CALGARY, Aug. 9, 2019
/CNW/ -
Year-to-Date Highlights
- The Pioneer Pipeline transported first gas four months ahead of
schedule to TransAlta's generating units at Sundance and Keephills
- On July 4, 2019, TransAlta issued
final notice to proceed ("FNTP") for the coal-to-gas conversion on
Sundance Unit 6 with a target to complete the conversion by the
second half of 2020
- 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
the Company's Centralia Plant, has a
20-year power purchase agreement with an investment grade
counterparty
- Entered into an agreement to acquire 100% of Keephills 3 from Capital Power in exchange for
Genesee 3 enabling full flexibility on coal-to-gas execution
strategy
- Issued the initial tranche of $350
million of unsecured, subordinated debentures to an
affiliate of Brookfield Renewable Partners and its institutional
partners (collectively "Brookfield") as part of the strategic
partnership that recognizes the anticipated future value of
TransAlta's hydro assets, enhances its financial position to
execute its strategy, and accelerates the opportunity to return
capital to shareholders
- Filed a normal course issuer bid ("NCIB") and purchased and
cancelled 2,398,200 common shares at an average price of
$8.57 per common share, for a total
cost of $21 million
- Funds from operations were $155
million, a decrease of $33
million compared with 2018 and in line with lower
expectations from Canadian Gas segment
- Free cash flow (1)(2) was $49
million in line with expectations
- 2019 free cash flow guidance of $270 to $330
million confirmed to the top end of the range
- Todd Stack appointed Chief
Financial Officer and John
Kousinioris appointed Chief Operating Officer
TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA)
(NYSE: TAC) today reported its second quarter and year-to-date 2019
financial results, which reflect solid operational and financial
results for the quarter and were in line with expectations.
"Results for the quarter demonstrate the competitiveness of our
business structure and asset diversification," said Dawn Farrell, President and Chief Executive
Officer. "We are pleased with the improving margins and performance
of our Canadian Coal fleet as we transition away from the Power
Purchase Arrangements and execute on our coal-to-gas plan. As we
look forward, we are seeing improving fundamentals in the
Alberta market and continue work
to competitively position our Alberta coal assets to deliver our coal-to-gas
strategy," commented Mrs. Farrell.
Comparable EBITDA(1)(2)(3) for the three and six
months ended June 30, 2019, was
$215 million and $436 million, a decline of $33 million and $48
million compared to 2018 and in line with guidance
expectations. This decline largely reflects the expected
roll-off of contract cash flows for the Mississauga and Poplar Creek assets within the
Canadian Gas segment. In the three and six months ended
June 30, 2018, comparable EBITDA
included $32 million and $70 million from these contracts.
The Company delivered free cash flow of $49 million and $144
million, respectively, for the three and six months ended
June 30, 2019. Free cash flow decreased by $47 million and $33
million compared to the same periods in 2018, mainly driven
by lower comparable EBITDA from Canadian Gas and planned outage
capital in Canadian Coal in 2019.
The Company's results were in line with expectations as the
roll-off in expected contract cash flows were met with improved
EBITDA margins in the Canadian Coal fleet resulting from lower fuel
and carbon compliance costs and lower operating costs. In addition,
performance from the Energy Marketing segment was stronger than the
same period in 2018. Overall, the Company's cash flows continued to
benefit from higher power prices during the year and asset
diversification within its portfolio.
Based on the current market outlook for the balance of the year,
TransAlta is tracking to achieve the upper end of its free cash
flow guidance.
An Investor Day will be held in Toronto on September
16, 2019 to showcase current and future growth
opportunities, including the coal-to-gas conversions.
Financial and Operating Highlights
- Free cash flow was $144 million,
a decrease of $33 million
- On August 2, 2019, the
Corporation announced that it entered into an agreement to acquire
Capital Power Corporation's 50 per cent ownership interest in the
Keephills 3 facility in exchange
for TransAlta's 50 per cent ownership interest in the Genesee 3
facility. This consolidates TransAlta's control and operation of
the Keephills 3 facility, allowing
the Company greater flexibility to pursue our coal-to-gas
conversions and optimize our fleet decisions. The Company
anticipates that the transaction will be neutral to both comparable
EBITDA and funds from operations. We expect to recognize a net
pre-tax loss in the range of $155
million to $205 million,
mainly resulting from the write-down to fair value of TransAlta's
existing 50 per cent of Keephills
3.
Comparable
EBITDA
(in CAD$
millions)
|
3 Months
Ended
|
6 Months
Ended
|
June 30,
2019
|
|
June 30,
2018
|
|
June 30,
2019
|
|
June 30,
2018
|
Canadian Coal
(1)
|
66
|
|
47
|
|
129
|
|
111(1)
|
U.S. Coal
|
19
|
|
25
|
|
9
|
|
50
|
Canadian
Gas
|
31
|
|
61
|
|
61
|
|
122
|
Australian
Gas
|
31
|
|
31
|
|
61
|
|
62
|
Wind and
Solar
|
47
|
|
49
|
|
116
|
|
117
|
Hydro
|
37
|
|
49
|
|
64
|
|
66
|
Energy
Marketing
|
13
|
|
6
|
|
32
|
|
(4)
|
Corporate
|
(29)
|
|
(20)
|
|
(36)
|
|
(40)
|
Total Comparable
EBITDA(1)
|
215
|
|
248
|
|
436
|
|
484(1)
|
- Canadian Coal: Comparable EBITDA for the three and six months
ended June 30, 2019 was $19 million and $18
million higher, compared to 2018, excluding the one-time
receipt of $157 million for the
termination of the Sundance B and C PPAs in the first quarter of
2018. This largely reflects the combined impact of higher realized
prices, lower variable costs and lower OM&A costs. Comparable
gross margin per MWh for the three and six months ended
June 30, 2019, improved by
$5/MWh and $2/MWh, respectively, compared to the same
periods in 2018.
- U.S. Coal: Comparable EBITDA for the three and six months ended
June 30, 2019, was down $6 million and $41
million, respectively, compared to 2018. During the first
quarter of 2019, the Company incurred cash losses of $25 million on its day ahead hedging position,
due to an isolated and extreme pricing event and unplanned outage
at US Coal. The remaining year-to-date comparable EBITDA variance
of $16 million was related to the
fact that in 2018 TransAlta fulfilled more of its contracted
volumes with lower priced power purchases. In 2019, lower priced
power to service its contracted volumes was not available until
later in the year, requiring additional higher cost production from
the plant to support TransAlta contracts.
- Canadian Gas: Comparable EBITDA for the three and six months
ended June 30, 2019 decreased by
$30 million and $61 million, respectively, compared to the same
periods 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 the three and six months
ended June 30, 2018, comparable
EBITDA included $32 million and
$70 million of EBITDA, respectively,
from the Mississauga contract and
Poplar Creek contract.
- Australian Gas: Comparable EBITDA for the three and six months
ended June 30, 2019 was consistent
compared to 2018, which was expected due to the nature of these
contracts.
- Wind and Solar: Comparable EBITDA for the three and six months
ended June 30, 2019 was consistent
with the same periods in 2018, as lower overall production was
mostly offset by insurance proceeds from a tower fire at
Summerview. OM&A costs were up slightly due to increased
contractor costs.
- Hydro: Comparable EBITDA for the three and six months ended
June 30, 2019 decreased by
$12 million and $2 million, respectively, compared to the same
periods in 2018, mainly due to strong results in 2018 and decreased
opportunities for ancillary services in 2019.
- Energy Marketing: For the three and six months ended
June 30, 2019, comparable EBITDA was
higher by $7 million and $36 million, respectively, compared to the same
periods in 2018 due to strong results across all markets with
particularly strong performance from the US Western markets. In
addition, for the three and six months ended June 30, 2019, Energy Marketing generated
$4 million and $22 million, respectively, in unrealized
mark-to-market gains, which were not included in comparable EBITDA.
The cash flow from the 2019 unrealized value is expected to be
realized in future periods.
- Corporate: During the quarter, corporate costs were negatively
impacted by the total return swap related to the Company's
share-based payment plan as well as higher legal fees. For the
year-to-date period, corporate costs were positively impacted by
the realized net gain of $9 million
from the total return swap on our share-based payment plans,
partially offset by increased legal fees.
Consolidated Earnings Review
Net earnings attributable to common shareholders during the
second quarter of 2019 was nil compared to a net loss of
$105 million last year, mainly due to
the impact of the Alberta tax rate
reduction, improved margins at Canadian Coal and strong performance
in the Energy Marketing segment. Net loss attributable to common
shareholders for the six months ended June 30, 2019 was
$65 million compared to a net loss of
$40 million for the same period in
2018. The net loss for the six months ended June 30, 2018 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, the
year-to-date earnings improved by $90
million, due to the impact of the Alberta tax rate reduction, strong
Alberta pricing, improved margins
at Canadian Coal, lower year-to-date OM&A costs and lower
interest expense, which was partially offset by a loss on sale of
assets.
Total sustaining capital expenditures of $86 million were $32
million higher compared to 2018 primarily due to higher
planned major maintenance in the Canadian Coal segment. There were
no planned maintenance outages on operated power plants in the same
periods in 2018. Total capital expenditures of $89 million, which includes productivity capital
expenditures, were $29 million higher
than 2018 and in-line with the Company's guidance for the year.
Second Quarter and Year-to-Date 2019 Financial and
Operational Highlights
In $CAD
millions, unless otherwise stated
|
3 Months
Ended
|
6 Months
Ended
|
June 30,
2019
|
|
June 30,
2018
|
|
June 30,
2019
|
|
June 30,
2018
|
Adjusted availability
(%)(2)(4)
|
83.8
|
|
85.8
|
|
86.7
|
|
90.1
|
Production (GWh)
(4)
|
5,235
|
|
5,199
|
|
13,360
|
|
12,370
|
Revenue
|
497
|
|
446
|
|
1,145
|
|
1,034
|
Comparable EBITDA
(2)
|
215
|
|
248
|
|
436
|
|
641
|
Net earnings (loss)
attributable to common shareholders
|
—
|
|
(105)
|
|
(65)
|
|
(40)
|
FFO
(2)
|
155
|
|
188
|
|
324
|
|
506
|
Cash Flow from
Operating Activities
|
258
|
|
104
|
|
340
|
|
529
|
FCF
(2)
|
49
|
|
96
|
|
144
|
|
334
|
|
|
|
|
|
Net earnings (loss)
per common share
|
$
|
—
|
|
$
|
(0.36)
|
|
$
|
(0.23)
|
|
$
|
(0.14)
|
FFO per share
(2)
|
$
|
0.55
|
|
$
|
0.65
|
|
$
|
1.14
|
|
$
|
1.76
|
FCF per share
(2)
|
$
|
0.17
|
|
$
|
0.33
|
|
$
|
0.51
|
|
$
|
1.16
|
Dividends declared
per common share
|
$
|
0.04
|
|
$
|
0.04
|
|
$
|
0.04
|
|
$
|
0.08
|
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 August 9,
2019 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
TransAlta will hold a conference call
and webcast at 9:00 a.m. MT
(11:00 a.m. ET) today, August 9,
2019, to discuss our second quarter 2019 results. The call
will begin with a short address by Dawn
Farrell, President and CEO, and Todd
Stack, 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 "Chiara Valentini" as moderator.
Dial-in numbers - Second 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
5281588 followed by the # sign. A transcript of the broadcast will
be posted on TransAlta's website once it becomes available.
Notes
(1)
|
Excluding the
one-time receipt of $157 million in compensation received from the
Balancing Pool for the early termination of the Sundance B and C
Power Purchase Arrangements received in the first
quarter of 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 Discussion of Consolidated Results section 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 include 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
coal-to-gas conversion for Sundance Unit 6; the Pioneer Pipeline
driving lower fuel and carbon costs for the Canadian Coal fleet and
improve EBITDA margins; ability to achieve the upper end of our FCF
guidance; throughput of approximately 130 MMcf/day of natural gas
flowing through the Pioneer Pipeline on November 1, 2019; improving fundamentals in the
Alberta market; ability to
competitively position the Alberta
coal assets to deliver on the coal-to-gas strategy; the acquisition
of the remaining 50% interest in Keephills 3 from Capital Power; purchasing a
49% interest in the Skookumchuck Wind Energy Facility upon
commercial operation and the timing thereof; the closing of the
second tranche of $400 million from
Brookfield and the anticipated
benefits thereof; and the anticipated future value of
TransAlta's hydro assets. 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;
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
pertaining to power prices remaining unchanged; 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;
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