Third Quarter 2022 Financial Highlights
- Adjusted EBITDA(1),(2) of $555 million, an increase of 38% over the same period in 2021
- Free Cash Flow(1) of $393 million, or $1.45 per share, an increase of $0.68 or 88% on a per-share basis compared to the same period in 2021
- Earnings before income taxes of $126 million, compared to a loss before income taxes of $441 in the same period in 2021
- Net earnings attributable to common shareholders of $61 million or $0.23 per share, compared to a loss of $1.68 per share for the same period in 2021
- Cash flow from operating activities of $204 million, a decrease of $406 million for the same period in 2021
- Increased annual common share dividend by 10% to $0.22 per year effective Jan. 1, 2023, representing the fourth consecutive annual increase
- Returned $34 million of capital to common shareholders during the nine months ended Sept. 30, 2022, through share buybacks of 2.7 million common shares
Other Business Highlights
- Executed contract renewals for five additional years for the Sarnia cogeneration and Melancthon 1 wind facilities with the Ontario Independent Electricity System Operator (“IESO”)
- Expanded TransAlta’s development pipeline by 553 MW across Canada and the United States
- Announced Ms. Beverlee Park’s retirement from the Board of Directors
2022 Revised Outlook
- Increased 2022 annual financial guidance as set out below:
- Adjusted EBITDA range of $1,380 to $1,460 million (original guidance of $1,065 to $1,185 million)
- FCF range of $725 to $775 million (original guidance of $455 to $555 million)
TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the three and nine months ended Sept. 30, 2022.
“Our third quarter results demonstrated the value of our strategically diversified fleet in Alberta. Our Alberta Electricity Portfolio, comprising our Alberta hydro, gas and wind facilities, led our results with exceptional operational availability and a portfolio position that benefited from the strong pricing environment,” said John Kousinioris, President and Chief Executive Officer. “With this exceptional performance across the fleet and our continuing positive outlook on market expectations for the balance of the year, we have revised our 2022 financial guidance upwards for both adjusted EBITDA and free cash flow, with revised ranges now exceeding the top end of our original targets. I am also pleased to announce that the Board of Directors has approved a 10% increase to the common share dividend effective for the first quarter 2023 dividend payment.”
“We continue to execute on our strategy of developing contracted renewables and are progressing several advanced-stage projects on multiple fronts. Our focus is to also expand our development pipeline and I am pleased to share that this quarter we have added 553 MW of development opportunities to our pipeline,” added Mr. Kousinioris.
Set out below are additional highlights of TransAlta’s business activities from the quarter, including the Company’s progress on advancing its Clean Electricity Growth Plan as well as details regarding the Company’s financial performance and liquidity.
Key Business Developments
Executed Contract Renewals with the IESO at Sarnia Cogeneration and Melancthon 1 Wind Facilities
On Aug. 23, 2022, TransAlta Renewables Inc., a subsidiary of the Company (“TransAlta Renewables”) announced that it was awarded capacity contracts for the Sarnia cogeneration facility and the Melancthon 1 wind facility from the IESO as part of the IESO’s Medium-Term Capacity Procurement Request for Proposals. The new capacity contracts run from May 1, 2026 to April 30, 2031 and will extend the period of contracted revenues of the Sarnia cogeneration facility to April 30, 2031. The Company expects the gross margin from the Sarnia cogeneration facility to step down by approximately thirty per cent as a result of the IESO price cap under the new contract.
New Term Facility
During the third quarter of 2022, the Company closed a two-year $400 million floating rate Term Facility with its banking syndicate with a maturity date of Sept. 7, 2024.
Changes to Board of Directors
On Sept. 30, 2022, Ms. Beverlee Park retired from TransAlta’s Board of Directors. Ms. Park served on the Board of Directors since 2015 and as Chair of the Audit, Finance and Risk Committee from April 2018 to April 2022. The Company recognizes her for the many contributions made by Ms. Park to TransAlta and thanks her for the many years of service.
Conversion Results for Series E and F Preferred Shares
On Sept. 21, 2022, there were 89,945 Cumulative Redeemable Rate Reset First Preferred Shares, Series E (Series E Shares) tendered for conversion, which was less than the one million shares required to give effect to conversions into Cumulative Redeemable Rate Reset First Preferred Shares, Series F (Series F Shares). As a result, the Series E Shares were not converted into Series F Shares.
Liquidity and Financial Position
The Company continues to maintain a strong financial position in part due to long-term contracts and hedged positions. At the end of the third quarter of 2022, TransAlta had access to $2.3 billion in liquidity, including $0.8 billion in cash and cash equivalents.
Accelerated Clean Electricity Growth Plan
On Sept. 28, 2021, the Company announced the strategic targets associated with its Clean Electricity Growth Plan.
During the third quarter, the Company added 553 MW to its renewable development pipeline across Canada and the United States, bringing its development pipeline to between 3.6 GW and 4.7 GW.
As of Nov. 7, 2022, the Company has made significant progress in achieving the targets of the Clean Electricity Growth Plan. Refer to Strategy and Capability to Deliver Results in the Company’s Management’s Discussion and Analysis (MD&A) for further details.
| Clean Electricity Growth Plan Targets | Target | % of Target Achieved |
|---|---|---|
| Renewable Energy Capacity | 2 GW | 40% |
| Capital Investment | $3 Billion | 49% |
| Incremental EBITDA | $250 Million | 59% |
Normal Course Issuer Bid
During the nine months ended Sept. 30, 2022, the Company purchased and cancelled a total of 2.7 million common shares at an average price of $12.50 per common share, for a total cost of $34 million.
Third Quarter 2022 Highlights
|
$ millions, unless otherwise stated |
3 months ended |
9 months ended |
||
|
Sept. 30, 2022 |
Sept. 30, 2021 |
Sept. 30, 2022 |
Sept. 30, 2021 |
|
|
Adjusted availability (%) |
93.8 |
89.2 |
90.1 |
87.5 |
|
Production (GWh) |
5,432 |
6,053 |
15,253 |
16,282 |
|
Revenues |
929 |
850 |
2,122 |
2,111 |
|
Adjusted EBITDA(1) |
555 |
402 |
1,093 |
1,043 |
|
Earnings (loss) before income taxes |
126 |
(441) |
346 |
(348) |
|
Net earnings (loss) attributable to common shareholders |
61 |
(456) |
167 |
(498) |
|
Cash flow from operating activities |
204 |
610 |
526 |
947 |
|
FFO(1) |
488 |
318 |
887 |
808 |
|
FCF(1) |
393 |
210 |
646 |
506 |
|
Net earnings (loss) per share attributable to common shareholders, basic and diluted |
0.23 |
(1.68) |
0.62 |
(1.84) |
|
FFO per share(1),(2) |
1.80 |
1.17 |
3.27 |
2.98 |
|
FCF per share(1),(2) |
1.45 |
0.77 |
2.38 |
1.87 |
