Edmonton-based Capital Power Corp. has signed a memorandum of understanding with a data-centre developer in Alberta.Christinne Muschi/The Canadian Press
Alberta’s nascent data-centre industry got a boost from one of the province’s largest electricity producers as Capital Power Corp. CPX-T announced a long-term agreement to provide energy to an unnamed artificial-intelligence platform.
Edmonton-based Capital Power said at a Wednesday investor day presentation that it signed a binding memorandum of understanding to provide 250 megawatts of electricity to an “investment grade data-centre developer.”
Capital Power will be one of several companies generating electricity for what is expected to be a massive Alberta data-centre project, chief executive officer Avik Dey said in an interview. He said confidentiality agreements prevented him from disclosing the data-centre operator’s identity.
Capital Power disclosed that if the data-centre operator backs out of the MOU, it will pay the power producer a termination fee.
Large tech companies, often referred to as hyperscalers, have signalled they plan to invest in Canadian digital infrastructure. This week, Microsoft Corp. said it will spend $7.5-billion on domestic data-centre expansion, in part to meet customer concerns with data sovereignty.
Alberta bill to prioritize AI data centres that generate their own power
Meta Platforms Inc. META-Q, parent to Facebook, is expected to build a massive data-centre facility northeast of Edmonton and backed by Pembina Pipeline Corp. PPL-T and Kineticor Resource Corp., both based in Calgary, according to media reports.
Capital Power’s potential client is another data-centre provider, not Meta, according to a source with knowledge of the project. The Globe and Mail is not disclosing the source because they are not permitted to speak for the company.
Data centres are dependable customers for Capital Power, according to analysts, as the company has significant unused generation capacity at facilities such as its Genesee gas plant near Edmonton, converted from coal power last year at a cost of $1.6-billion.
“We view Capital Power’s existing fleet of new and efficient natural gas units as well positioned to benefit from increasing load related to generators,” analyst Robert Hope at Bank of Nova Scotia said in a report.
Alberta’s government has made building AI data centres an economic priority. Premier Danielle Smith wants to see $100-billon worth of facilities under construction within five years.
In November, the Premier and Prime Minister Mark Carney signed an MOU on energy that included policies such as the elimination of carbon emission caps to ensure producers such as Capital Power invest in natural-gas-powered plants.
Editorial: The right way to win the race for data centres
The agreement between Alberta and the federal government paved the way for Capital Power to lock in long-term, gas-fuelled generation contracts with the data-centre operator while continuing to serve existing customers, Mr. Dey said.
“We see an opportunity to grow our business as a result of structural growth in power demand driven by the AI infrastructure boom and the growing need for reliable and affordable energy,” he said.
On Wednesday, Capital Power also announced a US$3-billion partnership with New York-based Apollo Global Management Inc. APO-N to acquire natural gas facilities in the United States.
Capital Power plans to acquire existing power plants, linked to pipelines and transmission networks, then upgrade the facilities, Mr. Dey said. He said Apollo’s backing helps the Edmonton company move quickly when assets are put up for sale.
Apollo, one of the world’s largest investment funds with US$908-billion in assets under management, will contribute US$2.25-billion to the partnership while Capital Power will put in US$750-million and operate the facilities.
“We have a favourable view of the joint venture,” Scotiabank analyst Mr. Hope said. “It reduces the funding risk of mergers and acquisitions while providing Capital Power the ability to improve returns on its capital through management and performance fees.”
In the U.S., Capital Power owns eight large natural-gas-powered plants. Across North America, it runs 32 facilities generating 12,000 megawatts of electricity. It is a significant electricity producer in British Columbia, Alberta and Ontario.
At Wednesday’s investor day, Capital Power boosted its growth target for adjusted funds from operations to annual increases of 8 to 10 per cent, up from a 7-per-cent growth target over the past two years. The company projected its common share dividend will rise by between 2 and 4 per cent each year.
Capital Power traces its roots to the first coal-powered generator in Edmonton, switched on in 1891. The city owned the company, branded as EPCOR Utilities Inc., until 2009, when it was sold to investors through an initial public offering.
Mr. Dey joined the company as CEO in 2023 after working at the Canada Pension Plan Investment Board and at Calgary-based Nova Chemicals.
On Wednesday, Capital Power’s share price fell by 4.7 per cent to close at $62.45 on the Toronto Stock Exchange.