Slide 1: Investor Presentation
Investor Presentation March 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: 1,337 MW RNW owns all Australian gas assets (425 MW) and 506 MW gas facility in Ontario Wind & Solar: 27 facilities in Canada and the U.
Slide 4: Our Highly Diversified Portfolio
Our Highly Diversified Portfolio • Generated $755 million of free EBITDA in 2015 • Canadian Coal contributed just over 25% of total free EBITDA • Gas and renewables accounted for more than 65% of total free EBITDA 2015 Free EBITDA (1) 2015 Free EBITDA ($M) 5% (2) Canadian Coal $203 27% 21% U.S. Coal
Slide 5: 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 6: Strategic Objectives
TransAlta Strategic Objectives
Slide 7: A Prudent and Proactive Plan
Strategic Objectives A Prudent and Proactive Plan 1) Deliver Operational Excellence 2) Increase Financial Flexibility 3) Strategically Grow our Portfolio of Contracted Gas-Fired and Renewable Generation 7
Slide 8: Executing our Strategic Objectives
Executing our Strategic Objectives 2015 2016 • Reduced costs by ~$50 million with productivity and efficiency Operational initiatives at Canadian Coal and • Continue to focus on Alberta coal Excellence Corporate mining operations • Best ever safety (IFR = 0.75) • Reposition our capital structure by
Slide 9: 2016 Outlook
TransAlta 2016 Outlook
Slide 10: 2016 Outlook & Assumptions
2016 Outlook & Assumptions 2016 Outlook Ranges ($M) Comparable EBITDA $990 $1,100 Comparable Funds from Operations (FFO) $755 $835 Sustaining Capital $(330) $(350) Pfd Share/Other Distributions $(175) $(185) Comparable Free Cash Flow (FCF) $250 $300 Comparable FCF Per Share $0.86 $1.03 Annual Divide
Slide 11: 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 12: 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 13: Financial Strategy
TransAlta Financial Strategy
Slide 14: Strengthening our Financial Position
Strengthening our Financial Position • Reduced our debt by ~$200 million since 2013 • Acquisition of renewable projects in the US in 2015 added ~$200 million of debt • Construction of South Hedland since 2014 required ~$250 million • The US dollar appreciation added an incremental ~$300 million over
Slide 15: Increasing our Financial Flexibility
Increasing our Financial Flexibility Reposition TransAlta’s capital structure • As of January 2016, ~$1.4 billion in available liquidity • Over the next three years, we plan to repay $1.2 billion of recourse debt with project-level debt and cash • Deliver on FFO and debt reduction targets and achiev
Slide 16: 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 17: TransAlta Renewables
TransAlta TransAlta Renewables
Slide 18: 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 19: 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 Market Cap. $2.4 $176 $0.84 $3.3 Billion million in 2014 $2.5 Billion billio
Slide 20: Significant Drop-Down Inventory
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 21: Growth Strategy
TransAlta Growth Strategy
Slide 22: 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 23: Long-Term Investment Opportunities
Long-Term Investment Opportunities Gas-Fired and Renewables • Alberta’s Climate Leadership Plan – requirement for gas-fired and renewable generation (~6,000 MW of coal will need to be replaced by 2030) • Sundance 7, low cost gas-fired option in our portfolio • Expansion & acquisition opportunities i
Slide 24: Coal Transition in Alberta
Coal Transition in Alberta 24
Slide 25: 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 26: The Alberta Climate Leadership Plan
The Alberta Climate Leadership Plan With respect to the power generation sector, the Climate Leadership Plan targets: • the phase-out of emissions from coal-fired generation in AB by 2030; • replacement of two-thirds of the retiring coal-fired generation with renewables and one-third with gas; • pha
Slide 27: Coal Transition in Alberta – Policy Discussions
Coal Transition in Alberta – Policy Discussions • The Government of Alberta is appointing a negotiator to work with coal-fired generators • TransAlta will work with the negotiator to ensure it has the certainty and capacity needed to invest in clean power • Energy only market structure expected to b
Slide 28: Appendix
TransAlta Appendix
Slide 29: Financial Performance by Business Segment
Financial Performance by Business Segment (1) Business Segment 2011 2012 2013 2014 2015 EBITDA ($M) Canadian Coal $273 $373 $311 $389 $393 U.S. Coal $211 $148 $67 $65 $67 Gas $275 $312 $332 $312 $330 Wind $163 $151 $181 $179 $176 Hydro $105 $127 $148 $87 $73 Energy Marketing $101 ($13) $58 $75 $37 C
Slide 30: Upcoming Debt Maturities
Upcoming Debt Maturities $800 $600 CAD USD $520 $400 $200 $400 $400 $400 $204 $27 $0 2016 2017 2018 2019 2020 30