Capital Power's High-Stakes Bet on Gas and AI

EDMONTON, Alberta – December 10, 2025 – In a bold declaration of its future strategy, Capital Power Corporation has unveiled a dual-pronged offensive aimed at dominating two of the most critical—and seemingly contradictory—fronts in the North American energy market. During its 2025 Investor Day, the company announced a monumental US$3 billion partnership with Apollo Funds to acquire U.S. natural gas power plants, while simultaneously positioning itself as the energy backbone for Alberta’s burgeoning artificial intelligence sector.

This two-track strategy represents a calculated gamble that the future of energy isn't a simple switch from brown to green, but a complex integration where traditional reliability powers next-generation demand. By doubling down on natural gas, Capital Power is betting that dispatchable, fossil-fueled power will remain indispensable for decades, even as it moves to capture the explosive growth from the world’s most advanced technologies.

A Multi-Billion Dollar Bet on Reliability

At the heart of the company’s growth plan is a memorandum of understanding with private equity giant Apollo Global Management. The agreement outlines a US$3 billion investment partnership to hunt for and acquire merchant natural gas generation assets across the United States. Under the proposed terms, Apollo Funds would commit up to US$2.25 billion, with Capital Power contributing US$750 million while taking an operating role and a 25% to 50% working interest in each acquisition.

This move is far more than a simple expansion; it is a strategic maneuver to capitalize on market dynamics where reliability commands a premium. While renewable energy sources like wind and solar expand, their intermittent nature creates grid instability and a profound need for on-demand power. Natural gas plants, particularly efficient combined-cycle facilities, are uniquely positioned to fill this gap, providing the flexible generation necessary to balance the grid and prevent blackouts.

"We have a long-standing track-record of delivering industry leading returns from natural gas fueled power generation assets, and an ability to acquire and optimize assets better than any other North American independent power producer,” stated Avik Dey, President and Chief Executive Officer of Capital Power, in the announcement.

The partnership structure is telling. Apollo, a seasoned infrastructure investor with a history of deploying capital alongside expert operators, provides the financial muscle. This follows a familiar playbook for the firm, which has previously engaged in similar ventures, such as its 2018 acquisition of a billion-dollar energy equity portfolio from GE Capital. By entrusting operations and management to Capital Power in exchange for fees, Apollo is betting on the company’s proven technical and commercial expertise to unlock value from underperforming or strategically located assets in the complex U.S. merchant power markets. This symbiotic relationship aims to accelerate Capital Power’s U.S. growth far beyond what it could achieve alone.

Powering the AI Revolution

While the Apollo deal targets the U.S., Capital Power’s second major initiative strikes closer to its Alberta home. The company revealed a binding MOU to negotiate a long-term Electricity Supply Agreement (ESA) with an unnamed, investment-grade data center developer. The 10+ year deal would supply 250 megawatts of power starting in 2028, specifically to fuel the province’s growing AI infrastructure.

This is not a standard industrial power contract. The energy appetite of artificial intelligence is voracious and unrelenting. Training large AI models and running data centers requires a massive, constant, and highly reliable supply of electricity—a demand profile that presents both a challenge and a golden opportunity for power producers. Capital Power is positioning its portfolio of Alberta-based generation, particularly its newly gas-converted Genesee Generating Station, as the ideal solution. Company leadership has even floated the idea that the Genesee site could host a hyper-scale data center of up to 1,000 megawatts, transforming it into a critical hub for North America's digital infrastructure.

This move cleverly leverages Alberta’s emerging status as a data center hotspot, a reputation bolstered by its cool climate, robust fiber optic networks, and an increasingly favorable regulatory environment for natural gas generation. By securing a foundational role in powering the AI boom, Capital Power is tapping into a structural, long-term demand driver that is largely insulated from broader economic cycles.

The Gas Dilemma and the Execution Challenge

Despite the clear strategic rationale, Capital Power’s aggressive pivot is not without significant risks and contradictions. The US$3 billion investment in natural gas assets places the company squarely in the crosshairs of the ESG movement and the global push for decarbonization. In an era where investors increasingly scrutinize fossil fuel exposure, doubling down on gas—even as a "bridge fuel"—challenges the company's own "Powering Change by Changing Power™" tagline. This strategy will test the market's willingness to prioritize grid reliability and the energy needs of the digital economy over a faster transition to zero-emission sources.

Moreover, the ambitious 2030 targets accompanying these announcements—including a 50% increase in U.S. capacity, 13-15% annual Total Shareholder Return, and 8-10% annual growth in Adjusted Funds From Operations (AFFO) per share—set a very high bar for execution. Achieving these goals hinges almost entirely on the successful consummation and integration of the Apollo partnership and the effective management of a much larger, more complex portfolio of merchant assets.

While Capital Power has a credible track record, including its recent successful joint acquisition of the Harquahala facility with BlackRock, the scale of the new ambition is unprecedented for the company. The volatile nature of merchant power prices, regulatory uncertainties in various U.S. markets, and the inherent risks of a large-scale acquisition spree present formidable hurdles.

Ultimately, Capital Power has laid out a clear, if audacious, vision. It aims to be the indispensable provider of reliable power in an increasingly electrified and data-driven world. The success of this dual strategy—marrying the steadfast dependability of natural gas with the insatiable energy demands of artificial intelligence—will determine whether the company can successfully navigate the turbulent energy transition and deliver on its bold promises to shareholders.