TransAlta Reports First Quarter 2024 Results

TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the first quarter ended March 31, 2024, demonstrating strong operational and financial performance and reaffirming its 2024 outlook.

First Quarter 2024 Financial Highlights

TransAlta’s first quarter results exceeded our expectations given the anticipated decline in Alberta spot power prices to $99 per MWh in 2024, as compared to elevated spot power prices of $142 per MWh in 2023. The 30 per cent decline in spot prices year over year was primarily due to milder weather, lower natural gas prices and incremental generation from the addition of new wind and solar supply in the market. Highlights for the quarter include:

• Adjusted EBITDA⁽¹⁾ of $328 million, compared to $503 million for the same period in 2023
• Free Cash Flow (“FCF”)⁽¹⁾ of $206 million or $0.67 per share, compared to $263 million or $0.98 per share for the same period in 2023
• Earnings before income taxes of $267 million, compared to $383 million for the same period in 2023
• Net earnings attributable to common shareholders of $222 million, compared to $294 million for the same period in 2023
• Cash flow from operating activities of $244 million, a decrease of $218 million for the same period in 2023
• The return of $53 million of capital to shareholders year to date through the buyback of 5.9 million common shares constituting 35 per cent of the Company’s previously announced 2024 enhanced share repurchase program of up to $150 million

Other Business Highlights and Updates

• Achieved commercial operation of the 100 MW White Rock West wind facility on Jan. 1, 2024 and the 200 MW White Rock East wind facility on April 22, 2024
• Completed the Mount Keith 132kV expansion on Feb. 29, 2024
• Advanced commissioning of the 200 MW Horizon Hill wind facility to its final stages
• Achieved strong operational adjusted availability of 92.3 per cent
• Paused greenfield growth projects in Alberta pending clarity on the impact of new market regulations announced by the Government of Alberta
• Signed the 2024 Bow River Basin water sharing memorandum of understanding in preparation for potential lower water conditions in southern Alberta
• Announced the transition of its Executive Vice President, Finance and Chief Financial Officer (“CFO”) with the retirement of Todd Stack effective June 30, 2024 and the appointment of Joel E. Hunter as Executive Vice President, Finance and CFO effective July 1, 2024

“Our first quarter results demonstrate the value of our asset optimization and hedging strategies, supported by our strong operating capabilities. We continue to perform well while managing through the evolving markets of our operating portfolio, illustrating the advantage of our diversified fleet,” said Mr. John Kousinioris, President and Chief Executive Officer of TransAlta.

“We are confident that we will reach our 2024 guidance given the performance of our growing generating portfolio.  We do not believe that our strong free cash flow results in the first quarter, and our expectations for the balance of 2024, are reflected in the current trading price of our common shares.  As a result, we will continue to use share repurchases as part of our capital allocation strategy. Year to date, we have deployed $53 million towards share repurchases, which is approximately 35 per cent of our $150 million share repurchase target or $0.17 per share in value to shareholders,” added Mr. Kousinioris.

“We are focused on making balanced capital allocation decisions that enhance value for our shareholders as we execute the next stage of our aspirational Clean Electricity Growth Plan. Given the recent announcements on market changes from the Government of Alberta, we have decided to pause greenfield development in Alberta until the full impact of the Restructured Energy Market is understood. Our focus will shift to our other core jurisdictions, the United States and Western Australia, where we will look to secure appropriate risk-adjusted returns within stable markets.”

“The interim regulations to be adopted by the Government of Alberta effective July 1, 2024 in relation to market power mitigation and the supply cushion in the province remain in effect until Nov. 30, 2027 and are not expected to have a significant impact on our Company.  We believe market prices and offer behaviour will be driven primarily by preexisting demand and supply fundamentals, which are already reflected in the weaker pricing conditions expected over the period of time that the regulations will be in place,” added Mr. Kousinioris.

Key Business Developments

White Rock Wind Facilities Achieve Commercial Operation

On Jan. 1, 2024, the 100 MW White Rock West wind facility achieved commercial operation. On April 22, 2024, the 200 MW White Rock East wind facility was also commissioned. The White Rock wind facilities are located in Caddo County, Oklahoma and are contracted under two long-term PPAs with Amazon for the offtake of 100 per cent of the generation from the facilities. The Company’s wind generating portfolio in the US now totals 819 MW in gross installed capacity.

Bow River Basin Memorandum of Understanding

On April 19, 2024, the Company announced it had signed a voluntary water-sharing memorandum of understanding with over thirty other water licence holders in the Bow River Basin. The Government of Alberta continues to anticipate and prepare for lower water conditions this summer with specific concerns in southern Alberta where agriculture could be impacted by water shortages. The Government of Alberta is leading efforts to coordinate water usage among water licence holders for Alberta river basins in an effort to ensure licensees get the water they need as opposed to the water to which they are entitled. In recognition of the unique role the Company plays in managing water flows while also serving as a key provider to Alberta’s electricity grid, we look forward to working with the Government and downstream stakeholders to maximize water storage in the early season to help mitigate any anticipated drought conditions. We anticipate the Company’s water management efforts will not have an adverse impact on our electricity generating and environmental objectives.

Annual Shareholder Meeting

The Honourable Rona Ambrose did not stand for reelection and retired from the Board of Directors (“Board”) following the annual shareholder meeting on April 25, 2024. The Board extends its gratitude for her service to the Company. She has been a valuable contributor to the Board since 2017 and we thank her for her leadership and insight, including her contributions as Chair of the Governance, Safety and Sustainability Committee of the Board.

At the annual general meeting of the holders of common shares of TransAlta, the Company received strong support on all items of business, including the election of all 12 directors and Say on Pay.

TransAlta Announced Retirement of CFO and Appointment of New CFO

On April 11, 2024, the Company announced the retirement of Todd Stack, Executive Vice President, Finance and Chief Financial Officer from the Company, effective June 30, 2024. The Board expresses its deep appreciation to Mr. Stack for his contributions during his 34-year career with the Company. Mr. Joel E. Hunter will be appointed as Executive Vice President, Finance and CFO effective July 1, 2024.  

Normal Course Issuer Bid (“NCIB”) and Automatic Share Purchase Plan (“ASPP”)

TransAlta is committed to enhancing shareholder returns through appropriate capital allocation such as share buybacks and its quarterly dividend. The Company previously announced an enhanced common share repurchase program for 2024 of up to $150 million, targeting up to 42 per cent of 2024 FCF guidance being returned to shareholders in the form of share repurchases and dividends.

The Company also previously announced that it had received approval from the Toronto Stock Exchange (TSX) to purchase up to 14,000,000 of its common shares during the 12-month period that commenced on May 31, 2023 and will terminate on May 30, 2024. The Company intends to renew the NCIB in May 2024.

On March 19, 2024, the Company entered into an ASPP to facilitate repurchases of TransAlta’s common shares under its NCIB.

Under the ASPP, the Company’s broker may purchase common shares from the effective date of the ASPP until the termination of the ASPP. All purchases of common shares made under the ASPP will be included in determining the number of common shares purchased under the NCIB. The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (b) May 3, 2024; or (c) the Company terminates the ASPP in accordance with its terms.

During the three months ended March 31, 2024, the Company purchased and cancelled a total of 3,460,300 common shares, at an average price of $9.36 per common share, for a total cost of $32 million.

Mount Keith 132kV Expansion Complete

The Mount Keith 132kV expansion project was completed during the first quarter of 2024. The expansion was developed under the existing power purchase agreement with BHP Nickel West (“BHP”), which has a term of 15 years. The expansion will facilitate the connection of additional generating capacity to the transmission network which supports BHP’s operations and increases its competitiveness as a supplier of low-carbon nickel.

Production Tax Credit (“PTC”) Sale Agreements

On Feb. 22, 2024, the Company entered into a 10-year transfer agreement with an AA- rated customer for the sale of approximately 80 per cent of the expected PTCs to be generated from the White Rock and the Horizon Hill wind projects. The expected annual average EBITDA from these contracts is approximately $57 million (US$43 million).

First Quarter 2024 Highlights

Related Articles