TransAlta Corporation

Transcription

1 TransAlta Corporation First Quarter Results Monday, May 8,

2 Forward Looking Statements This presentation includes 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 our beliefs as well as assumptions based on available information 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, can, believe, expect, anticipate, intend, plan, project, forecast, foresee, potential, enable, continue, or other comparable terminology. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause actual results or outcomes to be materially different from those set forth in the forward-looking statements. In particular, this presentation contains forward-looking statements pertaining to: our business strategy and goals, including our decision to shut-down Sundance Unit 1 and mothball Sundance Unit 2, to convert Sundance Unit 3 to 6 and Keephills Units 1 and 2 to gas and the cost and timing thereof; the useful life of the converted coal-to-gas units; the benefits expected to be realized from such strategy, including minimizing capital requirements, reducing risk and accelerating returns on and of capital; our 2017 outlook, including Comparable EBITDA, Funds from Operations ("FFO"), Free Cash Flow ("FCF") and Availability and revised guidance for Energy Marketing; the amount and timing for the full dispute settlement with the Ontario Energy Financial Corporation; the development of pit areas at the Highvale mine and the associated benefits; the payment by the Alberta government pursuant to the Off-Coal Agreement; the commissioning of South Hedland and the impact on FCF, FFO to Adjusted Net Debt and Adjusted Net Debt to EBITDA; our plans to raise approximately $700 million to $900 million through project level financing to improve our debt coverage to 20% to 25% FFO to Net Debt by 2020; interest savings to be realized through debt reductions; expectations relating to electricity prices and impact on FCF; cost savings to be realized from Project Greenlight; the cost of carbon; the growth in renewable generation and our ability to participate in such growth; the in-service dates for Garden Plains, Cowley Ridge and Antelope Coulee; development costs for our wind and solar projects and the availability of project financing to fund such development; Factors that may adversely impact our forward-looking statements include risks relating to: fluctuations in market prices and the availability of fuel supplies required to generate electricity; our ability to contract our generation for prices that will provide expected returns; the regulatory and political environments in the jurisdictions in which we operate; 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; the effects of weather; disruptions in the source of fuels, water, or wind required to operate our facilities; natural or man-made disasters; the threat of domestic terrorism and cyberattacks; lower than anticipated electricity prices; equipment failure and our ability to carry out, or have completed, repairs, alterations or conversions in a cost-effective manner or timely manner; commodity risk management; industry risk and competition; fluctuations in the value of foreign currencies and foreign political risks; the need for additional financing; counterparty credit risk; insurance coverage; our provision for income taxes; legal, regulatory, and contractual proceedings involving the Corporation; outcomes of investigations and disputes; reliance on key personnel; labour relations matters; risks associated with development projects and acquisitions; increased costs or delays in the construction or commissioning of the South Hedland power project; adverse regulatory developments; and any market disruption or changes in market regulation, including changes relating to the implementation of a capacity market. The foregoing risk factors, among others, are described in further detail in the Risk Management section of our Management Discussion and Analysis and under the heading Risk Factors in our Annual Information Form. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this document are made only as of the date hereof and we do not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise, except as required by applicable laws. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect the Corporation's expectations only as of the date of this news release. The purpose of the financial outlooks contained in this presentation 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. In light of these risks, uncertainties, and assumptions, the forward-looking events might occur to a different extent or at a different time than we have described, or might not occur at all. We cannot assure that projected results or events will be achieved. Certain financial information contained in this presentation, including Comparable EBITDA, FFO and FCF, may not be standard measures defined under International Financial Reporting Standards ( IFRS ) and may not be comparable to similar measures presented by other entities. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. For further information on non-ifrs financial measures we use, see the section entitled Reconciliation of Non-IFRS Measures contained in our most recently filed Management's Discussion and Analysis, filed with Canadian securities regulators on and the Securities and Exchange Commission on 2

3 Agenda Financial Performance Strategic Announcement Segment Performance Finance Review and FCF Bridge Coal to Gas Conversions Greenlight Growth Opportunities Questions and Answers 3

4 Q Financial & Operations Highlights 3 mos. ended Mar Outlook (in $CAD millions) Comparable EBITDA $274 $279 $1,025 - $1,135 FFO $203 $196 $765 - $855 FCF $98 $86 $300 - $365 Adjusted Coal Fleet Availability (1) 84.5% 90.1% 86% to 88% Liquidity has doubled since March 2015 $500 million in cash; positioned to pay off June 2017 debt maturity Financial ratios continue to improve Further improvement with commissioning of South Hedland Strong greenfield development pipeline Near-term focus on contracted Alberta and Saskatchewan renewables 1 Adjusted for economic dispatching at U.S. Coal. 4

5 Accelerating Coal-to-Gas Effective January 1, 2018: retirement of Sundance Unit 1; mothballing of Sundance Unit 2 Coal-to-gas conversions of Sundance Units 3 to 6, Keephills Unit 1 and 2 between 2021 to Align and execute our strategy to be consistent with Alberta s environmental and power policies. Minimizes capital required, reduces risk, accelerates return on (and of) invested capital Clearer view of expected cash flow duration from coal 5

6 EBITDA $ Millions Segmented EBITDA - Generation $350 Q Q Q $300 $250 $200 $150 $100 $50 $0 -$50 Canadian Coal U.S. Coal Canadian Gas Australian Gas Wind and Solar Hydro Total Renewables Comparable and Gas EBITDA Renewables and gas contributed 67% of Comparable Generation EBITDA in Q

7 $ Millions Alberta Power Price Overview $350 Quarterly Results and Alberta Power Price $90 $300 $80 $250 $65 $61 $70 $60 $200 $50 $150 $100 $29 $18 $22 $40 $30 $20 $50 $10 $0 Q Q Q Q Q $0 Comparable EBITDA ($M) Comparable FFO ($M) AB Avg Power Price ($/MWh) Performance not highly impacted by Alberta Power Price 7

8 Finance & Treasury Overview Area of Focus Execution Liquidity Liquidity of ~$2.0B at March 31, 2017 including cash of $504 million $2.0 (1) $1.5 $1.0 $0.5 $1.0 $1.0 $0.9 $1.3 $1.5 $1.5 $1.5 $1.4 $1.4 $0.0 Mar 31/15 Jun 30/15 Sep 30/15 Dec 31/15 Mar 31/16 Jun 30/16 Sep 30/16 Dec 31/16 Mar 31/17 Cash Available Liquidity Committed Credit Facilities (1) Reduction in committed credit facilities due to reduction in US bilateral credit facility from $300 million to $200 million. 8

9 Financial Ratios and Debt Reduction Metrics expected to improve with the commissioning of South Hedland in mid-2017 and growth in Free Cash Flow. Decreased total net debt by $244 million in the quarter Further debt reduction will drive share price appreciation Ratios Q Q Q Q Q Target Comparable FFO before Interest to Adjusted Interest x Adjusted FFO to Adjusted Net Debt % Adjusted Net Debt to Comparable EBITDA Debt Reduction Accretes Value of Equity + ~$3/share Current Post 2020 Debt Equity 9

10 Tangible Factors Driving Cash Flow Growth $440 mm $365 mm $400 mm $250 mm (1) $300 mm South Hedland (Partial Year) MSA Settlement Off-Coal Payment Lower Margin on Alberta Coal South Hedland (Full Year) Project Greenlight Interest Expense Mississauga and Poplar Creek Sundance 1&2 Higher Margin on Alberta Renewables Brazeau Wind RFP in Alberta and Saskatchewan Solar Project in Australia Guidance Outlook Targeting in excess of $400 million of Free Cash Flow for (1) Includes MSA settlement payment, productivity capital and Lakeswind tax equity. 10

11 Factors Driving Early CTG Conversion Early Conversion Benefits Expected Timing Expected Near- Term Carbon Costs Opex and Sustaining Capital vs Political and social influence trending to less carbon, CTG reduces emissions by ~40%, CTG better positioned for potential increases in carbon pricing ~70% Savings Upon Conversion Significant savings upon conversion driven by lower fixed operating expenses and sustaining capital expenditures (including avoidance of CASA compliance capital expenditures) Operating Flexibility Faster CTG ramp-up, ability to turn unneeded plants off and avoid unnecessary operating expenses will drive improved capacity market competitiveness Reliability CTG will have better reliability, important to meet performance obligations in a capacity market Gas Pricing Benefit from currently low natural gas pricing environment Early conversion decision supported by detailed risk assessment and NPV analysis 11

12 Transforming the way we do business Drives ambitious improvements in all parts of TransAlta Engaging all employees bottom-up approach Rigorous structure reinforcing accountability Creates a highly competitive low cost organization 12

13 Positioned to Seize Opportunities in Targeted Markets Opportunity Capacity Expected Capital Expected Online Date ALBERTA South Hedland 150MW $585 mm (1) Mid-2017 Long history of developing renewables in Alberta 3,000MW of CTG conversions Brownfield wind farms shovel-ready Goonumbla Solar Farm Alberta Wind Projects 80MW 150MW $160 mm $300 mm Mid-2018 December 2019 Brownfield solar and battery at existing facilities Saskatchewan Wind 200MW $400 mm December 2019 Brazeau Pump Storage MW $1.8 - $2.5 B ,000MW EASTERN CANADA Ontario RFPs greenfield solar / small hydro uprates UNITED STATES Renewables expansion at existing facilities Targeted gas and renewables acquisition 1,500MW USA 500MW CANADA 1,000MW SASKATCHEWAN Wind and Solar sites being developed Targeted gas and renewables acquisitions Potential for $3B to $4B of contracted growth opportunities over the next 5 10 years AUSTRALIA 5,000MW AUSTRALIA Wind and solar focus with sites in active development Offtake agreements Targeted gas and renewables acquisitions Contracted projects can be funded with 60-80% leverage Target 8-12% return on equity depending on locations, contract profile, and technologies $0.8 to $1.0 billion of equity investment 13 1 Total estimated project spend is AUD$570 million. Total estimated project spend is stated in CAD$ and includes estimated capital interest costs and may change due to fluctuation in foreign exchange rates.

14 Canadian Wind Projects Garden Plains Wind Location 30 km north of Hanna, Alberta Capacity 130MW Proposed In-Service Date December 2019 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, Sask 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 December 2019 $400 mm Wind resource data dating back to 2008 Proposed In-Service Date Capital Costs Other Details December 2019 $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 Garden Plains and Cowley Ridge Repower to be submitted in up-coming Alberta procurement; Antelope Coulee submitted to Saskatchewan s 14

15 Australian Opportunities Location Capacity Expected In-Service Date South Hedland South Hedland, Western Australia 150MW mid-2017 Capital Costs $585 mm (1) Notes Expected to generate $80 mm of EBITDA on an annualized basis Location Capacity Proposed In-Service Date Capital Costs Other Details Goonumbla Solar Farm 350km North-West of Sydney in New South Wales 80MW mid-2018 $160 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 Currently securing offtake agreements South Hedland AUSTRALIA Gas Perth Goonumbla Sydney Solar TransAlta continues to build on already its significant Australian presence 1 Total estimated project spend is AUD$570 million. Total estimated project spend is stated in CAD$ and includes estimated capital interest costs and may change due to fluctuation in foreign exchange rates 15

16 Question and Answer 16