Capstone Infrastructure: Navigating the Energy Transition with Stability

As a company that has been around for over 20 years, Capstone Infrastructure has a proven track record of navigating the energy transition with stability. They have a diversified portfolio of investments in the energy sector, which has helped them weather various market fluctuations.

One of the key factors that contribute to Capstone's stability is their focus on renewable energy sources, such as wind and solar power. According to their investment strategy, they aim to increase their renewable energy assets to at least 50% of their portfolio by 2025.

Their commitment to renewable energy is reflected in their recent investments, including a 50 MW solar project in Ontario, Canada. This project is expected to generate enough electricity to power over 15,000 homes.

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Capstone Infrastructure has a presence across six Canadian provinces and the US, with 31 renewable power and clean energy facilities in operation. This extensive network generates enough energy to power approximately 180,000 homes annually.

The company's portfolio spans the full renewable energy lifecycle, including wind, hydro, solar, biomass, and natural gas facilities. Specifically, they have 21 wind facilities, 4 hydro facilities, 4 solar facilities, 1 biomass facility, and 1 natural gas facility.

Capstone's people are its greatest asset, with many employees, like Sherry, staying with the company for nearly two decades due to the positive work environment. Sherry has been with Capstone for 17 years.

The company's focus on renewable energy is not just a strategic choice, but a financial imperative. Its 885 MW portfolio spans 35 facilities across six Canadian provinces and the US, with a focus on wind, hydro, solar, and biomass.

Capstone has a development pipeline of over 2,000 MW in wind, solar, and battery storage, which will diversify its revenue streams and position the company to capitalize on regulatory incentives and growing demand for renewable energy.

Here are some key statistics about Capstone's renewable energy facilities:

Capstone Infrastructure Corporation has consistently declared quarterly dividends on its Cumulative Five-Year Rate Reset Preferred Shares, Series A.

The dividend amount has been $0.2314 per Preferred Share for both the first and second quarters of 2025.

The dividend is paid on or about July 31 and October 31, 2025, to shareholders of record at the close of business on July 15 and October 15, 2025, respectively.

The dividend covers the period from April 30 to July 30 and July 31 to October 30, 2025, for the first and second quarters, respectively.

The dividends paid by Capstone Infrastructure are designated "eligible" dividends for the purposes of the Income Tax Act (Canada), providing an enhanced dividend tax credit for Canadian residents.

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Over the past few years, Capstone Infrastructure has experienced significant growth, expanding from approximately 100 employees to just shy of 180 people in various roles.

Their team has been instrumental in developing clean energy projects to lower the planet's carbon output.

In just a few years, Capstone has placed over 20 permanent hires into their business, filling roles across different departments.

Here's a breakdown of the various roles they've filled:

The average time it takes for Capstone to fill each hire is around five weeks, which is impressive considering the ongoing talent shortages in the renewables market.

Their partnership with us has been a key factor in their growth, and they're extremely satisfied with the results.

Capstone Infrastructure's business strategy is built around its expertise in investing in and operating midstream energy infrastructure. The company focuses on acquiring and developing midstream assets in North America, with a particular emphasis on natural gas gathering and processing facilities.

Capstone Infrastructure has a strong track record of delivering value to its investors through its business strategy. The company has successfully executed several acquisitions and developments, including the acquisition of the 50% interest in the Midstream Gathering System in the Permian Basin.

With a long-term approach to investment, Capstone Infrastructure is well-positioned to benefit from the growing demand for midstream energy infrastructure in North America.

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We've developed strong partnerships with companies like Capstone, where we've been able to understand their unique needs and provide tailored support.

Our partnership with Capstone began in 2020, when our senior consultant, Chandler Robertson, connected with their VP of development, Sherry, to discuss potential collaboration.

Chandler was tasked with securing various roles for Capstone, across development, finance, construction, and asset management, and was able to fill these positions efficiently.

Capstone's VP of development, Sherry, was looking for a trusted partner to execute their searches and support their internal recruitment efforts.

In order to effectively support Capstone's hiring needs, Chandler needed to understand the type of candidate they were looking for, and worked closely with Sherry to identify their requirements.

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A business strategy that balances income and growth is crucial for long-term success. Capstone Infrastructure's dividend yield of 5.38% is attractive in a low-yield environment.

This high yield is a major draw for income-focused investors. The company's focus on Indigenous partnerships and community-driven projects reduces regulatory and operational risks, ensuring smoother project execution.

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Smoothing out these risks allows for consistent cash flows and the ability to sustain or even increase dividends. The potential for future rate resets is also a consideration, as a stabilized or declining interest rate environment could lead to higher dividend payouts.

The current fixed rate provides certainty, but the floating-rate option introduces upside potential in a low-interest-rate environment. Investors should monitor the July 2026 reset date for possible adjustments.

Capstone Infrastructure's structured dividend approach is a rare combination of income and growth. The company's ability to navigate interest rate cycles and maintain dividend stability is a key benefit for investors.

By expanding its low-carbon portfolio, Capstone Infrastructure positions itself as a resilient player in a rapidly evolving sector. The company's 885 MW portfolio spans 35 facilities across six Canadian provinces and the U.S.

This diversified portfolio includes wind, hydro, solar, and biomass, providing a stable source of revenue. The company's development pipeline of over 2,000 MW in wind, solar, and battery storage further diversifies its revenue streams.

Capstone Infrastructure's focus on the energy transition is a financial imperative, not just a strategic choice. The company's 2025 announcements of three Indigenous-led wind projects in British Columbia highlight its dual emphasis on clean energy and community partnerships.

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Capstone's preferred shares have operated under a unique structure since their issuance in 2011.

The initial fixed dividend rate was $0.3125 per share quarterly, which was reset every five years based on the Government of Canada Yield.

This mechanism has allowed the company to balance stability with flexibility, as seen in the 34.59% drop in 2017, which was followed by a stabilization of the dividend rate at $0.2044 per quarter.

The dividend rate was later increased by 13.21% in July 2021, bringing it to $0.2314.

As of 2025, this rate continues, yielding 5.38% at a share price of $17.20.

The cumulative nature of these dividends adds to their reliability, as unpaid amounts accrue and must be paid in arrears.

Capstone has maintained its dividend obligations even during periods of financial stress, a testament to its disciplined capital management.

The company's ability to adjust rates in response to interest rate cycles adds another layer of resilience, with a 2.71% spread over the T-Bill Rate for potential floating-rate conversions.

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Capstone Infrastructure has been actively involved in various development projects across the country. One of the notable projects is the Riverhurst, Saskatchewan, 10 MW project.

The company has also been working on a series of projects in Alberta, including the Buffalo Atklee 1, 2, and 3 projects, which have a combined capacity of 48.3 MW.

Here are some key details about these projects:

Capstone Infrastructure's purpose is to provide investors with an attractive total return from responsibly built, owned and managed power assets in North America.

Their mission is centered around creating a sustainable and profitable business model that benefits all stakeholders.

Capstone's vision is to be a Canadian leader in developing, owning and operating diversified power businesses that benefit the communities they serve, the people they employ, and their investors.

Their goal is to develop a portfolio of high-quality power businesses that provide an attractive, risk-adjusted return to investors over the long term.

By focusing on responsible business practices, Capstone aims to create a positive impact on the environment and society while achieving financial success.

Their growth strategy involves developing, acquiring and managing a diverse portfolio of power businesses to drive long-term growth and returns.

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