TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today issued the following comments on the Balancing Pool’s recent announcement to commence consultation with customer representatives and the Minister of Energy regarding its ability to terminate a subset of the Alberta Power Purchase Arrangements (PPA) that it holds.
The PPAs were a design of the initial deregulation of the Alberta market in 2000. They were based on a regulated rate of return on low cost hydro and coal assets that have served Albertans for well over 50 years,- said TransAlta President and CEO Dawn Farrell. Shortening the life of the PPAs moves the Alberta market more quickly to total deregulation of the electricity market. It’s important that consumers, and other stakeholders fully evaluate the impacts of such a change in advance of the new capacity market which isn t slated to start until 2021.
Under Part 6, Section 97 of the Electric Utilities Act (Alberta), the Balancing Pool may terminate the PPAs if it:
Consults with representatives of customers and the Minister about the reasonableness of the termination;
Gives to the owner of the generating unit to which the power purchase arrangement applies 6 months notice, or any shorter period agreed to by the owner, of its intention to terminate, and;
Pays the owner or ensures that the owner receives an amount equal to the remaining closing net book value of the generating unit, determined in accordance with the PPA, as if the generating unit had been destroyed, less any insurance proceeds.
TransAlta has 3,770 MW of gross capacity under PPAs, including hydro, representing approximately 23% of the generation capacity in Alberta. If, after meeting the requirements, the Balancing Pool chooses to terminate the Sundance PPAs, TransAlta expects to receive approximately $231 million in payment for the net book value of the assets as compared to the Balancing Pool’s estimate of approximately $171 million. The Balancing Pool’s estimate differs because it excludes certain assets which TransAlta believes should be included in the net book value. Proceeds from any termination would be used to reduce outstanding debt and fund growth opportunities.
Termination of the PPAs is expected to provide TransAlta with increased operational flexibility, including with respect to offer pricing for generation from the affected units, maintenance and turnaround schedules, and the timing of the coal-to-gas conversions.
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.transalta.com or follow us on Twitter @TransAlta.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of applicable securities laws, including statements regarding: the termination of the PPAs; the impact that the termination of the PPAs could have on the Alberta market; the net book value of the Company’s generating facilities and the amount of any termination payment; the use of proceeds received in connection with any termination of the PPAs; and the impact the termination of the PPAs will have on the Company, including as it pertains to increasing operational flexibility, including with respect to offer pricing for generation from the affected units, maintenance and turnaround schedules and the timing of the coal-to-gas conversion. 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: a delay in any termination of the PPAs by the Balancing Pool or a decision not to terminate the PPAs by the Balancing Pool; a change in the net book value payable upon termination of the PPAs; legislative or regulatory changes; and changes to power prices or operating costs. 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.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) announced today that after having taken into account all election notices received by the June 15, 2017 deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series C (the Series C Shares) into Cumulative Redeemable Floating Rate Preferred Shares, Series D (the Series D Shares), there were 827,628 Series C Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series D Shares. As a result, none of the Series C Shares will be converted into Series D Shares on June 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.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
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 C (Series C Shares) (TSX: TA.PR.F) on June 30, 2017 (the Conversion Date).
As a result and subject to certain conditions set out in the prospectus supplement dated November 23, 2011 relating to the issuance of the Series C Shares, the holders of the Series C Shares will have the right to elect to convert all or any of their Series C Shares into Cumulative Redeemable First Preferred Shares, Series D of the Company (Series D Shares) on the basis of one Series D Share for each Series C Share on the Conversion Date.
With respect to any Series C Shares that remain outstanding after June 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 C Shares for the five-year period from and including June 30, 2017 to but excluding June 30, 2022, will be 4.027%, being equal to the five-year Government of Canada bond yield of 0.927% determined as of today plus 3.10%, in accordance with the terms of the Series C Shares.
With respect to any Series D Shares that may be issued on June 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 June 30, 2017 to but excluding September 30, 2017 will be 3.629%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 0.529% plus 3.10%, in accordance with the terms of the Series D Shares (the Floating Quarterly Dividend Rate). The Floating Quarterly Dividend Rate will be reset every quarter.
As provided in the share conditions of the Series C Shares: (i) if TransAlta determines that there would remain outstanding on June 30, 2017, less than 1,000,000 Series C Shares, all remaining Series C Shares shall be converted automatically into Series D Shares on a one-for one basis effective June 30, 2017; or (ii) if TransAlta determines that there would remain outstanding after June 30, 2017, less than 1,000,000 Series D Shares, Series C Shares shall not be entitled to convert their shares into Series D Shares effective June 30, 2017. There are currently 11,000,000 Series C Shares outstanding.
The Series C Shares are issued in book 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 C Shares must be exercised through CDS or the CDS Participant through which the Series C Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series C Shares into Series D Shares is 3:00 p.m. (MST) / 5:00 p.m. (EST) on June 15, 2017. Any notices received after this deadline will not be valid. As such, holders of Series C 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 C Shares during the time fixed therefor, then the Series C Shares shall be deemed not to have been converted (except in the case of an automatic conversion). Holders of the Series C Shares and the Series D Shares will have the opportunity to convert their shares again on June 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 D Shares effective upon conversion. Listing of the Series D 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.transalta.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 may, will, should, estimate, intend or other similar words). Specifically, this news release contains forward-looking information with respect to the Company, the Series C Shares and the Series D 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.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today reported first quarter 2017 comparable EBITDA(1) of $274 million, funds from operations (FFO)(1) of $203 million, and free cash flow (FCF)(1) of $98 million. Comparable EBITDA(1) decreased by $5 million compared to last year due to previous hedges rolling off and being replaced with lower priced hedges and as a result of higher mining costs. In addition, Energy Marketing was impacted by unusual weather in the Northeast and the Pacific Northwest and delivered below expected performance in the quarter. The recognition of the expected settlement in relation to the contract indexation dispute with the Ontario Electricity Financial Corporation (OEFC) relating to the Ottawa and Windsor generating facilities totaling $34 million, almost fully offset the shortfall in Energy Marketing and Canadian Coal. FFO and FCF for the first quarter of 2017 were up $7 million and $12 million respectively over the same period last year, due to higher realized foreign exchange gains and changes in non-cash mark-to-market value included in EBITDA.
First quarter results were comparable to 2016, we remain comfortable with our 2017 guidance for EBITDA, FFO, and FCF,- said Dawn Farrell, President and Chief Executive Officer. Solid free cash flow for the quarter, and the sale of Wintering Hills, contributed to our ability to decrease debt in the first quarter, commented Mrs. Farrell.
First Quarter Highlights
During the quarter, total debt, net of cash, decreased by $244 million, primarily due to strong FCF, a decrease in our working capital, the sale of the Wintering Hills merchant wind facility and the impact of the weakened US dollar at quarter end.
On March 1, 2017, we closed the previously announced sale of our 51 per cent interest in the Wintering Hills merchant wind facility for approximately $61 million. The sale provides us with near-term liquidity, increases our financial flexibility, and reduces our merchant exposure in Alberta.
We progressed the construction of the South Hedland power project. We expect the project to be fully commissioned in mid-2017. When fully commissioned, the project is expected to generate approximately $80 million of comparable EBITDA annually.
We progressed the expected settlement in relation to the contract indexation dispute with the OEFC. The settlement is expected to consist of a $34 million payment by the OEFC to TransAlta, of which $11 million has already been received. We have recognized the full $34 million amount in our results in the first quarter of 2017. The settlement is expected to be finalized during the second quarter.
We announced the acceleration of our transition to gas and renewables generation with the retirement of Sundance Unit 1, the mothballing of Sundance Unit 2, and the conversion of Sundance Units 3 to 6, and Keephills Units 1 and 2 from coal-fired generation to gas-fired generation between 2021 to 2023. The retirement of Sundance Unit 1 and mothballing of Sundance Unit 2 is not expected to have a material impact on our cash flow for 2018 and 2019.
The decision to convert six of our units to natural gas positions us to be a strong competitor in the Alberta power market as carbon is priced and capacity becomes more valuable,- said Mrs. Farrell. We have a clear path forward that is aligned with policy, and the need to provide clean and affordable solutions for Albertans, added Mrs. Farrell.
Summary of Credit Agency Reviews
Fitch Ratings reaffirmed our Unsecured Debt rating as BBB- and changed their outlook from negative to stable.
DBRS Limited changed our Unsecured Debt rating and Medium-Term Notes rating from BBB to BBB (low), the Preferred Shares rating from Pfd-3 to Pfd-3 (low), and Issuer Rating BBB to BBB (low).
Standard and Poor’s reaffirmed our Unsecured Debt rating and Issuer Rating from BBB- stable outlook to BBB- negative outlook.
First Quarter 2017 Review by Segment
Comparable EBITDA
(in CAD$ millions)
3 Months Ended
March 31, 2017
March 31, 2016
Canadian Coal
91
103
U.S. Coal
10
(4)
Canadian Gas
88
65
Australian Gas
31
31
Wind and Solar
68
61
Hydro
14
18
Energy Marketing
(4)
23
Corporate
(24)
(18)
Total Comparable EBITDA
274
279
Canadian Coal: Comparable EBITDA for the three months ended March 31, 2017 decreased $12 million compared to 2016. Revenues for the quarter were positively impacted by the pass through of higher environmental compliance costs to PPA buyers. Lower hedge prices on our non-contracted generation ($7 million) and changes in our mark-to-market positions attributable to long-term financial contracts to economically hedge our future generation ($5 million) partially offset the increase in our revenues. Fuel and purchased power was impacted by lower expected production volume and a higher expected strip ratio at our mine, and higher expected environmental compliance costs in 2017. Most of the higher environmental compliance costs are offset as pass through revenue. Comparable EBITDA also includes a $10 million accrual related to Off-Coal Agreement payments included in net other operating income.
U.S. Coal: Comparable EBITDA increased by $14 million compared to 2016. Gross margin was up $15 million as a result of higher prices on contracted sales, higher merchant sale volumes, favourable impacts of mark-to-market positions on certain forward financial contracts that do not qualify for hedge accounting, and a reduction in coal impairment charges. The weakened Canadian dollar also contributed to the higher comparable EBITDA during the first quarter of 2017.
Canadian Gas: Comparable EBITDA for the first quarter of 2017 increased by $23 million compared to 2016, mainly due to the expected settlement of the indexation dispute for our long-term contracts at Ottawa and Windsor, partially offset by lower realized hedge gains and higher mark-to-market losses as well as lower revenues from our Windsor facility under its new contract. Mississauga, Ottawa, and Windsor generating facilities are owned through our 51 per cent interest in TA Cogeneration LP.
Australian Gas: Comparable EBITDA for the first quarter of 2017 remained stable as our contracts are structured as capacity payments.
Wind and Solar: Comparable EBITDA for the first quarter of 2017 increased $7 million compared to 2016, primarily due to the sale of Solar Renewable Energy Credits (SRECs) generated from our US Solar assets. In the first quarter of 2016, the SRECs that we sold had been acquired at fair value as part of the acquisition of our solar assets during the fourth quarter of 2015 and recognized as inventory in 2015. In the first quarter of 2017, sales of SRECs were internally generated with no cost in inventory. Also impacting our results this quarter were the slightly better prices in Alberta on our non-contracted generation and the indexation of our contracts in Eastern Canada.
Hydro: Comparable EBITDA for the first quarter of 2017 decreased by $4 million compared to 2016. The first quarter of 2016 results included a prior year adjustment for metering at one of our hydro power plants.
Energy Marketing: Comparable EBITDA decreased by $26 million compared to 2016, due to warm weather during the winter in the Northeast, significant precipitation in the Pacific Northwest, and reduced volume of trading activity in the quarter due to a reduction in the risk taken by the traders facing uncertain conditions, and a reduction in the volume of activity from our customer risk management business.
Corporate: Corporate overhead costs of $24 million were $6 million higher in the first quarter of 2017 compared to 2016, primarily due to a reclassification of incentives for 2016 between our operational segments and corporate segment.
Consolidated Earnings Review Reported net earnings attributable to common shareholders for the quarter was nil (nil per share) compared to net earnings of $62 million ($0.22 net earnings per share) in 2016 due to higher net earnings attributable to TransAlta Renewables Inc. shareholders. Last year, net earnings in the first quarter were also positively impacted by the reduction of our reclamation obligation at our Centralia mine caused by a higher discount rate. This year, higher depreciation arose due to the shortening of useful lives of Keephills 3 and Genesee 3.
Operating Review Adjusted availability for the three months ended March 31, 2017 was 88.5 per cent compared to 92.3 per cent for the same period in 2016. Higher unplanned outages at Canadian and US Coal were the main cause of the decrease. Lower availability had a minimal impact on our results due to current low prices in Alberta and the Pacific Northwest.Production for the three months ended March 31, 2017 was 9,051 gigawatt hours (GWh), compared to 8,867 GWh for the same period in 2016, mainly due to higher production at US Coal as a result of later economic dispatching in 2017 due to higher prices, partially offset by the cessation of operations at our Mississauga cogeneration facility, effective Jan. 1, 2017, in accordance with the terms of a new contract with Ontario’s Independent Electricity System Operator (IESO). We will continue to receive monthly capacity payments from the IESO until Dec. 31, 2018.For the first quarter, sustaining capital expenditures decreased by $13 million compared to 2016, mainly due to lower planned outage expenditures. In 2016 we executed pit stops on our Sundance 1 and 2 Units as well as a large outage on Sundance Unit 4. During the first quarter of 2017, only one planned outage was performed on Sundance Unit 6.
First Quarter 2017 Financial and Operational Highlights
In $CAD millions, unless otherwise stated
3 Months Ended
March 31, 2017
March 31, 2016
Adjusted availability (%) (2)
88.5
92.3
Production (GWh) (2)
9,051
8,867
Revenue
$578
$568
Comparable EBITDA
$274
$279
Net earnings (loss) attributable to common shareholder
$62
FFO
$203
$196
Cash Flow from Operating Activities
$281
$275
FCF
$98
$86
Net earnings per common share attributable to common shareholders
$0.22
FFO per share
$0.70
$0.68
FCF per share
$0.34
$0.30
Dividends declared per common share
$0.04
The complete report for the quarter, including 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 Monday, May 8, 2017 to discuss our first 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 Jaeson Jaman as moderator.
Dial-in numbers: 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 5938029 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.transalta.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: TransAlta’s business and anticipated future financial performance; our expected strategies and opportunities; expected governmental regulatory regimes and legislation (including the Government of Alberta’s Climate Leadership Plan) and the timing of the implementation of such regimes and regulations; the impact of the retirement of Sundance Unit 1 and mothballing of Sundance Unit 2 on our future cash flow; the construction and commissioning of the South Hedland power project and its expected timing, costs and benefits; the repositioning of the strategy by Energy Marketing; the expected settlement with the OEFC; our expected major turnaround costs; and our strategy to accelerate our transition to gas and renewable generation, including through coal-to-gas conversions. 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, water or wind required to operate our facilities; 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); 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; and impediments to the construction and commissioning of South Hedland. 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.
(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.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TSX: TA; NYSE: TAC) (TransAlta or the Company) held its Annual Meeting of Shareholders on April 20, 2017 in Calgary, Alberta. A total of 126,567,006 common shares, representing 43.96% of the shares outstanding were represented in person and by proxy at the meeting.
The following resolutions were considered by Shareholders:
Election of Directors
The nine director nominees proposed by management were elected by a show of hands. Proxies were received as follows:
Nominee
Votes For
Per cent
Withheld
Per cent
John P. Dielwart
118,657,429
97.71%
2,779,026
2.29%
Timothy W. Faithfull
118,789,723
97.82%
2,646,732
2.18%
Dawn L. Farrell
118,761,470
97.80%
2,674,985
2.20%
Alan J. Fohrer
118,877,413
97.89%
2,559,042
2.11%
Gordon D. Giffin
117,995,546
97.17%
3,440,909
2.83%
P. Thomas Jenkins
106,516,301
87.71%
14,920,154
12.29%
Yakout Mansour
118,794,450
97.82%
2,642,005
2.18%
Georgia R. Nelson
106,023,523
87.31%
15,412,932
12.69%
Beverlee F. Park
106,378,987
87.60%
15,057,468
12.40%
Appointment of Auditors
The appointment of Ernst & Young LLP to serve as the independent auditors for 2017 was approved by a show of hands. Proxies were received as follows:
Votes For
Per cent
Withheld
Per cent
124,293,545
98.33%
2,113,141
1.67%
Advisory Vote on Executive Compensation
The advisory vote on the Company’s approach to executive compensation was conducted by ballot and the resolution was not approved. The votes by ballot were received as follows:
Votes For
Per cent
Votes Against
Per cent
57,496,305
47.29%
64,097,750
52.71%
As this is an advisory vote, the results will not be binding upon the Board; however, the Board will take the results of this vote into account, as appropriate, when considering future compensation policies, procedures and decisions. The Board will also continue engaging directly with Shareholders to receive feedback regarding the Company’s approach to executive compensation, and the Board will assess its future compensation policies, procedures, and decisions in the context of such feedback. The Company considers its approach to executive compensation as being a significant component of its broader corporate governance practices, which is generally consistent with best practices and includes claw-back policies, diversity policies, share ownership guidelines, anti-hedging policies and equity grant controls.
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.transalta.com or follow us on Twitter @TransAlta.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today announced that its Board of Directors has approved a strategy to accelerate the transition of the Company to gas and renewables generation. This strategy includes the following steps:
retirement of Sundance Unit 1 effective January 1, 2018;
mothballing of Sundance Unit 2 effective January 1, 2018, for a period of up to 2 years;
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 2023 timeframe, thereby extending the useful life of these units until the mid-2030s; and
effective immediately, taking steps to secure the gas supply required for the converted units (expected to be up to 700 million cubic feet of gas per day at peak levels of demand), including the construction of the required pipeline.
The retirement of Sundance Unit 1 and mothballing of Sundance Unit 2 reflects the limited economic viability of the units upon the expiry of their Power Purchase Arrangement (PPA) due to the current oversupplied Alberta power market and low power price environment.
The benefits of converting units to gas-fired generation for TransAlta include:
significantly lowering carbon intensities, emissions, and carbon costs;
significantly lowering operating and sustaining capital costs;
increasing operating flexibility; and
adding between five-to-ten years of economic life to each converted unit.
The Company is taking steps today that will position us as a leader in clean power generation and improve our competitive position as we consider a future where carbon is a high cost input to power generation,- said Dawn Farrell, President and Chief Executive Officer. TransAlta is committed to providing reliable and competitive power to our customers. Supplying markets with renewable power and competitive clean capacity from gas conversions will serve customers with low cost and low carbon electricity for decades to come, Mrs. Farrell said.
Sundance Units 1 & 2
Federal regulations stipulate that all coal plants built before 1975 must cease to operate on coal by the end of 2019, which includes Sundance Units 1 and 2. Given that Sundance Unit 1 will be shut down two years early, TransAlta intends to apply to the federal Minister of Environment to extend the life of Sundance Unit 2 from 2019 to 2021. This will provide the Company with flexibility to respond to the regulatory environment for coal-to-gas conversions and the new Alberta capacity market.
Sundance Units 1 and 2 collectively comprise 560 MW of the 2,141 MW at the Sundance power plant, which serves as a baseload provider for the Alberta electricity system. The PPA with the Balancing Pool relating to Sundance Units 1 and 2 expires on December 31, 2017.
Coal-to-Gas Conversions
The Company expects that the capacity of Sundance Units 3 to 6 and Keephills 1 and 2 will not change following conversion, which will result in a reduction of approximately 40 per cent of carbon emissions while maintaining approximately 2,400 MWs to the Alberta power grid.
The total capital commitment for the coal-to-gas conversions is approximately $300 million, and we anticipate funding the conversions with free cash flow,- said Donald Tremblay, Chief Financial Officer of TransAlta. These units are expected to provide low cost capacity and to be very competitive in the upcoming capacity market auctions; we expect the first auction to occur in 2019 for 2021. Mr. Tremblay said.
The Company expects that Federal and Provincial regulations will be adopted to facilitate coal-to-gas conversions and continues to be engaged with government in the development of the required regulatory regime.
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.transalta.com or follow us on Twitter @TransAlta.
Forward-Looking Statements
This news release contains forward looking statements within the meaning of applicable securities laws, including statements regarding: the closure of the Sundance Unit 1 and mothballing of Sundance Unit 2; the conversion to gas-fired generation of Sundance Units 3 to 6 and Keephills 1 and 2, including the timing thereof; the expected capacity from the units that have been converted from coal generation to gas-fired generation; the expected gas supply required for converted units; the reduction in carbon emissions arising from the coal-to-gas conversions; and the total capital commitment, timing and source of funding for the coal-to-gas conversions. 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; 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; decreased demand for energy or capacity; higher costs, expenses and interest rates; the outcome of pending and future litigation and governmental proceedings; availability of financing; 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.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
The Board of Directors of TransAlta Corporation (TSX: TA; NYSE: TAC) today declared a quarterly dividend of $0.04 per common share payable on July 1, 2017 to shareholders of record at the close of business on June 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 June 30, 2017 to shareholders of record at the close of business on June 1, 2017 for the period from and including March 31, 2017 to but excluding June 30, 2017.
The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.15645 per share at the Quarterly Floating Dividend Rate of 2.510% on TransAlta’s issued and outstanding Cumulative Redeemable Floating Rate First Preferred Shares, Series B, payable on June 30, 2017 to shareholders of record at the close of business on June 1, 2017 for the period from and including March 31, 2017 to but excluding June 30, 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 $0.2875 per share on TransAlta’s issued and outstanding 4.60% Cumulative Redeemable Rate Reset First Preferred Shares, Series C, payable on June 30, 2017 to shareholders of record at the close of business on June 1, 2017 for the period from and including March 31, 2017 to but excluding June 30, 2017.
The Board of Directors of TransAlta Corporation also declared a quarterly dividend of $0.3125 per share on TransAlta’s issued and outstanding 5.00% Cumulative Redeemable Rate Reset First Preferred Shares, Series E, payable on June 30, 2017 to shareholders of record at the close of business on June 1, 2017 for the period from and including March 31, 2017 to but excluding June 30, 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 June 30, 2017 to shareholders of record at the close of business on June 1, 2017 for the period from and including March 31, 2017 to but excluding June 30, 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.transalta.com or follow us on Twitter @TransAlta.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta) (TSX: TA; NYSE: TAC) will hold its Annual Meeting of Shareholders on Thursday, April 20, 2017 at 10:00 a.m. MT (12:00 p.m. ET) in the Palomino Room (E-H) at the BMO Centre (Stampede Park) in Calgary, Alberta. The Annual Meeting will be broadcast via webcast and conference call. To access the broadcast, please visit https://transalta.com/powering-investors/events-and-presentations or use the dial-in information provided below.
Dial-in number Annual Meeting of Shareholders:
Toll-free North American participants call: 1-877-385-4099 (Code 7664898)
TransAlta will release its first quarter 2017 results after market close on Friday, May 5, 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 Monday, May 8, 2017, at 9:00 a.m. Mountain (11:00 a.m. ET). 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 Jaeson Jaman as moderator.
Dial-in numbers Q1 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 5938029 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.transalta.com or follow us on Twitter @TransAlta.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Company) (TSX: TA; NYSE: TAC) today reported its fourth quarter and full year 2016 financial results. Comparable EBITDA(1) for the fourth quarter 2016 was $374 million compared to $268 million during the same period last year. Comparable FFO(1) for the quarter was $228 million, or $0.79 per share, compared to $243 million, or $0.86 per share, during the same period last year. The Keephills 1 Force Majeure (the K1 FM) adjustments to our provisions had no impact on FFO.
Comparable EBITDA for the full year ending December 31, 2016 totaled $1,145 million, an increase of $200 million compared to 2015. Comparable FFO for the full year ending December 31, 2016 was $763 million compared to $740 million in 2015 and in-line with the guidance range for the year of $755 to $835 million.
Improved results in 2016 are a result of full year contributions from renewable assets acquired in the second half of 2015, solid performance from our gas and renewable portfolios, cost reduction initiatives across the fleet implemented in 2015, and the reversal of our provision relating to the K1 FM in 2013. Our highly contracted profile and hedging strategy mitigated the impact of lower prices during the year in Alberta; however, unfavourable market conditions in the Pacific Northwest negatively impacted the contribution from our US coal segment.
We landed a solid year despite record low power prices in Alberta and the Pacific Northwest,- said Dawn Farrell, President and Chief Executive Officer. Highlights for year include landing the coal transition agreement, meeting our 2016 guidance, and furthering the repositioning of our capital structure, commented Mrs. Farrell.
As at December 31, 2016, total debt, net of cash, totaled $4.1 billion compared to $4.4 billion at December 31, 2015. The decrease is primarily due to debt paid down using the proceeds received from the sale to TransAlta Renewables of economic interests in the Canadian Assets (as defined below) completed in January 2016, free cash flows generated by the business, and the strengthening of the Canadian dollar. Over the next four years, we have approximately $2.2 billion of recourse and non-recourse debt maturing. We expect to refinance some of these upcoming debt maturities over the next 18-months by raising $700 million to $900 million of debt secured by our contracted cash flows. We have access to approximately $1.7 billion in liquidity at the end of the year and we expect to continue our de-leveraging strategy with a portion of our free cash flow over the next four years being allocated to debt reduction.
Comparable net earnings attributable to common shareholders for the full year ending December 31, 2016 was $34 million ($0.12 net earnings per share) compared to comparable net loss of $48 million ($0.17 net loss per share) in 2015. The year-over-year improvements primarily relate to contributions from assets we acquired last year, solid performance from the renewable asset portfolio, cost reduction initiatives and the reversal of our provision for the K1 FM. Reported net earnings attributable to common shareholders was $117 million ($0.41 net earnings per share) compared to net loss of $24 million ($0.09 net loss per share) in 2015. Comparable net earnings and reported net earnings for the three months ending December 31, 2016 were $53 million and $61 million, respectively as compared to $3 million and a net loss $7 million in same period in 2015.
2017 Outlook
The following table outlines TransAlta’s financial outlook for 2017 which was released on December 19, 2016:
Measure
Target
Comparable EBITDA(1)
$1,025 million to $1,135 million
Comparable FFO(1)
$765 million to $855 million
Sustaining Capital
$260 million to $280 million
Comparable FCF(1)
$300 million to $365 million
Fleet Availability
88% to 90%
Coal Availability
86% to 88%
2017 Key Priorities
In addition to meeting the financial targets set out in the 2017 Outlook, other priorities in 2017 include:
Working collaboratively with the Government of Alberta on advancing our investment in Brazeau, contributing to the design of a new capacity market, and establishing terms and conditions to convert coal plants to gas;
Commissioning South Hedland;
Growing our renewables platform through RFP’s in Saskatchewan, Alberta and Australia;
Continuing to execute our financing strategy to further strengthen the balance sheet; and
Continuing to lead in safety and environment performance.
2016 Strategic Accomplishments
In addition to delivering solid financial results in-line with our guidance, we accomplished the following:
Entered into an off-coal agreement with the Government of Alberta for the cessation of coal-fired emissions at our Alberta coal facilities. Under the terms of the off-coal agreement, we will receive transition payments of approximately $37.4 million (our net share) from 2017 to 2030 for a total amount of approximately $524 million.
Entered into a memorandum of understanding with the Government of Alberta to collaborate and co-operate in the development of a policy framework to facilitate coal-to-gas conversions and renewable electricity development, and ensure existing generation is able to effectively participate in a future capacity market.
Signed a new contract for our Mississauga cogeneration facility effective January 1, 2017, with Ontario’s Independent Electricity System Operator (IESO) and terminated our existing contract early. The new contract, which expires in December 2018, provides us with monthly payments totaling approximately $209 million over the term of the contract with no delivery obligations. The new contract will allow us to reduce operational costs for this facility while retaining flexibility to operate the facility should economic conditions permit.
Completed the sale to TransAlta Renewables Inc. (TransAlta Renewables) of an economic interest in the Sarnia cogeneration facility and two renewable energy facilities (collectively, the Canadian Assets) for aggregate proceeds valued at $540 million. Cash proceeds of this transaction were $173 million. We also received 15.6 million common shares of TransAlta Renewables and a $215 million convertible debenture. Proceeds were used to reduce TransAlta’s indebtedness. In November 2016, the economic interest was converted to direct ownership of the Canadian Assets by TransAlta Renewables.
Repositioned our capital structure through two non-recourse bond issuances in 2016, through our subsidiaries, New Richmond Wind L.P. and TAPC Holdings L.P., in the amounts of $159 million and $202.5 million, respectively. These financings have aligned debt maturities with the contracted cash flows of the underlying assets.
Announced the sale of our 51 per cent interest in the 88 MW Wintering Hills non-contracted wind facility, located in Alberta, for approximately $61 million in early 2017. The sale provides us with near-term liquidity, increases our financial flexibility, and reduces our merchant exposure in Alberta.
Continued to advance the construction of the South Hedland power project. We expect the project to be delivered on schedule and on budget in mid-2017.
Announced a reduction of our dividend to $0.16 per common share on an annualized basis from $0.72 previously. As a result, our annual dividend is approximately $46 million, down from $205 million, thereby increasing our financial flexibility.
Fourth Quarter and Full Year Segmented Review
Comparable EBITDA
(in CAD$ millions)
3 Months Ended
Year Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Dec. 31, 2015
Canadian Coal
178
67
473
334
U.S. Coal
14
22
41
63
Canadian Gas
70
57
244
212
Australian Gas
32
34
128
122
Wind and Solar
66
65
195
176
Hydro
20
19
82
73
Energy Marketing
13
26
52
37
Corporate
(19)
(22)
(70)
(72)
Total Comparable EBITDA
374
268
1,145
945
Canadian Coal: Comparable EBITDA for the year ended Dec. 31, 2016 increased $139 million compared to 2015, primarily due to the reversal of the $80 million provision relating to the K1 FM in 2013. The year over year impact to comparable EBIDTA of this provision was $139 million, as last year’s comparable EBITDA was reduced by $59 million due to this provision. Our high level of contracted generation and hedging strategy largely mitigated the impact of low power prices in Alberta. Comparable EBITDA was also positively impacted by a reduction in our operations, maintenance, and administration costs.
U.S. Coal: Comparable EBITDA decreased by $22 million compared to 2015 as a result of reduced margins due to lower prices and the unfavorable impact of mark-to-market on certain forward financial contracts that do not qualify for hedge accounting. This was partially offset by lower coal transportation costs and a reduction in our coal impairment charges.
Canadian Gas: Comparable EBITDA for 2016 increased by $32 million compared to 2015, as a result of a year-over-year change in unrealized mark-to-market on our gas position, cost efficiency initiatives, and favourable pricing in Ontario from our contracts for power and gas. The re-contracting of the Poplar Creek facility reduced our operations, maintenance and administration (OM&A) costs by more than $9 million in 2016, compared to last year.
Australian Gas: Comparable EBITDA for the year increased by $6 million compared to 2015, mainly due to the addition of capacity payments for the gas conversion project at our Solomon gas plant that was completed in May 2016, as well as the uplift from our natural gas pipeline that was commissioned in March 2015. The change in value of the Australian dollar had limited impact on our comparable EBITDA in 2016.
Wind and Solar: Comparable EBITDA for 2016 increased $19 million compared to 2015, as assets acquired in the second half of 2015 contributed approximately $23 million. Lower merchant prices in Alberta and lower generation in Canada negatively impacted our EBITDA.
Hydro: Comparable EBITDA for 2016 increased $9 million compared to 2015. Higher generation contributed to higher revenues. Our financial contracts partially offset lower levels of revenues in the Alberta ancillary market. We also benefited from cost reduction initiatives implemented in late 2015.
Energy Marketing: Comparable EBITDA for 2016 from Energy Marketing increased $15 million compared to 2015, as a result of solid performance in all markets where we are active. During the second quarter of 2015, unexpectedly volatile markets in Alberta and the Pacific Northwest negatively impacted gross margin. Operating, maintenance, and administration costs increased $12 million to $24 million in 2016 compared to 2015, due to increases in share based incentive compensation and lower charges to other business segments for energy hedging and optimization services.
Corporate: Our Corporate overhead costs of $70 million were lower in 2016 compared to 2015 and 2014 ($72 million and $71 million, respectively), as we realized benefits of cost efficiency initiatives which were offset by reduced allocations to our business segments.
Consolidated Financial Review
Reported net earnings attributable to common shareholders was $117 million ($0.41 net earnings per share) compared to net loss of $24 million ($0.09 net loss per share) in 2015. Comparable net earnings attributable to common shareholders was $34 million ($0.12 net earnings per share), up from a comparable net loss of $48 million ($0.17 net loss per share) in 2015. The improvements year-over-year primarily relate to contributions from assets we acquired last year, solid performance from the renewable asset portfolio, and cost reduction initiatives. The K1 FM provision reversal also impacted 2016 net earnings favourably. Our reported net earnings attributable to common shareholders in 2016 were impacted positively by the re-contracting of the Mississauga cogeneration facility ($48 million(2)) and negatively by the Wintering Hills wind facility impairment ($21 million(2)). Changes in the fair value of de-designated and economic hedges at U.S. Coal also had a negative impact on our reported net earnings of $17 million(2,3) in 2016 (2015 $38 million(2,3)). 2015’s reported net loss also included the gain on the Poplar Creek restructuring ($192 million(2)), the cost of the settlement with the Market Surveillance Administrator (the MSA) ($55 million(2)), and a $95 million income tax expense related to an internal reorganization. These items are not included in our comparable net earnings.
Total sustaining capital expenditures (including flood recovery capital) were $272 million, below the guidance range for 2016 of $330 million to $350 million and lower than $305 million incurred in 2015 as we were able to reschedule some capital expenditures including a large inspection of our gas generation units at Sarnia due to lower operating hours and our Ghost River diversion project.
Fourth Quarter and Year Ended 2016 Highlights
In $CAD millions, unless otherwise stated
3 Months Ended
Year Ended
Dec. 31, 2016
Dec. 31, 2015
Dec. 31, 2016
Dec. 31, 2015
Adjusted availability (%)(4,5)
88.9%
88.4%
89.2%
89.0%
Production (GWh) (4)
10,624
11,107
38,157
40,673
Revenue
$717
$595
$2,397
$2,267
Comparable EBITDA
$374
$268
$1,145
$945
Reported Net Earnings (loss) attributable to common shareholders
$61
($7)
$117
($24)
Comparable Net Earnings (loss) attributable to common shareholders
$51
$3
$34
($48)
Comparable Funds from Operations
$228
$243
$763
$740
Cash Flow from Operating Activities
$122
$118
$744
$432
Comparable Free Cash Flow
$93
$174
$299
$315
Net Earnings (loss) per common share
$0.21
($0.02)
$0.41
($0.09)
Comparable Net Earnings (loss) per share
$0.18
$0.01
$0.12
($0.17)
Comparable Funds from Operations per share
$0.79
$0.86
$2.65
$2.64
Comparable Free Cash Flow per share
$0.32
$0.61
$1.04
$1.13
Dividends declared per common share
$0.08
$0.18
$0.20
$0.72
TransAlta is in the process of filing its Annual Information Form, Audited Consolidated Financial Statements and accompanying notes, as well as the associated Management’s Discussion & Analysis. These documents will be available today on the Investors section of TransAlta’s website at transalta.com or through SEDAR at www.sedar.com.
TransAlta is also in the process of filing its 40-F with the U.S. Securities and Exchange Commission. The form will be available through their website at www.sec.gov. Paper copies of all documents are available to shareholders free of charge upon request.
Conference call
We will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) today to discuss our fourth quarter and 2016 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 and investors. 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 Jaeson Jaman as moderator.
Dial-in numbers: 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/powering-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 66068990 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.transalta.com or follow us on Twitter @TransAlta.
Cautionary Statement Regarding Forward Looking Information
This news release contains forward looking statements including, without limitation, statements pertaining to TransAlta’s business and anticipated future financial performance; our expected strategies and opportunities; TransAlta’s key priorities for 2017; expected comparable EBITDA, comparable FFO and comparable free cash flow ranges for 2017; expected sustaining capital expenditures for 2017; expected fleet and coal availability for 2017; the commissioning of South Hedland and the associated timing and costs thereof; expectations regarding governmental regulatory regimes and legislation and the expected impact of such regimes and regulations on the Company; the cost of complying with resulting regulations and laws; the refinancing our upcoming debt maturities over the next 18-months by raising $700 million to $900 million of debt secured by contracted cash flows; and expectations regarding our de-leveraging strategy, including applying a portion of our free cash flow over the next four years to reduce debt. These statements are based on TransAlta’s belief and assumptions based on information available at the time the assumptions were made, including assumptions regarding Alberta power prices, and the regulatory regimes and economic conditions relevant to the markets in which we operate. 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: operational risks involving our facilities; changes in market prices where we operate; unplanned outages at generating facilities and the capital investments required; equipment failure and our ability to carry out repairs in a cost effective and timely manner; the effects of weather; disruptions in the source of fuels, water or wind required to operate our facilities; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; negative impact to our credit ratings; legislative or regulatory developments and their impacts; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where TransAlta operates; impediments to the construction and commissioning of South Hedland; and disputes or claims involving TransAlta. 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. The financial outlook that is contained in this news release was approved March 2, 2017 and is being provided for the purpose of giving the reader information about management’s current expectations and plans. 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.
Notes:
(1) These items are not defined under 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 Comparable Funds from Operations and Comparable Free Cash Flow and Earnings and Other Measures on a Comparable Basis sections of the Company’s MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.
(2) Net of related income tax expense.
(3) Hedge accounting could not be applied to certain contracts, and accordingly, the mark-to-market on these contracts impacted reporting earnings. The impacts of these mark-to-market fluctuations have been removed from revenues to arrive at comparable results, which reflect the economic nature of these contracts.
(4) Availability and production includes all generating assets (generation operations and finance leases that we operate).
(5) Adjusted for economic dispatching at U.S. Coal.
TransAlta Comments on the Balancing Pools Announcement Regarding the Consultation Process Initiation
TransAlta Corporation (TransAlta or the Corporation) (TSX: TA, NYSE: TAC) announced today that it is not proceeding with the previously announced transaction pursuant to which all the currently outstanding first preferred shares in the capital of the Corporation would be exchanged for shares in a single new series of cumulative redeemable minimum rate reset first preferred shares in the capital of the Corporation. In light of the decision to terminate such transaction, the special meetings of preferred shareholders of the Corporation scheduled for February 16, 2017 have been cancelled.
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 transalta.com, or follow us on Twitter @TransAlta.
