Transalta Corporation · TSX:TA
Transalta — Investor Presentation (January 2016)
33 slides from Transalta's investor presentation, January 2016
Slide 1: Investor Presentation January 2016
Investor Presentation January 2016 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation may include forward-looking statements or information (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation. All forward-looking statements are based on our beliefs as well as assumptions
Slide 3: TransAlta's Diversified Portfolio
TransAlta’s Diversified Portfolio ~6 facilities in Alberta and the Pacific Coal: 4,931 MW Northwest 12 facilities in Canada and Australia; also 270km pipeline Gas: 1,315 MW RNW owns all Australian gas assets (425 MW) and 506 MW gas facility in Ontario Wind & Solar: 28 facilities in Canada and the U.
Slide 4: Proven Track Record
Proven Track Record • One of Canada’s largest publicly traded power generators & marketers with over 100 years of operating experience • Diversified and highly contracted asset base with over 70 facilities strategically positioned in Canada, the United States and Western Australia • Approximately 25
Slide 5: Contracted Portfolio Supports Stable EBITDA
Contracted Portfolio Supports Stable EBITDA Total portfolio contractedness1 Merchant exposure in Alberta and the MW Pacific NW 87% 84% 72% 70% 2016 Hedge prices 6,000 AB ~$45 - $50/MWh PacNW ~$40/MWh 5,000 2017 Hedge prices AB ~$45 - $50/MWh 4,000 PacNW ~$45 - $50/MWh 3,000 Alberta • Well hedged thr
Slide 6: Energy Marketing Capability - A Competitive Advantage
Energy Marketing Capability - A Competitive Advantage • Transacting in multiple markets provides us with a competitive Proprietary Trading advantage (20%) • Targeting $40 to $60 million in gross margin annually from Proprietary Trading Energy Marketing • Preparing for roll off of Alberta PPAs and •
Slide 7: Strategic Objectives
TransAlta Strategic Objectives
Slide 8: A Prudent and Proactive Plan
Strategic Objectives A Prudent and Proactive Plan 1) Deliver Operational Excellence 2) Maximize Financial Flexibility 3) Strategically Grow our Portfolio of Gas-Fired and Renewable Generation 8
Slide 9: Executing our Strategic Objectives
Executing our Strategic Objectives 2015 2016 • Reduced costs by ~$50 million Operational with productivity and efficiency • Continue to focus on Alberta coal Excellence initiatives at Canadian Coal and mining operations Corporate • Reposition our capital structure by • Raised approximately $1 billio
Slide 10: Financial Strategy
TransAlta Financial Strategy
Slide 11: Proactively Preparing for Debt Maturities
Proactively Preparing for Debt Maturities • As at Sept 30th 2015, ~$0.9 billion in available liquidity • TransAlta recently raised: • ~$440 million in non-recourse financing associated with two wind facilities • $200 million through the sale of RNW common shares to AIMCo • ~$170 million through the
Slide 12: Reposition TransAlta's capital structure
Maximizing Financial Flexibility Reposition TransAlta’s capital structure • Accelerate the use of project-level debt to fund upcoming corporate debt maturities • Deliver on FFO and debt reduction targets and achieve FFO to Debt target of 20% by 2018 • Raise $400 to $600 million of project-level debt
Slide 13: Utilizing our Contracted Asset Base
Utilizing our Contracted Asset Base • Assets support target of $400 - $600 million in financing in the near-term • Long-term contracted assets with credit worthy counterparties • Strong operating history and well planned maintenance programs • Size and ability to package certain assets together to m
Slide 14: Strengthening our Financial Position – Why?
Strengthening our Financial Position – Why? 1 Access to capital markets Competitiveness 2 Lower cost of debt Financial Flexibility 3 Access to customers Strategic Growth Agency Rating Outlook Current Ratings: S&P BBB- Stable DBRS BBB Stable Fitch BBB- Stable Moody’s Ba1 Stable Maintain investment gr
Slide 15: Leveraging TransAlta Renewables
Leveraging TransAlta Renewables • TransAlta is the largest shareholder of TransAlta Renewables and will TransAlta Public maintain ~60-80% ownership • Unlocks the value of long-life contracted assets on attractive terms ~60-80% ~20-40% • Provides access to lower cost funding • Funds growth and debt r
Slide 16: TransAlta Renewables (TSX:RNW)
TransAlta Renewables (TSX:RNW) • Created in August 2013 to provide stable, consistent returns for investors through the ownership of highly contracted power generation and other infrastructure assets. $3.0 Enterprise Value¹ $2.4 $176million in 2014 $0.84 $2.8 Billion Market Cap. billion Enterprise V
Slide 17: Sarnia, Le Nordais and Ragged Chute (SLR) Transaction
Sarnia, Le Nordais and Ragged Chute (SLR) Transaction • Closed the $540 million investment by TransAlta Renewables in three assets owned by TransAlta in January 2016 • Received cash proceeds of $172.5 million, $215 million in convertible unsecured subordinated debentures and approximately 15.6 milli
Slide 18: Australian Transaction
Australian Transaction • $1.78 billion investment in high quality portfolio underpinned by long-term contracts and proven technology • Received ~$217 million in net cash proceeds and ~$1,067 million of common and Class B shares in TransAlta Renewables • Southern Cross • 245 MW generation & 500 km tr
Slide 19: Significant Drop-Down Inventory Potential
Significant Drop-Down Inventory Potential Drop-Down Candidates from TransAlta Corporation • ~400 MW in Alberta & Ontario including: Gas Fired • 244 MW Poplar Creek facility in AB Generation • ~150 MW from 4 facilities through TA Cogen • ~$140M EBITDA • ~800 MW from 13 units in Alberta, representing
Slide 20: Growth Strategy
TransAlta Growth Strategy
Slide 21: Recent Growth Accomplishments
Recent Growth Accomplishments • Advanced construction of our 150 MW South Hedland gas-fired facility in Australia with expected commissioning in mid-2017 • Re-structured contracts at our Poplar Creek facility, extending the contract duration by 7 years and reducing our merchant exposure in Alberta •
Slide 22: Long-Term Investment Opportunities
Long-Term Investment Opportunities Gas-Fired and Renewables • Alberta’s Climate Leadership Plan – requirement for gas generation • Sundance 7, low cost gas-fired option in our portfolio • Expansion & acquisition opportunities in the United States & Australia • Evaluating hydro pumped storage at Tran
Slide 23: Alberta Market
TransAlta Alberta Market
Slide 24: TransAlta's Position in the Alberta Market
TransAlta’s Position in the Alberta Market Current By 2020 • 40% of total generation; ~15% of total • 30% of total customers under customer business 1 - 5 year contracts • 11% of total offer control • ~30% of total offer control • ~80% contract coverage through • Offering to large-scale customers Al
Slide 25: Managing Low Merchant Prices in Alberta
Managing Low Merchant Prices in Alberta $60 Alberta Forward Curve $55 Oversupply in the Alberta power market and low gas prices are driving historic lows for Alberta power prices $50 $45 $40 $35 $30 $25 $20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015 2016 2017 Opportunities • The Alberta PPA’s were des
Slide 26: Competitive Position - Low Cost Generation in Alberta
Competitive Position - Low Cost Generation in Alberta $/MWh Marginal Costs Customer Representation $60 $50 $40 TransAlta’s Average Marginal Cost in AB $30 $20 $10 $- Hydro Wind Coal Cogen/CC Gas Peakers • TransAlta has the largest and most diverse fleet in the Alberta market • Low-cost structure all
Slide 27: Value Potential as Alberta Legislated PPAs Expire
Value Potential as Alberta Legislated PPAs Expire Current Post PPA TransAlta 11% Other Other TransCanada 15% 22% 2% TransAlta Capital Power ~30% 10% Oil and Gas ATCO 15% 11% TransCanada 17% ENMAX ENMAX 8% Capital Power Uncontrolled 18% 15% 11% ATCO 12% Total Market Capacity: 15,777 MW TransAlta curr
Slide 28: Environmental Regulations
Environmental Regulations 28
Slide 29: Transitioning to Clean Power
Transitioning to Clean Power • Significant optionality and opportunity for replacing mandatory coal retirements TransAlta's Generation Capacity (MW) Potential Opportunities 9000 Solar • ~700 MW of Hydro 8000 expansion at Brazeau Hydro 7000 and BigHorn Wind 6000 • ~200 MW of other AB Gas hydro expans
Slide 30: Coal Transition in Alberta – The Facts
Coal Transition in Alberta – The Facts • There is currently 6,277 MW of coal-fired installed capacity in Alberta, representing approximately 39% of the overall supply • Federal regulations amended in 2012 designate useful life of coal plants as 50 years • Eight of TransAlta’s coal units, totaling 2,
Slide 31: Appendix
TransAlta Appendix
Slide 32: Financial performance by Business Segment
Financial performance by Business Segment Business Segment 2011 2012 2013 2014 EBITDA ($M) Canadian Coal $273 $373 $309 $386 U.S. Coal $211 $148 $66 $62 Gas $275 $312 $327 $309 Wind $163 $151 $180 $177 Hydro $105 $127 $147 $85 Energy Marketing $101 ($13) $61 $76 Corporate Segment ($84) ($83) ($67) $
Slide 33: Sustaining Capex by Business Segment
Sustaining Capex by Business Segment Sustaining Capital $M Business Segment 2011 2012 2013 2014 Generation Segment Canadian Coal $121 $316 $237 $211 U.S. Coal $63 $32 $16 $12 Gas $69 $49 $58 $63 Wind $7 $4 $9 $12 Hydro $32 $14 $14 $21 Corporate $27 $24 $22 $23 Sustaining Capital $319 $439 $341 $342