CALGARY,
AB, Dec. 15, 2022 /PRNewswire/ - TransAlta
Corporation ("TransAlta" or the "Company") (TSX: TA) (NYSE: TAC)
announced today its financial outlook for 2023.
Highlights
- Adjusted EBITDA(1) range of $1.20 billion to $1.32
billion
- Free Cash Flow(1)(2) range of $560 million to $660
million or FCF per share range of $2.07 to $2.44
- Sustaining capital(3) range of $140 million to $170
million
- Continued delivery of TransAlta's Clean Electricity Growth Plan
by reaching final investment decision on 500 MW of additional clean
energy projects across Alberta,
the United States and Australia to deliver $75 million to $100
million of incremental adjusted EBITDA
- Appointment of Ms. Manjit Sharma
to the Company's Board of Directors effective Jan. 1, 2023
Strategy Update
- Continuing strong FCF supports TransAlta's strategy of
increasing shareholder value through significant capital allocation
to contracted renewables growth
- Due to its strong financial position, TransAlta is positioned
as the primary growth vehicle for the consolidated TransAlta group
and expects to advance its Clean Electricity Growth Plan
- The Company will support organic expansions and opportunities
to manage the current Canadian and Australian tax horizons of
TransAlta Renewables Inc. ("TransAlta Renewables"), as well as
support the sustainability of the TransAlta Renewables'
dividend
"We are pleased to announce that our annual outlook highlights
continuing strong cash flow expectations for 2023. Our fleet
remains well positioned to capture the ongoing strength that we see
in the Alberta merchant market. We
are focused on redeploying these cash flows toward growing our
contracted renewables asset base, which will create further value
for our shareholders as we work to deliver our 2 GW renewables
growth target by 2025," said John
Kousinioris, President and Chief Executive Officer of
TransAlta.
"As we further advance our Clean Electricity Growth Plan and
decarbonization efforts, TransAlta is well positioned to fully
execute our growth plan. As we move forward, we expect to
prioritize new growth investments within the TransAlta parent
company. TransAlta Renewables will continue to retain growth
opportunities where it has a right of first offer on organic
expansions or where there is a mutual benefit to manage its tax
horizon in order to sustain its current dividend, which is highly
valued by its income-focused shareholders including
TransAlta," added Mr. Kousinioris.
2023 Strategic
Priorities
In addition to meeting the financial targets set out in the
outlook, the Company is focused on the following key priorities for
2023:
- Advance customer-centred power solutions, renewables and
storage, and grid reliability products for our Canadian,
United States and Australian
markets
- Continue execution of the Clean Electricity Growth Plan to
deliver 2 GW of new generation and a 5 GW growth pipeline by 2025
by reaching final investment decision on 500 MW of additional clean
energy projects across Canada,
the United States and Australia
- Develop and maintain a growing pipeline of greenfield and
brownfield development opportunities that add at least 1,500 MW of
new development sites to our pipeline
- Achieve commercial operation and integration of the Garden
Plain wind project, Northern Goldfields solar and storage project,
White Rock and Horizon Hill wind
projects and the Mount Keith transmission project ensuring these
projects are delivered safely, on-time and on-budget consistent
with their expected operating and financial performance
expectations
- Complete the rehabilitation of Kent Hills targeting a safe
return of the wind facility to full operations in the second half
of 2023
- Advance a new technology roadmap that aligns with the Clean
Electricity Growth Plan
- Advance long-term contractedness of the Alberta Electricity
Portfolio through new and existing sales channels
- Deliver permanent financing for growth projects by executing
tax equity or other financing program in order to monetize the
value of production tax credits and other potential tax
attributes
Update to Clean Electricity Growth
Plan
To date, the Company has announced 800 MW of projects for a
total cost of $1.5 billion toward our
2 GW Clean Electricity Growth Plan. These projects are expected to
deliver $147 million of annualized
adjusted EBITDA. With the current inflationary environment, we
expect costs on future projects to be higher based on increases to
expected pricing of equipment and construction labour. Although we
estimate that the remaining projects will cost more, we see
continuing demand for renewable energy and we expect PPA prices to
respond to absorb these higher costs across the industry. As a
result, we forecast that expected returns on projects will remain
intact. Accordingly, we have reset our capital investment target to
$3.6 billion with an increased
incremental EBITDA target of $315
million.
Clean
Electricity
Growth Plan Targets
|
Revised
Target
|
Original
Target
|
Achieved to
Date
|
% of Revised
Target
Achieved
|
Renewable Energy
Capacity
|
2 GW
|
2 GW
|
800 MW
|
40 %
|
Capital
Investment
|
$3.6 billion
|
$3 billion
|
$1.5 billion
|
41 %
|
Incremental
EBITDA
|
$315 million
|
$250 million
|
$147 million
|
47 %
|
|
|
|
|
|
Appointment of New Board
Member
The Company is pleased to announce the appointment of Ms.
Manjit Sharma to the Board of
Directors effective January 1,
2023. Ms. Sharma brings over 30 years of experience that
spans a variety of industries, most recently serving as Chief
Financial Officer of WSP Canada Inc. In this role, she was
responsible for leading the finance, real estate, procurement, tax
and shared services functions across Canada. Prior to WSP Canada Inc., she was on
the National Executive Team of General Electric Canada (GE Canada),
serving as Chief Financial Officer from 2016 to 2019. From 1999 to
2016, she held various senior positions with GE Canada, with
responsibilities that spanned strategic planning and analysis,
mergers and acquisitions, tax oversight, risk, governance, and
diversity and inclusion. Ms. Sharma currently serves as a board
member of each of Vermilion Energy Inc., Finning International Inc.
and Export Development Canada. She is also a member of the GE
Canada Pension Trust Committee.
Ms. Sharma holds a Bachelor of Commerce degree (with Honours)
from the University of Toronto, is a
Fellow Chartered Accountant and holds the ICD.D Directors
designation and the GCB.D Global Competent Boards designation. In
2019, Ms. Sharma was recognized as one of Canada's Top 100 Most Powerful Women by the
Women's Executive Network.
ESG Targets
The Company has a comprehensive and ambitious set of
environment, social, and governance ("ESG") targets that support
the long-term success of our business and highlight our ESG value
proposition. These targets include:
Environment
- Complete TransAlta's off-coal transition by retiring our single
remaining coal unit in the United
States by the end of 2025
- Achieve a company-wide reduction of greenhouse gases emissions
("GHG") of 75 per cent over 2015 levels by 2026
- Develop new renewable projects and power offerings that support
customer sustainability goals by delivering low cost, reliable and
clean energy solutions
Social
- Achieve at least 40 per cent gender diversity among all
employees by 2030
- Maintain equal pay for women in equivalent roles as men
- Support equal access to all levels of education for youth and
Indigenous peoples through financial support and employment
opportunities
- Provide Indigenous cultural awareness training to all U.S. and
Australian-based employees by the end of 2023
Governance
- Achieve 50 per cent female representation on the Board of
Directors of the Company by 2030
- Maintain our position as a leader in integrated ESG
disclosure
The Company continues to report on progress in alignment with
major frameworks and was recently upgraded to an A- score from CDP
(formerly Climate Disclosure Project).
2023 Financial Outlook
Comparable EBITDA is estimated to be between $1.20 billion to $1.32
billion. The midpoint of the range represents continued
strong performance compared to historical levels. The Company
expects comparable EBITDA for 2023 to be impacted by a number of
factors, including:
- Continued strong merchant pricing levels in Alberta though at a lowered target price range
than 2022 based on our fundamental market forecast. The lower price
expectations are driven by normalized weather expectations and the
addition of new wind and solar supply including TransAlta's Garden
Plain wind facility, which is expected to achieve commercial
operation in early 2023. This will be partially offset by lower
fuel costs due to favourable natural gas hedges
- Adjusted EBITDA contributions from newly commissioned projects
that include Garden Plain, White
Rock, Horizon Hill, Northern Goldfields Solar and Mount
Keith transmission asset additions
- Completion of the rehabilitation outage of Kent Hills 1 and 2
and fully returning the wind facility to service in the second half
of 2023
- Adjusted performance expectations from the Energy Marketing
segment due to exceptional performance achieved in 2022 partially
driven by timing of cash settlements. The reversal of these
settlements are included in our 2023 outlook.
The Company expects sustaining capital to be in the range of
$140 million to $170 million consistent with current levels.
FCF is expected to be between $560
million and $660 million
excluding the impact of rehabilitation capital expenditures
required at Kent Hills. The midpoint of the range represents a 9
per cent increase over 2021 levels and a 19 per cent decrease from
the midpoint of the 2022 outlook. This is largely driven by
lower expected Alberta power
pricing in 2023 and a return to normal performance from the Energy
Marketing segment, both of which will be partially offset by the
contribution from new assets.
The following table summarizes and provides additional details
pertaining to our 2023 outlook:
Measure
(millions)
|
2023
Target
|
2022
Target
|
2021
Actual
|
Adjusted
EBITDA(1)
|
$1,200 and
$1,320
|
$1,380 to
$1,460
|
$1,263
|
FCF (1)
|
$560 and
$660
|
$725 to $775
|
$562
|
Range of key power price assumptions:
Market
|
2023
Prices
|
2022
Prices
|
Alberta Spot
($/MWh)
|
$105 and
$135
|
$125 to $150
|
Mid-C Spot
($/MWh)
|
US$75 to
US$85
|
US$55 to
US$65
|
AECO Gas Price
($/GJ)
|
$4.60
|
$5.00 to
$6.00
|
Alberta spot price sensitivity:
a +/- $1 per MWh change in spot price
is expected to have a +/- $3.5
million annualized impact on Comparable EBITDA.
Other assumptions relevant to 2023 financial outlook
(millions):
Sustaining
capital(3)
|
$140 to $170
|
Energy marketing
gross margin
|
$90 to $110
|
Alberta Hedging – assumptions full year 2023:
Hedged production
(GWh)
|
5,200
|
Hedge price
($/MWh)
|
$74.00
|
Hedged gas volumes
(GJ)
|
58.4 million
|
Hedge gas price
($/GJ)
|
$2.24
|
Notes
|
(1)
|
These items are not
defined and have no standardized meaning under IFRS. Presenting
these items from period to period provides management and investors
with the ability to evaluate earnings (loss) trends more readily in
comparison with prior periods' results. Please refer to the
Segmented Financial Performance and Operating Results section of
the MD&A for further discussion of these items, including,
where applicable, reconciliations to measures calculated in
accordance with IFRS. See also the Additional IFRS Measures and
Non-IFRS Measures section of this release.
|
(2)
|
Free cash flow per
share is calculated using the weighted average number of common
shares outstanding. The weighted average number of common shares
outstanding for the three and nine months ended Sept. 30, 2022 was
271 million shares. Please refer to the Non-IFRS financial measures
section in this release for the purpose of this non-IFRS
ratio.
|
(3)
|
Excludes payments
associated with finance leases and Kent Hills rehabilitation
capital.
|
Non-IFRS financial measures and
other specified financial measures
We use a number of financial measures to evaluate our
performance and the performance of our business segments, including
measures and ratios that are presented on a non-IFRS basis, as
described below. Unless otherwise indicated, all amounts are in
Canadian dollars and have been derived from our audited annual 2021
consolidated financial statements and the unaudited interim
condensed consolidated statements of earnings (loss) for the three
and nine months ended Sept. 30, 2022,
prepared in accordance with IFRS. We believe that these non-IFRS
amounts, measures and ratios, read together with our IFRS amounts,
provide readers with a better understanding of how management
assesses results.
Non-IFRS amounts, measures and ratios do not have standardized
meanings under IFRS. They are unlikely to be comparable to similar
measures presented by other companies and should not be viewed in
isolation from, or as an alternative for, or more meaningful than
our IFRS results.
Adjusted EBITDA
In the fourth quarter of 2021, comparable EBITDA was relabeled
as adjusted EBITDA to align with industry standard terminology.
Each business segment assumes responsibility for its operating
results measured by adjusted EBITDA. Adjusted EBITDA is an
important metric for management that represents our core business
profitability. In the second quarter of 2022, our adjusted EBITDA
composition was adjusted to include the impact of closed positions
that are effectively settled by offsetting positions with the same
counterparty to reflect the performance of the assets and Energy
Marketing segment in the period in which the transactions occur.
Accordingly, the Company has applied this composition to all
previously reported periods. Interest, taxes, depreciation and
amortization are not included, as differences in accounting
treatments may distort our core business results. In addition,
certain reclassifications and adjustments are made to better assess
results excluding those items that may not be reflective of ongoing
business performance. This presentation may facilitate the readers'
analysis of trends. Adjusted EBITDA is a non-IFRS measure. Please
refer to M39-M40 of the MD&A for a description of adjustments
made.
Average Annual EBITDA
Average annual EBITDA is a non-IFRS financial measure that is
forward-looking and is used to show the average annual EBITDA that
the project currently under construction is expected to generate
upon completion.
Funds From Operations
FFO is an important metric as it provides a proxy for cash
generated from operating activities before changes in working
capital and provides the ability to evaluate cash flow trends in
comparison with results from prior periods. FFO is a non-IFRS
measure.
Free Cash Flow
FCF is an important metric as it represents the amount of cash
that is available to invest in growth initiatives, make scheduled
principal repayments on debt, repay maturing debt, pay common share
dividends or repurchase common shares. Changes in working capital
are excluded so FFO and FCF are not distorted by changes that we
consider temporary in nature, reflecting, among other things, the
impact of seasonal factors and the timing of receipts and payments.
FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to adjusted
EBITDA are non-IFRS ratios that are presented in the MD&A.
Refer to the Reconciliation of Cash Flow from Operations to FFO and
FCF and Key Financial Non-IFRS Ratios sections of the MD&A for
additional information.
FFO per share and FCF per share
FFO per share and FCF per share are calculated using the
weighted average number of common shares outstanding during the
period. FFO per share and FCF per share are a non-IFRS ratios.
Reconciliation of these non-IFRS financial measures to the most
comparable IFRS measure are provided below.
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 111 years, TransAlta has been a
responsible operator and a proud member of the communities where we
operate and where our employees work and live. TransAlta aligns its
corporate goals with the UN Sustainable Development Goals and its
climate change strategy with CDP (formerly Climate Disclosure
Project) and the Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. TransAlta has been recognized
by CDP with an 'A-' rating. TransAlta has achieved a 61 per cent
reduction in GHG emissions since 2015.
For more information about TransAlta, visit our web site at
transalta.com.
Cautionary Statement Regarding
Forward-Looking Information
This news release contains "forward-looking information",
within the meaning of applicable Canadian securities laws, and
"forward-looking statements", within the meaning of applicable
United States securities laws,
including the United States Private Securities Litigation Reform
Act of 1995 (collectively referred to herein as "forward-looking
statements). 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: 2023 annual financial guidance, including
adjusted EBITDA and free cash flow; the Company's strategy of
allocating capital to contracted renewables growth; TransAlta being
the primary growth vehicle for the consolidated TransAlta group;
the Company's support for organic expansions and opportunities to
manage the current Canadian and Australian tax horizons of
TransAlta Renewables; the Company's support for the sustainability
of the TransAlta Renewables' dividend; the Company's execution
towards targets associated with its Clean Electricity Growth Plan,
including the amount of incremental EBITDA to be delivered on the
execution of such growth plan ; the returns on the Company's growth
projects will remain intact despite an expected increase to costs;
the execution of the Company's growth plan without the need for
external capital; the key priorities for 2023, including adding at
least 1,500 MW of new development sites to the Company's pipeline;
achieving the commercial operation and integration of each of the
Garden Plain wind project, Northern Goldfields solar and storage
project, White Rock and Horizon
Hill wind projects and the Mount Keith transmission project on-time
and on-budget; completing the rehabilitation of Kent Hills and
realizing a safe return of the wind facility to full operations in
the second half of 2023; delivering permanent financing for growth
projects by executing tax equity or other financing program in
order to monetize the value of production tax credits and other
potential tax attributes; sensitivity of 2023 financial performance
to Alberta pricing; the Company's
ESG targets, including the Company's ability to achieve targets
relating to diversity and emission reductions; and guidance ranges
for Alberta spot price, Mid-C spot
price, AECO gas price, and sustaining capital. 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 environments; the
price of power in Alberta and the
extent of hedging to occur in Alberta (as described above); that PPA prices
will increase generally to account for the higher costs across the
industry; assumptions regarding Mid-C spot price and AECO gas
price; and the condition of the financial markets not changing
significantly. 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 power and gas prices where we operate; unplanned outages at
generating facilities and the capital investments required to
address such outages; any delays, cost increases or operational
issues with any of our current growth projects, including the
Northern Goldfields Solar Project or the Garden Plain wind project;
equipment failure and our ability to carry out repairs in a cost
effective and timely manner, including the Kent Hills remediation;
the effects of weather, catastrophes and public health crises;
global supply chain disruptions impacting major maintenance and
growth projects; disruptions in the source of thermal fuels, water,
solar or wind resources required to operate our facilities; energy
trading risks, including risks arising from the Company's exposure
to volatile markets and the regulatory risks associated with
the Company's trading and optimization activities; failure to
obtain necessary regulatory approvals in a timely fashion, or at
all; inability to satisfy all conditions and requirements
associated with announced growth projects; cybersecurity breaches;
negative impacts 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 or at all); changes in
prevailing interest rates, currency exchange rates and inflation
levels; armed hostilities, including an escalation of the war in
Ukraine; general economic
conditions in the geographic areas in which TransAlta operates;
disputes or claims involving TransAlta or TransAlta Renewables; 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 Dec. 31,
2021. 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.
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SOURCE TransAlta Corporation