TransAlta Reports First Quarter 2023 Results and Raises 2023 Financial Guidance

First Quarter 2023 Financial Highlights

• Adjusted EBITDA^(1),(2) of $503 million, an increase of 94% over the same period in 2022
• Free Cash Flow (“FCF”)⁽¹⁾ of $263 million, or $0.98 per share, an increase of 145% on a per-share basis from the same period in 2022
• Earnings before income taxes of $383 million, an improvement of $141 million from the same period in 2022
• Net earnings attributable to common shareholders of $294 million, an increase of $108 million from the same period in 2022
• Cash flow from operating activities of $462 million, an increase of 2% from the same period in 2022

Other Business Highlights

• Returned $36 million of capital to common shareholders through share buybacks of 3.2 million common shares
• Entered into an automatic share purchase plan to facilitate repurchases of common shares through the normal course issuer bid during blackout periods
• Announced agreement to acquire a 50% interest in a 320 MW early-stage pumped hydro development project
• Kent Hills rehabilitation program on track with 13 turbines reassembled and commissioning commenced in late April
• Garden Plain construction nearing completion with all turbines assembled and commercial operations to commence during the second quarter of 2023
• Northern Goldfields construction nearing completion with commercial operations to commence during the second quarter of 2023
• Mount Keith 132kV expansion project construction activities have commenced and are on track to be completed in latter half of 2023

2023 Revised Outlook

• Increased 2023 annual financial guidance as set out below:
  • Adjusted EBITDA range of $1.45 billion to $1.55 billion, an increase of 19% at the midpoint of prior guidance
  • FCF range of $650 million to $750 million, an increase of 15% at the midpoint of prior guidance
  • Energy Marketing gross margin range of $130 million to $150 million, an increase of 40% at the midpoint of prior guidance

TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the three months ended March 31, 2023.

“Our first quarter results continue to demonstrate the value of our strategically diversified fleet. Our results benefited from our strong operations and asset optimization and hedging activities. With our performance across the fleet and our continuing positive expectations for the balance of year, we have revised our 2023 full year financial guidance upwards for both adjusted EBITDA and free cash flow, with revised midpoints exceeding the top end of our original targets to reflect stronger market conditions and solid operational performance,” said John Kousinioris, President and Chief Executive Officer of TransAlta. 

“We continue to advance our growth plan and are progressing several opportunities with 374 MW of projects in an advanced stage of development. Our progress is on track, and the cash flows from our legacy fleet are positioning us well to realize our Clean Electricity Growth Plan,” added Mr. Kousinioris.

Key Business Developments

Automatic Share Purchase Plan

On March 27, 2023, the Company entered into an automatic share purchase plan (ASPP) in order to facilitate repurchases of TransAlta’s common shares under its previously announced normal course issuer bid (NCIB). The Company has received approval from the Toronto Stock Exchange to purchase up to 14,000,000 common shares during the 12-month period that commenced May 31, 2022 and terminates May 30, 2023, representing approximately 5.2 per cent of the Company’s currently issued and outstanding Common Shares as at Dec. 31, 2022.

Under the ASPP, the Company’s broker may purchase common shares from the effective date of the ASPP until the end of the NCIB. All purchases of common shares made under the ASPP will be included in determining the number of common shares purchased under the NCIB. Any common shares purchased by the Company pursuant to the NCIB will be cancelled. The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (ii) the NCIB expires; or (iii) the Company terminates the ASPP in accordance with its terms.  

During the three months ended March 31, 2023, the Company purchased and cancelled a total of 3,169,300 common shares at an average price of $11.23 per common share, for a total cost of $36 million.

Early-Stage Pumped Hydro Development Project

On Feb. 16, 2023, the Company entered into a definitive agreement to acquire a 50 per cent interest in the Tent Mountain Renewable Energy Complex (Tent Mountain), an early-stage 320 MW pumped hydro energy storage development project, located in southwest Alberta, owned by Montem Resources Limited (Montem). The acquisition includes the land rights, fixed assets and intellectual property associated with the pumped hydro development project. The transaction closed on April 24, 2023. The Company paid Montem approximately $8 million on closing of the transaction and additional contingent payments of up to $17 million (approximately $25 million total) may become payable to Montem based on the achievement of specific development and commercial milestones. The Company and Montem own the Tent Mountain project within a special purpose partnership that is jointly managed, with the Company acting as project developer. The partnership is actively seeking an offtake agreement for the energy and environmental attributes generated by the facility.

Kent Hills Wind Facilities Update

Rehabilitation of the Kent Hills 1 and 2 wind facilities is well underway. All of the towers have been fully disassembled with foundation demolition and removal nearing completion. Construction of new foundations is progressing well, with approximately two-thirds of foundations poured. Tower reassembly is also progressing with 13 turbines reassembled to date and associated commissioning activities commenced. We continue to target returning all turbines to service in the second half of 2023. The current estimate of the capital expenditures is approximately $120 million, inclusive of insurance proceeds.

During the first quarter of 2023, the Company filed and served a statement of claim in the New Brunswick Court of King’s Bench against certain defendants who the Company believes are responsible for, or contributed to, the failure of the turbine foundations at the Kent Hills 1 and 2 wind facilities. The claim seeks damages for lost profits, replacement costs, and other related costs to perform the remediation of Kent Hills 1 and 2, net of any insurance recoveries. The ability to recover any amounts is uncertain at this time.

First Quarter 2023 Highlights

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