TransAlta Reports Third Quarter 2023 Results

Third Quarter 2023 Financial Highlights

• Earnings before income taxes of $453 million, an improvement of $327 million from the same period in 2022
• Net earnings attributable to common shareholders of $372 million, an increase of $311 million from the same period in 2022
• Cash flow from operating activities of $681 million, an increase of $477 million from the same period in 2022
• Adjusted EBITDA⁽¹⁾ of $453 million, a decrease of 18% over the same period in 2022. Year-to-date adjusted EBITDA of $1.34 billion reflects an increase of 23% over the same period in 2022, and is in line with our revised full year financial guidance
• Free Cash Flow (“FCF”)⁽¹⁾ of $228 million, or $0.87 per share, a decrease of 40% on a per-share basis from the same period in 2022. Year-to-date FCF of $769 million, or $2.90 per share, an increase of 19% over the same period in 2022, is in line with our revised FCF financial guidance

Other Business Highlights and Updates

• Entered into a definitive share purchase agreement to acquire Heartland Generation and its entire business operations, which are located in Alberta and British Columbia
• Completed the acquisition of TransAlta Renewables
• Achieved commercial operations at the Garden Plain facility in August. The 130 MW wind facility is fully contracted with Pembina Pipeline Corporation and PepsiCo Canada
• Topped list of Newsweek’s Most Trustworthy Companies for 2023
• Commenced commissioning of Northern Goldfields Solar project. All major equipment has been installed and construction work is largely complete. Energization and testing processes have commenced and the facility is expected to achieve full commercial operations in the fourth quarter of 2023
• Advanced the Kent Hills rehabilitation program towards completion with all 50 turbines now fully reassembled. Energization activities are underway and turbines are being returned to service as commissioning activities are completed. To date, 36 turbines have been fully returned to commercial operations and the remaining turbines are expected to return to service in the fourth quarter of 2023
• Advanced the Mount Keith 132kV expansion project, which is nearing completion. The transmission line and transformer installation is complete and the project is expected to achieve commercial operations in the fourth quarter of 2023
• Advanced the Horizon Hill wind project in Oklahoma with all major equipment now delivered to site. Turbine erection activities are complete with all 34 turbines fully assembled. Construction of the transmission interconnection is underway and commercial operations are expected in the first quarter of 2024
• Advanced the White Rock East and West projects with all equipment deliveries complete and tower assembly well underway. Currently, 34 out of 51 turbines have been assembled and the construction of the transmission interconnection is in progress. Commercial operations are expected in the first quarter of 2024

TransAlta Corporation (TSX: TA) (NYSE: TAC) today reported its financial results for the three and nine months ended Sept. 30, 2023.

“Our third quarter results continue to demonstrate the value of our strategically diversified fleet, which benefited from our asset optimization and hedging activities. With strong performance across the fleet and our continuing positive expectations for the balance of year, we continue to track towards previously revised guidance,” said John Kousinioris, President and Chief Executive Officer of TransAlta. 

“We are pleased to have completed the acquisition of TransAlta Renewables. Our combined company’s greater scale and enhanced strategic positioning will drive value for all of our shareholders as we continue to advance our growth plan. Within the quarter, we were also pleased to reach commercial operations at Garden Plain, our 27th wind facility. We are now delivering clean electricity to our customers, Pembina Pipeline and PepsiCo, helping them achieve their sustainability goals.”

“We also continue to progress our advanced stage pipeline and other potential opportunities in the context of the current market environment. We are focused on making disciplined capital allocation decisions to ensure we deliver project returns that are appropriate for the current market environment and enhance value for our shareholders. We have 418 MW of projects in advanced stage of development on which we are working to reach final investment decisions in the near term. The cash flows from our legacy fleet are positioning us well to realize our Clean Electricity Growth Plan”, added Mr. Kousinioris. “Finally, and more recently, we are pleased to have entered into an agreement to acquire Heartland Generation, which we believe will support our competitive positioning and diversify our generating portfolio in Alberta.”

Key Business Developments

TransAlta to Acquire Heartland Generation from Energy Capital Partners

On Nov. 2, 2023, the Company announced that it had entered into a definitive share purchase agreement with an affiliate of Energy Capital Partners, the parent of Heartland Generation Ltd. and Alberta Power (2000) Ltd. (collectively, “Heartland”), pursuant to which TransAlta will acquire Heartland and its entire business operations in Alberta and British Columbia. The acquisition will add 10 facilities to TransAlta’s fleet, totalling 1,844 MW of new capacity. Heartland owns and operates generation assets consisting of 507 MW of cogeneration, 387 MW of contracted and merchant peaking generation, 950 MW of gas-fired thermal generation, transmission capacity and a development pipeline that includes the 400 MW Battle River Carbon Hub. The transaction is expected to close in the first half of 2024, subject to customary closing conditions, including receipt of regulatory approvals.

The purchase price for the acquisition is $390 million, subject to working capital and other adjustments, as well as the assumption of $268 million of low-cost debt. The Company will finance the transaction using cash on hand and draws on its credit facilities.

The assets are expected to add approximately $115 million of average annual EBITDA including synergies.  Approximately, 55 per cent of revenues are under contract with high creditworthy counterparties, which have a weighted-average remaining contract life of 16 years. Corporate pre-tax synergies are expected to exceed $20 million annually.

TransAlta Corporation Completes Acquisition TransAlta Renewables Inc. to Simplify Structure and Enhance Strategic Position

On Oct. 5, 2023, the Company announced the completion of the acquisition of TransAlta Renewables pursuant to the terms of the previously announced arrangement agreement between the parties (“the Arrangement”). TransAlta acquired all of the outstanding common shares of TransAlta Renewables (“RNW Shares”) not already owned, directly or indirectly, by TransAlta and certain of its affiliates, resulting in TransAlta Renewables becoming a wholly owned subsidiary of the Company. Prior to the Arrangement, TransAlta and its affiliates collectively held 160,398,217 RNW Shares, representing 60.1 per cent of the issued and outstanding RNW Shares, with the remaining 106,510,884 RNW Shares held by TransAlta Renewables shareholders (“RNW Shareholders”) other than TransAlta and its affiliates.

The Arrangement was approved by RNW Shareholders at a special meeting of shareholders held on Sept. 26, 2023, and by the Court of King’s Bench of Alberta on Oct. 4, 2023. The consideration paid totaled $1.3 billion, which consisted of $800 million of cash and approximately 46 million common shares of the Company.

The closing of the acquisition of TransAlta Renewables represents a key milestone for the Company and the simplified and unified corporate structure positions it well for future success. The combined company will unify our assets, capital, and capabilities to enhance cash flow predictability while enhancing our ability to realize future growth.

The RNW Shares were delisted from the Toronto Stock Exchange (“TSX”). Common shares of the Company will continue to trade on both the New York Stock Exchange (“NYSE”) and the TSX under the symbols “TAC” and “TA”, respectively.

TransAlta Tops List of Newsweek’s World’s Most Trustworthy Companies for 2023

On Sept. 14, 2023, the Company announced that it ranked first on Newsweek’s inaugural €œWorld’s Most Trustworthy Companies 2023€ list for the Energy and Utilities category. The list identifies the top 1,000 companies in 21 countries and across 23 industries. Newsweek’s 2023 World’s Most Trustworthy Companies have been chosen based on a holistic approach to evaluating trust across three pillars of public trust customer, investor and employee. The list was compiled based on an extensive survey of over 70,000 participants, gathering 269,000 evaluations of companies that people trust as a customer, as an investor and as an employee.

 Garden Plain Wind Facility Reaches Commercial Operations

In August 2023, the Garden Plain wind facility was commissioned adding 130 MW to our gross installed capacity. The facility is fully contracted with Pembina Pipeline Corporation and PepsiCo Canada, with a weighted average contract life of approximately 17 years.

Third Quarter 2023 Highlights

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