Artificial intelligence (AI) may live in the cloud, but its electricity bill is very much on the ground.
The International Energy Agency expects global data-centre electricity consumption to roughly double to 945 terawatt-hours (TWh) by 2030. From 2024 through 2030, demand could grow about 15% annually, more than four times faster than electricity consumption from everything else.
That sounds like a gift for power companies, but there’s one catch. Somebody has to pay for all those generators, transmission lines, substations, and cooling systems. Borrowing that money just became more expensive.
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Power meets costs
The Bank of Canada’s overnight rate remains 2.25%, yet longer-term borrowing costs have climbed as global bond markets sell off. The U.S. 10-year Treasury yield briefly hit 5.3% on October 1, its highest level since 2002. That changes the data-centre investment calculation.
A proposed power project might look fantastic with cheap debt. Raise the financing cost, and the same project needs better contracts, higher electricity prices or stronger returns to justify construction.
Investors therefore shouldn’t simply buy every company promising exposure to AI electricity demand. I’d favour businesses that can turn existing generation into contracted cash flow before spending billions on speculative capacity. That brings Capital Power (TSX: CPX) onto my watchlist.
AI finds Alberta
Capital Power owns natural-gas, renewable and energy-storage generation across Canada and the United States. Its portfolio increasingly provides the reliable, dispatchable electricity that enormous data centres need when the sun isn’t shining and the wind has decided to take the afternoon off.
The most important development came in July. Capital Power signed a greater-than-10-year energy-supply agreement with Meta Platforms for 250 megawatts (MW) of power supporting its new Sturgeon County, Alta., data centre. The load should begin during the second half of 2028.
Here’s the attractive part. The agreement is backed by Capital Power’s existing Alberta generation portfolio. Rather than betting entirely on a giant new build, Capital Power is converting current assets into longer-term contracted revenue. Higher financing costs make that distinction increasingly useful.
Cash flow grows
The broader business is already expanding. Second-quarter adjusted funds from operations (AFFO), a useful measure of cash available from the business, climbed to $328 million from $235 million a year earlier. Adjusted EBITDA increased to $351 million from $322 million.
Some of that growth came from the Hummel Station and Rolling Hills plants acquired in 2025, which expanded Capital Power’s U.S. natural-gas portfolio. Plus, shareholders are getting paid along the way. Capital Power raised its dividend another 2% this summer, its 13th consecutive annual increase. At the October 1 close of $61.43, the new $0.70 quarterly dividend provides a yield of roughly 4.6%.
That makes Capital Power interesting among Canadian dividend stocks, especially after the shares pulled back roughly 20% from their $77.02 52-week high.
Considerations
Higher rates remain the obvious complication. Capital Power spent about $3 billion buying Hummel and Rolling Hills last year, and Q2 finance expenses increased as the company carried acquisition debt. Continued expansion will require careful capital allocation if borrowing costs remain elevated.
Natural-gas generation also brings commodity, emissions and regulatory risks. Meanwhile, the Meta contract doesn’t begin contributing until 2028, so investors are still paying today for some growth arriving tomorrow.
That’s why I’d watch CPX rather than treat AI power demand as permission to chase it. Anyone buying stocks in Canada still needs the numbers to work after the excitement wears off.
Bottom line
Data centres may create extraordinary electricity demand, but higher rates are separating good projects from expensive promises.
Capital Power already owns generation that Meta has agreed to use under a decade-plus contract. Add rising AFFO, a 4.6% dividend yield and a share price well below its recent high, and CPX gives investors a more tangible way to follow the AI power boom.
