CALGARY, March 3, 2017 /CNW/ - TransAlta Corporation
("TransAlta" or the "Company") (TSX: TA; NYSE: TAC) today reported
its fourth quarter and full year 2016 financial results.
Comparable EBITDA(1) for the fourth quarter 2016
was $374 million compared to
$268 million during the same period
last year. Comparable FFO(1) for the quarter was
$228 million, or $0.79 per share, compared to $243 million, or $0.86 per share, during the same period last
year. The Keephills 1 Force
Majeure (the "K1 FM") adjustments to our provisions had no
impact on FFO.
Comparable EBITDA for the full year ending December 31, 2016 totaled $1,145 million, an increase of $200 million compared to 2015. Comparable FFO for
the full year ending December 31,
2016 was $763 million compared
to $740 million in 2015 and in-line
with the guidance range for the year of $755
to $835 million.
Improved results in 2016 are a result of full year contributions
from renewable assets acquired in the second half of 2015, solid
performance from our gas and renewable portfolios, cost reduction
initiatives across the fleet implemented in 2015, and the reversal
of our provision relating to the K1 FM in 2013. Our highly
contracted profile and hedging strategy mitigated the impact of
lower prices during the year in Alberta; however, unfavourable market
conditions in the Pacific Northwest negatively impacted the
contribution from our US coal segment.
"We landed a solid year despite record low power prices in
Alberta and the Pacific
Northwest," said Dawn Farrell,
President and Chief Executive Officer. "Highlights for year include
landing the coal transition agreement, meeting our 2016 guidance,
and furthering the repositioning of our capital structure,"
commented Mrs. Farrell.
As at December 31, 2016, total
debt, net of cash, totaled $4.1
billion compared to $4.4
billion at December 31, 2015.
The decrease is primarily due to debt paid down using the proceeds
received from the sale to TransAlta Renewables of economic
interests in the Canadian Assets (as defined below) completed in
January 2016, free cash flows
generated by the business, and the strengthening of the Canadian
dollar. Over the next four years, we have approximately
$2.2 billion of recourse and
non-recourse debt maturing. We expect to refinance some of these
upcoming debt maturities over the next 18-months by raising
$700 million to $900 million of debt
secured by our contracted cash flows. We have access to
approximately $1.7 billion in
liquidity at the end of the year and we expect to continue our
de-leveraging strategy with a portion of our free cash flow over
the next four years being allocated to debt reduction.
Comparable net earnings attributable to common shareholders for
the full year ending December 31,
2016 was $34 million
($0.12 net earnings per share)
compared to comparable net loss of $48
million ($0.17 net loss per
share) in 2015. The year-over-year improvements primarily relate to
contributions from assets we acquired last year, solid performance
from the renewable asset portfolio, cost reduction initiatives and
the reversal of our provision for the K1 FM. Reported net earnings
attributable to common shareholders was $117
million ($0.41 net earnings
per share) compared to net loss of $24
million ($0.09 net loss per
share) in 2015. Comparable net earnings and reported net earnings
for the three months ending December 31,
2016 were $53 million and
$61 million, respectively as compared
to $3 million and a net loss
$7 million in same period in
2015.
_________________________________
|
(1)
|
These items are
not defined under IFRS. Presenting these items from period to
period provides management and investors with the ability to
evaluate earnings trends more readily in comparison with prior
periods' results. Refer to the Comparable Funds from Operations and
Comparable Free Cash Flow and Earnings and Other Measures on a
Comparable Basis sections of the Company's MD&A for further
discussion of these items, including, where applicable,
reconciliations to measures calculated in accordance with
IFRS.
|
2017 Outlook
The following table outlines TransAlta's financial outlook for
2017 which was released on December 19,
2016:
Measure
|
Target
|
Comparable
EBITDA(1)
|
$1,025 million to
$1,135 million
|
Comparable
FFO(1)
|
$765 million to $855
million
|
Sustaining
Capital
|
$260 million to $280
million
|
Comparable
FCF(1)
|
$300 million to $365
million
|
Fleet
Availability
|
88% to 90%
|
Coal
Availability
|
86% to 88%
|
2017 Key Priorities
In addition to meeting the financial targets set out in the 2017
Outlook, other priorities in 2017 include:
- Working collaboratively with the Government of Alberta on advancing our investment in
Brazeau, contributing to the design of a new capacity market, and
establishing terms and conditions to convert coal plants to
gas;
- Commissioning South Hedland;
- Growing our renewables platform through RFP's in Saskatchewan, Alberta and Australia;
- Continuing to execute our financing strategy to further
strengthen the balance sheet; and
- Continuing to lead in safety and environment performance.
______________________
|
(1)
|
These items are not
defined under IFRS. Presenting these items from period to period
provides management and investors with the ability to evaluate
earnings trends more readily in comparison with prior periods'
results. Refer to the Comparable Funds from Operations and
Comparable Free Cash Flow and Earnings and Other Measures on a
Comparable Basis sections of the Company's MD&A for further
discussion of these items, including, where applicable,
reconciliations to measures calculated in accordance with
IFRS.
|
2016 Strategic Accomplishments
In addition to delivering solid financial results in-line with
our guidance, we accomplished the following:
- Entered into an off-coal agreement with the Government of
Alberta for the cessation of
coal-fired emissions at our Alberta coal facilities. Under the terms of
the off-coal agreement, we will receive transition payments of
approximately $37.4 million (our net
share) from 2017 to 2030 for a total amount of approximately
$524 million.
- Entered into a memorandum of understanding with the Government
of Alberta to collaborate and
co-operate in the development of a policy framework to facilitate
coal-to-gas conversions and renewable electricity development, and
ensure existing generation is able to effectively participate in a
future capacity market.
- Signed a new contract for our Mississauga cogeneration facility effective
January 1, 2017, with Ontario's Independent Electricity System
Operator ("IESO") and terminated our existing contract early. The
new contract, which expires in December
2018, provides us with monthly payments totaling
approximately $209 million over the
term of the contract with no delivery obligations. The new contract
will allow us to reduce operational costs for this facility while
retaining flexibility to operate the facility should economic
conditions permit.
- Completed the sale to TransAlta Renewables Inc. ("TransAlta
Renewables") of an economic interest in the Sarnia cogeneration facility and two renewable
energy facilities (collectively, the "Canadian Assets") for
aggregate proceeds valued at $540
million. Cash proceeds of this transaction were $173 million. We also received 15.6 million
common shares of TransAlta Renewables and a $215 million convertible debenture. Proceeds were
used to reduce TransAlta's indebtedness. In November 2016, the economic interest was
converted to direct ownership of the Canadian Assets by TransAlta
Renewables.
- Repositioned our capital structure through two non-recourse
bond issuances in 2016, through our subsidiaries, New Richmond Wind
L.P. and TAPC Holdings L.P., in the amounts of $159 million and $202.5
million, respectively. These financings have aligned debt
maturities with the contracted cash flows of the underlying
assets.
- Announced the sale of our 51 per cent interest in the 88 MW
Wintering Hills non-contracted wind facility, located in
Alberta, for approximately
$61 million in early 2017. The sale
provides us with near-term liquidity, increases our financial
flexibility, and reduces our merchant exposure in Alberta.
- Continued to advance the construction of the South Hedland
power project. We expect the project to be delivered on schedule
and on budget in mid-2017.
- Announced a reduction of our dividend to $0.16 per common share on an annualized basis
from $0.72 previously. As a result,
our annual dividend is approximately $46
million, down from $205
million, thereby increasing our financial flexibility.
Fourth Quarter and Full Year Segmented
Review
Comparable
EBITDA
(in CAD$ millions)
|
3 Months
Ended
|
Year
Ended
|
Dec. 31,
2016
|
Dec. 31,
2015
|
Dec. 31,
2016
|
Dec. 31,
2015
|
Canadian
Coal
|
178
|
67
|
473
|
334
|
U.S. Coal
|
14
|
22
|
41
|
63
|
Canadian
Gas
|
70
|
57
|
244
|
212
|
Australian
Gas
|
32
|
34
|
128
|
122
|
Wind and
Solar
|
66
|
65
|
195
|
176
|
Hydro
|
20
|
19
|
82
|
73
|
Energy
Marketing
|
13
|
26
|
52
|
37
|
Corporate
|
(19)
|
(22)
|
(70)
|
(72)
|
Total Comparable
EBITDA
|
374
|
268
|
1,145
|
945
|
- Canadian Coal: Comparable EBITDA for the year ended
Dec. 31, 2016 increased $139 million compared to 2015, primarily due to
the reversal of the $80 million
provision relating to the K1 FM in 2013. The year over year impact
to comparable EBIDTA of this provision was $139 million, as last year's comparable EBITDA
was reduced by $59 million due to
this provision. Our high level of contracted generation and hedging
strategy largely mitigated the impact of low power prices in
Alberta. Comparable EBITDA was
also positively impacted by a reduction in our operations,
maintenance, and administration costs.
- U.S. Coal: Comparable EBITDA decreased by $22 million compared to 2015 as a result of
reduced margins due to lower prices and the unfavorable impact of
mark-to-market on certain forward financial contracts that do not
qualify for hedge accounting. This was partially offset by lower
coal transportation costs and a reduction in our coal impairment
charges.
- Canadian Gas: Comparable EBITDA for 2016 increased by
$32 million compared to 2015, as a
result of a year-over-year change in unrealized mark-to-market on
our gas position, cost efficiency initiatives, and favourable
pricing in Ontario from our
contracts for power and gas. The re-contracting of the Poplar Creek
facility reduced our operations, maintenance and administration
("OM&A") costs by more than $9
million in 2016, compared to last year.
- Australian Gas: Comparable EBITDA for the year increased by
$6 million compared to 2015, mainly
due to the addition of capacity payments for the gas conversion
project at our Solomon gas plant that was completed in May 2016, as well as the uplift from our natural
gas pipeline that was commissioned in March
2015. The change in value of the Australian dollar had
limited impact on our comparable EBITDA in 2016.
- Wind and Solar: Comparable EBITDA for 2016 increased
$19 million compared to 2015, as
assets acquired in the second half of 2015 contributed
approximately $23 million to the
increase. Lower merchant prices in Alberta and lower generation in Canada negatively impacted our EBITDA.
- Hydro: Comparable EBITDA for 2016 increased $9 million compared to 2015. Higher generation
contributed to higher revenues. Our financial contracts partially
offset lower levels of revenues in the Alberta ancillary market. We also benefited
from cost reduction initiatives implemented in late 2015.
- Energy Marketing: Comparable EBITDA for 2016 from Energy
Marketing increased $15 million
compared to 2015, as a result of solid performance in all markets
where we are active. During the second quarter of 2015,
unexpectedly volatile markets in Alberta and the Pacific Northwest negatively
impacted gross margin. Operating, maintenance, and administration
costs increased $12 million to
$24 million in 2016 compared to 2015,
due to increases in share based incentive compensation and lower
charges to other business segments for energy hedging and
optimization services.
- Corporate: Our Corporate overhead costs of $70 million were lower in 2016 compared to 2015
and 2014 ($72 million and
$71 million, respectively), as we
realized benefits of cost efficiency initiatives which were offset
by reduced allocations to our business segments.
Consolidated Financial Review
Reported net earnings attributable to common shareholders was
$117 million ($0.41 net earnings per share) compared to net
loss of $24 million ($0.09 net loss per share) in 2015. Comparable net
earnings attributable to common shareholders was $34 million ($0.12
net earnings per share), up from a comparable net loss of
$48 million ($0.17 net loss per share) in 2015. The
improvements year-over-year primarily relate to contributions from
assets we acquired last year, solid performance from the renewable
asset portfolio, and cost reduction initiatives. The K1 FM
provision reversal also impacted 2016 net earnings favourably. Our
reported net earnings attributable to common shareholders in 2016
were impacted positively by the re-contracting of the Mississauga cogeneration facility
($48 million(1)) and
negatively by the Wintering Hills wind facility impairment
($21
million(1)). Changes in the
fair value of de-designated and economic hedges at U.S. Coal also
had a negative impact on our reported net earnings of $17 million(1,2) in 2016 (2015 –
$38 million(1,2)). 2015's
reported net loss also included the gain on the Poplar Creek
restructuring ($192
million(1)), the cost of the settlement with the
Market Surveillance Administrator (the "MSA") ($55 million(1)), and a $95 million income tax expense related to an
internal reorganization. These items are not included in our
comparable net earnings.
Total sustaining capital expenditures (including flood recovery
capital) were $272 million, below the
guidance range for 2016 of $330 million to
$350 million and lower than $305
million incurred in 2015 as we were able to reschedule some
capital expenditures including a large inspection of our gas
generation units at Sarnia due to
lower operating hours and our Ghost River diversion project.
Fourth Quarter and Year Ended 2016 Highlights
In $CAD millions,
unless otherwise stated
|
3 Months
Ended
|
Year
Ended
|
Dec. 31,
2016
|
Dec. 31,
2015
|
Dec. 31,
2016
|
Dec. 31,
2015
|
Adjusted availability
(%)(3,4)
|
88.9%
|
88.4%
|
89.2%
|
89.0%
|
Production (GWh)
(4)
|
10,624
|
11,107
|
38,157
|
40,673
|
Revenue
|
$717
|
$595
|
$2,397
|
$2,267
|
Comparable
EBITDA
|
$374
|
$268
|
$1,145
|
$945
|
Reported Net Earnings
(loss) attributable to common shareholders
|
$61
|
($7)
|
$117
|
($24)
|
Comparable Net
Earnings (loss) attributable to common
shareholders
|
$51
|
$3
|
$34
|
($48)
|
Comparable Funds from
Operations
|
$228
|
$243
|
$763
|
$740
|
Cash Flow from
Operating Activities
|
$122
|
$118
|
$744
|
$432
|
Comparable Free Cash
Flow
|
$93
|
$174
|
$299
|
$315
|
|
|
|
|
|
Net Earnings (loss)
per common share
|
$0.21
|
($0.02)
|
$0.41
|
($0.09)
|
Comparable Net
Earnings (loss) per share
|
$0.18
|
$0.01
|
$0.12
|
($0.17)
|
Comparable Funds from
Operations per share
|
$0.79
|
$0.86
|
$2.65
|
$2.64
|
Comparable Free Cash
Flow per share
|
$0.32
|
$0.61
|
$1.04
|
$1.13
|
Dividends declared
per common share
|
$0.08
|
$0.18
|
$0.20
|
$0.72
|
_________________________
|
(1)
|
Net of related income
tax expense.
|
(2)
|
Hedge accounting
could not be applied to certain contracts, and accordingly, the
mark-to-market on these contracts impacted reporting earnings. The
impacts of these mark-to-market fluctuations have been removed from
revenues to arrive at comparable results, which reflect the
economic nature of these contracts.
|
(3)
|
Availability and
production includes all generating assets (generation operations
and finance leases that we operate).
|
(4)
|
Adjusted for economic
dispatching at U.S. Coal.
|
TransAlta is in the process of filing its Annual Information
Form, Audited Consolidated Financial Statements and accompanying
notes, as well as the associated Management's Discussion &
Analysis. These documents will be available today on the Investors
section of TransAlta's website at www.transalta.com or through
SEDAR at www.sedar.com.
TransAlta is also in the process of filing its 40-F with the
U.S. Securities and Exchange Commission. The form will be available
through their website at www.sec.gov. Paper copies of all documents
are available to shareholders free of charge upon request.
Conference call
We will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m.
ET) today to discuss our fourth quarter and 2016
results. The call will begin with a short address by
Dawn Farrell, President and CEO, and
Donald Tremblay, Chief Financial
Officer, followed by a question and answer period for
investment analysts and investors. A question and answer period for
the media will immediately follow. Please contact the
conference operator five minutes prior to the call, noting
"TransAlta Corporation" as the company and "Jaeson Jaman" as
moderator.
Dial-in numbers:
Toll-free
North American participants call: 1-888-231-8191
Outside
of Canada & USA call: 1-647-427-7450
A link to the live webcast will be available on the Investor
Centre section of TransAlta's website at
http://www.transalta.com/powering-investors/events-and-presentations.
If you are unable to participate in the call, the instant replay is
accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code
66068990 followed by the # sign. A transcript of the broadcast will
be posted on TransAlta's website once it becomes available.
About TransAlta
TransAlta is a power generation and wholesale marketing
company focused on creating long-term shareholder value. TransAlta
maintains a low-to-moderate risk profile by operating a highly
contracted portfolio of assets in Canada, the United
States and Australia.
TransAlta's focus is to efficiently operate wind, hydro, solar,
natural gas and coal facilities in order to provide customers with
a reliable, low-cost source of power. For over 100 years, TransAlta
has been a responsible operator and a proud contributor to the
communities in which it works and lives. TransAlta has been
recognized on CDP's Canadian Climate Disclosure Leadership Index
(CDLI), which includes Canada's
top 20 leading companies reporting on climate change, and has been
selected by Corporate Knights as one of Canada's Top 50 Best Corporate Citizens and is
recognized globally for its leadership on sustainability and
corporate responsibility standards by FTSE4Good.
For more information about TransAlta, visit our web site at
transalta.com, or follow us on Twitter @TransAlta.
Cautionary Statement Regarding Forward Looking
Information
This news release contains forward looking statements
including, without limitation, statements pertaining to TransAlta's
business and anticipated future financial performance; our expected
strategies and opportunities; TransAlta's key priorities for 2017;
expected comparable EBITDA, comparable FFO and comparable free cash
flow ranges for 2017; expected sustaining capital expenditures for
2017; expected fleet and coal availability for 2017; the
commissioning of South Hedland and the associated timing and costs
thereof; expectations regarding governmental regulatory regimes and
legislation and the expected impact of such regimes and regulations
on the Company; the cost of complying with resulting regulations
and laws; the refinancing our upcoming debt maturities over the
next 18-months by raising $700 million to
$900 million of debt secured by contracted cash flows and;
expectations regarding our de-leveraging strategy, including
applying a portion of our free cash flow over the next four years
to reduce debt. These statements are based on TransAlta's
belief and assumptions based on information available at the time
the assumptions were made, including assumptions regarding
Alberta power prices, and the
regulatory regimes and economic conditions relevant to the markets
in which we operate. These statements are subject to a number of
risks and uncertainties that may cause actual results to differ
materially from those contemplated by the forward-looking
statements. Some of the factors that could cause such differences
include: operational risks involving our facilities; changes in
market prices where we operate; unplanned outages at generating
facilities and the capital investments required; equipment failure
and our ability to carry out repairs in a cost effective and timely
manner; the effects of weather; disruptions in the source of fuels,
water or wind required to operate our facilities; energy trading
risks; failure to obtain necessary regulatory approvals in a timely
fashion; negative impact to our credit ratings; legislative or
regulatory developments and their impacts; increasingly stringent
environmental requirements and their impacts; increased
competition; global capital markets activity (including our ability
to access financing at a reasonable cost); changes in prevailing
interest rates; currency exchange rates; inflation levels and
commodity prices; general economic conditions in the geographic
areas where TransAlta operates; impediments to the construction and
commissioning of South Hedland; and disputes or claims involving
TransAlta. Readers are cautioned not to place undue reliance on
these forward-looking statements, which reflect TransAlta's
expectations only as of the date of this news release. The
financial outlook that is contained in this news release was
approved March 2, 2017 and is being
provided for the purpose of giving the reader information about
management's current expectations and plans. TransAlta disclaims
any intention or obligation to update or revise these
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Note: All financial figures are in Canadian dollars unless
otherwise indicated.
SOURCE TransAlta Corporation