CALGARY, May 14, 2019 /CNW/ -
Financial Highlights
- Funds from operations were $169
million, an increase of $8
million over 2018;
- Free cash flow from ongoing operations increased 17% to
$95 million; and
- Entered into a $750 million
strategic investment with an affiliate of Brookfield Renewable
Partners
TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA)
(NYSE: TAC) today reported first quarter 2019 financial results
which reflect strong operational and financial results for the
quarter, based on the execution of our strategic goals to
competitively position our assets in the market. Our
portfolio of assets in Alberta
benefitted from high power prices during the quarter, and our
Energy Marketing segment successfully offset a portion of the
losses due to an extreme pricing event in the Pacific
Northwest.
During the quarter we agreed to acquire a 49% interest in the
Skookumchuck wind project adjacent
to our coal mine at Centralia, further diversifying our
fleet. The project has a 20-year PPA with an investment grade
counterparty, making it a good candidate for TransAlta Renewables
to acquire. The acquisition is expected to close in December 2019. Including Skookumchuck, we
now have over $700 million of
renewables project under development in addition to the investments
in the Pioneer Pipeline and our coal to gas conversions. An
Investor Day will be held in Toronto in September to showcase current and
future growth opportunities, including the coal to gas
conversions. Additionally, an analyst and institutional
investor tour of our Alberta wind
and hydro facilities will be held in mid-July.
Free cash flow(1,2) during the first quarter of
$95 million and funds from
operations(1,2) of $169
million, increased $14 million
and $8 million, respectively, after
adjusting for the receipt of $157
million from the Balancing Pool for the early termination of
the Sundance B and C Power Purchase Arrangements ("PPAs") received
in 2018. The increase was driven by strong performance from Energy
Marketing and Hydro, partially offset by lower results from US Coal
and Canadian Gas.
Comparable EBITDA(1,2,3) for the quarter decreased
$15 million compared to last year
after adjusting for the one-time payment received in 2018.
Alberta operations benefitted from higher prices in the
quarter with average power prices in the first quarter of
$69 per MWh compared to $35 per MWh in 2018, mainly reflecting the impact
of the extreme cold weather during February and March of 2019. This
was offset by lower EBITDA from US Coal as a result of one unit
being unavailable during extreme market conditions, the expiry of
the contract at Mississauga on
December 31, 2018, and lower
scheduled payments from the Poplar Creek finance lease in Canadian
Gas.
"Results for the quarter demonstrate the competitiveness of our
business structure and asset diversification." said Dawn Farrell, President and Chief Executive
Officer. "With increased financial capability through our
innovative arrangement with Brookfield, we are now excited to get back to
growing the business and continuing to execute our strategy."
commented Mrs. Farrell.
First Quarter Highlights
- Announced retirement plans for Tim
Faithfull and Ambassador Gordon
Giffin from the Board of Directors. Subsequent to the
quarter, Tim Faithfull retired from
the Board immediately following TransAlta's 2019 Annual and Special
Meeting of Shareholders. Ambassador Gordon
Giffin intends to retire as director and Board Chair in
2020.
- Received approval from the Alberta Electric System Operator to
extend the mothballing of Sundance Units 3 and 5 until November 1, 2021.
- Approved the innovative 10MW Windcharger battery storage
project that will store energy produced from our Summerview II Wind
Farm in Tesla batteries. The project received co-funding support
from Emissions Reduction Alberta and will be the first
utility-scale battery storage facility in Alberta.
- Agreed to issue $750 million of
exchangeable securities to Brookfield Renewable Partners and its
institutional partners (collectively "Brookfield") as part of a
strategic partnership that realizes the value of our hydro assets,
enhances our financial position to execute our strategy, and
accelerates the opportunity to return capital to shareholders. The
initial tranche of $350 million in
exchange for unsecured, subordinated debentures was funded on
May 1, 2019. TransAlta has also
committed to returning up to $250
million of capital to shareholders through share repurchases
within the next three years.
Important Subsequent Events
- Signed an agreement to purchase a 49% interest in the
Skookumchuck Wind Energy Facility upon commercial operation, which
is expected in December of 2019. The 136.8 MW wind facility,
located in Washington state near
our Centralia Plant, has a 20-year
power purchase agreement with an investment grade
counterparty.
- Announced that all resolutions at the Company's Annual and
Special Shareholders' Meeting were approved, and that three new
directors: Robert Flexon,
Harry Goldgut and Richard Legault, were elected to the Board of
Directors.
First Quarter 2019 Review by Segment
Comparable
EBITDA
(in CAD$ millions)
|
3 Months
Ended
|
March 31,
2019
|
March 31,
2018
|
Canadian
Coal
|
63
|
64(a)
|
U.S. Coal
|
(10)
|
25
|
Canadian
Gas
|
30
|
61
|
Australian
Gas
|
30
|
31
|
Wind and
Solar
|
69
|
68
|
Hydro
|
27
|
17
|
Energy
Marketing
|
19
|
(10)
|
Corporate
|
(7)
|
(20)
|
Total Comparable
EBITDA(a)
|
221
|
236(a)
|
a) Excludes $157 million in
compensation from the Balancing Pool for the early termination of
the
Sundance B and C
PPAs.
|
- Canadian Coal: Comparable EBITDA for the three months ended
March 31, 2019 was lower by
$1 million, after adjusting for the
one-time receipt of $157 million for
the termination of the Sundance B and C PPAs in the first quarter
of 2018. Performance in the first quarter of 2019 was in line with
the same quarter of 2018, despite the termination of the Sundance
PPAs and the mothballing of two units. This largely reflects the
combined impact of higher prices, co-firing with gas, and lower
OM&A costs offsetting the loss of ability to recover
Sundance carbon compliance costs
through the PPAs.
- U.S. Coal: Comparable EBITDA was down by $35 million during the first quarter of 2019
compared to 2018. During an isolated and extreme pricing event in
March, Centralia was unable to commit one of its units to physical
production for day ahead supply due to an unplanned forced outage
repair. As a result, the Company incurred cash losses of
$25 million on its day ahead hedging
position. This isolated and extreme pricing event was the result of
cold weather and strong demand in the Pacific Northwest as well as
from extremely high natural gas prices. The affected unit was able
to return to service earlier than expected for delivery in the real
time market, however, it was only able to recover a portion of the
day ahead hedge losses due to real time prices settling
significantly below the day ahead settlement price. The day ahead
and subsequent real time prices are historically very similar. The
event occurred within a 48-hour period. The remaining variance of
$10 million is mainly related to the
strong results in 2018 as we fulfilled our contracted volumes with
low priced power purchases.
- Canadian Gas: Comparable EBITDA for the three months ended
March 31, 2019 decreased by
$31 million compared to the same
period in 2018, mainly due to the expiry of the Mississauga contract on December 31, 2018 and lower scheduled payments
from the Poplar Creek finance lease. In 2018, comparable EBITDA
included $29 million of revenues from
the Mississauga contract.
- Australian Gas: Comparable EBITDA for the three months ended
March 31, 2019 was consistent with
the same period in 2018, which was expected due to the nature of
our contracts.
- Wind and Solar: Comparable EBITDA for the three months ended
March 31, 2019 was consistent with
the same period in 2018 as lower overall production was offset by
favorable pricing in Alberta and
reductions in operating and production-based costs.
- Hydro: Comparable EBITDA for the three months ended
March 31, 2019 increased by
$10 million compared to the same
period in 2018, primarily due to a favourable market in
Alberta.
- Energy Marketing: Comparable EBITDA was $29 million higher compared to the same period in
2018 due to strong results from U.S. Western markets. In addition,
Energy Marketing generated $18
million in unrealized mark-to-market gains in the quarter,
which were not included in comparable EBITDA. The cash flow from
these mark-to-market gains is expected to be realized in future
periods.
- Corporate: During the period, corporate cash flow was
positively impacted by a total return swap which resulted in a
$13 million decrease in
administrative costs related to our share-based payment plan.
Consolidated Earnings Review
Net loss attributable to common shareholders during the first
quarter of 2019 was $65 million
compared to net earnings of $65
million for the same period in 2018. Last year's net
earnings included the one-time receipt of $157 million ($115
million after tax) for the termination of the Sundance B and
C PPAs. Excluding the termination payment, this quarter's net loss
was $15 million higher due to lower
comparable EBITDA, higher depreciation, and higher earnings
attributable to non-controlling interests partially offset by lower
interest expense and lower income tax expense.
First Quarter 2018 Financial and Operational
Highlights
In $CAD millions,
unless otherwise stated
|
3 Months
Ended
|
March 31,
2019
|
March 31,
2018
|
Availability (%)
(4)
|
89.4
|
93.9
|
Production
(GWh)
|
8,125
|
7,171
|
Revenue
|
648
|
588
|
Comparable
EBITDA
|
221
|
393
|
Net earnings
attributable to common shareholder
|
(65)
|
65
|
Funds from
operations
|
169
|
318
|
Cash Flow from
Operating Activities
|
82
|
425
|
Free cash
flow
|
95
|
238
|
Net earnings per
common share attributable to common shareholders
|
$(0.23)
|
$0.23
|
Funds from operations
per share
|
$0.59
|
$1.10
|
Free cash flow per
share
|
$0.33
|
$0.83
|
Dividends declared
per common share
|
-
|
$0.04
|
TransAlta is in the process of filing its 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 and EDGAR at www.sec.gov/edgar.shtml.
Conference call
We will hold a conference call and
webcast at 9:00 a.m. MT (11:00 a.m. ET) today, May
14, 2019, to discuss our first quarter 2019 results.
The call will begin with a short address by Dawn Farrell, President and CEO, and Christophe
Dehout, 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 "Sally
Taylor" as moderator.
Dial-in numbers – First Quarter 2019
Results:
Toll-free North American participants call:
1-888-231-8191
Outside of Canada & USA call: 1-647-427-7450
A link to the live webcast will be available on the Investor
Centre section of TransAlta's website at
http://www.transalta.com/investors/events-and-presentations. If you
are unable to participate in the call, the instant replay is
accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code
3795994 followed by the # sign. A transcript of the broadcast will
be posted on TransAlta's website once it becomes available.
Notes
(1)
|
Excluding one-time
positive cash flows due to the Alberta Power Purchase Arrangement
terminations in 2018.
|
(2)
|
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 Funds from Operations and 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.
|
(3)
|
During the first
quarter of 2019, we revised our approach to reporting adjustments
to arrive at comparable EBITDA, mainly to be more comparable with
other companies in the industry. Comparable EBITDA is now adjusted
to exclude the impact of unrealized mark-to-market gains or losses.
Both the current and prior period amounts have been adjusted to
reflect this change.
|
(4)
|
Availability and
production includes all generating assets (generation operations
and finance leases that we operate).
|
About TransAlta Corporation:
TransAlta
owns, operates and develops a diverse fleet of electrical power
generation assets in Canada,
the United States and Australia with a focus on long-term
shareholder value. We provide municipalities, medium and large
industries, businesses and utility customers clean, affordable,
energy efficient, and reliable power. Today, we are one of
Canada's largest producers of wind
power and Alberta's largest
producer of hydro-electric power. For over 100 years, TransAlta has
been a responsible operator and a proud community-member where its
employees work and live. TransAlta aligns its corporate goals with
the UN Sustainable Development Goals and we have been recognized by
CDP (formerly Climate Disclosure Project) as an industry leader on
Climate Change Management. We are also proud to have achieved
the Silver level PAR (Progressive Aboriginal
Relations) designation by the Canadian Council for
Aboriginal Business.
For more information about TransAlta, visit our web site at
transalta.com.
Forward Looking Statements
This news release contains forward-looking statements and
forward-looking information within the meaning of applicable
securities laws (collectively referred to as "forwarding-looking
statements"). All forward-looking statements are based on our
beliefs as well as assumptions based on information available at
the time the assumption was made and on management's experience and
perception of historical trends, current conditions, results and
expected future developments, as well as other factors deemed
appropriate in the circumstances. Forward-looking statements are
not facts, but only predictions and generally can be identified by
the use of statements that include phrases such as "may", "will",
"can", "could", "would", "should", "shall", "believe", "expect",
"estimate", "anticipate", "intend", "plan", "propose", "project",
"forecast", "foresee", "potential", "enable", "continue" and
similar expressions. These statements are not guarantees of our
future performance, events or results and are subject to a number
of significant risks, uncertainties and other important factors
that could cause our actual performance, events or results to be
materially different from those set out in the forward-looking
statements. More particularly, and without limitation, this news
release contains forward-looking statements relating to: the
competitiveness of our business structure and asset
diversification; increased financial capability following the
arrangement with Brookfield;
strategies and plans, including growing the business and continuing
to execute our strategy; Ambassador Giffin intention to
retire as director and Board Chair in 2020; the mothballing of
Sundance Units 3 and 5 until November 1,
2021; the Windcharger battery storage project that is
expected to store energy produced from the Summerview II Wind
Farm; closing of the acquisition of a 49% interest in the
Skookuumchuk Wind Energy Facility, including the commercial
operation date; the investment by Brookfield for a further $400 million in exchangeable securities; the
expected benefits from the strategic partnership with Brookfield; and the expected return of capital
to shareholders. These statements are based on
TransAlta's beliefs and assumptions based on information available
at the time the assumptions were made, including assumptions
pertaining to: the Company's ability to successfully defend against
any existing or potential legal actions or regulatory proceedings,
including by Mangrove Partners; the closing of the second tranche
of the Brookfield investment
occurring and other risks to the Brookfield investment not materializing; no
significant changes to regulatory, securities, credit or market
environments; key assumptions including power prices, Sundance coal capacity factor and hydro/wind
resource remaining unchanged from those previously stated on
December 17, 2018; the anticipated
Alberta capacity market framework
in the future; our ownership of or relationship with TransAlta
Renewables Inc. not materially changing; the Alberta hydro assets achieving their
anticipated future value, cash flows and adjusted EBITDA; the
anticipated benefits and financial results generated on the
coal-to-gas conversions and the Company's other strategies; and
assumptions relating to the completion of the strategic partnership
with and investment by Brookfield
and proposed share buy-backs. The forward-looking statements are
subject to a number of risks and uncertainties that may cause
actual performance, events or results to differ materially from
those contemplated by the forward-looking statements. Some of the
factors that could cause such differences include: the failure of
the second tranche of the Brookfield investment to close; the outcomes
of existing or potential legal actions or regulatory proceedings
not being as anticipated, including those pertaining to the
Brookfield investment; changes in
our relationships with Brookfield
and its affiliated entities or our other shareholders; our
Alberta hydro assets not achieving
their anticipated value, cash flows or adjusted EBITDA; the
Brookfield investment not
resulting in the expected benefits for the Company and its
shareholders; the inability to complete share buy-backs within the
timeline or on the terms anticipated or at all; fluctuations in
demand, market prices and the availability of fuel supplies
required to generate electricity; changes in the current or
anticipated legislative, regulatory and political environments in
the jurisdictions in which we operate; environmental requirements
and changes in, or liabilities under, these requirements; the
failure of the conditions precedent to the second tranche of the
investment to be satisfied; and other risks and uncertainties
contained in the Company's Management Proxy Circular dated
March 26, 2019 and its Annual
Information Form and Management's Discussion and Analysis for the
year ended December 31, 2018, filed
under the Company's profile with the Canadian securities regulators
on www.sedar.com and the U.S. Securities and Exchange
Commission on www.sec.gov. Readers are urged to consider these
factors carefully in evaluating the forward-looking statements and
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. In light of these risks, uncertainties
and assumptions, the forward-looking statements might occur to a
different extent or at a different time than we have described, or
might not occur at all. 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.
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SOURCE TransAlta Corporation