting except with respect to the right to veto any
        proposal to amend Capital Power's articles of incorporation to allow
        its head office to move to another location from Edmonton. The City
        will also have a veto over any head office location change.

    4.  How will the creation of Capital Power affect employment in Edmonton?

        There will be no substantive change to employment in Edmonton. The
        plan supports long-term growth in high-quality employment at both
        Capital Power and EPCOR, as both companies implement their growth
        plans. As the two companies grow, the expectation is that additional
        good jobs will be created.

        That said, as the two companies are separated and reorganized along
        functional lines, some individuals may be affected based on how their
        skills, abilities, experience and performance levels match the
        short- and long-term needs of the two companies.

        In addition, EPCOR and Capital Power will honour the terms of all
        existing collective agreements and work collaboratively with union
        representatives to address any issues and/or concerns.

    5.  How will this decision affect the EPCOR Tower, which is under
        construction?

        There will be no impact. Capital Power will become a tenant in the
        new building, and the building will continue to be called EPCOR
        Tower.

    6.  How will this decision affect EPCOR's suppliers?

        Capital Power will honour the terms of all contracts for goods and
        services that support the power generation businesses.

    7.  Is the power generation portion of the Rossdale Integrated Utility
        site part of the transaction?

        No. The Rossdale power generation site is being decommissioned. The
        remainder of the Rossdale site is still in use by the water and wires
        utility. The entire Rossdale site will remain with EPCOR, and EPCOR
        will carry out the decommissioning, while Capital Power will carry
        the liability for decommissioning.

    8.  Will there be any opportunities for Edmonton residents to participate
        in an IPO?

        The company has requested that the Underwriters make arrangements to
        facilitate participation in the Offering by residents of the City of
        Edmonton, including by endeavouring to reserve some portion of the
        Common Shares offered under the prospectus for sale to such
        residents.


    BACKGROUNDER No. 5:

    Simplified View of the Planned Corporate Structure

    To see this graphic, please follow the link:
    http://files.newswire.ca/805/EPCORStructure.pdf


    ATTACHED VISUALS:

    PLANNED VISUAL IDENTITY FOR CAPITAL POWER CORPORATION

    The logo below will be available to media for download at Canada Newswire
(www.newswire.ca), and is available upon request to the contacts listed in the
news release. The Pantone Matching System colour reference numbers are:
    -  For coated stock: Blue 7545c, Green 3975c, and Cool Grey 8c;
    -  For uncoated stock: Blue 547u, Green 3975u, Grey 424u.


    /NOTE TO PHOTO EDITORS: A photo accompanying this release is available on
    the CNW Photo Network and archived at http://photos.newswire.ca.
    Additional archived images are also available on the CNW Photo Archive
    website at http://photos.newswire.ca. Images are free to accredited
    members of the media/
    





For further information:

For further information: Toronto and National Media: Derek Henderson,
Bryan Mills Iradesso, (416) 447-4740 Ext. 232, dhenderson@bmir.com; Alberta
Media: Tim Le Riche, EPCOR, (780) 969-8238, tleriche@epcor.ca

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