TransAlta Corporation (“TransAlta” or the “Company”) (TSX: TA) (NYSE: TAC) today reported its financial results for the three and six months ended June 30, 2024, demonstrating strong financial performance and reaffirming its 2024 outlook.
Second Quarter 2024 Financial Highlights
TransAlta’s second quarter results exceeded expectations and delivered strong free cash flow and solid operating performance. The Company delivered Free Cash Flow (“FCF”)(1) per share of $0.57, which was firmly supported by its hedging and asset optimization strategies given the expected decline in Alberta spot power prices year over year, milder weather, lower natural gas prices and incremental generation from the addition of new natural gas, wind and solar supply in the market. Highlights for the quarter include:
- Adjusted EBITDA(1) of $312 million, compared to $387 million for the same period in 2023
- Strong operational adjusted availability of 90.8 per cent, up from 84.6 per cent during the same period in 2023
- FCF of $172 million or $0.57 per share, compared to $278 million or $1.05 per share for the same period in 2023
- Earnings before income taxes of $94 million, compared to $79 million for the same period in 2023
- Net earnings attributable to common shareholders of $56 million or $0.18 per share, compared to $62 million or $0.23 per share for the same period in 2023
- Cash flow from operating activities of $108 million, an increase of $97 million for the same period in 2023
- The return of $89 million of capital to shareholders during the six months ended June 30, 2024, through the buyback of 9.5 million common shares constituting 59 per cent of the Company’s 2024 enhanced share repurchase program of up to $150 million
Other Business Highlights and Updates
- Achieved commercial operation of the 200 MW White Rock East wind facility on April 22, 2024 and the 200 MW Horizon Hill wind facility on May 21, 2024, increasing the Company’s renewables fleet in the US to over 1 GW
- Entered into an additional 10-year transfer agreement on June 21, 2024, with an A+ rated customer for the sale of the remaining 20 per cent of the expected production tax credits (“PTCs”) to be generated from the White Rock and Horizon Hill wind facilities
- Welcomed Joel Hunter as Executive Vice President, Finance and Chief Financial Officer (“CFO”) effective July 1, 2024, following the retirement of Todd Stack effective June 30, 2024
“Our strong second quarter results demonstrate the value of our portfolio management and market forecasting capabilities. In response to the evolving market conditions in Alberta, we proactively deployed hedging strategies to enhance portfolio margins and moderate the impact of the known supply additions and weakening price environment in Alberta. Given our portfolio position, we are confident that we will reach our 2024 guidance given our exceptional performance in the first half of the year,” said John Kousinioris, President and Chief Executive Officer of TransAlta.
“We continue to believe that our strong free cash flow results during the first half of the year, and our expectations for the balance of 2024, are not 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. We have completed $89 million of share repurchases so far this year, which is approximately 59 per cent of our $150 million share repurchase target or $0.29 per share in shareholder value.”
“Our capital allocation decisions will continue to be balanced and focused on enhancing shareholder value. We are seeing considerable opportunities to support the energy transition in our core jurisdictions, particularly at our legacy thermal sites, where we are actively pursuing redevelopment and recontracting opportunities for the benefit of our shareholders,” added Mr. Kousinioris.
Key Business Developments
Appointment of New CFO
On June 30, 2024, Todd Stack, the former Executive Vice President, Finance and CFO retired from the Company. The Board of Directors expresses its deep appreciation to Todd for his contributions to TransAlta and its success during his 34-year career with the Company.
Joel Hunter was appointed Executive Vice President, Finance and Chief Financial Officer of the Company 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 to be returned to shareholders in the form of share repurchases and dividends.
On May 27, 2024, the Company announced that it had received approval from the Toronto Stock Exchange to purchase up to a maximum of 14 million common shares during the 12-month period that commenced May 31, 2024 and terminates May 31, 2025. Any common shares purchased under the NCIB will be cancelled.
On June 21, 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: (a) Aug. 6, 2024; (b) the date on which the maximum purchase limits under the ASPP are reached; or (c) the date on which the Company terminates the ASPP in accordance with its terms.
During the six months ended June 30, 2024, the Company purchased and cancelled a total of 9,537,200 common shares, at an average price of $9.54 per common share, for a total cost of $91 million, including tax on share buybacks.
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 facilities.
On June 21, 2024, the Company entered into an additional 10-year transfer agreement with an A+ rated customer for sale of the remaining 20 per cent of the expected PTCs.
The expected annual average EBITDA from the two agreements is approximately $78 million (US$57 million).
Horizon Hill Wind Facility Achieved Commercial Operation
On May 21, 2024, the 200 MW Horizon Hill wind facility achieved commercial operation. The facility is located in Logan County, Oklahoma and is fully contracted to Meta for the offtake of 100 per cent of the generation.
White Rock Wind Facilities Achieved 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 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.
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 re-election and retired from the Board following the annual shareholder meeting on April 25, 2024. At the annual shareholder meeting, the Company received strong support on all items of business, including the election of 12 directors, the reappointment of auditors and the Company’s approach to executive compensation.
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 PPA 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.
Second Quarter 2024 Highlights
| $ millions, unless otherwise stated | Three months ended | Six months ended | ||
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |
| Operational information | ||||
| Adjusted availability (%) | 90.8 | 84.6 | 91.5 | 88.2 |
| Production (GWh) | 4,781 | 4,596 | 10,959 | 10,568 |
| Select financial information | ||||
| Revenues | 582 | 625 | 1,529 | 1,714 |
| Adjusted EBITDA(1) | 312 | 387 | 643 | 890 |
| Earnings before income taxes | 94 | 79 | 361 | 462 |
| Net earnings attributable to common shareholders | 56 | 62 | 278 | 356 |
| Cash flows | ||||
| Cash flow from operating activities | 108 | 11 | 352 | 473 |
| Funds from operations(1) | 231 | 391 | 473 | 765 |
| Free cash flow(1) | 172 | 278 | 381 | 541 |
| Per share | ||||
| Net earnings per share attributable to common shareholders, basic and diluted | 0.18 | 0.23 | 0.91 | 1.34 |
| Funds from operations per share(1),(2) | 0.76 | 1.48 | 1.55 | 2.88 |
| FCF per share(1),(2) | 0.57 | 1.05 | 1.25 | 2.03 |
| Weighted average number of common shares outstanding | 303 | 264 | 306 | 266 |
