Annual Meeting April 22, We re ready. for a changing world

Transcription

1 Annual Meeting April 22, 2008 We re ready for a changing world 1

2 Board of Directors William D. Anderson 2

3 Board of Directors Stanley J. Bright 3

4 Board of Directors Timothy W. Faithfull 4

5 Board of Directors Gordon D. Giffin Gordon D. Giffin 5

6 Board of Directors C. Kent Jespersen 6

7 Board of Directors Michael M. Kanovsky 7

8 Board of Directors Gordon S. Lackenbauer 8

9 Board of Directors Dr. Martha C. Piper 9

10 Board of Directors Luis Vázquez Senties 10

11 Board of Directors Stephen G. Snyder 11

12 Board of Directors Donna Soble Kaufman 12

13 Board of Directors 13

14 Annual Meeting April 22, 2008 We re ready for a changing world 14

15 Remarks from Chair of the Board Donna Soble Kaufman 15

16 Monitoring progress against strategic plan Growth investments Portfolio optimization Share buybacks Dividends Eight per cent increase Formal dividend policy 16

17 Championing sustainable development 17

18 Board of Directors 18

19 Chief Financial Officer s Report Brian Burden 19

20 Forward looking statements This presentation may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These statements are not guarantees of our future performance and are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include cost of fuels to produce electricity, legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels, unanticipated accounting or audit issues with respect to our financial statements or our internal control over financial reporting, plant availability, and general economic conditions in geographic areas where TransAlta Corporation operates. Given these uncertainties, the reader should not place undue reliance on this forward-looking information, which is given as of this date. The material assumptions in making these forward-looking statements are disclosed in our 2007 Annual Report to shareholders and other disclosure documents filed with securities regulators. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. 20

21 Outline Financial Results Outlook Financial Strategy 21

22 2007 Financial Results : A record year Results Comparable earnings (MM) $264 $234 $161 Net earnings (MM) $309 $45 $186 Per share Comparable earnings $1.31 $1.16 $0.82 Net earnings $1.53 $0.22 $0.94 Dividends $1.00 $1.00 $1.00 Cash flow from Operations (MM) $847 $490 $620 Total Shareholder Return 29% 9% 48% Comparable Return on Capital Employed (ROCE) 9.7% 9.0% 7.4% 22

23 Q Another strong quarter Results Comparable earnings (MM) Net earnings (MM) Per share Comparable earnings Net earnings Dividends Cash flow from Operations (MM) Q $99 $33 $0.50 $0.17 $0.27 $237 Q $56 $56 $0.28 $0.28 $0.25 $331 23

24 EPS and cash flow growth Expect low double digit EPS growth and strong cash flow from operations $2.20 $2.00 COMPARABLE EPS Comparable EPS $2.00 MM CASH FLOW FROM OPERATIONS Cash Flow from Operations $1.80 $1.60 $1,000 $900 $950 $1.40 $1.20 $1.00 $0.80 $0.60 $1.31 $1.44 $1.16 $0.82 $ e $800 $777 $850 $700 $675 $620 $600 $591 $500 $ e 1. Range based on low double digit growth estimate 2. Cash flow adjusted for timing of PPA and contracted revenue payments 24

25 Financial strategy supports consistent shareholder value creation Financial strength provides shareowners an advantage in a long-cycle, capital intensive, cyclical industry Maintain balanced capital allocation plan Maintain financial flexibility Maintain focus on IRR, ROCE, and TSR objectives 25

26 Balanced capital allocation plan creates consistent value over time Increasing capital efficiency is the focus of management and the Board ALTERNATIVES DIRECTION ACTION Portfolio Optimization Divest or improve underperforming assets Divest non-core assets Mexico PSA signed for USD $303.5 MM Sarnia - pursuing improved long-term contract Centralia Gas - assessing contracting options Australia - no action at this time Dividend Share Buyback Provide shareholders sustainable dividend growth Provide shareholders incremental return of capital 2008 annual dividend increased 8% to $1.08; Board policy is to target a payout of 60-70% of comparable EPS NCIB expanded to full 10%; in 2007 purchased 2.4M shares = $75 million 2008, intent is to renew and utilize significant portion of NCIB Asset Investment Projects must deliver unlevered, free cash, after tax IRR >10%: Greenfield Acquisitions Announced ~$1.2 billion to date 225 MW Keephills 3 $815 MM 96 MW Kent Hills $170 MM 66 MW Blue Trail $115 MM 53 MW Sun 5 Uprate $ 75 MM Targeting W. U.S. and W. Canada 26

27 We maintain a competitive weighted average cost of capital Increasing Debt Spreads for Non-Investment Grade Credits Lower Weighted Average Cost of Capital For Investment Grade Companies Corporate Spreads to Treasuries (bps) Spread to BBB (bps) Date BBB BB B BB B 2004 YE YE YE YE Current Emera Fortis Canadian Utilities TransCanada Enbridge TransAlta NRG Dynegy Reliant Mirant 5.6% 5.8% 6.7% 7.0% 7.5% 7.6% 8.3% 9.1% 9.4% 9.9% Increase Since % 2% 4% 6% 8% 10% 12% Non-Investment Grade Investment Grade 27

28 Sustainable shareholder returns in a long-cycle, capital intensive, commodity power industry COMPARABLE ROCE CUMULATIVE TSR 16% 140% 12% 120% 100% 8% WACC 80% 60% 4% 40% 20% 0% e 2009e 2010e 0% e 2009e 2010e 28

29 President and CEO s Report Steve Snyder 29

30 Our messages Strong financial shape Strong cash flow Balanced approach to capital allocation Sustainable development and technical knowledge Customer base in growing markets 2,201 dedicated employees 30

31 Delivering results Competitive strengths Favourable market conditions + = low double-digit earnings growth and strong cash flow 31

32 A diverse portfolio of fuels Our diversification supports stable, steady income and cash flow 9,000 8,000 7,000 6,000 5,000 4,000 3,000 Hydro, Wind, Geothermal Natural Gas Coal 2,000 1,

33 Our market focus CANADA 6,023 MW UNITED STATES 2,043 MW AUSTRALIA 300 MW 33

34 Growth Focus Geothermal Wind Cogeneration 34

35 Announced growth projects Keephills 3 Kent Hills Blue Trail 35

36 New technologies Post combustion CO 2 capture is expected to be available commercially in the long-term to retrofit existing thermal plants and any new build 36

37 Markets outside of western Canada and U.S. Mexico: Executed on strategy Australia: Great value Ontario: Complex Assets are performing well 37

38 Challenges Environment Emerging Technologies Plant replacement costs 38

39 The triple E equation Environment Economic Health Energy Growth 39

40 Addressing the challenge A complex problem Infrastructure costs to consumers and shareowners Requirement for government/ research/industry partnerships Demand management The strategic value of coal 40

41 The path forward Carbon Capture and Sequestration Investment in renewables Increase interconnections Encourage use of all fuel sources 41

42 An exciting time for TransAlta and the industry Short-term Grow earnings and dividend Medium-term Options to grow asset base Framework for sustained earnings growth Long-term Increasing capability to break Triple E equation Meet environmental standards Deliver excellent shareowner value 42

43 Executive Team 43

44 We re ready for a changing world 44