TransAlta Announces Accelerated Transition to Clean Energy

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TransAlta Announces Accelerated Transition to Clean Energy

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) announced today that its Board of Directors has approved additional elements in the Company’s strategy to accelerate its transition to gas and renewables generation.  These elements include:

  • Entering into a letter of intent with Tidewater Midstream and Infrastructure Ltd. (Tidewater) to construct a 120 kilometre natural gas pipeline from Tidewater’s Brazeau River Complex to TransAlta’s generating units at Sundance and Keephills to eventually supply the Company with up to 340 million cubic feet of gas per day;
  • Accelerating the conversion of Sundance Units 3 to 6 and Keephills Units 1 and 2 from coal-fired generation to gas-fired generation in the 2021 to 2022 timeframe, a year earlier than originally planned. The coal-fired plants operated by TransAlta, once converted to gas, are anticipated to be able to run through to 2031 to 2039 a significant lengthening of their asset lives; and
  • Mothballing temporarily a combination of Sundance units in 2018 and 2019 to ensure that two Sundance coal units can operate at high capacity utilizations with lower costs through the period to 2020 when additional power will be needed in the Alberta market. Sundance Units 3 to 6 will re-enter the market starting in 2020 as the demand for electricity rises.

Details on the Company’s Brazeau Pumped Storage Project, which is a key cornerstone of its gas and renewables strategy, are also provided. The Company expects dispatchable renewable resources to be valuable in a future where carbon emitting plants will mostly provide back up to low cost intermittent renewable resources.

The Company also provided its 2018 annual guidance today, which is discussed below.

“We continue to position TransAlta as a leader in clean power generation and our strategy dramatically improves our competitive position and our ability to generate strong cash flow over the long term”,- said Dawn Farrell, President and Chief Executive Officer. “Our asset base in Alberta is poised to ensure that we can provide low cost, clean, reliable and firm electricity to customers.”

Gas Supply for Conversions and Accelerated Coal-to-Gas Conversion Schedule

As announced earlier today, TransAlta has entered into a letter of intent with Tidewater for the construction of a 120 kilometre pipeline from their Brazeau River Complex to TransAlta’s Sundance and Keephills facilities. The pipeline will provide initial capacity of 130 million cubic feet of gas per day by 2020, and have expansion capability to 340 million cubic feet of gas per day. The initial capacity will support fuel blending, using a fuel combination of coal and gas for generation, which will reduce the marginal cost as well as emissions. TransAlta will have the option to invest up to 50 percent in the pipeline, which, if exercised, would reduce the costs associated with the tolling agreement.

The decision to work with Tidewater advances the timeframe for the construction of a pipeline and permits the acceleration of plant conversions.  As a result, and given the clarity provided by the draft coal-to-gas conversion rules proposed by the Government of Canada, the Company has determined to accelerate the conversion of Sundance Units 3 to 6 and Keephills Units 1 and 2 from coal-fired generation to gas-fired in the 2021 to 2022 timeframe, a year earlier than originally planned.  TransAlta remains of the view that having at least two pipelines supplying natural gas would reduce operational risks and continues to advance discussions with other parties to construct additional pipelines to meet the remaining gas supply requirements for the facilities.

Although not yet finalized, the Government of Canada has proposed coal-to-gas conversion rules that would extend the life of TransAlta’s gas conversion units by five-to-ten years past their federal end of coal life, depending on their CO2 emissions profile.  The proposed rules would see the life of TransAlta’s entire coal-fired fleet extended by an aggregate of approximately 75 years.

In addition to the extending of their operating lives, the benefits of converting units to gas generation include: (i) significantly lowering carbon intensities, emissions, and costs; (ii) significantly lowering operating and sustaining capital costs; and (iii) increasing operating flexibility.

Sundance Operations in the 2018 to 2020 Timeframe

The Board of Directors have approved the following;

  • Sundance Unit 3, will be temporarily mothballed on April 1, 2018 for a period of up to two years;
  • Sundance Unit 5, will be temporarily mothballed on April 1, 2018 for a period of up to one year; and
  • Sundance Unit 4, will be temporarily mothballed on April 1, 2019 for a period of up to two years.

The decision to mothball selected units ensures that the remaining units operate at strong capacity utilization factors which ensure competitive cost structures.  Sundance Unit 3, Sundance Unit 4 and Sundance Unit 5 comprise 368 MW, 406 MW and 406 MW, respectively, of the 2,141 MW Sundance power plant.  TransAlta maintains the flexibility to return mothballed units to service when market fundamentals support the addition of their generation.  The mothballing of the units will also assist TransAlta in its preparations for converting the units to gas.

On April 19, 2017, the Company announced that it would retire Sundance Unit 1 and mothball Sundance Unit 2, effective January 1, 2018.  Sundance Unit 2 will also be available to return to service in 2020.

Brazeau Pumped Storage

Brazeau Hydro is an existing power station on the North Saskatchewan River location north-west of Edmonton.  The facility currently produces 355 MW of power under a power purchase arrangement (PPA) with the Balancing Pool. The PPA expires at the end of 2020.  Brazeau Pumped Storage is a development project, at Brazeau Hydro, that would create up to 900 MW of additional generation and storage capability. The facility would utilize the existing footprint to generate power under conditions of strong demand and store power when supply resources outpace demand. It is particularly competitive for ensuring that low cost, intermittent wind and solar generation resources can be stored for use in high demand periods.  The Company is developing the project in anticipation of a requirement over time to replace baseload thermal resources with dispatchable renewable resources in the Alberta market.  The project, if it were to win a long-term contract in a future competitive call, could be ready for service as early as 2025.

2018 Outlook

For 2018, we expect our annual free cash flow (FCF) to be in-line with our 2017 expected annual FCF, despite the expiry of the Sundance A PPA, the early termination of the Sundance B PPA and Sundance C PPA, and the termination of our Solomon contract in Australia. We have already received approximately $400 million for the early termination of the Solomon contract and we are expecting to receive in excess of $200 million from the Balancing Pool for the early termination of the Sundance B PPA and Sundance C PPA.  As a result, we have accelerated our debt reduction plan and will have additional financial flexibility over the next three years.  The PPA terminations have provided increased operational flexibility and enables optimization of the Sundance power plant.  This optimization results in significant reductions in operating costs as well as sustaining and productivity capital, which we expect will be in the range of $215 to $235 million.

The outlook assumes an average price of $50-60/MWh in Alberta and that the Sundance merchant units will run between 65 to 75% in 2018.   The following table outlines TransAlta’s financial targets for 2018:

Measure Target
Comparable EBITDA(1) $950 million to $1,050 million
FFO(1) $725 million to $800 million
FCF (1) $275 million to $350 million
Dividend $0.16 per share, 13 to 17 per cent payout of Comparable FCF

 

Range of key power price assumptions:

Market Power Prices ($/MWh)
Alberta Spot $50 to $60
Alberta Contracted $35 to $40
Mid-C Spot (US$) $20 to $25
Mid-C Contracted (US$) $47 to $53

 

Other assumptions relevant to the 2018 outlook:

Sustaining Capital $215 million to $235 million
Canadian Coal Capacity Factor 65% to 75%
Hydro/Wind Resource Long term average

 

(1)  These items are not defined under IFRS. Presenting these items provides management and investors with the ability to evaluate earnings trends more readily in comparison with prior periods results. Refer to the Funds from Operations and Free Cash Flow, Discussion of Segmented Comparable Results, and Earnings and Other Measures on a Comparable Basis sections of TransAlta’s 2017 third quarter management discussion and analysis for additional information.

Investor Day

TransAlta will be hosting an Investor Day at 9:30am ET on Wednesday, December 6th, 2017 during which our executive team will discuss the announcements above.  A link to the presentation and live webcast will be available on the Investors section of TransAlta’s website at https://transalta.com/investors/events-and-presentations.

About TransAlta Corporation:

TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. We provide municipalities, medium and large industries, businesses and utility customers clean, affordable, energy efficient, and reliable power. Today, we are one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 100 years, TransAlta has been a responsible operator and a proud community-member where its employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and we have been recognized by CDP (formerly Climate Disclosure Project) as an industry leader on Climate Change Management. We are also proud to have achieved the Silver level PAR (Progressive Aboriginal Relations) designation by the Canadian Council for Aboriginal Business.

For more information about TransAlta, visit our web site at transalta.com.

Forward-Looking Statements 

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “propose”, “plans”, “intends” and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to: the mothballing of Sundance Units 3, 4 and 5; the expected value of dispatchable renewable resources, such as the Brazeau Pumped Storage project; that carbon emitting plants are expected to primarily provide back up to low cost intermittent renewable resources in the future; the expectation that mothballing a combination of Sundance units in 2018 and 2019 will allow the two operating Sundance coal units to operate at high capacity utilizations to 2020, when additional power is expected to be needed in the Alberta market; the conversion to gas-fired generation of Sundance Units 3 to 6 and Keephills Units 1 to 2, including the timing thereof; the lengthening of the coal-fired plants lives, once converted to gas, to 2031 to 2039; the expected gas supply required for converted units and the construction by Tidewater of a 120 kilometre pipeline to TransAlta’s Sundance and Keephills facilities with a capacity of 130 million cubic feet of gas per day by 2020 and expansion capability to 340 million cubic feet of gas per day; the terms of any definitive agreement with Tidewater, including the option to invest up to 50 percent in the pipeline; the anticipated benefits of converting units to gas; the Government of Canada’s proposed coal-to-gas conversion rules expected to extend the life of TransAlta’s coal units by five-to-ten years past their federal end of coal life, depending on their emissions profile; the life of TransAlta’s coal-fired fleet to be extended by an aggregate of approximately 75-years; the benefits of converting coal-fired generating units to gas-fired generating units; the construction and development of the Brazeau Pumped Storage project, including that such project  would create up to 900 MW of additional hydro and storage capability, the timing for when such project could come on-line, the competitiveness of such project, and the anticipated Alberta provincial requirement to replace baseload thermal generation with dispatchable renewable resources; the 2018 outlook, including 2017 expected annual FCF and 2018 financial targets; amounts to be received from the Balancing Pool in connection with the termination of the Sundance B and Sundance C PPAs; increased asset optimization; reductions in operating costs and sustaining and productivity capital in the range of $215 to $235 million; and the 2018 dividend amounts and payout ratio. These statements are based on TransAlta’s belief and assumptions based on information available at the time the assumptions were made. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include: legislative or regulatory developments, including as it pertains to the Alberta capacity market; the Federal and/or Provincial governments not implementing legislation or regulations facilitating the conversion from coal generation to gas generation; the Federal and/or Provincial governments adopting different carbon prices rules; changes in economic and competitive conditions; inability to secure natural gas supply and the construction of a natural gas pipeline on terms satisfactory to the Company; the introduction of disruptive sources of energy or capacity; changes in the price for natural gas and electricity, including expected pricing in Alberta and Mid-C; decreased demand for energy or capacity; Canadian coal capacity factors and hydro and wind resources being lower than expected; availability of financing; and other risk factors contained in the Company’s annual information form and management’s discussion and analysis. Readers are cautioned not to place undue reliance on these forward-looking statements or forward-looking information, which reflect TransAlta’s expectations only as of the date of this news release. The purpose of the financial outlooks contained in this news release are to give the reader information about management’s current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Note: All financial figures are in Canadian dollars unless otherwise indicated.

 

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

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TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) and Tidewater Midstream and Infrastructure Ltd. (Tidewater) (TSX: TWM) announced today that the two companies have entered into a Letter of Intent (LOI) for Tidewater to construct a 120 Kilometre natural gas pipeline from its Brazeau River Complex to TransAlta’s generating units at Sundance and Keephills.

The Tidewater Pipeline will facilitate TransAlta’s strategy to convert its coal units at Sundance and Keephills to natural gas. Converting the coal units extends the operating life of the assets and significantly reduces operating costs and emissions.

The pipeline will provide initial capacity of 130 MMcf/d by 2020, and have expansion capability to 340 MMcf/d, which represents approximately 50% of TransAlta’s gas requirements at full capacity.  Under the LOI, TransAlta has the option to invest up to 50% in the pipeline.

€œConstruction of the natural gas pipeline supports our strategy of being a low-cost provider of firm, clean and reliable energy,- said Dawn Farrell, President and Chief Executive Officer of TransAlta. €œIn addition, having greater access to natural gas allows TransAlta to blend natural gas with the coal, prior to fully converting the units, allowing us to take advantage of low natural gas prices and reduce our carbon costs.€

€œTidewater is excited to enter into a long-term arrangement with TransAlta which is supported by a 15-year take or pay agreement that provides oil and gas producers throughout Western Canada with direct connectivity to a new, large demand source,- said Joel MacLeod, President and Chief Executive Officer of Tidewater. €œThis agreement with TransAlta enables Tidewater to transport production direct from the wellhead, through Tidewater’s extensive natural gas processing and storage infrastructure network, direct to an end market.€

 About TransAlta Corporation:

TransAlta develops new, and owns and operates a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. We provide municipalities, medium and large industries, businesses and utility customers clean, affordable, energy efficient, and reliable power. Today, we are Canada’s largest producer of wind power and Alberta’s largest producer of hydro-electric power. For over 100 years, TransAlta has been a responsible operator and a proud community-member where its employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and we have been recognized by CDP (formerly Climate Disclosure Project) as an industry leader on Climate Change Management. We are also proud to have achieved the Silver level PAR (Progressive Aboriginal Relations) designation by the Canadian Council for Aboriginal Business.

For more information about TransAlta, visit our web site at transalta.com.

About Tidewater Midstream and Infrastructure Ltd.

Tidewater is traded on the TSX under the symbol €œTWM€. Tidewater’s business objective is to build a diversified midstream and infrastructure company in the North American natural gas and natural gas liquids (NGL) space. Its strategy is to profitably grow and create shareholder value through the acquisition and development of oil and gas infrastructure. Tidewater plans to achieve its business objective by providing customers with a full service, vertically integrated value chain through the acquisition and development of oil and gas infrastructure including: gas plants, pipelines, railcars, trucks, export terminals and storage facilities.

Forward-Looking Statements 

This news release contains forward looking statements within the meaning of applicable securities laws, including statements regarding: the construction of a 120 kilometre natural gas pipeline from Tidewater’s Brazeau River Complex to TransAlta’s generating units at Sundance and Keephills; TransAlta’s strategy of converting certain of its coal units to natural gas; and the terms of any definitive agreement with Tidewater, including that the pipeline will provide initial capacity of 130 MMcf/d by 2020, have expansion capability to 340 MMcf/d, and provide TransAlta with an option to invest up to 50% in the pipeline.  These statements are based on TransAlta’s belief and assumptions based on information available at the time the assumptions were made. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include: legislative or regulatory developments, including as it pertains to the emission standards; the Federal and/or Provincial legislation impacting the conversion from coal generation to gas generation; changes in economic and competitive conditions; ability to secure natural gas supply; any inability to reach a definitive agreement with Tidewater regarding the construction of a natural gas pipeline on terms satisfactory to the Company; changes in the price for natural gas; decreased demand for energy or capacity; higher costs, expenses and interest rates; strikes or other labour disruptions; and other risk factors contained in the Company’s annual information form and management’s discussion and analysis. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect TransAlta’s expectations only as of the date of this news release. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 Note: All financial figures are in Canadian dollars unless otherwise indicated.

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Opens the Pilbara’s Most Efficient Power Station

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TransAlta Opens the Pilbara’s Most Efficient Power Station

Lower GHG emissions and 30 per cent more electricity from the same fuel

The Pilbara’s most efficient combined-cycle natural gas power station officially opened today in South Hedland, securing electricity supply to residents and businesses across the Pilbara.

TransAlta Energy Australia, owner-operator of the AU$570 million station, marked the milestone with a formal opening attended by the head of its Canadian parent company, President and CEO, Dawn Farrell, and foundation customer Horizon Power.

The 150 MW power station provides low-cost electricity with low greenhouse gas emissions, feeding power into the North West Interconnected System (NWIS), which serves approximately 47,500 people across Karratha, Port Hedland, South Hedland, Point Samson and Roebourne.

Unlike other natural gas-powered stations in the region, the South Hedland combined-cycle gas power station uses both gas and steam turbines, which together produce up to one-third more electricity from the same fuel than a traditional simple-cycle plant. The waste heat from the gas turbine is routed to the nearby steam turbine, which generates additional electricity and energy.

“We are proud to be working with Horizon Power and proud of our work in Australia over the past 20 years and the facilities we have built and maintained in Western Australia” – said TransAlta President and CEO, Dawn Farrell.

“We are here to stay in the Pilbara and to have Horizon Power as a key and substantial customer with TransAlta.”

“South Hedland power station is a clean, cost-effective, important driver of growth, jobs and infrastructure in the Pilbara region,” added Ms. Farrell.

Ms Farrell joined Horizon Power’s Managing Director, Frank Tudor, Chairman, Ian Mickel and Parliamentary Secretary to the Energy Minister, Reece Whitby, MLA for the opening.

“Completion of the South Hedland Power Station is the outcome of our partnership with TransAlta and several years of work, and is part of a bigger vision to have a fully integrated and coordinated electricity network in the Pilbara” – said Horizon Power’s Frank Tudor.

“This new station ensures customers are buying power from the most cost-effective system possible.”

“This project is a great example of a public-private partnership working together to deliver the right outcomes for the resources sector and regional communities,”- said Mr Tudor.

The power station, which has been generating power since July, has an operating life of 40 years and will serve what is expected to be ever-increasing demand from a growing population.

TransAlta has operated in Western Australia since 1996, with six facilities totaling 450 MW of electricity generating capacity. The company’s role in helping to secure energy supply in the region provides a firm foundation upon which hundreds of businesses and thousands of local residents rely to fuel a burgeoning local economy. In other Australian investments, the company is currently also developing the Goonumbla 70 MW solar farm located in NSW.

TransAlta’s Western Australia operations include:

  • South Hedland Power Station
  • Southern Cross Energy (Located in Kambalda, Mount Keith, Leinster & Kalgoorlie)
  • Fortescue River Gas Pipeline
  • Parkeston Gas Power Station

 

About TransAlta

TransAlta develops new, and owns and operates a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. We provide municipalities, medium and large industries, businesses and utility customers clean, affordable, energy efficient, and reliable power. Today, we are Canada’s largest producer of wind power and Alberta’s largest producer of hydro-electric power. For over 100 years, TransAlta has been a responsible operator and a proud community-member where its employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and we have been recognized by CDP (formerly Climate Disclosure Project) as an industry leader on Climate Change Management. We are also proud to have achieved the Silver level PAR (Progressive Aboriginal Relations) designation by the Canadian Council for Aboriginal Business.

For more information about TransAlta, visit our web site at transalta.com.

-30-

For more information: 

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta and TransAlta Renewables Respond to Notice of Termination for the South Hedland Power Purchase Agreement Received from Fortescue Metals Group

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TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta or the Company) (TSX: TA, NYSE: TAC) and TransAlta Renewables Inc. (TransAlta Renewables) (TSX: RNW) announced today that TEC Hedland Pty Ltd, a subsidiary of TransAlta, received formal notice of termination of the South Hedland Power Purchase Agreement (PPA) from a subsidiary of Fortescue Metals Group Limited (FMG).  The PPA allows FMG to terminate the agreement if the power station has not reached commercial operation within a specified time period.  FMG continues to be of the view that the South Hedland Power Station has yet to achieve commercial operation.

TransAlta and TransAlta Renewables remain confident that all conditions required to establish commercial operations, including all performance conditions, have been achieved under the terms of the PPA.  These conditions include receiving a commercial operation certificate, successfully completing and passing certain test requirements, and obtaining all permits and approvals required from the North West Interconnected System (NWIS) and government agencies.

Confirmation of commercial operation has been provided by independent engineering firms, as well as by Horizon Power, the state-owned utility.  TransAlta and TransAlta Renewables will take all steps necessary to protect their interests in the facility and ensure all cash flows promised under the PPA are realized.

The South Hedland Power Station has been fully operational and able to meet FMG’s requirements under the terms of the PPA since July 2017.

The South Hedland Power Station, located in the Pilbara Region of Western Australia, is a 150 MW combined-cycle natural gas power station that is one of the most efficient power plants in Western Australia, providing low cost electricity to its customers and generating low greenhouse gas emissions.

 

About TransAlta Corporation:

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

About TransAlta Renewables Inc.:

TransAlta Renewables is among the largest of any publicly traded renewable independent power producers (IPP) in Canada.  Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 18 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities (including South Hedland) and one natural gas pipeline, representing an ownership interest of 2,316 MW of net generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the State of Wyoming and the State of Western Australia. Our objectives are to (i) provide stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.

 Cautionary Statement Regarding Forward Looking Information:

This news release contains forward looking statements, including statements regarding the business and anticipated financial performance of the Company and TransAlta Renewables that are based on the Company’s and TransAlta Renewable’s current expectations, estimates, projections and assumptions in light of their experience and their perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as €œplans€, €œexpects€, €œproposed€, €œwill€, €œanticipates€, €œdevelop€, €œcontinue€, and similar expressions suggesting future events or future performance. In particular, this news release contains forward-looking statements pertaining to, without limitation, the following: the satisfaction of all conditions to achieving commercial operations under the terms of the PPA; the ability of the South Hedland Power Station to meet all of the requirements of FMG under the terms of the PPA; TransAlta and TransAlta Renewables taking all steps necessary to protect their interests in the South Hedland Power Station and to ensure all cash flows promised under the PPA are realized; and the ability of the South Hedland Power Station to provide low cost electricity and generate low greenhouse gas emissions. These forward-looking statements are not historical facts but reflect the Company’s and TransAlta Renewables current expectations concerning future plans, actions and results. These statements are subject to a number of risks and uncertainties that could cause actual plans, actions and results to differ materially from current expectations including, but not limited to: the outcome of the dispute with FMG; and operational breakdowns, failures, or other disruptions. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s and TransAlta Renewables expectations only as of the date of this news release. The Company and TransAlta Renewables disclaim any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Reports In Line Third Quarter 2017 Results

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TransAlta Reports In Line Third Quarter 2017 Results

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today reported third quarter 2017 comparable EBITDA(1) of $245 million, funds from operations (FFO)(1) of $196 million, and free cash flow (FCF)(1) of $99 million. Comparable EBITDA for the third quarter was the strongest third quarter result since 2013.  Our results were in line with expectations and provide us with confidence in our ability to reach our current outlook for 2017.

During the quarter, the Company benefited from lower transportation costs and higher prices on merchant and contracted revenues in our US Coal segment and we commissioned the South Hedland power station in Australia.  Canadian Gas and Energy Marketing segments performed well, offset by lower volumes on wind assets during the quarter.

At Canadian Coal, higher fuel costs were caused by the expected higher strip ratio, lower planned equipment availability, and unexpected lower productivity at our mine during the first half of the year. Results for Canadian Coal were also negatively impacted by lower priced hedges, partially offset by the Off-Coal Agreement payment and higher prices on non-contracted generation for both the quarter and year-to-date.

FCF was up $44 million and $24 million during the third quarter and year-to-date, respectively, compared to the same periods in 2016, mostly due to the timing of sustaining and productivity capital expenditures and the Mississauga re-contracting.

“Quarterly results were as anticipated and the recovery at our mine is advancing ahead of plan”,- said Dawn Farrell, President and Chief Executive Officer. “The addition of South Hedland and our diversity of assets across fuel types and regions is enabling us to grow cash flow, strengthen our balance sheet and continue our transition to gas and renewables.”

Third Quarter Highlights

  • Formal notice was received from the Balancing Pool for the termination of the Alberta Power Purchase Arrangements (Alberta PPAs) for Sundance B and C effective March 31, 2018. TransAlta expects to receive compensation of approximately $215 million, representing the net book value of the assets, and will benefit from increased operational flexibility upon termination.
  • TransAlta Renewables announced that the South Hedland power station, located in the Pilbara Region of Western Australia, had begun commercial operation. As a result of the commissioning, the Class B shares in the capital of TransAlta Renewables held by TransAlta were converted into common shares, and TransAlta Renewables increased the dividend on its common shares by approximately 7%. Fortescue Metals Group (FMG) is disputing the requisite performance criteria to declare commercial operation for their 35 MW Power Purchase Agreement (PPA). In our view, all conditions to establish that commercial operations commenced have been satisfied in full under the terms of the PPA with FMG.
  • TransAlta cancelled the $350 million credit agreement provided to TransAlta Renewables and reduced our $1.5 billion credit facility to $1.0 billion. Concurrent with this transaction, TransAlta Renewables entered into a $500 million syndicated credit agreement, resulting in no change to liquidity for TransAlta on a consolidated basis. Both credit facilities expire in 2021.
  • TransAlta appointed the Honourable Rona Ambrose to its Board of Directors. Ms. Ambrose is the former Leader of Canada’s Official Opposition in the House of Commons, and brings extensive public policy experience to the Board.

Important Subsequent Events

  • Kent Hills Wind LP, a subsidiary of the TransAlta Renewables, completed a private placement bond offering for $260 million in proceeds, which will be used to fund a portion of the construction costs for the Kent Hills expansion and to redeem the unsecured debentures issued by Canadian Hydro Developers, Inc., a wholly owned subsidiary of TransAlta Renewables.
  • TransAlta Renewables expects to receive approximately US$335 from FMG for the repurchase of the Solomon power station, which will be utilized to repay the credit facility used to fund the development of the South Hedland power station, for other future growth opportunities, and for general corporate purposes.

 Third Quarter 2017 Review by Segment

Comparable EBITDA
(in CAD$ millions)		 3 Months Ended 9 Months Ended
Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
Canadian Coal 82 99 258 295
U.S. Coal 24 13 68 27
Canadian Gas 56 53 201 174
Australian Gas 45 32 108 96
Wind and Solar 26 32 136 129
Hydro 19 19 61 62
Energy Marketing 12 10 20 39
Corporate (19) (14) (65) (51)
Total Comparable EBITDA 245 244 787 771
  • Canadian Coal: Comparable EBITDA for the three and nine months ended September 30, 2017 decreased $17 million and $37 million, respectively, compared to the same periods in 2016. Generation for the quarter and year-to-date was slightly lower than the comparable periods in 2016, which was offset by higher payments under the Alberta PPAs relating to the pass through of most of the environmental costs. The net impact resulted in higher revenue on a year-to-date basis and flat revenue for the third quarter compared to the corresponding periods in 2016. The three and nine month periods ended September 30, 2017, also included $10 million and $30 million, respectively, in income related to accruals for the Off-Coal Agreement payment. These benefits were more than offset by lower prices on our long term financial contracts and increased fuel costs related to lower productivity at the Highvale mine.
  • US Coal: Comparable EBITDA for the third quarter and year-to-date improved $11 million and $41 million, respectively, compared to the corresponding periods in 2016.  This increase is primarily due to higher prices on merchant and contracted revenues and lower transportation costs on coal.  Availability for the three months ended Sept. 30, 2017, was up compared to 2016, due to higher unplanned outages in 2016. Year-to-date, availability was down compared to last year due to a forced outage on Unit 1 in January.
  • Canadian Gas: Comparable EBITDA for the three and nine months ended September 30, 2017 increased by $3 million and $27 million, respectively, compared to the same period in 2016, primarily due to the positive impact of the temporary shutdown at our Mississauga facility and the settlement with the Ontario Electricity Financial Corporation in the second quarter. A reduction in contracted revenue from our Windsor facility partially offset this increase.
  • Australian Gas: Production for the three and nine months ended September 30, 2017 increased 87 GWh and 214 GWh, respectively, compared to the corresponding periods in 2016 due to the commissioning of South Hedland in July 2017. Comparable EBITDA for the three and nine month periods ended September 30, 2017 increased $13 million and $12 million, respectively, over the comparable period in 2016.
  • Wind and Solar: Comparable EBITDA for the three months ended September 30, 2017 decreased $6 million primarily driven by lower production at our contracted facilities as a result of lower wind resources and the sale of Wintering Hills in the first quarter of 2017. Year-to-date comparable EBITDA increased $7 million compared to the same period in 2016, primarily due to increased renewable energy certificate sales and lower operating expenses after renegotiating long term service agreements with service providers for some Alberta wind projects.
  • Hydro: Comparable EBITDA of $19 million and $61 million for the third quarter and year-to-date, respectively, were relatively flat compared to the same periods in 2016. Higher volumes were offset by increased costs related to our corporate transformation initiatives.
  • Energy Marketing: Comparable EBITDA for the third quarter was up $2 million compared to 2016 reflecting a return to a normalized gross margin. On a year-to-date basis, results were lower compared to 2016 due to weak margins in the first quarter of 2017 as traders reduced their positions to manage market uncertainty.
  • Corporate: Corporate overhead costs increased $5 million and $14 million for the three and nine month periods ending September 30, 2017, respectively. Corporate overhead costs include certain costs relating to our corporate transformation and the reclassification of 2016 incentives between our operational and corporate segments.

Consolidated Earnings Review

Reported net loss attributable to common shareholders for the third quarter of 2017 was $27 million ($0.09 loss per share) compared to net loss of $12 million ($0.04 loss per share) during the same period in 2016. Year-to-date, reported net earnings were down $101 million ($0.35 loss per share). The income related to the Off-Coal Agreement payments were offset by the Sundance Unit 1 impairment charge of $20 million recognized in the second quarter and higher net earnings attributable to non-controlling interests. Additionally, the comparative net earnings for 2017 are negatively impacted by higher depreciation on Keephills 3 and Genesee 3, which were expected to run beyond 2030 and therefore have had their useful lives shortened.

Operating Review

Adjusted availability for the three and nine months ended September 30, 2017, was 86.5 per cent and 86.3 per cent, respectively, compared to 89 per cent and 89.3 per cent for the same periods in 2016. During the quarter and year-to-date, the main causes of the decreases were higher outages and derates at Canadian Coal and planned maintenance at our Sarnia facility. Windsor’s cycling conversion project also impacted the year-to-date availability. Lower availability had a minimal impact on our results due to current low prices in Alberta and the Pacific Northwest.

Production for the three and nine months ended September 30, 2017 was 9,767 GWh and 26,526 GWh, respectively, compared to 10,769 GWh and 27,533 GWh for the same periods in 2016. The cessation of operations at our Mississauga cogeneration facility effective January 1, 2017, higher outages and derates at Canadian Coal and lower wind resources, were the main drivers of the production decrease in the third quarter of 2017. This was partially offset by higher generation from Australia due to the commissioning of South Hedland and stronger customer demand. On a year-to-date basis, US Coal had higher production compared to 2016 as a result of later economic dispatching in the first quarter due to slightly higher prices in the first quarter of 2017. Higher water resources at Hydro also contributed to higher production in 2017.

Third Quarter 2017 Financial and Operational Highlights

In $CAD millions, unless otherwise stated 3 Months Ended 9 Months Ended
Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017 Sept. 30, 2016
Adjusted availability (%)(2) 86.5 89.0 86.3 89.3
Production (GWh)(2) 9,767 10,769 26,526 27,533
Revenue 588 620 1,669 1,680
Comparable EBITDA(1) 245 244 787 771
Net earnings (loss) attributable to common shareholders (27) (12) (45) 56
FFO(1) 196 163 585 535
Cash Flow from Operating Activities 201 228 545 622
FCF(1) 99 55 224 200
Net earnings (loss) per common share attributable to common shareholders (0.09) (0.04) (0.16) 0.19
FFO per share(1) 0.68 0.57 2.03 1.86
FCF per share(1) 0.34 0.19 0.78 0.69
Dividends declared per common share 0.04 0.04 0.08 0.12

The complete report for the quarter, including Management Discussion and Analysis (MD&A) and unaudited interim financial statements, as well as our quarterly presentation, will be available on the Investors section of our website: transalta.com.

Conference call

We will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) on Wednesday, November 1, 2017 to discuss our third quarter 2017 results. The call will begin with a short address by Dawn Farrell, President and Chief Executive Officer, and Donald Tremblay, Chief Financial Officer, followed by a question and answer period for investment analysts, investors and other interested parties. A question and answer period for the media will immediately follow. Please contact the conference operator five minutes prior to the call, noting “TransAlta Corporation” as the company and “Sally Taylor” as moderator.

Dial-in numbers:
Toll-free North American participants call: 1-888-231-8191

Outside of Canada & USA call: 1-647-427-7451

A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/events-and-presentations. If you are unable to participate in the call, the instant replay is accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code 95462860 followed by the # sign. A transcript of the broadcast will be posted on TransAlta’s website once it becomes available.

Notes

(1) These items are not defined under International Financial Reporting Standards (IFRS). Presenting these items from period to period provides management and investors with the ability to evaluate earnings trends more readily in comparison with prior periods results. Refer to the Reconciliation of Non-IFRS Measures sections of this quarter’s MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.

 (2) Adjusted for economic dispatching at U.S. Coal.

 About TransAlta

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

Cautionary Statement Regarding Forward Looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends” and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to: our strategy, including our ability to grow cash flow, strengthen our balance sheet and continue our transition to gas and renewables; the compensation to be received from the Balancing Pool in connection with the termination of the Alberta PPAs for Sundance B and C; our ability to increase operational flexibility following the termination of the Alberta PPAs Sundance B and C; our ability to establish that all conditions to the PPA with FMG at South Hedland have been satisfied in full; the amount of proceeds, if any, to be received from FMG in respect of FMG’s purchase of the Solomon power station, and the use of proceeds thereof; and the use of proceeds from the Kent Hills private placement bond offering. By their nature, forward-looking information requires us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking information will not prove to be accurate and readers are cautioned not to place undue reliance on our forward-looking information as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information. Some of the factors that could cause such differences include: operational risks involving our facilities; changes in market prices where we operate; equipment failure and our ability to carry out repairs in a cost effective and timely manner, including unplanned outages at generating facilities and associated capital investments; the effects of weather; changes in our relationship with TransAlta Renewables; disruptions in the source of fuels, including coal, gas, water or wind required to operate our facilities; our ability to resolve the impact of labour constraints at our Highvale mine; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; legislative or regulatory developments and their impacts, including development of regulations facilitating coal-to-gas conversions; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); the outcome of disputes with counterparties; changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where we operate; deterioration of credit markets; impediments to the construction and commissioning of the Kent Hills expansion; and the outcome of any and other risks and uncertainties discussed in the Company’s materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company’s MD&A for the year ended December 31, 2016 and 2017 Annual Information Form. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect TransAlta’s expectations only as of the date of this news release. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Declares Dividends

Posted on by ta_root

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

The Board of Directors of TransAlta Corporation (TSX: TA; NYSE: TAC) today declared a quarterly dividend of $0.04 per common share payable on January 1, 2018 to shareholders of record at the close of business on December 1, 2017.

The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.16931 per share on TransAlta’s issued and outstanding 2.709% Cumulative Redeemable Rate Reset First Preferred Shares, Series A, payable on December 31, 2017 to shareholders of record at the close of business on December 1, 2017 for the period from and including September 30, 2017 to but excluding December 31, 2017.

The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.17467 per share at the Quarterly Floating Dividend Rate of 2.772% on TransAlta’s issued and outstanding Cumulative Redeemable Floating Rate First Preferred Shares, Series B, payable on December 31, 2017 to shareholders of record at the close of business on December 1, 2017 for the period from and including September 30, 2017 to but excluding December 31, 2017. Please note the Quarterly Floating Rate will be reset every quarter.

The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.25169 per share on TransAlta’s issued and outstanding 4.027% Cumulative Redeemable Rate Reset First Preferred Shares, Series C, payable on December 31, 2017 to shareholders of record at the close of business on December 1, 2017 for the period from and including September 30, 2017 to but excluding December 31, 2017.

The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.32463 per share on TransAlta’s issued and outstanding 5.194% Cumulative Redeemable Rate Reset First Preferred Shares, Series E, payable on December 31, 2017 to shareholders of record at the close of business on December 1, 2017 for the period from and including September 30, 2017 to but excluding December 31, 2017.

The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.33125 per share on TransAlta’s issued and outstanding 5.30% Cumulative Redeemable Rate Reset First Preferred Shares, Series G, payable on December 31, 2017 to shareholders of record at the close of business on December 1, 2017 for the period from and including September 30, 2017 to but excluding December 31, 2017.

All currency is expressed in Canadian dollars except where noted.

About TransAlta Corporation:

TransAlta Corporation (TransAlta) is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

Media Advisory: TransAlta Third Quarter 2017 Results and Conference Call

Posted on by ta_root

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta) (TSX: TA; NYSE: TAC) will release its third quarter 2017 results after market close on Tuesday, October 31, 2017. A conference call and webcast to discuss the results will be held for investors, analysts, members of the media and other interested parties the following day beginning at 9:00 a.m. MDT (11:00 a.m. EDT). The media will be invited to ask questions following analysts.

Please contact the conference operator five minutes prior to the call, noting TransAlta Corporation€ as the company and €œSally Taylor€ as moderator.

Dial-in numbers Q3 2017 Results:

Toll-free North American participants call: 1-888-231-8191

Outside of Canada & USA call: 1-647-427-7450

A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/events-and-presentations. If you are unable to participate in the call, the instant replay is accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code 95462860 followed by the # sign. A transcript of the broadcast will be posted on TransAlta’s website once it becomes available.

About TransAlta

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

 

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Announces Conversion Results for Series E Preferred Shares

Posted on by ta_root

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) announced today that after taking into account all election notices received by the September 15, 2017 deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series E (the €œSeries E Shares) into Cumulative Redeemable Floating Rate Preferred Shares, Series F (the €œSeries F Shares), there were 133,969 Series E Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series F Shares. As a result, none of the Series E Shares will be converted into Series F Shares on September 30, 2017.

About TransAlta Corporation

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Corporation Provides Notice of Series E Preferred Shares Conversion Right and Announces Reset Dividend Rates

Posted on by ta_root

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) announced today that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative Redeemable Rate Reset First Preferred Shares, Series E (Series E Shares) (TSX: TA.PR.H) on September 30, 2017 (the €œConversion Date).

As a result, and subject to certain conditions set out in the prospectus supplement dated August 3, 2012 relating to the issuance of the Series E Shares, the holders of the Series E Shares will have the right to elect to convert all or any of their Series E Shares into Cumulative Redeemable Floating Rate First Preferred Shares, Series F of the Company (Series F Shares) on the basis of one Series F Share for each Series E Share on the Conversion Date.

With respect to any Series E Shares that remain outstanding after September 30, 2017, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of TransAlta. The annual dividend rate for the Series E Shares for the five-year period from and including September 30, 2017 to but excluding September 30, 2022, will be 5.194%, being equal to the five-year Government of Canada bond yield of 1.544% determined as of today plus 3.65%, in accordance with the terms of the Series E Shares.

With respect to any Series F Shares that may be issued on September 30, 2017, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of TransAlta. The annual dividend rate for the 3-month floating rate period from and including September 30, 2017 to but excluding December 31, 2017 will be 4.392%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 0.742% plus 3.65%, in accordance with the terms of the Series F Shares (the €œFloating Quarterly Dividend Rate). The Floating Quarterly Dividend Rate will be reset every quarter.

As provided in the share conditions of the Series E Shares: (i) if TransAlta determines that there would remain outstanding immediately following the conversion, less than 1,000,000 Series E Shares, all remaining Series E Shares shall be converted automatically into Series F Shares on a one-for one basis effective September 30, 2017; or (ii) if TransAlta determines that there would remain outstanding immediately after the conversion, less than 1,000,000 Series F Shares, holders of Series E Shares shall not be entitled to convert their shares into Series F Shares on the Conversion Date. There are currently 9,000,000 Series E Shares outstanding.

The Series E Shares are issued in €œbook entry only€ form and must be purchased or transferred through a participant in the CDS depository service (CDS Participant). All rights of holders of Series E Shares must be exercised through CDS or the CDS Participant through which the Series E Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series E Shares into Series F Shares is 3:00 p.m. (MST) / 5:00 p.m. (EST) on September 15, 2017. Any notices received after this deadline will not be valid. As such, holders of Series E Shares who wish to exercise their right to convert their shares should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

If TransAlta does not receive an election notice from a holder of Series E Shares during the time fixed therefor, then the Series E Shares shall be deemed not to have been converted (except in the case of an automatic conversion). Holders of the Series E Shares and the Series F Shares will have the opportunity to convert their shares again on September 30, 2022, and every five years thereafter as long as the shares remain outstanding.

The Toronto Stock Exchange (TSX) has conditionally approved the listing of the Series F Shares effective upon conversion. Listing of the Series F Shares is subject to TransAlta fulfilling all the listing requirements of the TSX.

About TransAlta Corporation

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

 

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

Forward Looking Information

This news release contains certain information that is forward-looking and is subject to important risks and uncertainties (such statements are usually accompanied by words such as €œmay€, €œwill€, €œshould€, €œestimate€, €œintend€ or other similar words). Specifically, this news release contains forward-looking information with respect to the Company, the Series E Shares and the Series F Shares, including but not limited to future conversions, redemptions and dividends. All forward-looking information reflect the Company’s beliefs and assumptions based on information available at the time the statements were made and as such are not guarantees of future performance. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is expressed in this press release. TransAlta undertakes no obligation to update or revise any forward-looking information except as required by law. For additional information on the assumptions made, and the risks and uncertainties which could cause actual results to differ from those in the forward-looking information, refer to the Company’s Annual Report and Management’s Discussion and Analysis filed under the Company’s profile on SEDAR at www.sedar.com and with the U.S. Securities and Exchange Commission at www.sec.gov.

 

For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]

TransAlta Reports Second Quarter 2017 Results and Revised 2017 Outlook

Posted on by ta_root

TransAlta and Tidewater Midstream announce today a Letter of Intent to construct a Natural Gas Pipeline to TransAlta’s Facilities

TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today reported second quarter 2017 comparable EBITDA(1) of $268 million, funds from operations (FFO)(1) of $187 million, and free cash flow (FCF)(1) of $30 million. Comparable EBITDA and FFO for the second quarter are the highest second quarter results in over five years, and increased by $20 million and $12 million, respectively, over the same period last year.

The second quarter results reflect strong performance across our portfolio. US Coal benefited from favourable mark-to-market impacts on financial contracts, higher contracted revenue, and lower costs for purchased power; Wind and Solar profited from stronger wind resources in eastern Canada and lower operating expenses; Hydro benefitted from higher water resources; and the gross margin from Energy Marketing returned to historic levels.  Canadian Coal, as expected, was negatively impacted by lower realized price on uncontracted volumes and higher coal costs compared to last year.

Free cash flow was down by $26 million and $15 million for the three and six months ended June 30, 2017, respectively, due to the timing of capital expenditures, higher productivity capital spending relating to our corporate transformation, and higher distributions to our partner in TransAlta Cogeneration L.P.

€œThe business operated as predicted with some upside in our renewables portfolio,- said Dawn Farrell, President and Chief Executive Officer. €œThe highlight for this reporting period is the commissioning of the South Hedland power station which will increase our dividend from TransAlta Renewables from $120 million to $150 million on an annualized basis. However, expected headwinds in the back half of the year and additional productivity capital spending have lowered our free cash flow guidance by approximately ten per cent on an annualized basis,€ commented Mrs. Farrell.

Second Quarter Highlights

  • We accelerated our transition to gas and renewables generation with the announcement of our intention to retire Sundance Unit 1, mothball Sundance Unit 2, and convert Sundance Units 3 to 6 and Keephills Units 1 and 2 from coal-fired to gas-fired generation between 2021 to 2023.
  • TransAlta Renewables will be investing approximately $37 million in five new towers, adding 17 MW of capacity to the existing Kent Hills wind farm. The expansion is supported by a long-term contract with New Brunswick Power Corporation, and will bring the total capacity of the Kent Hills wind farm to approximately 167 MW.  Construction of the expansion is expected to begin in the spring of 2018 and will be funded through project financing.  We expect the Kent Hills wind project to support between $240 and $275 million of project financing.
  • We settled the contract indexation dispute with the Ontario Electricity Financial Corporation (OEFC). The settlement consisted of a $34 million payment to TransAlta, and relates to long-term contracts at Ottawa and Windsor, which form part of TransAlta Cogeneration L.P.

Important Subsequent Events

  • TransAlta Renewables announced that the South Hedland power station, located in the Pilbara Region of Western Australia, had begun commercial operation. The 150 MW combined-cycle natural gas power station is expected to contribute approximately $80 million of annual EBITDA from two 25-year power purchase agreements (PPA).  As a result of the commissioning, the Class B shares in the capital of TransAlta Renewables held by TransAlta were converted into common shares, and TransAlta Renewables increased the dividend on its common shares by approximately 7%.
  • Fortescue Metals Group (FMG) announced that in their view the South Hedland power station has not yet satisfied the requisite performance criteria to declare commercial operation for their 35 MW contract. In our view, all conditions to establish that commercial operations commenced have been satisfied in full under the terms of the PPA with FMG. We continue to confer on the issue with FMG.
  • TransAlta cancelled the $350 million credit agreement provided to TransAlta Renewables and reduced our $1.5 billion credit facility to $1.0 billion. Concurrent with this transaction, TransAlta Renewables entered into a $500 million syndicated credit agreement, resulting in no change to liquidity for TransAlta on a consolidated basis. Both credit facilities expire in 2021.
  • The Balancing Pool announced its intention to consult with customer representatives and the Minister of Energy regarding its ability to terminate certain of the power purchasing arrangements (The Alberta PPAs) that it holds and which relate to Sundance Units 1 to 6. The Balancing Pool is required to provide six months notice of any termination, and provide us with a termination payment which we estimate to be approximately $231 million.
  • TransAlta appointed the Honourable Rona Ambrose to its Board of Directors. Ambrose is the former Leader of Canada’s Official Opposition in the House of Commons, and brings extensive public policy experience and demonstrated ability to bring people of divergent views together.
  • We received notice that FMG intends to repurchase the Solomon power station from TEC Pipe Pty Ltd, a wholly owned subsidiary of TransAlta, a right that FMG has under the applicable power purchase arrangement. TransAlta Renewables owns the economic interest in the Solomon facility and its gross proceeds from the repurchase are estimated to be approximately US$335 and will be utilized to repay the credit facility used to fund the development of the South Hedland power station, for other future growth opportunities, and for general corporate purposes.
  • Productivity at the Highvale mine was impacted by emerging labour constraints. The temporary shortfall affects our coal-fired Sundance Units 1 to 6 and Keephills Units 1 to 3.

2017 Fiscal Outlook Update

During the first half of the year, emerging labour constraints at our Highvale mine have impacted productivity, significantly reducing our coal inventory and causing coal supply constraints for our facilities in Alberta. The shortfall affects our coal-fired Sundance generating Units 1 to 6 and Keephills Units 1 to 3. We expect additional mining costs at our Highvale mine operations for the remainder of 2017, and a shorter-term reduction in the power generation at Sundance and Keephills, in order to rebuild our coal inventory. Also, higher productivity capital and higher distributions to non-controlling interests have negatively impacted FCF.

The following table outlines TransAlta’s updated financial targets for 2017:

Measure

 Revised Outlook Previous Outlook

Comparable EBITDA

 $1,025 to $1,100 million

$1,025 to $1,135 million

FFO

 $765 to $820 million

$765 to $855 million

FCF

 $270 to $310 million

$300 to $365 million

Dividend

$0.16 per share, 15% 17% payout of FCF

$0.16 per share, 13% 15% payout of FCF


Second Quarter 2017 Review by Segment

Comparable EBITDA
(in CAD$ millions)		 3 Months Ended 6 Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Canadian Coal 85 93 176 196
U.S. Coal 34 18 44 14
Canadian Gas 57 56 145 121
Australian Gas 32 33 63 64
Wind and Solar 42 36 110 97
Hydro 28 25 42 43
Energy Marketing 12 6 8 29
Corporate (22) (19) (46) (37)
Total Comparable EBITDA 268 248 542 527
  • Canadian Coal: Comparable EBITDA for the three and six months ended June 30, 2017 decreased by $8 million and $20 million, respectively, compared to the same periods in 2016. Generation for the quarter and year-to-date was slightly higher than the comparable period in 2016, which when combined with higher payments under the Alberta PPA relating to the pass through of environmental costs, resulted in higher revenues. The three and six month periods ended June 30, 2017, also included $10 million and $20 million, respectively, in income related to accruals for the Off-Coal Agreement payment. These benefits were more than offset by lower hedged volumes and a reduction in our mark-to-market positions, attributable to long-term financial contracts, as well as higher coal costs.
  • US Coal: Comparable EBITDA for the second quarter and year-to-date improved by $16 million and $30 million, respectively, compared to the corresponding periods in 2016. Favourable impacts of mark-to-market positions on certain forward financial contracts and higher revenues benefitted both the quarter and year-to-date results.  Second quarter results also benefitted from lower costs to purchase power and favourable foreign exchange rates.  Availability for the three and six months ended June 30, 2017 was down compared to 2016 due to a forced outage at Unit 1 in January.
  • Canadian Gas: Comparable EBITDA for the six months ended June 30, 2017 increased by $24 million compared to 2016, primarily due to the settlement with the OEFC, partially offset by unfavourable changes in unrealized mark-to-market positions and higher labour costs.
  • Australian Gas: Production for the three and six months ended June 30, 2017 increased 27 per cent and 17 per cent respectively, over the corresponding periods in 2016, due to higher customer load. The nature of our capacity payments, with a flow through of fuel costs, results in comparable EBITDA remaining stable across the periods. In July, we achieved commercial operation at our South Hedland project, which is expected to contribute approximately $80 million in EBITDA annually.
  • Wind and Solar: Comparable EBITDA for the three and six months ended June 30, 2017 increased by $6 million and $13 million, respectively, compared to the same period in 2016, primarily due to increased generation at our contracted facilities in eastern Canada and lower operating expenses after renegotiating long term service agreements for service providers for some Alberta wind projects.
  • Hydro: Comparable EBITDA of $28 million for the three months ended June 30, 2017 reflected an increase of $3 million, related to higher generation, compared to the same period in 2016.
  • Energy Marketing: Comparable EBITDA of $12 million was $6 million higher than the same period in 2016 reflecting a return to a normalized gross margin and better performance in certain markets. On a year-to-date basis, results were lower compared to 2016 due to weak margins in the first quarter of 2017 as traders reduced their positions to manage market uncertainty.
  • Corporate: Corporate overhead includes certain costs relating to our corporate transformation and reclassification of 2016 incentives between our operational and corporate segments.

Consolidated Earnings Review

Reported net loss attributable to common shareholders for the second quarter of 2017 was $18 million ($0.06 loss per share) compared to net earnings of $6 million ($0.02 earnings per share) during the same period in 2016. Year-to-date, reported net earnings were down $86 million ($0.30 loss per share). For both the quarter and year-to-date, the income related to the Off-Coal Agreement payments were offset by the Sundance Unit 1 impairment charge of $20 million recognized in the quarter and higher net earnings attributable to non-controlling interests. Additionally, the comparative net earnings for 2017 are negatively impacted by higher depreciation on Keephills 3 and Genesee 3, which were expected to run beyond 2030 and therefore have had their useful lives shortened.

Operating Review

Adjusted availability for the three and six months ended June 30, 2017 was 84.0 per cent and 86.2 per cent, respectively, compared to 86.5 per cent and 89.4 per cent for the same periods in 2016. Higher planned outages at Canadian and US Coal, and planned outages at our Sarnia cogeneration plant and Windsor plant, were the main causes of the decreases.

Production for the three and six months ended June 30, 2017 was 7,707 GWh and 16,758 GWh, respectively, compared to 7,899 GWh and 16,766 GWh for the same periods in 2016. The cessation of operations at our Mississauga cogeneration facility effective Jan. 1, 2017, and planned major maintenance at US Coal, were the main drivers of the production decrease in the second quarter of 2017. This was partially offset by higher generation at Alberta Hydro and Wind, as well as stronger customer demand in Australia.

Second Quarter 2017 Financial and Operational Highlights

In $CAD millions, unless otherwise stated 3 Months Ended 6 Months Ended
June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016
Adjusted availability (%)(2) 84.0 86.5 86.2 89.4
Production (GWh)(2) 7,707 7,899 16,758 16,766
Revenue 503 492 1,081 1,060
Comparable EBITDA(1) 268 248 542 527
Net earnings (loss) attributable to common shareholder (18) 6 (18) 68
FFO(1) 187 175 389 372
Cash Flow from Operating Activities 63 119 344 394
FCF(1) 30 56 125 140
Net earnings (loss) per common share attributable to common shareholders (0.06) 0.02 (0.06) 0.24
FFO per share(1) 0.65 0.61 1.35 1.29
FCF per share(1) 0.10 0.19 0.43 0.49
Dividends declared per common share 0.04 0.04 0.04 0.08

The complete report for the quarter, including Management Discussion and Analysis (MD&A) and unaudited interim financial statements, as well as our quarterly presentation, will be available on the Investors section of our website: transalta.com.

Conference call

We will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) on Thursday, August 10, 2017 to discuss our second quarter 2017 results. The call will begin with a short address by Dawn Farrell, President and CEO, and Donald Tremblay, Chief Financial Officer, followed by a question and answer period for investment analysts, investors and other interested parties. A question and answer period for the media will immediately follow. Please contact the conference operator five minutes prior to the call, noting TransAlta Corporation€ as the company and €œSally Taylor€ as moderator.

Dial-in numbers:


Toll-free North American participants call: 1-888-231-8191

Outside of Canada & USA call: 1-647-427-7451

A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/events-and-presentations. If you are unable to participate in the call, the instant replay is accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code 53257141 followed by the # sign. A transcript of the broadcast will be posted on TransAlta’s website once it becomes available.

 

Notes

(1) These items are not defined under International Financial Reporting Standards (IFRS). Presenting these items from period to period provides management and investors with the ability to evaluate earnings trends more readily in comparison with prior periods results. Refer to the Reconciliation of Non-IFRS Measures sections of this quarter’s MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.

 (2) Adjusted for economic dispatching at U.S. Coal.

 

 About TransAlta

TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta’s focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP’s Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada’s top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada’s Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.

For more information about TransAlta, visit our web site at www.transaltaprd.wpenginepowered.com or follow us on Twitter @TransAlta.

 

 Cautionary Statement Regarding Forward Looking Information

This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words €œexpect€, €œanticipate€, €œcontinue€, €œestimate€, €œmay€, €œwill€, €œproject€, €œshould€, €œbelieve€, €œplans€, €œintends€ and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to: our ownership in TransAlta Renewables and receipt of additional dividends from TransAlta Renewables; the intention to retire Sundance Unit 1, mothball Sundance Unit 2, and convert Sundance Units 3 to 6 and Keephills Units 1 and 2 from coal-fired to gas-fired generation between 2021 to 2023; the revised outlook for 2017, including as it pertains to Comparable EBITDA, FFO and  FCF;  the investment by TransAlta Renewables of approximately $37 million in five new  for the Kent Hills wind farm, and the timing of construction and funding associated therewith; the contribution to EBITDA from South Hedland; the satisfaction of all requisite performance criteria to declare commercial operation at South Hedland under the PPA with FMG; the expiry of the credit facilities; the potential termination of the Alberta PPAs and the receipt of a termination payment of approximately $231 million; the repurchase by FMG of the Solomon power station, the gross proceeds to be received therefrom and the use of proceeds received from the repurchase of such  facility; the return to normalized gross margin for Energy Marketing; and the impact of labour constraints at our Highvale mine on coal supply, mining costs and power generation at Sundance and Keephills.   By their nature, forward-looking information requires us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking information will not prove to be accurate and readers are cautioned not to place undue reliance on our forward-looking information as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information. Some of the factors that could cause such differences include: operational risks involving our facilities; changes in market prices where we operate; equipment failure and our ability to carry out repairs in a cost effective and timely manner, including unplanned outages at generating facilities and associated capital investments; the effects of weather; disruptions in the source of fuels, including coal, gas, water or wind required to operate our facilities and our ability to resolve the impact of labour constraints at our Highvale mine; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; legislative or regulatory developments and their impacts, including development of regulations facilitating coal-to-gas conversions; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); disputes with counterparties; changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where we operate; deterioration of credit markets; impediments to the construction and commissioning of the Kent Hills expansion; disputes with counterparties including the potential for, and outcome of, any contractual disputes, including as it pertains to South Hedland; and the outcome of any and other risks and uncertainties discussed in the Company’s materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company’s MD&A for the year ended December 31, 2016 and 2017 Annual Information Form. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect TransAlta’s expectations only as of the date of this news release. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 For more information:

Investor Inquiries:Media Inquiries:
Phone: 1-800-387-3598 in Canada and U.S.Phone: 1-855-255-9184
Email: [email protected]Email: [email protected]
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