CALGARY, AB, July 31, 2020 /PRNewswire/ -
Second Quarter 2020 Highlights
- Comparable EBITDA of $217 million
in line with 2019
- Free cash flow ("FCF") of $91
million or $0.33 per share, a
94% increase on a per share basis compared to $49 million or $0.17 per share of FCF for the same period in
2019
- Adjusted availability was 90.7% compared to 83.8% for the same
period in 2019
- Completed the acquisition of a 29 MW contracted cogeneration
facility located in Michigan
("Ada") for a purchase price of approximately US$27 million
- Entered into a sale agreement for the sale of the Pioneer
Pipeline to Nova Gas Transmission Ltd. ("NGTL") for a net purchase
price of approximately $128 million
(the "Pioneer Transaction")
Year-to-date 2020 Financial and Operating Highlights
- FCF of $200 million or
$0.72 per share compared to
$144 million or $0.51 per share, a 41% increase to 2019 on a
per
share basis
- Returned $21 million of capital
to shareholders in the first six months through the repurchase and
cancellation of 2,849,400 common shares at an average price of
$7.51 per share through our normal
course issuer bid ("NCIB") program
- Received regulatory approval from the Alberta Utilities
Commission ("AUC") for the repowering of Sundance Unit 5 and
Keephills Unit 1 into combined cycle units
- Continued construction on the Windrise Wind Project in April
and expect to fully commission the project in the second half of
2021
- Completed the second phase of our back-to-office business
continuity plan in response to the COVID-19 pandemic, which ensured
continued essential services to our customers and communities,
while safeguarding the health and safety of
our employees
Subsequent Events
- Provided notice to retire currently mothballed coal-fired
Sundance Unit 3 effective July 31,
2020
- Issued full notice to proceed on Keephills Unit 3 for
coal-to-gas boiler conversions to be completed in 2021
- Mr. Robert Flexon to resign from
the Board effective August 1, 2020
due to his new role as Chair of PG&E Corporation
TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA)
(NYSE: TAC) today reported its second quarter 2020 financial
results, with comparable EBITDA(1) of $217 million compared to $215 million in the same period of 2019. EBITDA
for the six months ended June, 30, 2020, was $437 million, in line with the same period last
year. Funds from operations ("FFO")(1,2) for the three
and six months ended June 30, 2020,
increased approximately 3% and 2% to $159
million for the quarter compared to $155 million in 2019 and $331 million year-to-date as compared to
$324 million in 2019.
FCF(1), one of the Company's key financial metrics,
totaled $91 million and $200 million for the three and six months ended
June 30, 2020, an increase of $42
million and $56 million
respectively. Year-to-date, the Company has generated FCF of
$0.72 per share, a 41% increase
compared to 2019.
"Second quarter results are in line with our
expectations and continue to show strong EBITDA and free cash flow
generation from our diversified fleet. With the support of our
back-to-office protocols, we continue to deliver the essential
power to meet the demands of our communities and our customers,"
said Dawn Farrell, President and
Chief Executive Officer. "These results demonstrate the
strength of our operations, hedging and energy marketing
capabilities, as well as our people."
"We also expanded our cogeneration fleet with the acquisition of
our Ada cogeneration facility into our portfolio and welcomed
Consumers Energy and Amway as new customers. We are excited to mark
our first cogeneration facility in the
United States and we look forward to building on this U.S.
toehold as we further progress our on-site generation strategy into
the region."
"I'd like to thank all of our front-line employees, contractors
and their families whose exceptional efforts keep up the strong
operational performance of the Company in the face of these
challenging times," added Mrs. Farrell.
Comparable EBITDA for the three and six months ended
June 30, 2020, were consistent with
the same periods in 2019. This was driven by full period operations
of the Big Level and Antrim
facilities in the Company's Wind and Solar segment, superior
performance from the Energy Marketing segment, favourable gross
margins from the U.S. Coal segment, and favourable gains resulting
from equity hedge settlements and lower expenses in the Corporate
segment. This favourable performance was offset by anticipated
weaker margins in the Canadian Coal, Hydro and North American Gas
segments resulting from weaker prices in both the Alberta market and the Ontario power markets due to lower market
demand and the impact of COVID-19. The Canadian Coal comparable
EBITDA in the quarter and year-to-date also declined due to
recognition of a $7 million provision
adjustment for out-of-period line losses relating to the Alberta
Electric System Operator ("AESO") Line Loss
Rule proceeding.
Operations, maintenance and administration ("OM&A") expense
for the three and six months ended June 30, 2020, decreased by
$18 million and increased by $6 million, respectively,
compared to the same periods in 2019. Variability caused by the
total return swap resulted in a decrease of $7 million and an increase of $17 million for the three month and six months
ended June 30, 2020, respectively. Excluding the impact of the
total return swap, OM&A decreased by $11
million in both periods, due to tighter cost controls, lower
labour costs across multiple segments and lower legal fees.
FCF totaled $91 million and
$200 million for the three and six
months ended June 30, 2020,
respectively. FCF for the three and six months ended June 30, 2020 increased by $42 million and $56
million, respectively, compared to the same periods in 2019.
The increase was driven primarily by strong segmented cash flows,
realized foreign exchange gains, lower sustaining capital
expenditures and lower distributions paid to subsidiaries'
non-controlling interests. Segmented cash flows generated by the
business are $47 million and
$48 million dollars higher for the
second quarter and year-to-date periods in 2020, respectively,
compared with 2019, due to higher performance in our U.S. Coal,
North American Gas, Wind and Solar and Energy Marketing segments
that more than offset lower results in the Canadian Coal and Hydro
segments.
Clean Energy Investment Program
Coal-to-Gas
TransAlta's growth construction
programs are underway and progressing forward under its business
continuity health measures. The Company is on-track to complete the
conversion of Sundance Unit 6 during the second half of 2020. The
Company continues to advance conversion of its Keephills Unit 2 and
Unit 3 planned for 2021 and has issued full notice to proceed for
both units. We are on-track to issue full notice to proceed in 2021
for Sundance Unit 5, with an expected commercial operation date in
2023.
In furtherance of the coal-to-gas fuel supply needs, TransAlta
entered into long-term natural gas delivery transportation
agreements with NGTL, bringing the cumulative total of new and
existing pipeline transportation service to the Company's
generating facilities up to 400 terajoules ("TJ") per day by 2023.
TransAlta's current commitments, including its 139 TJ/day supply
arrangement with Tidewater Midstream and Infrastructure Ltd., will
remain in place until the closing of the Pioneer Transaction. The
Pioneer Transaction is subject to customary regulatory approvals,
which are currently expected in the second half of 2021.
Sundance 3
On
July 22, 2020, the Company announced
that it gave notice to the AESO of its intention to retire the
currently mothballed coal-fired Sundance Unit 3 effective
July 31, 2020. The retirement
decision was largely driven by TransAlta's assessment of future
market conditions, the age and condition of the unit and the
ability to supply energy and capacity from our generation portfolio
in Alberta. This decision advances
our transition to 100 per cent clean electricity by 2025. An asset
impairment of approximately $69
million ($52 million
after-tax) will be recorded in the third quarter of 2020.
Windcharger Battery Storage
Construction for
Windcharger, Alberta's first
battery storage project, is in its final stages and will achieve
its commercial operations date in August
2020.
Windrise Wind
Construction activities on the
Windrise Wind Project continues to advance with all appropriate
procedures in place to protect the construction team during the
COVID-19 pandemic. The construction schedule has been modified to
reflect a COVID-19-related delay in the delivery of the wind
turbine components and the Company plans to complete construction
and commissioning in second half of 2021.
Kaybob Cogeneration
The Company continues to
advance the Kaybob Cogeneration Project with commercial operations
scheduled to commence in the second half of 2021; however, the
Company continues to monitor COVID-19 and market conditions to
determine if any adjustments to plans are necessary. During the
first half of 2020, TransAlta executed agreements for the purchase
of the reciprocating engine generator, generator step up
transformers, electrical building and switchgear. The project
secured a municipal development permit in March 2020 and Alberta Energy Regulator permit
approval in early April 2020.
Board of Director Changes
On July 30, 2020, Mr. Robert
Flexon delivered his resignation from the Board, which is to
be effective August 1, 2020. Mr.
Flexon recently assumed the role of Chair of the Board of Directors
of PG&E Corporation ("PG&E") and is resigning from the
Board due only to the potential for perceived conflicts of
interests between PG&E and the Company. Mr. Flexon has provided
valuable insight during his time on the Board, which included
acting as the inaugural chair of the Investment Performance
Committee of the Board.
COVID-19 Response Update
The Company formally
implemented its business continuity plan on March 9, 2020, which focused on ensuring that:
(i) employees that could work remotely did so; and (ii) employees
that operate and maintain our facilities, and who were not able to
work remotely, were able to work safely and in a manner that
ensured they remained healthy. During the second quarter of 2020,
the Company began a staggered approach to bring employees that were
working remotely back to the office. All of TransAlta's offices and
sites follow strict health screening and social distancing
protocols with personal protective equipment readily available.
Further, TransAlta maintains travel bans aligned to local
jurisdictional guidance, enhanced cleaning procedures, revised work
schedules, contingent work teams and the reorganization of
processes and procedures to limit contact with other employees and
contractors on-site.
While the Company's results have been impacted by price and
demand as a result of COVID-19, all of the Company's facilities
remain fully operational and capable of meeting its customers'
needs. The Company has modified its operating procedures and
implemented safety protocols that are allowing all office employees
to now return to sites across the fleet by end of July. The
Company continues to work and serve all of its customers and
counterparties under the terms of the relevant contracts. TransAlta
has not experienced interruptions to service requirements.
Electricity and steam supply continue to remain a critical service
requirement to all of the Company's customers and have been deemed
an essential service in all of the jurisdictions in which TransAlta
operates.
The Company continues to maintain a strong financial position in
part due to its long-term contracts and hedged positions. The
Company is scheduled to receive $400
million from the second tranche of financing from the
Brookfield investment in the
fourth quarter of 2020 and has access to additional capital through
potential project financing of existing assets that are currently
unencumbered. The Company currently has access to $1.6 billion in liquidity including $257 million in cash and has sufficient liquidity
to meet the upcoming debt maturity due November 2020 and growth construction
requirements. The next major debt repayment is scheduled for
November 2022.
In addition, the Company has approximately 75 per cent of its
Alberta thermal baseload merchant
generation hedged at approximately $53 per MWh for the
remainder of 2020.
Second Quarter
2020 Segmented Review
Comparable EBITDA (in CAD$ millions)
|
3 Months
Ended
|
6 Months
Ended
|
June 30,
2020
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
Canadian
Coal
|
30
|
66
|
74
|
129
|
U.S. Coal
|
27
|
19
|
60
|
9
|
North American
Gas
|
27
|
31
|
56
|
61
|
Australian
Gas
|
29
|
31
|
59
|
61
|
Wind and
Solar
|
61
|
47
|
135
|
116
|
Hydro
|
29
|
37
|
55
|
64
|
Energy
Marketing
|
28
|
13
|
41
|
32
|
Corporate
|
(14)
|
(29)
|
(43)
|
(36)
|
Total Comparable
EBITDA(2)
|
217
|
215
|
437
|
436
|
- Canadian Coal: Comparable EBITDA for the three and six months
ended June 30, 2020, decreased
$36 million and $55 million, respectively, compared to the same
periods in 2019. This largely reflects the weaker power demand
conditions driving lower Alberta
wholesale power prices and resulting in lower merchant production
as well as the increase to the transmission line loss
provision.
- U.S. Coal: Comparable EBITDA returned to normalized levels in
2020 and for the three months ended June 30,
2020, increased by $8 million
compared to the same period in 2019, primarily due to low priced
power purchases and favourable foreign exchange rates. For the six
months ended June 30, 2020,
comparable EBITDA increased by $51
million compared to the same period in 2019, primarily due
to the impacts of an isolated and extreme pricing event in
March 2019 during which Centralia was unable to commit one of its
units to physical production for day-ahead supply due to an
unplanned forced outage repair. In addition, comparable EBITDA in
the first half of 2020 benefited from low-priced power purchases
and the strengthening of the U.S. dollar relative to the Canadian
dollar.
- North American Gas: Comparable EBITDA for the three and six
months ended June 30, 2020, decreased
by $4 million and $5 million, respectively, compared with the same
periods in 2019, due to lower power prices in Alberta and Ontario.
- Australian Gas: Comparable EBITDA for the three and six months
ended June 30, 2020, decreased by
$2 million for both periods compared
with the same periods in 2019, mainly due to the weakening of the
Australian dollar relative to the Canadian dollar.
- Wind and Solar: Comparable EBITDA for the three and six months
ended June 30, 2020, increased by
$14 million and $19 million, respectively, compared with the same
periods in 2019, primarily due to higher production related to the
Big Level and Antrim wind
facilities, which were commissioned in December of 2019, partially
offset by insurance proceeds received in 2019.
- Hydro: Comparable EBITDA for the three and six months ended
June 30, 2020, decreased by
$8 million and $9 million, respectively, compared with the same
periods in 2019, as lower energy and ancillary services revenues
were impacted by lower Alberta
pricing, which was partially offset by higher production.
- Energy Marketing: Comparable EBITDA for the three and six
months ended June 30, 2020, increased
by $15 million and $9 million, respectively, compared to the same
periods in 2019. Results were primarily attained from short-term
strategies across various geographic regions in both the power and
natural gas markets.
- Corporate: Corporate overhead costs for the three months ended
June 30, 2020, decreased by
$15 million and for the six months
ended June 30, 2020, increased by
$7 million compared to the same
periods in 2019. These changes were primarily due to realized gains
and losses from the total return swap. 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.
Consolidated Financial Highlights
Net loss attributable to common shareholders for the three
months ended June 30, 2020, was $60
million compared to nil in the same period in the prior
year. The decrease is largely due to lower revenues, higher
depreciation, asset impairment and lower income tax recoveries
partially offset by lower OM&A and foreign exchange gains. Net
loss attributable to common shareholders for the six months ended
June 30, 2020, was $33 million,
compared to a loss of $65 million in
the same period in 2019, an improvement of $32 million. Stronger earnings from our U.S. Coal
and Wind and Solar segments, foreign exchange gains and a reduction
in the Centralia mine
decommissioning provision due to changes in discount rates
resulting in an asset impairment reversal were partially offset by
higher depreciation, higher interest expense and lower income tax
recoveries.
Total sustaining capital expenditures (2) of
$55 million were $31 million lower compared to 2019 primarily due
to higher planned major maintenance in our coal segments in
2019.
Second Quarter 2020 Highlights
In $CAD
millions, unless otherwise stated
|
3 Months
Ended
|
6 Months
Ended
|
June 30,
2020
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
Adjusted availability
(%)(3)
|
90.7
|
%
|
83.8
|
%
|
91.7
|
%
|
86.7
|
%
|
Production
(GWh)(3)
|
4,607
|
|
5,235
|
|
11,093
|
|
13,360
|
|
Revenues
|
$
|
437
|
|
$
|
497
|
|
$
|
1,043
|
|
$
|
1,145
|
|
Fuel, carbon
compliance and purchased power
|
$
|
151
|
|
$
|
177
|
|
$
|
389
|
|
$
|
543
|
|
Operations,
maintenance and administration
|
$
|
112
|
|
$
|
130
|
|
$
|
240
|
|
$
|
234
|
|
Net loss attributable
to common shareholders
|
$
|
(60)
|
|
$
|
—
|
|
$
|
(33)
|
|
$
|
(65)
|
|
Cash flow from
operating activities
|
$
|
121
|
|
$
|
258
|
|
$
|
335
|
|
$
|
340
|
|
Comparable
EBITDA(1)
|
$
|
217
|
|
$
|
215
|
|
$
|
437
|
|
$
|
436
|
|
Funds from
operations(1)
|
$
|
159
|
|
$
|
155
|
|
$
|
331
|
|
$
|
324
|
|
Free cash
flow(1)
|
$
|
91
|
|
$
|
49
|
|
$
|
200
|
|
$
|
144
|
|
Net loss per share
attributable to common shareholders, basic and diluted
|
$
|
(0.22)
|
|
$
|
—
|
|
$
|
(0.12)
|
|
$
|
(0.23)
|
|
Funds from operations
per share(1)
|
$
|
0.58
|
|
$
|
0.55
|
|
$
|
1.20
|
|
$
|
1.14
|
|
Free cash flow per
share(1)
|
$
|
0.33
|
|
$
|
0.17
|
|
$
|
0.72
|
|
$
|
0.51
|
|
Dividends declared
per common share
|
$
|
0.0425
|
|
$
|
0.040
|
|
$
|
0.0850
|
|
$
|
0.040
|
|
Dividends declared
per preferred share(4)
|
$
|
0.25
|
|
$
|
0.26
|
|
$
|
0.51
|
|
$
|
0.26
|
|
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 July 31, 2020, 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.
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 Discussion of
Consolidated Financial Results 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)
|
Excludes payments
associated with finance leases.
|
(3)
|
Availability and
production include 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.
|
(4)
|
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 9:00 a.m. MT
(11:00 a.m. ET) today, July 31, 2020, to discuss our second quarter 2020
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.
Second Quarter 2020 Conference
Call:
Toll-free North American participants call:
1-888-231-8191
Webcast link:
https://produceredition.webcasts.com/starthere.jsp?ei=1345059&tp_key=3994b82c94
Related materials 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
3287982 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 forward-looking statements,
pertaining to, without limitation, the following: the
potential impact of COVID-19 on the Company and the actions to be
undertaken by the Company in response to the COVID-19 pandemic; the
sale of the Pioneer Pipeline, including the terms and timing
thereof; the commercial operation date for the WindCharger Battery
Project; the potential repowering of Sundance Unit 5 and Keephills
Unit 1 into combined cycle units; the conversion of Sundance Unit 6
by the second half of 2020; the conversion of Keephills Unit 2 and
Unit 3, and the timing thereof; the closing of the $400 million investment from Brookfield; the asset impairment to be
recorded for Sundance Unit 3; losses relating to the
AESO Line Loss Rule proceeding; and sufficient liquidity to meet
the upcoming debt maturity due November
2020 and growth construction requirements. The
forward-looking statements contained in this news release are based
on many assumptions and are subject to a number of significant
risks and uncertainties 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
the forward-looking statements contained in this news release
include risks relating to the impact of COVID-19 and the associated
general economic downturn, the impact of which will largely depend
on the overall severity and duration of COVID-19 and the general
economic downturn, which cannot currently be predicted, and which
present risks including, but not limited to: more restrictive
directives of government and public health authorities; reduced
labour availability impacting our ability to continue to staff the
Company's operations and facilities; impacts on the Company's
ability to realize its growth goals; decreases in short-term and/or
long-term electricity demand and lower power pricing; increased
costs resulting from the Company's efforts to mitigate the impact
of COVID-19; deterioration of worldwide credit and financial
markets that could limit the Company's ability to obtain external
financing to fund its operations and growth expenditures; a higher
rate of losses on accounts receivables due to credit defaults;
further disruptions to the Company's supply chain; impairments
and/or write-downs of assets; and adverse impacts on the Company's
information technology systems and the Company's internal control
systems as a result of the need to increase remote work
arrangements, including increased cybersecurity threats. Other
factors that may adversely impact the Company's forward-looking
statements include, but are not limited to, risks relating
to: operational risks involving the Company's facilities,
including unplanned outages at such facilities; disruptions in the
transmission and distribution of electricity; the effects of
weather and other climate-related risks; disruptions in the source
of water, wind, solar or gas resources required to operate our
facilities; natural disasters; equipment failure and our ability to
carry out repairs in a cost-effective or timely manner; and
industry risks and competition. The foregoing risk factors, among
others, are described in further detail in the Company's
Management's Discussion and Analysis and Annual Information Form
for the year ended December 31, 2019,
which are available on SEDAR at www.sedar.com. 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.
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SOURCE TransAlta Corporation