TransAlta Renewables Inc. Investor Presentation January 2018

Transcription

1 TransAlta Renewables Inc. Investor Presentation January

2 Forward Looking Statements This presentation may include forward-looking statements or information (collectively referred to herein as forward-looking statements ) within the meaning of applicable securities legislation. All forward-looking statements are based on TransAlta Renewables Inc. s (the Company ) beliefs as well as assumptions based on information available at the time the assumptions were made and on management s experience and perception of historical trends, current conditions, and expected future developments, as well as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements that include phrases such as may, will, believe, expect, anticipate, intend, plan, project, foresee, potential, enable, continue, or other comparable terminology. These statements are not guarantees of the Company s future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance to be materially different from that projected. In particular, this presentation contains forward-looking statements pertaining to, without limitation, the following: ability to realize drop-downs and third party growth opportunities; the continued support and sponsorship of TransAlta Corporation; the cash outlook for 2017; the Kent Hills expansion, including the costs and timing of completion; the forecasted government policies and regulations, competitiveness, customer requirements and diversified system expected to contribute to future growth and the Company s ability to benefit from such factors; the Company s strategic focus and potential sources of capital; the Company s ability to develop and construct the identified Canadian wind and Australian solar projects and the capital costs associated with such projects, including Garden Plains Wind, Cowley Ridge Wind Repower, Antelope Coulee Wind and Goonumbla Solar Farm; and the development and construction of Brazeau Energy Storage, including the size, timing and costs thereof. These forward-looking statements are not historical facts but reflect current expectations concerning future plans, actions and results. These statements are subject to a number of risks and uncertainties that could cause actual plans, actions and results to differ materially from current expectations including, but not limited to: changes in tax, environmental, and other laws and regulations; the regulatory and political environments in the jurisdictions in which we operate; adverse regulatory developments, including unanticipated impacts on existing generation; environmental requirements and changes in, or liabilities under, these requirements; changes in general economic conditions including interest rates; operational risks involving our facilities, including unplanned outages at such facilities; disruptions in the transmission and distribution of electricity; disputes with counterparties, including as it pertains to the commercial operation at South Hedland; the effects of weather; disruptions in the source of fuels, water, or wind required to operate our facilities; risks pertaining to our relationship with TransAlta Corporation; competitive factors in the power industry; operational breakdowns, failures, or other disruptions; changes in economic and market conditions; potential delay in construction and commissioning of the Kent Hills expansion; and other risks and uncertainties discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company s MD&A and the Annual Information Form for the year ended December 31, Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this presentation. The purpose of the financial outlooks contained herein is to give the reader information about management's current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. The Company disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. The Company evaluates its performance and the performance of our business segments using a variety of measures. Certain of the financial measures discussed in this presentation are not defined under International Financial Reporting Standards (IFRS) and, therefore, should not be considered in isolation or as an alternative to IFRS measures when assessing the financial performance or liquidity of the Company. These non-ifrs measures may not be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Refer to the Company s MD&A, which is available on the Company s website or under the Company s profile on for further discussion of these Items, including, where applicable, reconciliations to measures calculated in accordance with IFRS. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. 2

3 TransAlta Renewables at a Glance Significant Scale Highly Diversified Enterprise Value 1,2 Market Cap. 2 $4.1 Billion $3.3 Billion # of Assets Net MW Percent of Generation Cash Flow 2017 EBITDA (guidance) $ Million 2017 CAFD (guidance) $235 - $260 Million Dividend Yield 7.1% TransAlta s Ownership 64% Wind 18 1,248 49% Natural Gas % Hydro % Total 38 2, % Note: EBITDA and CAFD are not defined under IFRS. For further information on non-ifrs financial measures we use, see the section entitled Non-IFRS Measures contained in our Management Discussion andanalysis 1 Enterprise value calculated as: market capitalization + total debt (book value) + non-controlling interests (book value) - cash and cash equivalents. Balance sheet data as at September 30, 2017 and includes Solomon proceeds 2 Based on closing price on the Toronto Stock Exchange as of January 4,

4 Investment Highlights Highly Diversified 38 facilities across multiple regions and spanning various technologies Highly Contracted Portfolio 12 year weighted average contract life Strong Balance Sheet and Access to Competitive Capital 1.7x Net Debt/EBITDA Raised over $0.9 billion of low cost project debt, with additional capacity Proven Track Record of Growth and Value Creation $2.4 billion of acquisitions since IPO ~80% Total Shareholder return since IPO Strong Sponsorship from TransAlta Corporation Excellent source of drop-down and third party growth opportunities 4

5 Highly Contracted Facilities Pingston, BC Southern Cross, WA McBride Lake, AB Sarnia, ON Upper Mamquam, BC Parkeston, WA Misema, ON Melancthon, ON Castle River, AB Wyoming Wind, WY Ragged Chute, ON Wolfe Island, ON Moose Rapids, ON Appleton, ON Galetta, ON Bone Creek, BC Sinnott, AB Cowley North, AB St. Mary, AB Waterton, AB Belly River, AB Taylor, AB New Richmond, QC Le Nordais, QC Macleod Flats, AB Soderglen, AB Blue Trail, AB Ardenville, AB Summerview 2, AB Summerview 1, AB Kent Hills, NB South Hedland, WA Akolkolex, BC Average capacity weighted contract life of ~12 years Remaining Contracted Years 5

6 Millions Significant Increase in Cash Available For Distribution $300 $250 $245 $235 - $260 $200 $177 $150 $100 $82 $50 $ Outlook Cash Available for Distribution refers to the amount of cash generated from operations after deducting sustaining capital and distributions to non-controlling interests, excluding the effects of timing and working capital on distributions from subsidiaries of TransAlta in which the Company holds an economic interest and less principal repayments of amortizing debt. Outlook based on expected revenues from PPAs and the sale of green attributes. Renewable energy production from wind/hydro assets expected to range from 3,500 to 3,900 GWh including economic interests. Gas-fired generation provides compensation for capacity and production is not a significant indicator of this business. 6

7 Strong Performance Since IPO Share Price Performance Since Aug, % 50% 40% 30% 20% 10% 0% -10% Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 RNW S&P TSX ~$2.4 billion in new assets Significantly increased dividend and public float Added to the S&P/TSX Composite Index in 2016 Completed over $0.9 billion of project level financing 7

8 Strong Dividend Growth Annual Dividend Per Share $1.00 $0.80 $0.60 $0.40 $0.75 ~3% Wyoming Wind $0.77 ~9% Australian Assets $0.84 ~5% Three Canadian Projects $0.88 ~7% South Hedland $0.94 $0.20 $0.00 At IPO (Aug 2013) 8

9 Attractive Dividend Yield Dividend Yield RNW Peers² Average (~5.1%) 0% 2% 4% 6% 8% 1 Based on the closing price as of January 4, Other companies include Algonquin Power, Brookfield Renewables, Enbridge Income Fund, Innergex, Northland Power, NRG Yield, NextEra Energy Partners, Pattern Energy. Source: FactSet 9

10 Proven Growth Track Record MW Wyoming wind acquisition 575 MW Australian Assets investments MW Sarnia gas investment 98 MW Le Nordais wind investment 7 MW Ragged Chute hydro investment MW South Hedland gas 17 MW Kent Hills 3 wind expansion $2.4 billion in investments 10

11 South Hedland Power Station 150 MW Combined Cycle Gas Power Station in Western Australia Commercial operation began in July 2017 Highly contracted until 2042 with Horizon Power (AA+ rating) Expected to generate ~$80 million of EBITDA on an annualized basis 11

12 Kent Hills 3 Expansion of the existing Kent Hills Wind Farm in New Brunswick Five additional turbines adding 17 MW of capacity, bringing total capacity to 167 MW The entire wind farm is now fully contracted until 2035 with New Brunswick Power Issued $260 million project level debt secured by cash flows 12

13 Drivers of Future Growth Government Policies and Regulations Renewable targets Carbon pricing Thermal environmental regulations Competitiveness Low gas prices and abundant supply More cost competitive renewables Technological improvements Customer Requirements Desire for renewable energy Behind-the-fence needs Diversified System Highly dispatchable generation to complement growth in intermittent generation Minimize exposure to any one technology or fuel type 13

14 U.S. Opportunity Wind and solar represent only ~10% of US capacity Natural gas generation needed to replace coal with dispatchable generation 1,200 Generation capacity US (GW) 1, Significant Growth in Natural Gas Wind & Solar only 10% Decline in coal Coal/Other Nuclear Hydro Solar Wind Gas Source: US Dept. of Energy, Staff Report on electricity Markets and Reliability, August

15 Growth & Financing Strategy Strategic Focus Potential Source of Capital Primarily focused on North America and Australia Renewables and gas fired generation Highly contracted facilities Greenfield, brownfield and acquisitions Early staged projects are often less competitive and provide higher returns $500 million of project debt potentially available from existing assets Proceeds from Solomon handback Internally generated excess cash flow New assets can support project debt $500 million credit facility put in place at RNW Partners New equity 15

16 Significant Growth Opportunities Actively Evaluating with TransAlta over $5 billion in Opportunities Greenfield Third-party Acquisitions Near-term: Renewable calls in Alberta and Saskatchewan, and opportunities in Australia and Pacific Northwest Long-term: Over 5,000 MW of additional renewables potential in Western Canada Attractive opportunities in North America Strong cost of capital and balance sheet to compete Proceeds from Solomon can be used to fund growth 800 MW of hydro in Alberta Potential Drop-downs from TransAlta 400 MW of gas in Alberta & Ontario 90 MW wind and solar in Eastern Canada and the U.S. $2.5 billion Alberta Brazeau pumped hydro project 16

17 Canadian Wind Projects Garden Plains Wind Location 30 km north of Hanna, Alberta Capacity 130MW Proposed In-Service Date Future Alberta REP calls or third party contracting Capital Costs $260 mm Other Details Wind resource data dating back to 2009 Partnerships with landowners since 2011 Location Antelope Coulee Wind 35 km southwest of Swift Current, Saskatchewan Capacity Up to 200MW Location Capacity Cowley Ridge Wind Repower Northwest of Pincher Creek, Alberta 20MW Edmonton Proposed In-Service Date Capital Costs Other Details April 2021 $400 mm Wind resource data dating back to 2008 Proposed In-Service Date Capital Costs Other Details Future Alberta REP calls or third party contracting $40 mm Site of original Cowley Ridge Wind Farm which was built in 1993 and dismantled in 2016 Long-term understanding of wind resource Hanna Calgary Swift Current Pincher Creek Saskatoon Regina Alberta wind projects remain candidates for future REP procurements or third party contracting; Antelope Coulee prepared for up-coming Saskatchewan RFP. 17

18 Australian Growth Goonumbla Solar Farm AUSTRALIA Location Capacity Proposed In-Service Date Capital Costs Other Details 350km North-West of Sydney in New South Wales 70MW 2019 $140 mm Site is permitted under the New South Wales Major Project Planning Development process Engaged Tier 1 EPC contractor to undertake construction and operation and maintenance Interconnection agreements are in place Currently securing offtake agreements Perth Goonumbla Sydney TransAlta continues to build on its already significant Australian presence 18

19 Brazeau Energy Storage SIGNIFICANT VALUE Edmonton Unique one-of-a-kind pumped storage hydro project Up to 900 MW/5,000 MWh Water Flow Brazeau Reservoir Brazeau Canal Water Flow Brazeau Gorge Brazeau Dam 355MW Investment of $2.5 billion Significant economic and employment benefits Abraham Lake Big Horn 1&2 120MW Water Flow Rocky Mountain House Targeting 2025/2026 operating date Requires long-term contract Ft. McMurray Grande Prairie Bonnyville Hinton Edmonton Camrose Wetaskiwin Red Deer Calgary Drumheller Medicine Hat 100 km Lethbridge 60 mi 19

20 Brazeau Pumped Hydro Significant System Benefits Fast Ramping Load Following Brazeau Pumped Hydro Storage Avoided Curtailment Wind Firming Voltage and Inertia Support Supports Transition to Clean Energy and a Low Cost, Reliable Electricity System 20

21 TransAlta s Brazeau Pumped Hydro Opportunity Proposed pumped hydro Existing power house Leverages existing infrastructure 21

22 Brazeau: Significant Work Completed and Underway Engaged Owner s Engineer, providing Class 5 Estimate Conducted initial geotechnical work Started engagement with First Nations Started environmental field studies Engaged with Governments, Communities, Unions, Regulators and NGOs 22

23 Investment Highlights Strong Core Business with a proven track record Diversified: Hydro, Wind, Gas; Canada, U.S. and Australia 12 year weighted average contract life 1.7x Net Debt/EBITDA Raised $0.9 billion of low cost project debt, with additional capacity $2.4 billion of acquisitions since IPO Positioned for growth and further valuation creation ~80% Total Shareholder Return since IPO Access to growth capital Source of growth opportunities with TransAlta Corporation sponsorship U.S. market fundamentals will drive development and acquisition opportunities 23