TransAlta Corporation Announces Closing of the Acquisition of TransAlta Renewables Inc. and Final Pro Ration
TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) and TransAlta Renewables Inc. (RNW) (TSX: RNW) are pleased to announce the completion of the acquisition of RNW by TransAlta pursuant to the terms of the previously announced arrangement agreement between the parties (the Arrangement). Under the Arrangement, TransAlta acquired all of the outstanding common shares of RNW (each, a RNW Share) not already owned, directly or indirectly, by TransAlta and certain of its affiliates, resulting in RNW becoming a wholly owned subsidiary of TransAlta.
The closing of the acquisition of TransAlta Renewables represents a key milestone for TransAlta with our simplified and unified corporate structure positioning the company well for future success,- said John Kousinioris, President and Chief Executive Officer of TransAlta. “The combined company will unify our assets, capital, and capabilities to enhance cash flow predictability while enhancing our ability to realize future growth.
The RNW Shares will be delisted from the Toronto Stock Exchange and RNW will submit an application to cease to be a reporting issuer in each of the provinces of Canada under National Policy 11-206 Process for Cease to be a Reporting Issuer Applications promptly upon the delisting of the RNW Shares. Common shares of TransAlta (the TransAlta Shares) will continue to trade on both the New York Stock Exchange and the Toronto Stock Exchange under the symbols TAC and TA,respectively.
As a result of the Arrangement, certain RNW directors have resigned, and TransAlta has appointed two of its employees to serve on the board of directors of RNW.
Results of RNW Shareholders Election
Prior to the Arrangement, TransAlta and its affiliates collectively held 160,398,217 RNW Shares, representing 60.1% of the issued and outstanding RNW Shares, with the remaining 106,510,884 RNW Shares held by RNW Shareholders other than TransAlta and its affiliates.
The Arrangement was approved by RNW shareholders (the “RNW Shareholders”) at a special meeting of shareholders held on September 26, 2023, and by the Court of King’s Bench of Alberta on October 4, 2023. Under the Arrangement, the maximum aggregate amount of cash payable to holders of RNW Shares is $800 million and the maximum aggregate number of TransAlta Shares issuable to RNW Shareholders is 46,441,779 (excluding any TransAlta Shares issuable in connection with the settlement of deferred share units of RNW). Pursuant to the Arrangement, RNW Shareholders had the option to receive (i) 1.0337 TransAlta Shares; or (ii) $13.00 in cash, subject to the terms and conditions of the Arrangement, including pro-rationing.
RNW Shareholders holding 69,707,018 RNW Shares elected (or were deemed to have elected) to receive an aggregate of 72,056,140 TransAlta Shares as consideration and will receive 46,441,764 TransAlta Shares following pro-rationing; whereas RNW Shareholders holding 36,758,506 RNW Shares elected to receive aggregate cash consideration of $477,860,578 and this will be increased to approximately $800 million following pro rationing.
The closing price of a TransAlta Share on the Toronto Stock Exchange on the last trading day prior to the completion of the Arrangement was $12.01 per share.
Section 85 Election
TransAlta has agreed, in accordance with the procedures and within the time limits set out in the plan of arrangement, to make a joint election (a “Joint Tax Election”) under subsection 85(1) or subsection 85(2) of the Income Tax Act (Canada) (and any similar provision of any applicable provincial tax legislation) with eligible RNW Shareholders who dispose of RNW Shares in exchange for consideration that includes TransAlta Shares. For more information concerning the Joint Tax Election, please refer to the Management Information Circular (the “Circular”) that was filed and provided to RNW Shareholders in connection with the Arrangement (see the discussion in the Circular under the heading, Certain Canadian Federal Income Tax Considerations – Joint Tax Election). The Circular can be found at https://transaltarenewables.com/wp-content/uploads/sites/2/2023/08/TransAlta-Renewables-Transaction-Management-Information-Circular.pdf.
Eligible RNW Shareholders who wish to make a Joint Tax Election must submit the information and complete the documentation made available on TransAlta’s website at www.transalta.com/RNWacquisition. Upon receipt of a completed Joint Tax Election from TransAlta, the electing shareholder must sign the Joint Tax Election form and submit the signed form to the relevant tax authorities within the time limits prescribed by the relevant tax legislation. The Joint Tax Elections are required to be submitted to TransAlta on or before January 3, 2024. Eligible RNW Shareholders considering making a Joint Tax Election should consult their investment and tax advisors. Additional information can be found at www.transalta.com/RNWacquisition.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and AA from MSCI.
TransAlta was incorporated under the Canada Business Corporations Act. Its head office is located at 1400, 1100 1st Street S.E., Calgary, Alberta T2G 1B1. RNW’s head office is located at 1400, 1100 1st Street S.E. Calgary, Alberta T2G 1B1.
For more information about TransAlta, visit our website at transalta.com.
Cautionary Statement Regarding Forward-Looking Information
This news release contains “forward-looking information”, within the meaning of applicable Canadian securities laws. In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects”, “proposed”, “will”, “anticipates”, “develop”, “continue”, and similar expressions suggesting future events or future performance. In particular, this news release contains, without limitation, statements pertaining to post-closing RNW filings and the timing thereof. The forward-looking statements contained in this news release are based on many assumptions and are subject to a number of significant risks, uncertainties and assumptions that could cause actual plans, performance, results or outcomes to differ materially from current expectations. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this news release include, but are not limited to risks and uncertainties discussed in the Company’s materials filed with the securities regulatory authorities from time to time and as also set forth in the Company’s and TransAlta’s MD&A and Annual Information Form for the year ended December 31, 2022. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date of this news release. The Company 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.
This press release includes information required under section 3.1 of National Instrument 62-103 The Early Warning System and Related Take-Over Bid and Insider Reporting Issues. An early warning report will be filed on RNW’s SEDAR+ profile within two days of the closing of the Arrangement. A copy of the early warning report can be obtained from RNW’s SEDAR+ profile at www.sedarplus.ca or by contacting TransAlta’s Investor Relations team at 1-800-387-3598.
TransAlta tops list of Newsweek’s World’s Most Trustworthy Companies for 2023
TransAlta Corporation (TSX: TA) (NYSE: TAC) (the Company or TransAlta) announced today that it has ranked first on Newsweek’s inaugural World’s Most Trustworthy Companies 2023 list for the Energy and Utilities category. The list identifies the top 1,000 companies in 21 countries and across 23 industries.
Newsweek’s 2023 World’s Most Trustworthy companies have been chosen based on a holistic approach to evaluating trust across three pillars of public trust customer, investor, and employee. The list was compiled based on an extensive survey of over 70,000 participants, gathering 269,000 evaluations of companies that people trust as a customer, as an investor and as an employee.
We are extremely proud to be recognized as a notable and trusted brand amongst this list of respected international leaders across our sector and others. This is not only an honour for TransAlta, but also a testament to the hard work of our employees in ensuring we are true to our core values of respect and integrity and are delivering on our commitment of being a leader in clean electricity,- said John Kousinioris, President and CEO of TransAlta.
“We stress the importance of our core values in all that we do and have been focusing our efforts on being a leader in our customer centric focus and on building a culture of purpose, learning and results. We’re so proud to see how this intentional work is garnering international recognition, building trust and elevating our reputation with our employees, our customers, and our investors,- said Jane Fedoretz, Executive Vice President, People, Talent and Transformation at TransAlta.
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. TransAlta provides municipalities, medium and large industries, and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and AA from MSCI.
For more information about TransAlta, visit our web site at transalta.com.
For more information about TransAlta’s recognition, please contact:
TransAlta Reports Second Quarter 2023 Results and Raises 2023 Financial Guidance
Second Quarter 2023 Financial Highlights
Adjusted EBITDA(1) of $387 million, an increase of 39 per cent over the same period in 2022
Free Cash Flow (“FCF”)(1) of $278 million, or $1.05 per share, an increase of 94 per cent on a per-share basis from the same period in 2022
Earnings before income taxes of $79 million, an improvement of $101 million from the same period in 2022
Net earnings attributable to common shareholders of $62 million, an increase of $142 million from the same period in 2022
Cash flow from operating activities of $11 million, an increase of $140 million from the same period in 2022
Other Business Highlights
Entered into a definitive arrangement agreement with TransAlta Renewables to acquire all of the outstanding common shares of TransAlta Renewables subject to the approval of TransAlta Renewables shareholders
Entered into an automatic share purchase plan (“ASPP”) to facilitate repurchases of common shares through the normal course issuer bid during blackout period. The Company returned $71 million of capital to common shareholders in the first and second quarter of 2023 through buybacks of 6.1 million common shares
Kent Hills rehabilitation program on track with 27 turbines fully reassembled. Turbines are being returned to service as commissioning activities are completed and, to date, 10 turbines have been fully placed back in operation. The remaining turbines are expected to return to service in the second half of 2023
Northern Goldfields Solar project has entered its commissioning phase. All major equipment has been installed and construction work is largely complete. Energization and testing processes have commenced and the facility is expected to achieve full commercial operations in the second half of 2023
Mount Keith 132kV expansion project is well advanced. The gas-insulated switchgear will be installed in August and the project will achieve commercial operations in the second half of 2023
Construction at the Horizon Hill wind project in Oklahoma is advancing well with all major equipment now delivered to site. Turbine erection activities are underway with 27 of the 34 wind turbines fully assembled. Construction of the transmission interconnection is also underway. Based on the schedule to complete the transmission line, we have updated our schedule to reflect commercial operations in the first half of 2024
Equipment deliveries at White Rock East and West projects are well advanced with the final blade sets due to arrive in August. Tower assembly has commenced as well as the construction of the transmission interconnection
Acquired a 50 per cent interest in the 320 MW Tent Mountain early-stage pumped hydro development project
2023 Revised Outlook
Increased 2023 annual financial guidance as set out below:
Adjusted EBITDA range of $1.7 billion to $1.8 billion, an increase of 17 per cent at the midpoint of prior guidance
FCF range of $850 million to $950 million, an increase of 29 per cent at the midpoint of prior guidance
TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the three and six months ended June 30, 2023.
“Our second quarter results continue to demonstrate the value of our strategically diversified fleet, which benefited from our strong asset optimization and hedging activities. With our performance across the fleet and our continuing positive expectations for the balance of year, we have revised our 2023 full year financial guidance upwards for both adjusted EBITDA and free cash flow, with revised midpoints exceeding the top end of our original targets to reflect stronger market conditions and solid operational performance,” said John Kousinioris, President and Chief Executive Officer of TransAlta.
“We continue to advance our growth plan and are progressing several opportunities, with 418 MW of projects in an advanced stage of development and set to reach final investment decisions. The cash flows from our legacy fleet are positioning us well to realize our Clean Electricity Growth Plan.”
“As we continue the execution of our Clean Electricity Growth Plan, I am pleased that we have reached an agreement with TransAlta Renewables for the acquisition of the common shares of TransAlta Renewables not already owned by TransAlta. It is clear that the strategies of both TransAlta and TransAlta Renewables have converged and we are excited to bring these two companies back together. The combined company’s greater scale and enhanced positioning will drive value for all of our shareholders,” added Mr. Kousinioris.
Key Business Developments
TransAlta Corporation to Acquire TransAlta Renewables Inc. to Simplify Structure and Enhance Strategic Position
On July 10, 2023, the Company and TransAlta Renewables entered into a definitive arrangement agreement (the “Arrangement Agreement”) under which the Company will acquire all of the outstanding common shares of TransAlta Renewables not already owned, directly or indirectly, by TransAlta and certain of its affiliates, subject to the approval of TransAlta Renewables shareholders.
The transaction will provide shareholders of the combined company with a single strategy and a clear and compelling opportunity for long-term growth, with greater clarity around the execution of the Clean Electricity Growth Plan. TransAlta Renewables shareholders will benefit from a fair offer reflecting an attractive premium, a clear and sustainable path going forward, ownership in an expanded pool of assets and exposure to the Alberta electricity market. For TransAlta shareholders, the transaction will provide an enhanced strategic position, sustainable and attractive transition metrics, and increased liquidity and synergies, while maintaining the Company’s financial strength.
Under the terms of the Agreement, each TransAlta Renewables share will be exchanged for, at the election of each holder of TransAlta Renewables shares, (i) 1.0337 common shares of TransAlta or (ii) $13.00 in cash. The consideration payable to TransAlta Renewables shareholders is subject to pro-rationing based on a maximum aggregate number of TransAlta shares that may be issued to TransAlta Renewables shareholders of 46,441,779 and a maximum aggregate cash amount of $800 million.
The consideration payable to TransAlta Renewables shareholders represents an 18.3 per cent premium based on the closing price of TransAlta Renewables shares on the Toronto Stock Exchange (“TSX”) as of July 10, 2023, and a 13.6 per cent premium relative to TransAlta Renewables’ 20-day volume-weighted average price per share as of July 10, 2023. The total consideration paid to TransAlta Renewables shareholders is valued at $1.4 billion on July 10, 2023, of which $800 million will be paid in cash, and the remaining balance in common shares of TransAlta. The combined company will operate as TransAlta and remain listed on the TSX and the New York Stock Exchange (“NYSE”), under the symbols “TA” and “TAC”, respectively.
The TransAlta Renewables Board (with abstentions by TransAlta-nominated directors) unanimously determined that the Agreement is in the best interests of TransAlta Renewables and is fair to its shareholders, approved the execution and delivery of the Agreement and unanimously recommends that TransAlta Renewables shareholders vote in favour of the Agreement.
A special meeting for TransAlta Renewables shareholders to consider the transaction will be held on or about Sept. 26, 2023. If all approvals are received and other closing conditions satisfied, the transaction is expected to be completed in early October 2023.
Normal Course Issuer Bid
On May 26, 2023, the TSX accepted the notice filed by the Company to implement a normal course issuer bid (NCIB) for a portion of its common shares. Pursuant to the NCIB, TransAlta may repurchase up to a maximum of 14,000,000 common shares, representing approximately 7.29 per cent of its public float of common shares as at May 17, 2023. Purchases under the NCIB may be made through open market transactions on the TSX and any alternative Canadian trading platforms on which the common shares are traded, based on the prevailing market price. Any common shares purchased under the NCIB will be cancelled. The period during which TransAlta is authorized to make purchases under the NCIB commenced on May 31, 2023 and ends on May 30, 2024, or such earlier date on which the maximum number of common shares are purchased under the NCIB or the NCIB is terminated at the Company’s election.
The NCIB provides the Company with a capital allocation alternative with a view to ensuring long-term shareholder value. TransAlta’s Board of Directors and management believe that, from time to time, the market price of the common shares might not be reflective of the underlying value and purchases of common shares for cancellation under the NCIB may provide an opportunity to enhance shareholder value.
Tent Mountain Pumped Hydro Development Project
On April 24, 2023, the Company acquired a 50 per cent interest in the Tent Mountain Renewable Energy Complex (Tent Mountain), an early-stage 320 MW pumped hydro energy storage development project, located in southwest Alberta, from Montem Resources Limited (Montem). The acquisition includes the land rights, fixed assets and intellectual property associated with the pumped hydro development project. The Company paid Montem approximately $8 million on closing of the transaction and additional contingent payments of up to $17 million (approximately $25 million total) may become payable to Montem based on the achievement of specific development and commercial milestones. The Company and Montem own the Tent Mountain project within a special purpose partnership that is jointly managed, with the Company acting as project developer. The partnership is actively seeking an offtake agreement for the energy and environmental attributes generated by the facility.
Second Quarter 2023 Highlights
$ millions, unless otherwise stated
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Adjusted availability (%)
84.6
87.3
88.2
88.2
Production (GWh)
4,596
4,461
10,568
9,820
Revenues
625
458
1,714
1,193
Adjusted EBITDA(1)
387
279
890
538
FFO(1)
391
220
765
399
FCF(1)
278
145
541
253
Earnings (loss) before income taxes
79
(22)
462
220
Net earnings (loss) attributable to common shareholders
62
(80)
356
106
Cash flow from (used in) operating activities
11
(129)
473
322
Net earnings (loss) per share attributable to common shareholders, basic and diluted
0.23
(0.30)
1.34
0.39
FFO per share(1),(2)
1.48
0.81
2.88
1.47
FCF per share(1),(2)
1.05
0.54
2.03
0.93
Second Quarter Financial Results Summary
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, increased by $108 million and $352 million, respectively, compared to the same periods in 2022. These results were largely due to higher revenue from the Alberta Electricity Portfolio, as a result of higher merchant prices realized primarily by the gas and hydro facilities. The Hydro segment also benefited from higher ancillary service prices in the Alberta market. Adjusted EBITDA was further improved by higher revenue in the Energy Transition segment due to higher merchant pricing and higher production, and lower input costs in the Gas segment. These increases were partially offset by higher carbon compliance costs in the Gas segment, lower production in the Wind and Solar segment and higher OM&A in the Corporate segment.
FCF(1) for the three and six months ended June 30, 2023, totaled $278 million and $541 million, respectively, compared to $145 million and $253 million, respectively, in the same periods in 2022. For the three and six months ended June 30, 2023, this represented an increase of $133 million and $288 million, respectively, primarily due to higher adjusted EBITDA, lower interest expense mainly driven by higher interest income due to higher interest rates, higher interest capitalized on construction capital expenditures and lower income tax expense due to a current income tax recovery in the second quarter of 2023. This was partially offset by higher distributions paid to subsidiaries’ non-controlling interests, higher sustaining capital expenditures and higher realized foreign exchange losses compared to 2022.
Net earnings (loss) attributable to common shareholders for the three and six months ended June 30, 2023, were $62 million and $356 million compared to a net loss of $80 million and net earnings of $106 million in the same periods in 2022. For the three and six months ended June 30, 2023, the Company benefited from higher revenues, lower natural gas prices, higher income tax recoveries, largely due to realized current income tax benefits from an internal reorganization that occurred in the second quarter and higher asset impairment reversals. This was partially offset by higher depreciation due to the acceleration of useful lives on certain facilities in the third quarter of 2022, higher carbon compliance costs resulting from the previous years obligation being settled partially with emission credits, higher OM&A costs related to the Corporate and Energy Marketing segments and higher net earnings allocated to non-controlling interests. In the six months ended June 30, 2023, the Gas segment had higher production which resulted in higher fuel usage and higher carbon compliance costs and the Energy Transition segment had higher power purchases during planned outages.
Cash flow from operating activities for the three and six months ended June 30, 2023, increased by $140 million and $151 million, respectively, compared with the same periods in 2022, primarily due to higher revenues net of unrealized gains and losses from risk management activities. This was partially offset by higher unfavourable changes in working capital and higher fuel and purchased power, OM&A and carbon compliance costs.
Alberta Electricity Portfolio
For the three and six months ended June 30, 2023, the Alberta electricity portfolio generated 2,525 GWh and 5,680 GWh of energy, respectively. This was a decrease of 157 GWh and an increase of 422 GWh, respectively, compared to the same periods in 2022. Lower production in the three months ended June 30, 2023, was primarily due to lower wind resources and slightly lower merchant production from the Gas assets due to lower availability, partially offset by strong generation from the Hydro assets due to precipitation and snowpack melt. For the six months ended June 30, 2023, generation was higher overall due to increased merchant production in the Gas segment driven by market opportunities as well as higher production from the Hydro segment in the second quarter of 2023.
Gross margin for the three and six months ended June 30, 2023, was $302 million and $651 million, respectively, an increase of $134 million and $319 million compared to the same periods in 2022. Higher gross margin was the result of higher merchant prices for our Gas segment, strong production and realized prices from the Hydro assets, as well as hedging contributions. The six months ended June 30, 2023, benefited from increased merchant production from our Gas assets.
For the three and six months ended June 30, 2023, the realized merchant power price per MWh of production increased by $70 per MWh and $68 per MWh, respectively, compared with the same periods in 2022. The realized merchant power price per MWh of production for the three and six months ended was $175 per MWh and $174 per MWh, respectively, compared to $105 per MWh and $106 per MWh, for the same periods in 2022. Higher realized merchant power pricing for energy across the portfolio was due to higher market prices and optimization of our available capacity across all fuel types. The segment spot prices exclude gains and losses from hedging positions that are entered into in order to mitigate the impact of unfavourable market pricing.
For the three and six months ended June 30, 2023, the fuel and purchased power cost per MWh of production decreased by $26 per MWh and $12 per MWh, respectively, compared with the same periods in 2022 primarily due to lower natural gas prices.
For the three and six months ended June 30, 2023, carbon compliance costs per MWh of production increased by $7 per MWh, compared with the same periods in 2022, due to an increase in carbon compliance prices from $50 per tonne in 2022 to $65 per tonne in 2023. In 2023, the 2022 carbon compliance obligation was settled with cash. In 2022, the Company utilized emission credits to settle a portion of the 2021 carbon compliance obligation resulting in a lower carbon cost per MWh.
Hedged volumes for the three and six months ended June 30, 2023 were 1,667 GWh and 3,713 GWh at an average price of $91 per MWh and $116 per MWh, respectively, compared to 1,901 GWh and 3,639 GWh at an average price of $73 per MWh and $78 per MWh, respectively, in 2022.
Increased 2023 Financial Guidance
The Company increased its 2023 outlook for adjusted EBITDA to between $1.7 billion and $1.8 billion. The midpoint of the range represents a 17 per cent increase over the Company’s previous revised 2023 outlook as at the first quarter of 2023 of $1.45 billion and $1.55 billion.
FCF outlook has also been increased and is now expected to be between $850 million and $950 million. The midpoint of the range represents a 29 per cent increase over the Company’s previous 2023 revised outlook of $650 to $750 million.
The following table provides additional details pertaining to the 2023 outlook:
Measure
Updated Target 2023
Original Target 2023
2022 Actuals
Adjusted EBITDA(1)
$1,700 million – $1,800 million
$1,200 million -$1,320 million
$1,634 million
FCF(1)
$850 million – $950 million
$560 million – $660 million
$961 million
Range of key 2023 power and gas price assumptions:
Market
Updated 2023 Assumptions
2023 Original Assumptions
Alberta Spot ($/MWh)
$150 to $170
$105 to $135
Mid-C Spot (US$/MWh)
US$90 to US$100
US$75 to US$85
AECO Gas Price ($/GJ)
$2.50
$4.60
Alberta spot price sensitivity: a +/- $1 per MWh change in spot price is expected to have a +/- $4 million impact on adjusted EBITDA for 2023.
Range of Alberta hedging assumptions:
Range of hedging assumptions
Q3 2023
Q4 2023
Full year 2024
Full year 2025
Hedged production (GWh)
2,012
1,558
4,506
2,423
Hedge price ($/MWh)
$116
$84
$82
$83
Hedged gas volumes (GJ)
18 million
15 million
44 million
22 million
Hedge gas prices ($/GJ)
$2.27
$2.26
$2.64
$3.62
Liquidity and Financial Position
The Company continues to maintain a strong financial position in part due to long-term contracts and hedged positions. As at June 30, 2023, TransAlta had access to $2.3 billion in liquidity, including $0.9 billion in cash and cash equivalents.
Normal Course Issuer Bid
During the three and six months ended June 30, 2023, the Company purchased and cancelled a total of 6,112,900 common shares, including those purchased under the ASPP, at an average price of $11.62 per common share, for a total cost of $71 million.
Segmented Financial Performance
($ millions)
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Hydro
147
88
253
149
Wind and Solar
50
88
138
177
Gas
166
65
406
170
Energy Transition
13
11
67
16
Energy Marketing
43
50
82
67
Corporate
(32)
(23)
(56)
(41)
Adjusted EBITDA(1)
387
279
890
538
Earnings (loss) before
income taxes
79
(22)
462
220
Hydro:
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, increased by $59 million and $104 million, respectively, compared to the same periods in 2022, primarily due to higher realized energy and ancillary service prices in the Alberta market and higher production. The three months ended June 30, 2023, further benefited from higher energy production, partially offset by lower revenues from lower ancillary service volumes. The six months ended June 30, 2023, benefited from higher sales of environmental attributes and the Company captured revenue through forward hedging for the Alberta hydro assets and realized gains from the hedging strategy. OM&A in both periods increased primarily due to higher insurance costs, salary escalations and incentive accruals, and higher legal fees.
Wind and Solar:
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, decreased by $38 million and $39 million, respectively, compared to the same periods in 2022, primarily due to lower production due to lower wind resource, lower environmental attribute revenue, lower realized merchant prices in Alberta in the second quarter, and lower liquidated damages recognized at the Windrise wind facility. During the six months ended June 30, 2023, lower adjusted EBITDA was partially offset by higher realized merchant prices in Alberta. OM&A in both periods increased due to salary escalations, higher insurance costs and long-term service agreement escalations.
Gas:
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, increased by $101 million and $236 million, respectively, compared to the same periods in 2022, mainly due to higher realized energy prices for our Alberta gas merchant assets, net of hedging, and lower natural gas prices, partially offset by higher carbon compliance costs and higher OM&A from higher contract labour related to planned major maintenance in Australia. The six months ended June 30, 2023, benefited from higher production due to stronger market conditions in Alberta partially offset by higher carbon costs and fuel usage related to production.
Energy Transition:
Adjusted EBITDA(1) increased by $2 million and $51 million, respectively, for the three and six months ended June 30, 2023, compared to the same periods in 2022, primarily due to higher merchant pricing and higher production, partially offset by higher fuel usage. During the six months ended June 30, 2023, adjusted EBITDA was negatively impacted by higher purchased power costs required to fulfill contractual obligations during planned outages. OM&A decreased due to the retirement of Sundance Unit 4 in the first quarter of 2022.
Energy Marketing:
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, , decreased by $7 million and increased by $15 million, respectively, compared to the same periods in 2022. Year-to-date results exceeded segment expectations from short-term trading of both physical and financial power and gas products across all North American deregulated markets. The Company was able to capitalize on short-term volatility in the trading markets while maintaining the overall risk profile of the business unit.
Corporate:
Adjusted EBITDA(1) for the three and six months ended June 30, 2023, decreased by $9 million and $15 million, respectively, compared to the same periods in 2022, primarily due to higher incentive accruals reflecting the Company’s performance, increased spending to support strategic and growth initiatives and increased costs due to inflationary pressures.
Conference call
TransAlta will hold a conference call and webcast at 9:00 a.m. MST (11:00 a.m. EST) today, August 4, 2023, to discuss our second quarter 2023 results. The call will begin with a short address by John Kousinioris, President and Chief Executive Officer, and Todd Stack, EVP Finance and 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.
Dial-in number – Second Quarter 2023 Conference Call
Toll-free North American participants call: 1-888-664-6392
A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/presentations-and-events/. If you are unable to participate in the call, the instant replay is accessible at 1-888-390-0541 (Canada and USA toll free) with TransAlta pass code 650793 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 and have no standardized meaning under IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods results. Please refer to the Non-IFRS Measures section of this earnings release for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.
(2)Funds from operations per share and free cash flow per share are calculated using the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding for June 30, 2023, was 266 million shares (June 30, 2022 271 million). Please refer to the Non-IFRS Measures section in this earnings release for the purpose of these non-IFRS ratios.
Non-IFRS financial measures and other specified financial measures
We use a number of financial measures to evaluate our performance and the performance of our business segments, including measures and ratios that are presented on a non-IFRS basis, as described below. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual 2022 consolidated financial statements and the unaudited interim condensed consolidated statements of earnings (loss) for the three and six months ended June 30, 2023, prepared in accordance with IFRS. We believe that these non-IFRS amounts, measures and ratios, read together with our IFRS amounts, provide readers with a better understanding of how management assesses results.
Non-IFRS amounts, measures and ratios do not have standardized meanings under IFRS. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, as an alternative to, or more meaningful than, our IFRS results.
Adjusted EBITDA
Each business segment assumes responsibility for its operating results measured by adjusted EBITDA. Adjusted EBITDA is an important metric for management that represents our core business profitability. Interest, taxes, depreciation and amortization are not included, as differences in accounting treatments may distort our core business results. In addition, certain reclassifications and adjustments are made to better assess results, excluding those items that may not be reflective of ongoing business performance. This presentation may facilitate the readers’ analysis of trends.
Funds From Operations (“FFO”)
FFO is an important metric as it provides a proxy for cash generated from operating activities before changes in working capital and provides the ability to evaluate cash flow trends in comparison with results from prior periods. FFO is a non-IFRS measure.
Free Cash Flow (“FCF”)
FCF is an important metric as it represents the amount of cash that is available to invest in growth initiatives, make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or repurchase common shares. Changes in working capital are excluded so FFO and FCF are not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and timing of receipts and payments. FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to adjusted EBITDA are non-IFRS ratios that are presented in the MD&A. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF and Key Non-IFRS Financial Ratios sections of the MD&A for additional information.
FFO per share and FCF per share
FFO per share and FCF per share are calculated using the weighted average number of common shares outstanding during the period. FFO per share and FCF per share are non-IFRS ratios.
Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below.
Reconciliation of Non-IFRS Measures on a Consolidated Basis
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the three months ended June 30, 2023:
Three months ended June 30, 2023
$ millions
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
168
86
251
121
3
1
630
(5)
625
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
(1)
(8)
56
(3)
93
137
(137)
Realized loss on closed
exchange positions
(4)
(48)
(52)
52
Decrease in finance lease
receivable
13
13
(13)
Finance lease income
4
4
(4)
Unrealized foreign
exchange loss on
commodity
1
1
(1)
Adjusted revenues
167
78
320
118
49
1
733
(5)
(103)
625
Fuel and purchased power
5
7
85
90
1
188
188
Reclassifications and adjustments:
Australian interest income
(1)
(1)
1
Adjusted fuel and purchased
power
5
7
84
90
1
187
1
188
Carbon compliance
25
25
25
Gross margin
162
71
211
28
49
521
(5)
(104)
412
OM&A
14
18
50
14
6
32
134
134
Taxes, other than income taxes
1
4
4
1
10
(1)
9
Net other operating income
(1)
(9)
(10)
(10)
Adjusted EBITDA(2)
147
50
166
13
43
(32)
387
Equity income
(1)
Finance lease income
4
Depreciation and amortization
(173)
Asset impairment reversals
13
Net interest expense
(56)
Foreign exchange loss
8
Gain on sale of assets and
other
5
Earnings before income taxes
79
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release.
The following table reflects adjusted EBITDA by segment and provides reconciliation to loss before income taxes for the three months ended June 30, 2022:
Three months ended June 30, 2022
$ millions
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
105
96
127
96
36
1
461
(3)
458
Reclassifications and adjustments:
Unrealized mark-to-market
(gain) loss
15
128
(56)
87
(87)
Realized gain (loss) on
closed exchange
positions
(10)
75
65
(65)
Decrease in finance lease
receivable
11
11
(11)
Finance lease income
6
6
(6)
Unrealized foreign
exchange loss on
commodity
2
2
(2)
Adjusted revenues
105
111
262
96
57
1
632
(3)
(171)
458
Fuel and purchased power
6
6
147
71
1
231
231
Reclassifications and adjustments:
Australian interest income
(1)
(1)
1
Adjusted fuel and purchased
power
6
6
146
71
1
230
1
231
Carbon compliance
1
12
(4)
9
9
Gross margin
99
104
104
29
57
393
(3)
(172)
218
OM&A
10
15
45
17
7
23
117
117
Taxes, other than income
taxes
1
4
4
1
10
(1)
9
Net other operating income
(10)
(10)
(20)
(20)
Reclassifications and adjustments:
Insurance recovery
7
7
(7)
Adjusted net other operating
income
(3)
(10)
(13)
(7)
(20)
Adjusted EBITDA(2)
88
88
65
11
50
(23)
279
Equity income
2
Finance lease income
6
Depreciation and amortization
(115)
Asset impairment reversals
24
Net interest expense
(62)
Foreign exchange gain
9
Gain on sale of assets and other
2
Loss before income taxes
(22)
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release.
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the six months ended June 30, 2023:
Six months ended June 30, 2023
$ millions
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
293
201
746
388
95
1
1,724
(10)
1,714
Reclassifications and adjustments:
Unrealized mark-to-market (gain) loss
(2)
(8)
(8)
(17)
109
74
(74)
Realized loss on closed exchange positions
(17)
(103)
(120)
120
Decrease in finance lease receivable
26
26
(26)
Finance lease income
8
8
(8)
Unrealized foreign exchange
loss on commodity
1
1
(1)
Adjusted revenues
291
193
755
371
102
1
1,713
(10)
11
1,714
Fuel and purchased power
10
16
215
271
1
513
513
Reclassifications and adjustments:
Australian interest income
(2)
(2)
2
Adjusted fuel and purchased
power
10
16
213
271
1
511
2
513
Carbon compliance
57
57
57
Gross margin
281
177
485
100
102
1,145
(10)
9
1,144
OM&A
26
35
91
31
20
56
259
(1)
258
Taxes, other than income taxes
2
7
8
2
19
(1)
18
Net other operating income
(3)
(20)
(23)
(23)
Adjusted EBITDA(2)
253
138
406
67
82
(56)
890
Equity income
1
Finance lease income
8
Depreciation and amortization
(349)
Asset impairment reversals
16
Net interest expense
(115)
Foreign exchange loss
5
Gain on sale of assets and
other
5
Earnings before income taxes
462
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release.
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the six months ended June 30, 2022:
Six months ended June 30, 2022 $ millions
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
182
191
561
202
62
2
1,200
(7)
1,193
Reclassifications and adjustments:
Unrealized mark-to-market (gain) loss
28
(34)
11
(46)
(41)
41
Realized gain (loss) on closed exchange positions
(7)
65
58
(58)
Decrease in finance lease
receivable
22
22
(22)
Finance lease income
11
11
(11)
Adjusted revenues
182
219
553
213
81
2
1,250
(7)
(50)
1,193
Fuel and purchased power
10
14
278
165
2
469
469
Reclassifications and adjustments:
Australian interest income
(2)
(2)
2
Adjusted fuel and purchased
power
10
14
276
165
2
467
2
469
Carbon compliance
1
30
(3)
28
28
Gross margin
172
204
247
51
81
755
(7)
(52)
696
OM&A
21
31
89
33
14
41
229
229
Taxes, other than income taxes
2
6
8
2
18
(1)
17
Net other operating income
(17)
(20)
(37)
(37)
Reclassifications and adjustments:
Insurance recovery
7
7
(7)
Adjusted net other operating
income
(10)
(20)
(30)
(7)
(37)
Adjusted EBITDA(2)
149
177
170
16
67
(41)
538
Equity income
4
Finance lease income
11
Depreciation and amortization
(232)
Asset impairment reversals
66
Net interest expense
(129)
Foreign exchange gain
11
Gain on sale of assets and
other
2
Earnings before income taxes
220
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures n in this earnings release.
Reconciliation of Cash flow from operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Three Months Ended
Six Months Ended
$ millions unless otherwise stated
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Cash flow from (used in) operating activities(1)
11
(129)
473
322
Change in non-cash operating working capital balances
408
260
366
(24)
Cash flow from operations before changes in working capital
419
131
839
298
Adjustments
Share of adjusted FFO from joint venture(1)
5
2
8
5
Decrease in finance lease receivable
13
11
26
22
Clean energy transition provisions and adjustments(2)
7
8
7
8
Realized gain (loss) on closed positions with same counterparty
(52)
65
(120)
58
Other(3)
(1)
3
5
8
FFO(4)
391
220
765
399
Deduct:
Sustaining capital(1)
(44)
(31)
(64)
(48)
Productivity capital
(1)
(1)
(1)
(2)
Dividends paid on preferred shares
(12)
(10)
(25)
(20)
Distributions paid to subsidiaries non-controlling interests
(53)
(30)
(129)
(72)
Principal payments on lease liabilities
(3)
(3)
(5)
(4)
FCF(4)
278
145
541
253
Weighted average number of common shares outstanding in the period
264
271
266
271
FFO per share(4)
1.48
0.81
2.88
1.47
FCF per share(4)
1.05
0.54
2.03
0.93
(1) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture. (2) Includes amounts related to onerous contracts recognized in 2021. (3) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity accounted joint venture. (4) These items are not defined and have no standardized meaning under IFRS. Refer to the Non-IFRS Measures section in this earnings release.
The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF:
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Adjusted EBITDA(1)(4)
387
279
890
538
Provisions
1
4
10
Interest expense
(38)
(50)
(83)
(104)
Current income tax recovery (expense)(2)
42
(13)
(18)
(25)
Realized foreign exchange gain (loss)
1
13
(6)
15
Decommissioning and restoration costs settled
(9)
(7)
(16)
(14)
Other non-cash items
7
(2)
(6)
(21)
FFO(3)(4)
391
220
765
399
Deduct:
Sustaining capital(4)
(44)
(31)
(64)
(48)
Productivity capital
(1)
(1)
(1)
(2)
Dividends paid on preferred shares
(12)
(10)
(25)
(20)
Distributions paid to subsidiaries non-controlling interests
(53)
(30)
(129)
(72)
Principal payments on lease liabilities
(3)
(3)
(5)
(4)
FCF(3)
278
145
541
253
(1) Adjusted EBITDA is defined in the Non-IFRS financial measures and other specified financial measures section in this earnings release and reconciled to earnings (loss) before income taxes above. (2) The Company incurred lower current tax expense for 2023, due to the Company completing an internal reorganization during the second quarter of 2023, which allowed the Company to apply tax attributes, previously unavailable due to Canadian tax limitations, against taxable income in Canada. (3) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Non-IFRS financial measures and other specified financial measures section of in this earnings release and reconciled to cash flow from operating activities above. (4) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture.
TransAlta is in the process of filing its unaudited interim Consolidated Financial Statements and accompanying notes, as well as the associated Management’s Discussion & Analysis (MD&A). These documents will be available today on the Investors section of TransAlta’s website at www.transalta.com or through SEDAR at www.sedarplus.ca.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit our web site at transalta.com.
Cautionary Statement Regarding Forward-Looking Information
This news release contains “forward-looking information”, within the meaning of applicable Canadian securities laws, and “forward-looking statements”, within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as “forward-looking statements). In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects”, “proposed”, “will”, “anticipates”, “develop”, “continue”, and similar expressions suggesting future events or future performance. In particular, this news release contains, without limitation, statements pertaining to: acquisition by the Company of all of the outstanding common shares of TransAlta Renewables Inc. (“TransAlta Renewables”) not already owned by TransAlta pursuant to the definitive arrangement agreement dated July 10, 2023, including the benefits of such transaction and the timing and completion of such transaction; the rehabilitation of the Kent Hills 1 and 2 wind facilities, including the expected date that the facilities will fully return to service and capital expenditures; the development of the Tent Mountain pumped hydro project; the Mount Keith transmission and Northern Goldfields projects under construction in Australia, including the expected timing of commercial operations; our ability to progress 418 MW of advanced stage projects; and our revised 2023 financial guidance, including expectations regarding adjusted EBITDA, free cash flow and gross margin from the Energy Marketing segment; expectations on power and gas prices, including Alberta merchant spot prices; and Alberta hedging assumptions.
The forward-looking statements contained in this news release are based on many assumptions including, but not limited to, the following material assumptions: no significant changes to applicable laws and regulations beyond those that have already been announced; merchant power prices in Alberta and the Pacific Northwest; the Alberta hedge position, including price and volume of hedged power; the availability and cost of labour, services and infrastructure; and the satisfaction by third parties of their obligations, including under our power purchase agreements. Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions that could cause actual plans, performance, results or outcomes to differ materially from current expectations. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this news release include, but are not limited to: the completion and timing of the arrangement with TransAlta Renewables; the ability of the Company and TransAlta Renewables to receive, in a timely manner, the necessary regulatory, court, shareholder, stock exchange and other third-party approvals and to satisfy the other conditions to closing of the arrangement; fluctuations in merchant power prices, including lower pricing in Alberta, Ontario and Mid-Columbia; changes in demand for electricity and capacity; our ability to contract or hedge our electricity generation for prices and at volumes that will provide expected returns; risks relating to our early stage development projects, including interconnection, offtake contracts and geotechnical and environmental conditions of such projects; long term commitments on gas transportation capacity that may not be fully utilized over time; our ability to replace or renew contracts as they expire; risks associated with our projects under construction and projects in development, namely as it pertains to capital costs, permitting, land rights, engineering risks, and delays in the construction or commissioning of such projects; any difficulty raising needed capital in the future, including debt, equity and tax equity, as applicable, on reasonable terms or at all; changes to the legislative, regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; operational risks involving our facilities, including unplanned outages; disruptions in the transmission and distribution of electricity, including congestion and basis risk; restricted access to capital and increased borrowing costs; changes in short-term and/or long-term electricity supply and demand; reductions in production; increased costs; a higher rate of losses on our accounts receivables due to credit defaults; impairments and/or write-downs of assets; adverse impacts on our information technology systems and our internal control systems, including increased cybersecurity threats; commodity risk management and energy trading risks, including the effectiveness of the Company’s risk management tools associated with hedging and trading procedures to protect against significant losses; reduced labour availability and ability to continue to staff our operations and facilities; disruptions to our supply chains, including our ability to secure necessary equipment on the expected timelines or at all; the effects of weather, including man made or natural disasters, as well as climate-change related risks; unexpected increases in cost structure; reductions to our generating units relative efficiency or capacity factors; disruptions in the source of fuels, including natural gas and coal, as well as the extent of water, solar or wind resources required to operate our facilities; general economic risks, including deterioration of equity markets, increasing interest rates or rising inflation; failure to meet financial expectations; general domestic and international economic and political developments, including armed hostilities, the threat of terrorism, diplomatic developments or other similar events; equipment failure and our ability to carry out or have completed the repairs in a cost-effective manner timely manner or at all, including if the rehabilitation at the Kent Hills wind facilities is more costly than expected; industry risk and competition; public health crises and the impacts of any restrictive directives of government and public health authorities; fluctuations in the value of foreign currencies; structural subordination of securities; counterparty credit risk; inadequacy or unavailability of insurance coverage; our provision for income taxes; legal, regulatory and contractual disputes and proceedings involving the Company; reliance on key personnel; labour relations matters and other risks and uncertainties discussed in the Company’s materials filed with the securities regulatory authorities from time to time and as also set forth in the Company’s MD&A and Annual Information Form for the year ended December 31, 2022. 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.
CALGARY, Alberta (July 27, 2023) The Board of Directors of TransAlta Corporation (TSX: TA) (NYSE: TAC) declared a quarterly dividend of $0.055 per common share payable on October 1, 2023 to shareholders of record at the close of business on September 1, 2023.
The Board of Directors also declared the following quarterly dividend on its Cumulative Redeemable Rate Reset First Preferred Shares for the period starting from and including June 30, 2023 up to but excluding September 30, 2023:
Preferred Shares
TSX Stock Symbol
Dividend Rate
Dividend Per Share
Record Date
Payment Date
Series A
TA.PR.D
2.877%
$0.17981
September 1, 2023
September 30, 2023
Series B*
TA.PR.E
6.593%
$0.41545
September 1, 2023
September 30, 2023
Series C
TA.PR.F
5.854%
$0.36588
September 1, 2023
September 30, 2023
Series D*
TA.PR.G
7.663%
$0.48287
September 1, 2023
September 30, 2023
Series E
TA.PR.H
6.894%
$0.43088
September 1, 2023
September 30, 2023
Series G
TA.PR.J
4.988%
$0.31175
September 1, 2023
September 30, 2023
*Please note the quarterly floating rate on the Series B and Series D Preferred Shares will be reset every quarter.
All currency is expressed in Canadian dollars except where noted. When the dividend payment date falls on a weekend or holiday, the payment is made the following business day.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit its website at transalta.com.
TransAlta Corporation to Acquire TransAlta Renewables Inc. to Simplify Structure and Enhance Strategic Position
Business combination creates a unified, large-scale clean electricity leader to serve customers with clean and reliable electricity
Creates a single, publicly-traded entity with one strategy and a simplified governance structure that facilitates growth, and provides greater clarity around the execution of the Clean Electricity Growth Plan
The combined company enhances diversification, increases public float and trading liquidity, with attractive transaction metrics that unlocks value to the benefit of all shareholders
10.99 per common share of TransAlta Renewables Inc. as of July 10, 2023
1.0337 common shares of TransAlta Corporation or $13.00 in cash, subject to pro-rationing based on a maximum aggregate issuance of 46,441,779 common shares of TransAlta Corporation and maximum aggregate cash consideration of $800 million
A special committee of independent directors of TransAlta Renewables Inc., who conducted an independent and comprehensive review process, supported by the receipt of two fairness opinions, unanimously recommends that the shareholders of TransAlta Renewables Inc. vote in favour of the transaction
TransAlta Corporation (TSX: TA; NYSE: TAC) (“TransAlta”) and TransAlta Renewables Inc. (TSX: RNW) (“RNW”) today announced that they have entered into a definitive arrangement agreement (the “Agreement”) under which TransAlta will acquire all of the outstanding common shares of RNW (each, a “RNW Share”) not already owned, directly or indirectly, by TransAlta and certain of its affiliates, subject to the approval of RNW shareholders.
With the execution of our Clean Electricity Growth Plan well underway, it is clear that the strategies of both TransAlta and RNW have converged. Now is the right time to bring these two companies together to create a single clean electricity leader. The combined company’s greater scale and enhanced positioning will drive benefits and unlock value for all of our shareholders. The combination of the two companies will be underpinned by a single strategy that provides greater clarity to investors and will support future growth,- said Mr. John Kousinioris, President and Chief Executive Officer of TransAlta.
We are pleased to announce that this transaction provides RNW shareholders with an immediate premium and greater growth and cash flow certainty going forward. It resolves significant risks associated with maintaining RNW’s current dividend level given challenges with RNW’s cash available for distribution due to near-term contract expiries, significant increases to cash taxes and other factors,- said Mr. David Drinkwater, Chair of the Board of Directors of RNW. A special committee of independent directors of RNW undertook a comprehensive process with its own independent advisors to negotiate the Agreement to ensure fair value for RNW, and we are pleased to recommend this Agreement to our shareholders.
Under the terms of the Agreement, each RNW Share will be exchanged for, at the election of each holder of RNW Shares (RNW Shareholders):
1.0337 common shares of TransAlta (each, a “TransAlta Share”), or
$13.00 in cash.
The consideration payable to RNW Shareholders is subject to pro-rationing based on a maximum aggregate number of TransAlta Shares that may be issued to RNW Shareholders of 46,441,779and a maximum aggregate amount of cash of $800 million. The transaction will be effected by way of an arrangement under the Canada Business Corporations Act (the Arrangement).
The consideration payable to RNW Shareholders represents an 18.3% premium based on the closing price of RNW Shares on the Toronto Stock Exchange (TSX) as of July 10, 2023.The total consideration paid to RNW Shareholders is valued at $1,384,051,812 on July 10, 2023, of which $800 million will be paid in cash. The combined company will operate as TransAlta and remain listed on the TSX and the New York Stock Exchange (“NYSE”), under the symbols TA and TAC, respectively.
Key Highlights and Rationale for Arrangement
The Arrangement provides shareholders of the combined company with a single strategy and a clear and compelling opportunity for long-term growth:
Alignment and Execution of a Single Strategy: The combined company will share a common strategic path to achieve its clean electricity growth objectives and be more competitive as a single, streamlined, publicly-listed entity. It will align, clarify and enhance management’s strategic focus and efforts in the marketing, development, construction, operation and maintenance of generation assets to serve customers with clean and reliable electricity.
Accretive Transaction and Attractive Dividend, while Supporting Future Growth: Following the transaction, shareholders of the combined company will benefit from an accretive transaction and receive a sustainable quarterly dividend while ensuring the combined company retains sufficient cash flow for reinvestment in future growth projects.
Direct Ownership in One of Canada’s Largest Independent Power Producers: The combined company will have unified and direct ownership interests in a diversified portfolio of wind, hydro, solar, storage and natural gas generation assets, all backed by an aligned strategy that allows shareholders of the combined company to benefit from future growth.
Increased Scale, Public Float and Liquidity: The combined company will have a larger market capitalization and will provide stronger access to capital markets while providing increased trading liquidity. The reduced corporate complexity will provide greater transparency and understanding of the combined company’s business, which is expected to enable investment in TransAlta’s growing clean electricity portfolio.
Synergies: The combined company will benefit from greater efficiencies and corporate synergies under a single entity.The combined company will create opportunities for further capital efficiencies by funding growth in a single simplified entity, providing a higher retention of cash flows, and resulting in lower corporate and administration costs.
Benefits to RNW Shareholders
The transaction offers RNW Shareholders a compelling investment proposition and is expected to provide the following benefits:
Fair Offer Reflecting Attractive Premium: The terms of the offer represent an 18.3% premium based on the closing price of RNW Shares on the TSX as of July 10, 2023, and a 13.6% premium relative to RNW’s 20-day volume-weighted average price per share as of July 10, 2023.
Clear and Sustainable Path Going Forward: The combined company will provide resilience and mitigate near-term risks associated with maintaining RNW’s current dividend level given its challenges with contract expiries and increased cash taxes. This combined company will provide stronger dividend sustainability and payout coverage, and it will be better positioned to realize growth as compared to RNW as a standalone entity.
Expanded Pool of Assets: The combined company will offer an expanded pool of assets and business capabilities. RNW Shareholders who elect to receive TransAlta shares as consideration will become owners of TransAlta’s high-quality Alberta assets, which total 3.3 GW in the combined company. It will also provide exposure to TransAlta’s energy marketing division that delivers industry-leading trading capability and market insights to generate strong cash flows driving further portfolio diversification.
Simplified Structure and Synergies: The simplified structure provides clarity of ownership and enhanced transparency, including through the elimination of tracking shares, which will enhance the investment analysis and decision-making process for investors. The combined company will also optimize the use of capital to fund growth more efficiently as compared to RNW as a standalone entity.
Immediate Exposure to Alberta Electricity Market: RNW Shareholders will benefit from upside due to the current strong power price environment in Alberta and TransAlta’s position in the Alberta market to generate significant cash flows through the capabilities and expertise of TransAlta’s leading asset optimization team, while continuing to benefit from a strong underlying base of contracted cashflows.
Enhanced Growth Opportunities: RNW Shareholders who elect to receive TransAlta Shares as consideration will be able to directly participate in the benefits of the combination including a consolidated development pipeline of 4.3 GW of clean electricity projects and early-stage investments in new technologies, along with access to business development expertise and innovation capabilities to enhance growth potential that will support capital appreciation.
Benefits to TransAlta Shareholders
The Arrangement is strategically and economically attractive to holders of TransAlta Shares (TransAlta Shareholders) and provides the following benefits:
Enhanced Strategic Position: The combined company will leverage scale, assets and capabilities in all markets, while retaining greater exposure to the growth in clean electricity opportunities. The Arrangement will provide economic contribution from an incremental 1,187 MW of generating capacity, being 39.9% of the generating capacity at RNW not currently owned by TransAlta (directly or indirectly). The Arrangement also increases the proportion of TransAlta’s contractedness and diversifies the impact of TransAlta’s merchant market exposure.
Sustainable, Attractive Transaction Metrics: The Arrangement is accretive to free cash flow and provides greater financial flexibility by increasing the retention of cash, which will support the combined company’s growth plan.
Execution of a Single Strategy: The Arrangement provides clarity and will result in the execution of a single strategy. All future growth will be pursued in the combined company and funded with greater capital efficiency, while the combined company retains access to future growth in contracted opportunities.
Increased Liquidity and Synergies: The combined company will have an increased public float and trading liquidity, and have access to more efficient capital, along with corporate synergies.
Maintains Financial Strength: The simplified structure and funding of the Arrangement is expected to have a neutral impact to the credit rating of TransAlta.
Additional Information on the Arrangement
TransAlta owns 160,398,217 RNW Shares, representing approximately 60.1% of the outstanding RNW Shares. As a result of the Arrangement, TransAlta would issue an estimated 46,441,779 TransAlta Shares, representing approximately 15% of the total number of outstanding TransAlta Shares.
The Arrangement is subject to the approval by: (i) 66 2/3% of the votes cast by RNW Shareholders present in person or by proxy at a special meeting of RNW Shareholders (the RNW Meeting) called to consider the Arrangement; and (ii) a majority of the votes cast by RNW Shareholders present in person or by proxy at the RNW Meeting after excluding the votes attached to RNW Shares that, to the knowledge of RNW and its directors and senior officers, after reasonable inquiry, are beneficially owned or over which control or direction is exercised by TransAlta, the directors and senior officers of TransAlta, any TransAlta Shareholder holding more than 10% of the issued and outstanding TransAlta Shares and any other person who is an interested party or a related party of an interested party in relation to RNW with respect to the Arrangement within the meaning of Canadian securities laws.
The exchange of RNW Shares for TransAlta Shares will generally be tax deferred, while the exchange of RNW Shares for cash will generally be a taxable disposition, in each case, for Canadian income tax purposes. Any RNW Shareholder who receives a combination of TransAlta Shares and cash for its RNW Shares will be able to file a joint tax election that may, depending on the RNW Shareholders’ own circumstances, allow for the exchange of its RNW Shares to occur on a fully tax-deferred basis for Canadian income tax purposes.
The Agreement provides for, among other things, a non-solicitation covenant of RNW, subject to a customary fiduciary out provision that entitles RNW to consider and accept a superior proposal if TransAlta does not match the superior proposal within a five-business day period. If the Agreement is terminated in certain circumstances, including if RNW enters into an agreement with respect to a superior proposal, TransAlta is entitled to a termination payment of $95.4 million.
In addition to the required approvals of RNW Shareholders, closing of the Arrangement is also subject to obtaining the approval of the Court of King’s Bench of Alberta, required regulatory approvals and other customary closing conditions.
Further details regarding the Arrangement will be contained in a management information circular (the Circular) for the RNW Meeting to be sent to RNW Shareholders in connection with the RNW Meeting. The Circular is expected to be mailed on or about August 25, 2023, and the RNW Meeting is expected to be held on or about September 26, 2023.
If all approvals are received and other closing conditions satisfied, the Arrangement is expected to be completed early in the fourth quarter of 2023.
Copies of the Agreement will be filed by TransAlta with the U.S. Securities and Exchange Commission and the Canadian securities regulators and will be available for viewing at www.sec.gov and www.sedar.com. The Circular, as well as other filings containing information about the Arrangement including the Agreement, will also be available for viewing under RNW’s profile on www.sedar.com. All RNW Shareholders are urged to read the Circular once available as it will contain additional important information concerning the Arrangement.
Support for the Arrangement
The Arrangement is the result of an independent and comprehensive review process. The Board of Directors of RNW (the RNW Board) delegated to a special committee consisting solely of independent directors of RNW (the RNW Special Committee) the authority to, among other things, review, evaluate and negotiate the Arrangement on behalf of RNW.
National Bank Financial Inc. (NBF) and TD Securities Inc. (TD), acting as independent financial advisors to the RNW Special Committee, have each provided their verbal opinions to the RNW Special Committee (subject to certain assumptions and qualifications) that the Arrangement is fair from a financial point of view to the RNW Shareholders (the RNW Opinions) without consideration to TransAlta and any affiliate thereof. NBF has also prepared a formal valuation of the RNW Shares (the Formal Valuation), and based upon their analysis and subject to the various assumptions, qualifications, and limitations to be set forth in its written valuation report, in addition to other factors that it considered relevant, the fair market value of a RNW Share as of July 10, 2023 was in the range of $12.25 and $13.60. The RNW Special Committee, after considering the terms of the Arrangement, the RNW Opinions, the Formal Valuation, advice of its independent financial and legal advisors and other relevant matters, recommended to the RNW Board that it determine that the Arrangement is in the best interests of RNW and fair to RNW Shareholders (without consideration to TransAlta and any affiliate thereof), approve the execution and delivery of the Agreement and recommend that RNW Shareholders vote in favour of the Arrangement.
After considering, among other things, the recommendation of the RNW Special Committee and its receipt of the RNW Opinions and the Formal Valuation, the RNW Board (with four directors who are not independent abstaining) unanimously determined that the Arrangement is in the best interests of RNW and is fair to the RNW shareholders (without consideration to TransAlta and any affiliate thereof), approved the execution and delivery of the Agreement and unanimously recommends that RNW Shareholders vote in favour of the Arrangement.
RBC Dominion Securities Inc. (RBC Capital Markets), acting as financial advisor to TransAlta, provided a verbal opinion, as of July 10, 2023, to the Board of Directors of TransAlta (subject to assumptions and qualifications) that the consideration to be paid by TransAlta pursuant to the Arrangement is fair from a financial point of view to TransAlta (the TransAlta Fairness Opinion). After considering, among other things, the TransAlta Fairness Opinion, the TransAlta Board determined that the Arrangement is in the best interests of TransAlta and approved the execution and delivery of the Agreement.
All of the directors of RNW have entered into support agreements with TransAlta pursuant to which they have agreed to vote their respective RNW Shares in favour of the Arrangement at the RNW Meeting. Additionally, TransAlta, holding approximately 60.1% of the RNW Shares, intends to vote its RNW Shares in favour of the Arrangement at the RNW Meeting.
Investor Call
A conference call with the investment community will take place on July 11 at 9:00 a.m. MST (11:00 a.m. EST). The call will begin with a short address by John Kousinioris, President and Chief Executive Officer, and Todd Stack, President of TransAlta Renewables and Executive Vice President, Finance and Chief Financial Officer of TransAlta, followed by a question-and-answer period for analysts and media.
Dial-in number TransAlta Corporation Acquires TransAlta Renewables Conference Call
Toll-free North American participants call: 1-888-664-6392
RBC Capital Markets is acting as financial advisor to TransAlta. Norton Rose Fulbright Canada LLP is acting as legal advisor to TransAlta.
NBF and TD are acting as financial advisors to the RNW Special Committee. Stikeman Elliott LLP is acting as legal advisor to the RNW Special Committee.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 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 its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit our website at transalta.com.
This press release does not constitute an offer to buy or sell or the solicitation of an offer to sell or buy any securities. Any offers, solicitations or offers to buy, or any sales of securities will be made in accordance with registration and other requirements under applicable law.
Cautionary Note Forward-Looking Statements
This news release contains forward-looking information within the meaning of applicable Canadian securities laws, and forward-looking statements, within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as forward-looking statements). Forward-looking statements are predictive in nature, depend upon or refer to future events or conditions, or include words such as expects, plans, estimates, intends, targets, result, future or negative versions thereof and other similar expressions or future or conditional verbs such as may, can, will, and would. These statements may include, without limitation, statements regarding: expectations with respect to the business, financial prospects and future opportunities for the combined company, including its broader platform with enhanced diversification and simplified governance structure; the combined company’s stronger access to capital markets; the complementary nature of the combined company’s asset base and that the combined company will share a common strategic path; increased competitiveness of the combined company; enhancement of management’s efforts in serving customers with low-cost clean electricity; increased trading liquidity of the combined company’s shares and that such shares will remain listed on the TSX and the NYSE; the combined company’s enhanced access to operational, tax and corporate synergies; the combined company’s dividend plans following closing of the Arrangement; the expected benefits of the Arrangement to the RNW Shareholders, including stronger dividend sustainability, directly participating in the upside of TransAlta’s development pipeline of renewable energy projects and other corporate synergies; the expected benefits of the Arrangement to TransAlta Shareholders, including that the combined company will leverage scale, assets and capabilities in all markets, that the transaction is expected to be accretive to free cash flow, all future growth will be pursued in the combined company and funded with greater capital efficiency, and greater access to contracted cash flows through the acquisition of the remaining 39.9% interest of RNW; the expectation that the transaction will have a neutral impact to TransAlta’s credit rating; the tax implications of the Arrangement and the ability of a RNW Shareholder to file a joint tax election; the anticipated date of the RNW Meeting, the Circular sent in connection therewith and the expected mailing date thereof; the anticipated closing conditions and regulatory approvals pursuant to the Agreement; and the anticipated timing and completion of the Arrangement, including the expected closing date of the Arrangement.
Forward-looking statements are based upon, among other things, factors, expectations and assumptions that TransAlta and RNW have made as at the date of this news release regarding, among other things: the satisfaction of the conditions to closing of the Arrangement in a timely manner, if at all, including the receipt of all necessary approvals; the combined company’s ability to successfully integrate the businesses of TransAlta and RNW; TransAlta’s ability to issue TransAlta Shares pursuant to the Arrangement; sources of funding that each of TransAlta and RNW have relied upon in the past continue to be available to the combined company on terms favourable to the combined company; the combined company will have access to sufficient capital to pursue future development plans; there will be increases to the combined company’s share price and market capitalization over the long term; and that the combined company will have the ability to return capital to its shareholders.
Forward-looking statements involve significant known and unknown risk and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether such results will be achieved. These risks include, but are not limited to: the completion and timing of the Arrangement; the ability of TransAlta and RNW to receive, in a timely manner, the necessary regulatory, court, shareholder, stock exchange and other third-party approvals and to satisfy the other conditions to closing of the Arrangement; the ability of the parties to complete the Arrangement on the terms contemplated by TransAlta and RNW or at all; the ability of the combined company to realize the anticipated benefits of, and synergies and savings from, the Arrangement; consequences of not completing the Arrangement, including the volatility of the share prices of TransAlta and RNW, negative reactions from the investment community, and the required payment of certain costs related to the termination of the Arrangement; the accuracy of the pro forma financial information of the combined company; and the focus of management’s time and attention on the Arrangement and other disruptions arising from the Arrangement. Additional risk factors relating to TransAlta and RNW are described in further detail in TransAlta’s management’s discussion and analysis and annual information form for the year ended December 31, 2022, and in RNW management’s discussion and analysis and annual information form for the year ended December 31, 2022, and in TransAlta’s management’s discussion and analysis and RNW’s management discussion analysis, each for the three months ended March 31, 2023, which are available on SEDAR at www.sedar.com. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect TransAlta and RNW’s expectations only as of the date of this news release, as a number of factors could cause actual results to differ materially from the results discussed in these forward-looking statements. TransAlta and RNW 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.
The TSX and NYSE have not reviewed and do not accept responsibility for the adequacy or accuracy of this release. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.
Media Advisory: TransAlta and TransAlta Renewables Second Quarter 2023 Results and Conference Call
TransAlta Corporation (TransAlta) (TSX: TA) (NYSE: TAC) will release its second quarter 2023 results before markets open on Friday, August 4, 2023. A conference call and webcast to discuss the results will be held for investors, analysts, members of the media and other interested parties the same day beginning at 9:00 a.m. Mountain Time (11:00 a.m. ET). The media will be invited to ask questions following analysts.
TransAlta Renewables Inc. (TransAlta Renewables) (TSX:RNW) will release its second quarter 2023 results before markets open on Thursday, August 3, 2023. Any questions regarding TransAlta Renewables may be asked on the TransAlta conference call.
Second Quarter 2023 Conference Call:
Toll-free North American participants call: 1-888-664-6392 Webcast link: https://app.webinar.net/QZL0W2G3RdB
Related materials will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/presentations-and-events/. If you are unable to participate in the call, the instant replay is accessible at 1-888-390-0541 (Canada and USA toll free) with TransAlta pass code 650793 followed by the # sign. A transcript of the broadcast will be posted on TransAlta’s website once it becomes available.
About TransAlta:
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit its website at transalta.com. About TransAlta Renewables Inc.:
TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) announced today that the Toronto Stock Exchange (TSX) has accepted the notice filed by the Company to implement a normal course issuer bid (NCIB) for a portion of its common shares (Common Shares).
Pursuant to the NCIB, TransAlta may repurchase up to a maximum of 14,000,000 Common Shares, representing approximately 7.29% of its public float of Common Shares, where the aggregate public float (as defined by the TSX) as at May 17, 2023, was 192,048,191 Common Shares. Purchases under the NCIB may be made through open market transactions on the TSX and any alternative Canadian trading platforms on which the Common Shares are traded, based on the prevailing market price. Any Common Shares purchased under the NCIB will be cancelled.
Transactions under the NCIB will depend on future market conditions. TransAlta will initially retain discretion whether to make purchases under the NCIB, and to determine the timing, amount and acceptable price of any such purchases, subject at all times to applicable TSX and other regulatory requirements. The period during which TransAlta is authorized to make purchases under the NCIB commences on May 31, 2023 and ends on May 30, 2024 or such earlier date on which the maximum number of Common Shares are purchased under the NCIB or the NCIB is terminated at the Company’s election.
Under TSX rules, not more than 150,222 Common Shares (being 25% of the average daily trading volume on the TSX of 600,891 Common Shares for the six months ended April 30, 2023) can be purchased on the TSX on any single trading day under the NCIB, with the exception that one block purchase in excess of the daily maximum is permitted per calendar week. As at May 17, 2023, there were 263,330,038 Common Shares issued and outstanding.
TransAlta has repurchased and cancelled 8,549,500 Common Shares on the open market through the facilities of the TSX and/or alternative Canadian trading systems at an average price of $11.86 per share under its prior NCIB approved by the TSX on May 24, 2022 for the twelve-month period commencing May 31, 2022.
The NCIB provides the Company with a capital allocation alternative with a view to long-term shareholder value. TransAlta’s Board of Directors and Management believe that, from time to time, the market price of the Common Shares does not reflect their underlying value and purchases of Common Shares for cancellation under the NCIB may provide an opportunity to enhance shareholder value.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit its website at transalta.com.
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 may, will, 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 intentions with respect to the NCIB, the effects of repurchases of Common Shares and purchases thereunder, including any enhancement to shareholder value. 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: the entering into of an automatic securities purchase plan; legislative or regulatory developments; any significant changes to Common Share price or trading volume; continued availability of capital and financing; changes to general economic, market or business conditions; business opportunities that become available to, or are pursued by TransAlta; 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. 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 Reports First Quarter 2023 Results and Raises 2023 Financial Guidance
First Quarter 2023 Financial Highlights
Adjusted EBITDA(1),(2) of $503 million, an increase of 94% over the same period in 2022
Free Cash Flow (“FCF”)(1) of $263 million, or $0.98 per share, an increase of 145% on a per-share basis from the same period in 2022
Earnings before income taxes of $383 million, an improvement of $141 million from the same period in 2022
Net earnings attributable to common shareholders of $294 million, an increase of $108 million from the same period in 2022
Cash flow from operating activities of $462 million, an increase of 2% from the same period in 2022
Other Business Highlights
Returned $36 million of capital to common shareholders through share buybacks of 3.2 million common shares
Entered into an automatic share purchase plan to facilitate repurchases of common shares through the normal course issuer bid during blackout periods
Announced agreement to acquire a 50% interest in a 320 MW early-stage pumped hydro development project
Kent Hills rehabilitation program on track with 13 turbines reassembled and commissioning commenced in late April
Garden Plain construction nearing completion with all turbines assembled and commercial operations to commence during the second quarter of 2023
Northern Goldfields construction nearing completion with commercial operations to commence during the second quarter of 2023
Mount Keith 132kV expansion project construction activities have commenced and are on track to be completed in latter half of 2023
2023 Revised Outlook
Increased 2023 annual financial guidance as set out below:
Adjusted EBITDA range of $1.45 billion to $1.55 billion, an increase of 19% at the midpoint of prior guidance
FCF range of $650 million to $750 million, an increase of 15% at the midpoint of prior guidance
Energy Marketing gross margin range of $130 million to $150 million, an increase of 40% at the midpoint of prior guidance
TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the three months ended March 31, 2023.
“Our first quarter results continue to demonstrate the value of our strategically diversified fleet. Our results benefited from our strong operations and asset optimization and hedging activities. With our performance across the fleet and our continuing positive expectations for the balance of year, we have revised our 2023 full year financial guidance upwards for both adjusted EBITDA and free cash flow, with revised midpoints exceeding the top end of our original targets to reflect stronger market conditions and solid operational performance,” said John Kousinioris, President and Chief Executive Officer of TransAlta.
“We continue to advance our growth plan and are progressing several opportunities with 374 MW of projects in an advanced stage of development. Our progress is on track, and the cash flows from our legacy fleet are positioning us well to realize our Clean Electricity Growth Plan,” added Mr. Kousinioris.
Key Business Developments
Automatic Share Purchase Plan
On March 27, 2023, the Company entered into an automatic share purchase plan (ASPP) in order to facilitate repurchases of TransAlta’s common shares under its previously announced normal course issuer bid (NCIB). The Company has received approval from the Toronto Stock Exchange to purchase up to 14,000,000 common shares during the 12-month period that commenced May 31, 2022 and terminates May 30, 2023, representing approximately 5.2 per cent of the Company’s currently issued and outstanding Common Shares as at Dec. 31, 2022.
Under the ASPP, the Company’s broker may purchase common shares from the effective date of the ASPP until the end of the NCIB. All purchases of common shares made under the ASPP will be included in determining the number of common shares purchased under the NCIB. Any common shares purchased by the Company pursuant to the NCIB will be cancelled. The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (ii) the NCIB expires; or (iii) the Company terminates the ASPP in accordance with its terms.
During the three months ended March 31, 2023, the Company purchased and cancelled a total of 3,169,300 common shares at an average price of $11.23 per common share, for a total cost of $36 million.
Early-Stage Pumped Hydro Development Project
On Feb. 16, 2023, the Company entered into a definitive agreement to acquire a 50 per cent interest in the Tent Mountain Renewable Energy Complex (Tent Mountain), an early-stage 320 MW pumped hydro energy storage development project, located in southwest Alberta, owned by Montem Resources Limited (Montem). The acquisition includes the land rights, fixed assets and intellectual property associated with the pumped hydro development project. The transaction closed on April 24, 2023. The Company paid Montem approximately $8 million on closing of the transaction and additional contingent payments of up to $17 million (approximately $25 million total) may become payable to Montem based on the achievement of specific development and commercial milestones. The Company and Montem own the Tent Mountain project within a special purpose partnership that is jointly managed, with the Company acting as project developer. The partnership is actively seeking an offtake agreement for the energy and environmental attributes generated by the facility.
Kent Hills Wind Facilities Update
Rehabilitation of the Kent Hills 1 and 2 wind facilities is well underway. All of the towers have been fully disassembled with foundation demolition and removal nearing completion. Construction of new foundations is progressing well, with approximately two-thirds of foundations poured. Tower reassembly is also progressing with 13 turbines reassembled to date and associated commissioning activities commenced. We continue to target returning all turbines to service in the second half of 2023. The current estimate of the capital expenditures is approximately $120 million, inclusive of insurance proceeds.
During the first quarter of 2023, the Company filed and served a statement of claim in the New Brunswick Court of King’s Bench against certain defendants who the Company believes are responsible for, or contributed to, the failure of the turbine foundations at the Kent Hills 1 and 2 wind facilities. The claim seeks damages for lost profits, replacement costs, and other related costs to perform the remediation of Kent Hills 1 and 2, net of any insurance recoveries. The ability to recover any amounts is uncertain at this time.
First Quarter 2023 Highlights
$ millions, unless otherwise stated
Three Months Ended
March 31, 2023
March 31, 2022
Adjusted availability (%)
92.0
89.1
Production (GWh)
5,972
5,359
Revenues
1,089
735
Adjusted EBITDA(1),(2)
503
259
FFO(1),(2)
374
179
FCF(1),(2)
263
108
Earnings before income taxes
383
242
Net earnings attributable to common shareholders
294
186
Cash flow from operating activities
462
451
Net earnings per share attributable to common shareholders, basic and diluted
1.10
0.69
FFO per share(1),(3)
1.40
0.66
FCF per share(1),(3)
0.98
0.40
First Quarter Financial Results Summary
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, was $503 million, an increase of $244 million, or 94 per cent compared to the same period in 2022, largely due to increased revenue from the Alberta electricity portfolio, driven primarily by gas, hydro and wind facilities as a result of higher merchant prices, increased revenue in the Energy Transition segment due to higher production at Centralia Unit 2 and stronger market prices in the Pacific Northwest and higher production in the Gas segment due to stronger market conditions in Alberta. Adjusted EBITDA was further improved by higher ancillary services revenues in Hydro, higher environmental attribute revenues in the Hydro and Wind and Solar segments and higher earnings from the Energy Marketing segment due to short-term trading of both physical and financial power and gas products across all North American deregulated markets. These increases were partially offset by higher fuel and purchased power resulting from higher market price of coal and higher coal usage, higher carbon compliance costs in the Gas segment due to higher carbon price per tonne and higher gas production, lower production in the Wind and Solar segment due to stronger wind resources in the first quarter of 2022 and higher OM&A in the Energy Marketing and Corporate segments.
FCF(1) for the three months ended March 31, 2023, was $263 million compared to $108 million in the same period of 2022, driven primarily by higher adjusted EBITDA and lower interest expense. This was partially offset by higher current income tax expense, higher distributions paid to subsidiaries’ non-controlling interests and changes in provisions compared to 2022. The Company expects a portion of the current tax expenses to reverse during the balance of the year as projects under construction are completed including the Garden Plain wind project and projects in Australia.
Net earnings attributable to common shareholders for the three months ended March 31, 2023, was $294 million compared to $186 million in the same period of 2022, an increase of $108 million. During the first quarter of 2023, the Company benefited from higher revenues, partially offset by higher fuel and purchased power, higher carbon compliance costs, higher depreciation due to the acceleration of useful lives on certain facilities in 2022, higher OM&A costs related to the Corporate and Energy Marketing segments, lower asset impairment reversals, and higher income tax expense due to higher earnings before tax. Net earnings attributable to common shareholders in the current period were impacted by higher net earnings allocated to non-controlling interests.
Cash flow from operating activities for the three months ended March 31, 2023, was $462 million, an increase of $11 million compared with the same period in 2022, primarily due to higher revenues net of unrealized gains and losses from risk management activities. This was partially offset by higher unfavourable changes in working capital, mainly from changes in collateral paid and received and higher fuel and purchase power and carbon compliance costs.
Alberta Electricity Portfolio
The Alberta electricity portfolio generated gross margin of $349 million, an increase of $185 million compared to the same period in 2022. Higher gross margin was the result of increased merchant production and higher realized prices for our Gas and Hydro segment, merchant hedging contributions and growing contribution from contracted wind.
Alberta power prices for the first quarter of 2023 were higher compared to last year as a result of generally higher demand in the province and significantly lower net power imports due to strong prices in adjacent power markets. The average pool price increased as a result of these factors from $90 per MWh in 2022 to $142 per MWh in 2023.
For the three months ended March 31, 2023, the Alberta electricity portfolio achieved a realized merchant power price of $156 per MWh, compared to the Alberta electricity price, which averaged $142 per MWh. Higher realized merchant power pricing for energy across the fleet was due to higher market prices and optimization of our available capacity across all fuel types. The segment spot prices exclude gains and losses from hedging positions that are entered into in order to mitigate the impact of unfavourable market pricing.
Hedged volume for the three months ended March 31, 2023 was 2,046 GWh at an average price of $136 per MWh compared to 1,738 GWh at an average price of $84 per MWh in 2022.
Increased 2023 Financial Guidance
The Company increased its 2023 outlook for adjusted EBITDA to be between $1.45 billion and $1.55 billion. The midpoint of the range represents a 19% increase over the Company’s previous 2023 outlook as at the fourth quarter of 2022.
FCF outlook has also been increased and is now expected to be between $650 million and $750 million. The midpoint of the range represents a 15% increase over the Company’s previous 2023 outlook.
The Energy Marketing gross margin range has been revised to $130 million to $150 million, an increase of 40% at the midpoint of the Company’s previous 2023 outlook.
The following table provides additional details pertaining to the 2023 outlook:
Measure
Updated Target 2023
Original Target 2023
2022 Actuals
Adjusted EBITDA(1)(2)
$1.45 billion – $1.55 billion
$1.2 billion – $1.32 billion
$1.63 billion
FCF(1)(2)
$650 million – $750 million
$560 million – $660 million
$961 million
Range of key 2023 power and gas price assumptions:
Market
Updated 2023 Assumptions
2023 Original Assumptions
Alberta Spot ($/MWh)
$125 to $145
$105 to $135
Mid-C Spot (US$/MWh)
US$90 to US$100
US$75 to US$85
AECO Gas Price ($/GJ)
$2.50
$4.60
Alberta spot price sensitivity: a +/- $1 per MWh change in spot price is expected to have a +/- $5 million impact on adjusted EBITDA for 2023.
Other assumptions relevant to the 2023 outlook:
Updated 2023 Expectations
Original Expectations
Energy Marketing gross margin
$130 million – $150 million
$90 million – $110 million
Range of Alberta hedging assumptions:
Range of hedging assumptions
Q2 2023
Q3 2023
Q4 2023
Hedged production (GWh)
1,727
1,630
1,411
Hedge price ($/MWh)
$90
$89
$77
Hedged gas volumes (GJ)
16 million
16 million
15 million
Hedge gas prices ($/GJ)
$2.32
$2.31
$2.26
Liquidity and Financial Position
The Company continues to maintain a strong financial position in part due to long-term contracts and hedged positions. As at March 31, 2023, TransAlta had access to $2.6 billion in liquidity, including $1.2 billion in cash and cash equivalents.
Normal Course Issuer Bid
During the three months ended March 31, 2023, the Company purchased and cancelled a total of 3,169,300 common shares at an average price of $11.23 per common share, for a total cost of $36 million.
Segmented Financial Performance
($ millions)
Three months ended
March 31, 2023
March 31, 2022
Hydro
106
61
Wind and Solar
88
89
Gas
240
105
Energy Transition
54
5
Energy Marketing
39
17
Corporate
(24)
(18)
Adjusted EBITDA(1)
503
259
Earnings before income taxes
383
242
Hydro:
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, increased by $45 million compared to the same period in 2022, primarily due higher power and ancillary service prices in the Alberta market and higher environmental attribute revenues. In addition, the Company captured revenue through forward hedging for the Alberta Hydro Assets and realized gains from the hedging strategy in the first quarter of 2023.
Wind and Solar:
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, decreased by $1 million compared to the same period in 2022, primarily from lower production due in part to weaker wind resources during the quarter and lower liquidated damages recognized at the Windrise wind facility, partially offset by higher environmental attribute revenues and higher power pricing.
Gas:
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, increased by $135 million compared to the same period in 2022, mainly due to higher realized energy prices for our Alberta merchant assets, net of hedging, lower natural gas prices and lower OM&A due to staffing reductions in Alberta. This was partially offset by increased natural gas consumption and carbon compliance costs driven by higher production, higher carbon price per tonne and lower Ontario merchant pricing and steam generation.
Energy Transition:
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, increased by $49 million compared to the same period in 2022, primarily due to increased production stemming from strong market prices in the Pacific Northwest and higher availability at Centralia Unit 2.
Energy Marketing:
Adjusted EBITDA(1),(2) for the three months ended March 31, 2023, increased by $22 million compared to the same period in 2022. Results exceeded segment expectations from short-term trading of both physical and financial power and gas products across all North American deregulated markets. The Company was able to capitalize on short-term volatility in the trading markets while maintaining the overall risk profile of the business unit.
Corporate:
Our Corporate costs for the three months ended March 31, 2023, increased by $6 million compared to the same period in 2022, primarily due to recoveries realized in 2022, increased spending to support strategic and growth initiatives, lower allocations of corporate costs to the generation segments and increased costs due to inflationary pressures.
Conference call
TransAlta will hold a conference call and webcast at 9:00 a.m. MST (11:00 a.m. EST) today, May 5, 2023, to discuss our first quarter 2023 results. The call will begin with a short address by John Kousinioris, President and Chief Executive Officer, and Todd Stack, EVP Finance and 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.
Dial-in number – First Quarter 2023 Conference Call Toll-free North American participants call: 1-888-664-6392
A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/presentations-and-events/. If you are unable to participate in the call, the instant replay is accessible at 1-888-390-0541 (Canada and USA toll free) with TransAlta pass code 337489 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 and have no standardized meaning under IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods results. Please refer to the Non-IFRS Measures section of this earnings release for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.
(2) During the second quarter of 2022, our adjusted EBITDA composition was amended to include the impact of closed exchange positions that are effectively settled by offsetting positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which the transactions occur. The Company has applied this composition to all previously reported periods.
(3)Funds from operations per share and free cash flow per share are calculated using the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding for March 31, 2023, was 268 million shares (March 31, 2022 271 million). Please refer to the Non-IFRS Measures section in this earnings release for the purpose of these non-IFRS ratios.
Non-IFRS financial measures and other specified financial measures
We use a number of financial measures to evaluate our performance and the performance of our business segments, including measures and ratios that are presented on a non-IFRS basis, as described below. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our audited annual 2022 consolidated financial statements and the unaudited interim condensed consolidated statements of earnings (loss) for the three months ended March 31, 2023, prepared in accordance with IFRS. We believe that these non-IFRS amounts, measures and ratios, read together with our IFRS amounts, provide readers with a better understanding of how management assesses results.
Non-IFRS amounts, measures and ratios do not have standardized meanings under IFRS. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, as an alternative to, or more meaningful than, our IFRS results.
Adjusted EBITDA
Each business segment assumes responsibility for its operating results measured by adjusted EBITDA. Adjusted EBITDA is an important metric for management that represents our core business profitability. In the second quarter of 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which the transactions occur. Accordingly, the Company has applied this composition to all previously reported periods. Interest, taxes, depreciation and amortization are not included, as differences in accounting treatments may distort our core business results. In addition, certain reclassifications and adjustments are made to better assess results, excluding those items that may not be reflective of ongoing business performance. This presentation may facilitate the readers’ analysis of trends.
Average Annual EBITDA
Average annual EBITDA is a non-IFRS financial measure that is forward-looking, used to show the average annual EBITDA that the project currently under construction is expected to generate upon completion.
Funds From Operations (“FFO”)
FFO is an important metric as it provides a proxy for cash generated from operating activities before changes in working capital and provides the ability to evaluate cash flow trends in comparison with results from prior periods. FFO is a non-IFRS measure.
Free Cash Flow (“FCF”)
FCF is an important metric as it represents the amount of cash that is available to invest in growth initiatives, make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or repurchase common shares. Changes in working capital are excluded so FFO and FCF are not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and timing of receipts and payments. FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to adjusted EBITDA are non-IFRS ratios that are presented in the MD&A. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF and Key Non-IFRS Financial Ratios sections of the MD&A for additional information.
FFO per share and FCF per share
FFO per share and FCF per share are calculated using the weighted average number of common shares outstanding during the period. FFO per share and FCF per share are non-IFRS ratios.
Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below.
Reconciliation of Non-IFRS Measures on a Consolidated Basis
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before income taxes for the period ended March 31, 2023:
Three months ended March 31, 2023
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
125
115
495
267
92
1,094
(5)
1,089
Reclassifications and adjustments:
Unrealized mark-to-market (gain) loss
(1)
(64)
(14)
16
(63)
63
Realized gain (loss) on closed exchange positions
(13)
(55)
(68)
68
Decrease in finance lease receivable
13
13
(13)
Finance lease income
4
4
(4)
Adjusted revenues
124
115
435
253
53
980
(5)
114
1,089
Fuel and purchased power
5
9
130
181
325
325
Reclassifications and adjustments:
Australian interest income
(1)
(1)
1
Adjusted fuel and purchased
power
5
9
129
181
324
1
325
Carbon compliance
32
32
32
Gross margin
119
106
274
72
53
624
(5)
113
732
OM&A
12
17
41
17
14
24
125
(1)
124
Taxes, other than income taxes
1
3
4
1
9
9
Net other operating income
(2)
(11)
(13)
(13)
Adjusted EBITDA(2)
106
88
240
54
39
(24)
503
Equity income
2
Finance lease income
4
Depreciation and amortization
(176)
Asset impairment reversals
3
Net interest expense
(59)
Foreign exchange loss
(3)
Earnings before income taxes
383
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this news release.
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings (loss) before income taxes for the period ended March 31, 2022:
Three months ended March 31, 2022
Hydro
Wind & Solar(1)
Gas
Energy Transition
Energy
Marketing
Corporate
Total
Equity accounted investments(1)
Reclass adjustments
IFRS financials
Revenues
77
95
434
106
26
1
739
(4)
735
Reclassifications and adjustments:
Unrealized mark-to-market (gain) loss
13
(162)
11
10
(128)
128
Realized gain (loss) on closed exchange positions(2)
3
(10)
(7)
7
Decrease in finance lease
receivable
11
11
(11)
Finance lease income
5
5
(5)
Unrealized foreign exchange
gain on commodity
(2)
(2)
2
Adjusted revenues
77
108
291
117
24
1
618
(4)
121
735
Fuel and purchased power
4
8
131
94
1
238
238
Reclassifications and adjustments:
Australian interest income
(1)
(1)
1
Adjusted fuel and purchased
power
4
8
130
94
1
237
1
238
Carbon compliance
18
1
19
19
Gross margin
73
100
143
22
24
362
(4)
120
478
OM&A
11
16
44
16
7
18
112
112
Taxes, other than income taxes
1
2
4
1
8
8
Net other operating income
(7)
(10)
(17)
(17)
Adjusted EBITDA(3)
61
89
105
5
17
(18)
259
Equity income
2
Finance lease income
5
Depreciation and amortization
(117)
Asset impairment reversals
42
Net interest expense
(67)
Foreign exchange gain and
other gains
2
Earnings before income taxes
242
(1) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. (2) In 2022, our adjusted EBITDA composition was adjusted to include the impact of closed positions that are effectively settled by offsetting positions with the same counterparty to reflect the performance of the assets and the Energy Marketing segment in the period in which the transactions occur. (3) Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of this news release.
Reconciliation of Cash flow from operations to FFO and FCF
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Three Months Ended
$ millions unless otherwise stated
March 31, 2023
March 31, 2022
Cash flow from operating activities(1)
462
451
Change in non-cash operating working capital balances
(42)
(284)
Cash flow from operations before changes in working capital
420
167
Adjustments
Share of adjusted FFO from joint venture(1)
3
3
Decrease in finance lease receivable
13
11
Realized gain on closed positions with same counterparty
(68)
(7)
Other(2)
6
5
FFO(3)
374
179
Deduct:
Sustaining capital(1)
(20)
(17)
Productivity capital
(1)
Dividends paid on preferred shares
(13)
(10)
Distributions paid to subsidiaries non-controlling interests
(76)
(42)
Principal payments on lease liabilities
(2)
(1)
FCF(3)
263
108
Weighted average number of common shares outstanding in the period
268
271
FFO per share(3)
1.40
0.66
FCF per share(3)
0.98
0.40
(1) Includes our share of amounts for Skookumchuck, an equity accounted joint venture. (2) Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from equity accounted joint venture. (3) These items are not defined and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures section of the MD&A.
The table below bridges our adjusted EBITDA to our FFO and FCF for the three months ended March 31, 2023 and 2022:
Three Months Ended
March 31, 2023
March 31, 2022
Adjusted EBITDA(1)(4)
503
259
Provisions
3
10
Interest expense
(45)
(54)
Current income tax expense(2)
(60)
(12)
Realized foreign exchange gain (loss)
(7)
2
Decommissioning and restoration costs settled
(7)
(7)
Other non-cash items
(13)
(19)
FFO(3)(4)
374
179
Deduct:
Sustaining capital(4)
(20)
(17)
Productivity capital
(1)
Dividends paid on preferred shares
(13)
(10)
Distributions paid to subsidiaries non-controlling interests
(76)
(42)
Principal payments on lease liabilities
(2)
(1)
FCF(3)
263
108
(1) Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to earnings (loss) before income taxes above. (2) The Company incurred higher current tax expense for the first quarter of 2023, due to utilizing a large portion of its loss carryforwards during the fourth quarter of 2022. The Company expects a portion of the current tax expense to reverse during the balance of the year as projects under construction are completed including the Garden Plain wind project and projects in Australia. (3) These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Additional IFRS Measures and Non-IFRS Measures section of this MD&A and reconciled to cash flow from operating activities above. (4) Includes our share of amounts for Skookumchuck wind facility, an equity accounted joint venture.
TransAlta is in the process of filing its unaudited interim Consolidated Financial Statements and accompanying notes, as well as the associated Management’s Discussion & Analysis (MD&A). These documents will be available today on the Investors section of TransAlta’s website at www.transalta.com or through SEDAR at www.sedar.com.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit our web site at transalta.com.
Cautionary Statement Regarding Forward-Looking Information
This news release contains “forward-looking information”, within the meaning of applicable Canadian securities laws, and “forward-looking statements”, within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as “forward-looking statements). In some cases, forward-looking statements can be identified by terminology such as “plans”, “expects”, “proposed”, “will”, “anticipates”, “develop”, “continue”, and similar expressions suggesting future events or future performance. In particular, this news release contains, without limitation, statements pertaining to: the rehabilitation of the Kent Hills 1 and 2 wind facilities, including the expected date that the facilities will fully return to service and capital expenditures; the development of the Tent Mountain pumped hydro project; the Mount Keith transmission and Northern Goldfields projects under construction in Australia, including the expected timing of commercial operations; our ability to progress 374 MW of advanced stage projects; and our 2023 financial guidance, including expectations regarding adjusted EBITDA, free cash flow and gross margin from the Energy Marketing segment; expectations on power and gas prices, including Alberta merchant spot prices; and Alberta hedging assumptions.
The forward-looking statements contained in this news release are based on many assumptions including, but not limited to, the following material assumptions: no significant changes to applicable laws and regulations beyond those that have already been announced; merchant power prices in Alberta and the Pacific Northwest; the Alberta hedge position, including price and volume of hedged power; the availability and cost of labour, services and infrastructure; the satisfaction by third parties of their obligations, including under our power purchase agreements; our proportionate ownership of TransAlta Renewables not changing materially; and no material decline in the dividends expected to be received from TransAlta Renewables. Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions that could cause actual plans, performance, results or outcomes to differ materially from current expectations. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this news release include, but are not limited to: fluctuations in merchant power prices, including lower pricing in Alberta, Ontario and Mid-Columbia; changes in demand for electricity and capacity; our ability to contract or hedge our electricity generation for prices and at volumes that will provide expected returns; risks relating to our growth projects, including the Tent Mountain pumped hydro project and risks relating to interconnection, offtake contracts and geotechnical and environmental conditions of such project; our ability to replace or renew contracts as they expire; risks associated with our projects under construction and projects in development, namely as it pertains to capital costs, permitting, land rights, engineering risks, and delays in the construction or commissioning of such projects; any difficulty raising needed capital in the future, including debt, equity and tax equity, as applicable, on reasonable terms or at all; changes to the legislative, regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; operational risks involving our facilities, including unplanned outages; disruptions in the transmission and distribution of electricity, including congestion and basis risk; restricted access to capital and increased borrowing costs; changes in short-term and/or long-term electricity supply and demand; reductions in production; increased costs; a higher rate of losses on our accounts receivables due to credit defaults; impairments and/or write-downs of assets; adverse impacts on our information technology systems and our internal control systems, including increased cybersecurity threats; commodity risk management and energy trading risks, including the effectiveness of the Company’s risk management tools associated with hedging and trading procedures to protect against significant losses; reduced labour availability and ability to continue to staff our operations and facilities; disruptions to our supply chains, including our ability to secure necessary equipment on the expected timelines or at all; the effects of weather, including man made or natural disasters, as well as climate-change related risks; unexpected increases in cost structure; reductions to our generating units relative efficiency or capacity factors; disruptions in the source of fuels, including natural gas and coal, as well as the extent of water, solar or wind resources required to operate our facilities; general economic risks, including deterioration of equity markets, increasing interest rates or rising inflation; failure to meet financial expectations; general domestic and international economic and political developments, including armed hostilities, the threat of terrorism, diplomatic developments or other similar events; equipment failure and our ability to carry out or have completed the repairs in a cost-effective manner timely manner or at all, including if the rehabilitation at the Kent Hills wind facilities is more costly than expected; industry risk and competition; public health crises and the impacts of any restrictive directives of government and public health authorities; fluctuations in the value of foreign currencies; structural subordination of securities; counterparty credit risk; changes to our relationship with, or ownership of, TransAlta Renewables; changes in the payment or receipt of future dividends, including from TransAlta Renewables; inadequacy or unavailability of insurance coverage; our provision for income taxes; legal, regulatory and contractual disputes and proceedings involving the Company; reliance on key personnel; labour relations matters and other risks and uncertainties discussed in the Company’s materials filed with the securities regulatory authorities from time to time and as also set forth in the Company’s MD&A and Annual Information Form for the year ended December 31, 2022. 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 Corporation Announces Results of the Annual and Special Meeting of Shareholders and Election of all Directors
CALGARY, Alberta (April 28, 2023) TransAlta Corporation (TSX: TA) (NYSE: TAC) (“TransAlta” or the “Company”) held its Annual and Special Meeting of Shareholders (the Meeting) on April 28, 2023. The total number of common shares represented by shareholders at the Meeting and by proxy was 151,051,401, representing 56.49 per cent of the Company’s outstanding common shares.
The following resolutions were considered by shareholders:
Election of Directors
The thirteen director nominees proposed by management were elected. The votes by ballot were received as follows:
Nominee
Votes For
Per cent
Withheld
Per cent
Rona H. Ambrose
148,554,412
99.33%
1,009,260
0.67%
John P. Dielwart
149,100,353
99.69%
463,320
0.31%
Alan J. Fohrer
148,745,934
99.45%
817,738
0.55%
Laura W. Folse
148,974,621
99.61%
589,050
0.39%
Harry A. Goldgut
149,070,660
99.67%
493,012
0.33%
John H. Kousinioris
149,135,402
99.71%
428,271
0.29%
Candace J. MacGibbon
138,099,843
92.34%
11,463,829
7.66%
Thomas M. O’Flynn
136,442,018
91.23%
13,121,655
8.77%
Bryan D. Pinney
148,707,763
99.43%
855,909
0.57%
James Reid
149,129,758
99.71%
433,915
0.29%
Manjit K. Sharma
149,024,498
99.64%
539,174
0.36%
Sandra R. Sharman
148,064,047
99.00%
1,499,624
1.00%
Sarah A. Slusser
149,092,994
99.69%
470,677
0.31%
Appointment of Auditors
The appointment of Ernst & Young LLP to serve as the auditors for 2023 was approved. The votes by ballot were received as follows:
Votes For
Per cent
Withheld
Per cent
138,102,736
91.43%
12,948,564
8.57%
Advisory Vote on Executive Compensation (also known as say-on-pay)
The advisory vote on the Company’s approach to executive compensation or say-on-pay was approved. The votes by ballot were received as follows:
The resolution approving the Company’s increase of shares issuable under the Share Unit Plan was approved. The votes by ballot were received as follows:
Votes For
Per cent
Withheld
Per cent
148,519,290
98.32%
2,532,106
1.68%
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit its website at transalta.com.
TransAlta Corporation Announces Results of the Annual and Special Meeting of Shareholders and Election of all Directors
The Board of Directors of TransAlta Corporation (TSX: TA) (NYSE: TAC) declared a quarterly dividend of $0.055 per common share payable on July 1, 2023 to shareholders of record at the close of business on June 1, 2023.
The Board of Directors also declared the following quarterly dividend on its Cumulative Redeemable Rate Reset First Preferred Shares for the period starting from and including March 31, 2023 up to but excluding June 30, 2023:
Preferred Shares
TSX Stock Symbol
Dividend Rate
Dividend Per Share
Record Date
Payment Date
Series A
TA.PR.D
2.877%
$0.17981
June 1, 2023
June 30, 2023
Series B*
TA.PR.E
6.594%
$0.41100
June 1, 2023
June 30, 2023
Series C
TA.PR.F
5.854%
$0.36588
June 1, 2023
June 30, 2023
Series D*
TA.PR.G
7.664%
$0.47769
June 1, 2023
June 30, 2023
Series E
TA.PR.H
6.894%
$0.43088
June 1, 2023
June 30, 2023
Series G
TA.PR.J
4.988%
$0.31175
June 1, 2023
June 30, 2023
*Please note the quarterly floating rate on the Series B and Series D Preferred Shares will be reset every quarter.
All currency is expressed in Canadian dollars except where noted. When the dividend payment date falls on a weekend or holiday, the payment is made the following business day.
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. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 111 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and A from MSCI.
For more information about TransAlta, visit its website at transalta.com.
