Financial Performance

In 2004, we delivered $0.70 in comparable earnings per share, roughly the same as we earned in 2003. Our reported earnings were $0.88 per share, compared with $1.26 in 2003. The main reasons were higher than normal ongoing cycle maintenance expenses for our plants, lower than anticipated sales from two of our gas plants (our Sarnia plant in Ontario and our Centralia plant in Washington state) and the impact of increased interest expenses as new generating plants have been placed into service. We maintained a $1.00 per share dividend for the sixth consecutive year.

Improving cash flow

In 2004, our cash flow from operations continued to improve, increasing 16 per cent from $527 million in 2003 to $613 million. This allowed us to meet all our requirements for ongoing reinvestments in our assets, dividends and debt repayments.

Healthy balance sheet

A strong balance sheet is important to us. We have set medium-term targets for key financial ratios to improve our investment-grade credit rating. For our debt to capital ratio, our goal is to reach 45 per cent. In 2004, TransAlta was at 47.4 per cent — a slight improvement over 2003 but still short of our goal. Our cash flow to interest ratio target is 4.5 times. We are on track, coming in at 4.1 times in 2004, a marked improvement over the 3.3 times we posted in 2003.

Focus on productivity and safety

Our plants performed well in 2004. Overall, they were available to dispatch power 89 per cent of the time. High plant availability directly impacts our bottom line. In fact, 81 per cent of our expected power production is tied to long-term contracts where revenues are based on meeting availability targets and on the actual power dispatched.

This availability was driven by a series of productivity improvements in 2004. Here are some highlights:

A special task force carried out detailed benchmarking analysis of each of our plants. Our plant operating teams then used these studies to drive productivity improvements, ranging from streamlining parts management to fuelling our trucks more quickly to improving the efficiency of our equipment.
Our engineering and technology teams performed major outage work on 12 plants, finishing these with fewer outage days, less expense and less capital than budgeted.
Each of our plants have been assigned a multi-functional asset team whose sole purpose is to get the most production they can out of our facilities — safely, reliably and profitably. They deal with daily issues, determine when it is best to ramp up or ramp down our generators, help decide what major maintenance work needs to be done and the best time to do it, and develop the business case for future investments for their facility.
Our Target Zero initiative has been embraced across our fleet. Hazard and near miss reporting, an important feature of Target Zero, has grown from 3,000 in 2003 to 17,300. This change is positive — the more hazards and near misses reported, the more improvements are made, driving improved safety performance and reduced costs.