Fourth Quarter 2019 Highlights
- Generated $121 million or
$0.43 per share of free cash flow
("FCF") in the quarter compared to $98
million or $0.34 per share of
FCF for the same period in 2018, a 26 per cent increase;
- Advanced our Clean Energy Investment Plan by commissioning 119
MW of new wind generation and acquiring two gas turbines for the
Sundance 5 repowered combined
cycle unit project;
- Entered into an agreement to construct and own a new 40 MW
cogeneration facility; and
- Returned $41 million of capital
to shareholders in the fourth quarter through the repurchase and
cancellation of 4,583,100 common shares at an average price
of $8.95 per share through our normal
course issuer bid ("NCIB") program.
Full Year 2019 Highlights
- Achieved exceptional financial results with FCF of $379 million or $1.34 per share for the full year which was five
per cent above 2018 on a per share basis, adjusting for
one-time PPA Termination Payments in both years;
- Received $56 million, plus GST
and interest on our successful arbitration related to the Sundance
B and C PPA terminations;
- Generated total FCF of $435
million or $1.54 per share for
full year 2019;
- Achieved adjusted availability of 90.0 per cent in the
year;
- Announced transformative strategic investment by Brookfield
Renewable Partners with receipt of the first $350 million tranche of the $750 million investment advancing our coal-to-gas
conversion strategy and accelerating our return of capital to
shareholders through our NCIB;
- Announced our Clean Energy Investment Plan and timing for
our conversions and repowerings;
- Entered into an agreement to purchase a 49 per cent interest in
the Skookumchuck wind
project;
- Transported first gas through the Pioneer pipeline four months
ahead of schedule and commenced firm throughput in November;
- Returned $68 million of capital
to shareholders with the repurchase and cancellation of 7,716,300
common shares at an average price of $8.80 per share through our NCIB program;
- Reduced our carbon emissions by approximately 200,000 tonnes
compared to 2018, representing a one per cent reduction;
- Safety results with a Total Incident Frequency ("TIF") rate of
1.12, representing over a 40 per cent reduction to 2018; and
- In January of 2020, increased the common share dividend by 6.25
per cent.
Other Highlights
- Announced 2020 Outlook in January
-
- Comparable EBITDA range of $925
million to $1,000 million, up
four per cent from 2019 at the mid-point;
- FCF range of $325 million to
$375 million; and
- Sustaining capital range of $170
to $200 million.
CALGARY, March 4, 2020 /PRNewswire/ - TransAlta
Corporation ("TransAlta" or the "Company") (TSX: TA) (NYSE: TAC)
today reported its fourth quarter and full year 2019 financial
results, with comparable EBITDA(1,2) of $928 million for the full year. Funds from
operations ("FFO")(1,2) decreased nine per cent to
$701 million for the full year
compared to $770 million in
2018. FCF(1,2) for the full year was $379 million, representing a three per cent
increase over 2018. These financial results exclude the
one-time payments in both periods for the early termination of the
Sundance B and C Power Purchase Arrangements (the "PPA Termination
Payments"). The strong financial results for the year highlight the
exceptional performance of the business when considering the
expected free cash flow decline as a result of the expiry of the
Mississauga contract and lower
scheduled payments on the Poplar Creek contract. With the inclusion
of the PPA Termination Payments, we earned $435 million of FCF or $1.54 per share.
Comparable EBITDA decreased by $177
million compared to 2018. After adjusting for the PPA
Termination Payments in 2019 and 2018, comparable EBITDA decreased
by $76 million for the year ended
December 31, 2019, compared to 2018.
This decrease was expected as a result of the expiry of the
Mississauga contract and lower
scheduled payments on the Poplar Creek contract. Strong performance
at the Canadian Coal and Energy Marketing segments as well as lower
Corporate costs have significantly offset this expected decrease.
Comparable EBITDA for the year ended December 31, 2019 was negatively impacted by the
unplanned outage at US Coal during the first quarter of 2019.
OM&A expense for the year ended December 31, 2019 decreased by $40 million
compared to 2018. This decline in OM&A is largely due to lower
costs in our Canadian Coal and Corporate segments and ongoing
streamlining of our workforce. Lower salary, contractor and
materials expenses were partially offset by higher legal fees.
FCF increased by $12 million in 2019 compared to 2018,
primarily as a result of stronger year-over-year cash flow from
operating activities and lower sustaining and productivity capital
expenditures after adjusting for the PPA Termination
Payments.
"Our performance for the year was very strong from a financial,
operational and strategic perspective," said Dawn Farrell, President and Chief Executive
Officer. "We successfully navigated key milestones throughout the
year and entered into a transformational transaction that benefited
all shareholders as we were able to accelerate our strategy and
return capital to shareholders. All of the hard work by the
TransAlta employees throughout the year has allowed us to progress
on our main goal which is to be 100 per cent clean electricity by
2025."
2020 Objectives
In addition to meeting the financial targets defined in the
outlook, everything we do in 2020 will move us closer to 100 per
cent clean power by 2025. Our teams are focused on the
following:
- Delivering a full year of cash flow from Big Level and
Antrim, which reached commercial
operation in December 2019;
- Significantly progressing the construction of the SemCAMS
cogeneration project and Windrise wind facilities for commercial
operation in 2021;
- Completing the Sundance Unit 6 gas conversion in 2020;
- Advancing the Sundance Unit 5 repowering project for commercial
operation in 2023;
- Preparing Keephills Units 2 and 3 for gas conversions in
2021;
- Repaying the $400 million bond
maturing in November 2020;
- Continuing the share buyback program in an additional amount up
to $80 million in 2020;
- Achieving commercial operation for the WindCharger 10 MW
battery project in 2020; and
- Progressing on our Environment, Social and Governance ("ESG")
targets which are outlined below.
ESG Targets
- A continued focus on safe operations and environmentally
sustainable practices, including by minimizing environmental
incidents and undertaking significant reclamation work;
- By 2030, achieving a 95% reduction of SO2 emissions
and a 50% reduction of NOx emissions over 2005 levels from
TransAlta's coal facilities, and a Company-wide reduction of
greenhouse gases emissions of 60% below 2015 levels;
- Undertaking initiatives that will enhance the environmental
performance of the Company, including converting coal facilities to
gas and developing new renewable projects that support customer
sustainability goals to achieve both long-term power price
affordability and carbon reductions;
- Supporting equal access to all levels of education for youth
and Indigenous peoples through financial assistance and employment
opportunities;
- Enhancing our commitment to workplace diversity and adopting a
target of 50 per cent female membership on the Board by 2030 and
achieving gender diversity of at least 40 per cent of female
employment for all employees by 2030; and
- Maintaining our commitment to leading ESG disclosure.
Fourth Quarter Highlights
- Entered into an agreement with Kineticor Holdings Limited #2 to
indirectly acquire two 230 MW Siemens F class gas turbines and
related equipment for $84 million,
which will be redeployed to our Sundance site as part of the strategy to
repower Sundance Unit 5 to a highly efficient combined cycle unit.
The Company is assuming long-term power purchase agreements for
capacity plus energy, including the pass-through of GHG costs,
starting in late 2023 with Shell Energy North America (Canada).
- TransAlta and SemCAMS announced that they entered into
definitive agreements to develop, construct and operate a
cogeneration facility at the Kaybob South No. 3 sour gas processing
plant. The Kaybob facility is strategically located in the Western
Canadian Sedimentary Basin and accepts natural gas production out
of the Montney and Duvernay formations. TransAlta will construct
the cogeneration plant which is expected to be jointly owned,
operated and maintained with SemCAMS. The capital cost of the new
cogeneration facility is expected to be approximately $105 million to $115
million and the project is expected to deliver approximately
$18 million in annual EBITDA.
Important Subsequent Events
- On January 16, 2020, we announced
our financial outlook and ESG targets for 2020, highlighted by the
addition of recently commissioned projects and productivity
improvements, which are expected to drive strong comparable EBITDA
and FCF performance in 2020. The Company also announced that the
Board of Directors determined that following the retirement of
Ambassador Gordon D. Giffin at the
upcoming annual shareholder meeting, John
P. Dielwart will be appointed Chair of the Board, pending
his re-election to the Board. Lastly, TransAlta declared an
increase in the annualized dividend to $0.17 per common share, representing a 6.25 per
cent increase.
Fourth Quarter and
Full Year Segmented
|
3 Months
Ended
|
Year
Ended
|
Review Comparable
EBITDA (in CAD$ millions)
|
Dec. 31,
2019
|
Dec. 31,
2018
|
Dec. 31,
2019
|
Dec. 31,
2018
|
Canadian
Coal
|
55
|
48
|
263
|
232
|
U.S. Coal
|
29
|
24
|
73
|
91
|
Canadian
Gas
|
29
|
74
|
120
|
259
|
Australian
Gas
|
28
|
32
|
118
|
124
|
Wind and
Solar
|
80
|
82
|
231
|
233
|
Hydro
|
18
|
17
|
110
|
109
|
Energy
Marketing
|
26
|
16
|
89
|
43
|
Corporate
|
(22)
|
(28)
|
(76)
|
(87)
|
Total Comparable
EBITDA(2)
|
243
|
265
|
928
|
1,004
|
- Canadian Coal: Excluding the PPA Termination Payments,
comparable EBITDA for the year ended Dec.
31, 2019, increased $31 million compared to 2018. This
largely reflects lower fuel, carbon compliance, and purchased
power costs, as well as lower OM&A costs.
- U.S. Coal: Comparable EBITDA decreased by $18 million compared to 2018, primarily due to 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.
- Canadian Gas: Comparable EBITDA for 2019 decreased by
$139 million compared to 2018, mainly
due to the Mississauga contract
ending Dec. 31, 2018 and lower
scheduled payments from the Poplar Creek finance lease. Comparable
EBITDA for the year ended December 31,
2019, includes nil (2018 - $105
million) and $20 million (2018 - $57 million) from
the Mississauga and Poplar Creek
contracts, respectively. Additionally, comparable EBITDA benefited
from lower OM&A compared to the prior year as a result of
reduced overhead and operating costs.
- Australian Gas: Comparable EBITDA for the year ended
Dec. 31, 2019, decreased by
$6 million compared to 2018, due to
the weakening of the Australian dollar and ongoing legal costs
associated with our disputes with FMG .
- Wind and Solar: Comparable EBITDA for 2019 was consistent
with 2018. Higher insurance proceeds from tower fires at Wyoming
Wind and Summerview were partially offset by a reduction in
revenues due to the scheduled expiration of production-based
incentives for three wind facilities.
- Hydro: Comparable EBITDA for 2019 increased by
$1 million compared to 2018, as we
were able to reduce OM&A due to cost- saving initiatives, while
absorbing the $1.5 million Brookfield
Hydro Fee.
- Energy Marketing: Comparable EBITDA for 2019 increased by
$46 million compared to 2018 results,
due to strong results from all Marketing segments, with
particularly strong performance from US Western and Eastern markets
due to continued high levels of volatility. OM&A increased due
to higher incentives related to stronger performance. The Energy
Marketing team was able to capitalize on short-term arbitrage
opportunities in the markets in which we trade without materially
changing the risk profile of the business unit.
- Corporate: Our Corporate overhead costs in 2019 were
$76 million, a decrease of
$11 million compared to $87 million in 2018, primarily due to
cost-efficiency initiatives and payments on lease obligations. In
addition, we realized a net gain of $13
million from the total return swap on our share-based
payment plans, which was mostly offset by higher legal fees. A
portion of the settlement cost of our share-based payment plans is
fixed by entering into total return swaps, which are cash settled
every quarter. Corporate cash flow also benefited from lower
sustaining and productivity capital spend due to higher spend in
2018 on automation and new information technology solutions
implemented in prior years, which helped contribute to the cost
efficiencies realized in 2019.
Consolidated Financial Highlights
Net earnings
attributable to common shareholders for the year ended December 31, 2019, were $52 million, compared to a loss of $248 million in the prior year. Increased
earnings were partially driven by the Keephills 3 and Genesee 3 swap with Capital
Power Corporation that closed in the fourth quarter of 2019, where
we recognized a gain on termination of the coal rights contract of
$88 million and a gain on the sale of
Genesee 3 of $77 million, in addition to the $56 million PPA Termination Payments received
during the third quarter of 2019. Excluding the PPA Termination
Payments and impairment charges in both years, as well as the gains
related to Keephills 3 and Genesee
3 in 2019, we have a net loss of $20 million in 2019 compared
to a net loss of $174 million in 2018. Stronger earnings are
attributable to stronger performance at Canadian Coal and Energy
Marketing, strong Alberta pricing,
the Alberta tax rate reduction,
lower OM&A costs and lower interest expense, partially offset
by other losses on sale of property, plant and equipment.
Total sustaining capital expenditures of $141 million were $9
million lower compared to 2018 primarily due to lower
planned major maintenance in our coal segments. Total capital
expenditures of $150 million, which
includes productivity capital expenditures, was in line with our
expectations for the year.
Fourth Quarter and Year Ended 2019 Highlights
In $CAD
millions, unless otherwise stated
|
3 Months
Ended
|
Year
Ended
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
|
Dec. 31,
2019
|
|
Dec. 31,
2018
|
Adjusted availability
(%)(4,5)
|
|
91.6%
|
|
91.5%
|
|
90.0%
|
|
91.3%
|
Production (GWh)
(5)
|
|
8,153
|
|
8,276
|
|
29,071
|
|
28,409
|
Revenues
|
|
609
|
|
622
|
|
2,347
|
|
2,249
|
Fuel, carbon
compliance and purchased power
|
|
286
|
|
336
|
|
1,086
|
|
1,100
|
Operations,
maintenance and administration
|
|
127
|
|
139
|
|
475
|
|
515
|
Net earnings (loss)
attributable to common
shareholders
|
|
66
|
|
(122)
|
|
52
|
|
(248)
|
Cash flow from
operating activities
|
|
181
|
|
132
|
|
849
|
|
820
|
Comparable
EBITDA(1,2,3)
|
|
243
|
|
265
|
|
984
|
|
1,161
|
FFO(1,3)
|
|
189
|
|
217
|
|
757
|
|
927
|
FCF(1,3)
|
|
121
|
|
98
|
|
435
|
|
524
|
Net earnings (loss)
per share attributable to common
|
$
|
0.24
|
$
|
(0.43)
|
$
|
0.18
|
$
|
(0.86)
|
shareholders, basic
and diluted
|
FFO per
share(1,3)
|
$
|
0.67
|
$
|
0.76
|
$
|
2.67
|
$
|
3.23
|
FCF per
share(1,3)
|
$
|
0.43
|
$
|
0.34
|
$
|
1.54
|
$
|
1.83
|
Dividends declared
per common share
|
$
|
0.04
|
$
|
0.08
|
$
|
0.12
|
$
|
0.20
|
Dividends declared
per preferred share(6)
|
$
|
0.26
|
$
|
0.52
|
$
|
0.78
|
$
|
1.29
|
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 ("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.
TransAlta will also be filing its Form 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.
Notes
(1)
These items are not defined under
IFRS. Presenting these items from period to period provides
management and investors with the ability to evaluate earnings
trends more readily in comparison with prior periods' results.
Refer to the Comparable EBITDA, 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.
|
(2)
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.
The current and prior period amounts have been adjusted to reflect
this change.
|
(3)
Includes the PPA Termination Payment
of $157 million received from the Balancing Pool for the early
termination of Sundance B and C PPAs in the first quarter of 2018
and $56 million received following the successful outcome of the
dispute with the Balancing Pool in the third quarter of
2019.
|
(4)
Availability and production includes
all generating assets under generation operations that we operate
and finance leases and excludes hydro assets and equity
investments. Production includes all generating assets,
irrespective of investment vehicle and fuel type.
|
(5)
Adjusted for economic dispatching at
U.S. Coal.
|
(6)
Weighted average of the Series A, B,
C, E, and G preferred share dividends declared. Dividends declared
vary year over year due to timing of dividend
declarations.
|
Conference call
TransAlta will hold a conference call
and webcast at 8:00 a.m. MST
(10:00 a.m. EST) today, March 4, 2020, to discuss our fourth quarter and
full year 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.
Dial-in numbers - Fourth Quarter and Full Year
2019 Results:
Toll-free North American participants call:
1-888-231-8191
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
6481289 followed by the # sign. A transcript of the broadcast will
be posted on TransAlta's website once it becomes available.
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 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 has been recognized by CDP
(formerly Climate Disclosure Project) as an industry leader on
Climate Change Management. TransAlta is 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.
Cautionary Statement Regarding Forward Looking
Information
This news release contains forward looking statements,
including statements regarding the business and anticipated
financial performance of the Company that are based on the
Company's current expectations, estimates, projections and
assumptions in light of its experience and its perception of
historical trends. 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: our 2020 outlook, including EBITDA, FCF
and sustaining capital; our 2020 objectives, including
significantly progressing the construction of the Kaybob
cogeneration project and Windrise wind facilities to achieve
commercial operation in 2021, completing the Sundance Unit 6 gas
conversion in 2020, advancing the Sundance Unit 5 repowering
project and achieving commercial operation in 2023, converting
Keephills Units 2 and 3 to gas in 2021, repaying the $400 million bond maturity, continuing the share
buyback program in an additional amount of up to $80 million, achieving commercial operation
for the WindCharger battery project; achieving a 95% reduction
of SO2 emissions and a 50% reduction of NOx
emissions over 2005 levels from TransAlta's coal facilities, and a
Company-wide reduction of greenhouse gases emissions of 60% below
2015 levels; enhancing the environmental performance of the
Company; achieving 50 per cent female membership on the Board by
2030 and achieving gender diversity of at least 40 per cent of
female employment for all employees by 2030; the construction and
expected capital cost of the new Kaybob cogeneration facility and
this project's expected annual EBITDA; and the appointment of
John P. Dielwart as Chair of the
Board. The forward-looking statements contained in this news
release are based on current expectations, estimates, projections
and assumptions, having regard to the Corporation's experience and
its perception of historical trends, and includes, but is not
limited to, expectations, estimates, projections and assumptions
relating to: foreign exchange rates; global economic growth;
electricity load growth; electricity prices and carbon tax;
interest rates; sufficiency of our budgeted capital expenditures in
carrying out our business plan; applicable laws, regulations and
government policies; the availability and cost of labour, services
and infrastructure; and the satisfaction by third parties of their
obligations, including under power purchase agreements. These
forward-looking statements are not historical facts but are based
on TransAlta's belief and assumptions based on information
available at the time the assumptions were made, including, but not
limited to, the current political and regulatory environment, the
price of power in Alberta and the
condition of the financial markets. 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, catastrophes and public health
crises; disruptions in the source of thermal fuels, water, solar or
wind required to operate our facilities, including the necessary
natural gas supply to support the conversion of the coal units;
energy trading risks; failure to obtain necessary regulatory
approvals in a timely fashion, or at all; 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;
disputes or claims involving TransAlta or TransAlta Renewables,
including those pertaining to the Brookfield investment and the commissioning of
South Hedland; 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, 2019. 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 purpose of the financial outlooks
contained in this news release are to give the reader information
about management's current expectations and plans and readers are
cautioned that such information may not be appropriate for other
purposes and is given 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.
View original
content:http://www.prnewswire.com/news-releases/transalta-reports-fourth-quarter-and-full-year-2019-results-301016267.html
SOURCE TransAlta Corporation