Slide 1: TransAlta Investor Presentation
TransAlta Investor Presentation September 2009
Slide 2: Forward looking statements
Forward looking statements This presentation may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. All forward-looking statements are based on our beliefs and assumptions based on information available at t
Slide 3: Outline
Outline ] Value Proposition ] Strategy ] 2009 Outlook ] Markets and Profile ] Investment Highlights 2010+ 3
Slide 4: Value Proposition
Value Proposition ] Yield plus steady and disciplined growth • Providing a strong dividend payout ratio: target of 60 - 70% of comparable EPS • Comparable earnings per share and cash flow growth ] Low to moderate risk profile • Diversified contracting strategy, with diversified fuels • Focused on we
Slide 5: TransAlta's strategy – Disciplined Growth
TransAlta’s strategy – Disciplined Growth Wholesale generator & marketer in Western Canada and U.S. ] Strong long-term market fundamentals CANADA ] Knowledge base provides competitive advantage Low to moderate risk ] Strong balance sheet and balanced capital allocation ] Diversified fuels and age of
Slide 6: 2009 Outlook
2009 Outlook POSITIVES CHALLENGES ] Approximately 95% contracted for 2009; 85% ] Current market conditions put downward for 2010; PPAs provide cash flow stability pressure on price and demand growth: • Q2 AB: $32 vs. $108 in 2008 ] Energy Trading gross margins of $65 - $85 • Q2 PACNW: $21 vs. $54 in
Slide 7: Alberta Market: Reserve margin tightness underpins pricing
Alberta Market: Reserve margin tightness underpins pricing ] Load growth dependent on economic recovery and oil sands expansion; Steady price growth in various natural gas scenarios supply growth also somewhat dependent Alberta Power Prices (CAD $/MWh) ] Reserve margin will likely remain lower than
Slide 8: PacNW market: Forward prices tracking natural gas movements
PacNW market: Forward prices tracking natural gas movements ] Demand weak in short-term due to recession but expected to stabilize next year Steady price growth in various natural gas ] New supply growth in short-term is dominated by wind scenarios PacNW Power Prices (USD $/MWh) ] Intermittent natur
Slide 9: Alberta PPAs and long-term contracts provide the base of our contracted position
Alberta PPAs and long-term contracts provide the base of our contracted position Total ] Hedge strategy is to contract an average of 90% MWs of adjusted capacity for TransAlta’s fleet 9,000 8,000 7,000 Merchant contracting 6,000 strategy targets 25% / yr 5,000 4,000 3,000 Alberta PPAs & LTC 2,000 1,
Slide 10: Alberta & PacNW open merchant positions are managed to provide for greater earnings certainty
Alberta & PacNW open merchant positions are managed to provide for greater earnings certainty Merchant MWs ] Disciplined hedging strategy provides for more secure earnings and cash profile in a volatile and cyclical 3,000 commodity market 2,500 2,000 1,500 2009 2010 2011 2012 Contracts Contracts Con
Slide 11: Alberta Thermal: Accelerated major maintenance plans expected to greatly improve 2010 availability
Alberta Thermal: Accelerated major maintenance plans expected to greatly improve 2010 availability ] Enhanced AB Thermal major maintenance work substantially complete; plants on track to deliver availability targets and lower forced outage rates 2009 Availability • Maintenance in 2nd half 2008 impro
Slide 12: Focused on improving base operations
Focused on improving base operations ] Accelerated major maintenance program lowering EPS and cash flow from operations in 2009 but provides an upside in 2010 Comparable earnings per share Cash flow from operations 2004 – 2008 2004 – 2008 $MM 56% Growth CAGR: 22% 1 $1.75 $1,000 $922 $750-$900 $1.56
Slide 13: TransAlta's growth investments deliver long-term sustainable cash flow and earnings growth
TransAlta’s growth investments deliver long- term sustainable cash flow and earnings growth Sun 5 Uprate Blue Trail Summerview Keephills 3 Keephills 1 and Ardenville Projects II 2 Uprates Location Alberta Alberta Alberta Alberta Alberta Alberta Type Efficiency Uprate Wind Wind Supercritical Coal Eff
Slide 14: Disciplined growth strategy: Accelerating the expansion of our renewable portfolio
Disciplined growth strategy: Accelerating the expansion of our renewable portfolio ] Announced intention to acquire Canadian Hydro Developers, Inc. to further enhance and diversify the development pipeline ] All-cash offer: $4.55 per share representing a 30% TSX: TA premium over the 10-day VWAP and
Slide 15: Acquisition of Canadian Hydro Developers expands our position as a leading renewable provider
Acquisition of Canadian Hydro Developers expands our position as a leading publicly traded provider of renewable energy in Canada Renewable Capacity In Canada Pro Forma Statistics as at June 30, 2009 (MW)* 2,000 Current Pro Forma Total Generation (MW) 7,963 8,657 1,800 Renewables (MW) 1,206 1,900 1,
Slide 16: Environmental Leadership
Environmental Leadership ] TransAlta is competitively positioned to mitigate emission costs through early engagement, a portfolio of initiatives, and pass through contracts Cost pass through Continuous under change-in-law improvement at provisions existing facilities Emissions Management Active acqu
Slide 17: Project Pioneer – leading the world in CCS
Project Pioneer – leading the world in CCS ] We are advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2013 Carbon Capture and Storage CO2 returned Energy Input (oil/gas) Energy Input (coal) 17
Slide 18: Investment highlights - 2010+
Investment highlights - 2010+ ] Long-term value proposition remains the same Strong balance sheet, solid financial outlook and low-to-moderate risk business model; contracting strategy provides high degree of earnings protection Long-term market fundamentals for Western Canada and Western U.S. remai
Slide 19: Investment highlights - 2010+
Investment highlights - 2010+ ] Long-term industry opportunities outweigh short-term market risks Projects under construction tracking well: • Summerview II (66 MW) • Keephills 3 (225 MW) • Keephills 1 and 2 uprates (46 MW) • Ardenville (69 MW) Timing on additional greenfield within our control • Al
Slide 20: Appendix
Appendix TransAlta’ 2
Slide 21: Performance goals
Performance goals Financial Measures 2009 Goals Q2 2009 Q2 2008 Review ratios Increased due to lower unplanned outages at AB Thermal plants, lower Achieve top Availability 90 - 92% 88.8% 79.3% planned and unplanned outages at decile operations Centralia and no planned maintenance at Genesee 3. Impro
Slide 22: Q2 2009 – Higher planned maintenance at Alberta Thermal and reduced water levels at hydro lower results
Q2 2009 – Higher planned maintenance at Alberta Thermal and reduced water levels at hydro lower results ] Comparable loss per share of $0.03 versus comparable earnings of $0.25 in Q2 2008 • Affected by accelerated major maintenance, Centralia boiler modifications, increased related major maintenance
Slide 23: Q2 2009 - Comparable earnings
Q2 2009 - Comparable earnings Results (MM) Q2 2009 Q2 2008 YTD YTD Q2’09 Q2’08 Net (loss) earnings $(6) $47 $36 $80 Sale of assets at Centralia, net of tax - - - (4) Change in life of Centralia parts, net of tax - 2 1 7 Settlement of commercial issue, net of tax - - (6) - Writedown of Mexican invest
Slide 24: Q2 2009 - Results
Q2 2009 - Results Results (MM) Q2 2009 Q2 2008 YTD YTD Q2’09 Q2’08 Revenue $585 $708 $1,341 $1,511 Gross margin $346 $376 $727 $809 Operating income $14 $93 $99 $282 Comparable (loss) earnings $(6) $49 $31 $148 Net Earnings $(6) $47 $36 $80 Comparable (loss) earnings per share $(0.03) $0.25 $0.16 $0
Slide 25: Q2 2009 – Net earnings
Q2 2009 – Net earnings Q2 2009 YTD Q2’09 Net earnings, 2008 $47 $80 Decrease in Generation gross margins (23) (73) Mark-to-market movements - Generation 23 21 Decrease in COD gross margins (30) (30) Increase in operations, maintenance, and admin (29) (68) costs Increase in depreciation expense (18)
Slide 26: Q2 2009 – Significant events
Q2 2009 – Significant events ] Ardenville Wind Power Project April 28, announced plans to design, build, and operate Ardenville, a 69 MW wind project with a capital cost of $135 million ] Chief Operating Officer April 28, appointment of Dawn Farrell to the position of COO ] NCIB May 6, renewal of NC
Slide 27: Free Cash Flow
Free Cash Flow Q2 2009 Q2 2008 YTD YTD (MM) Q2’09 Q2’08 Cash flow from operating activities $57 $171 $140 $408 Add (Deduct): Sustaining capital expenditures (109) (109) (178) (186) Dividends on common shares (57) (54) (111) (105) Distribution to subsidiaries’ non-controlling (17) (27) (33) (44) inte
Slide 28: Minimal debt refinancing
Minimal debt refinancing Minimal debt refinancing (MM) 2009 2010 2011 2012 2013 Thereafter Total TAC CDN MTN’s (CDN$) $205 $225 $451 $881 USD MTN’s (US$) $300 $300 $500 $1,100 Other (CDN$) $39 $32 $29 $30 $29 $171 $330 1, 2 Total (CDN$) $244 $32 $254 $397 $396 $1,233 $2,556 1) Updated to reflect CDN
Slide 29: Sustaining capex spend
Sustaining capex spend ] Focus of 2009 capital: improving AB Thermal availability, increasing productivity and completing the Centralia transition (MM) 2008 2009e 2010e Sustaining $465 $360 - 410 $270 - 315 Routine $135 $115 – 135 $100 - 115 Productivity $32 $40 – 45 Mine $100 $35 - 45 $40 - 50 Cent
Slide 30: Growth capex spend
Growth capex spend ] Growth capex highest in 2009 as Keephills 3 labour peaks, Sun 5 and Blue Trail are commissioned, and the addition of Ardenville (MM) Total 2008 2009e 2010e Growth $ 1,404 $5412 $485 - 550 TBD Keephills 31 $888 $336 $235 - 255 Blue Trail $115 $26 $85 - 90 $75 $13 $50 - 60 Sun Uni
Slide 31: Balanced and disciplined capital allocation supports value creation through market cycles
Balanced and disciplined capital allocation supports value creation through market cycles Priority Direction Action Provide shareowners sustainable ] Board policy is to target a payout ratio of 60 - 70% of Dividend dividend growth comparable EPS ] 2008 annual dividend increased 8% to $1.08 ] 2009 an
Slide 32: Solid track record of results
Solid track record of results Comparable earnings per share Cash flow from operations $1.75 $1,000 $922 $1.50 22% $1.46 56% $1.31 CF Growth $778 CAGR $800 $1.16 $675 $1.25 $620 $591 $600 $1.00 $0.82 $0.66 $400 $0.75 $0.50 $200 $0.25 $0 2004 2005 2006 2007 2008 2004 2005 2006 2007 2008 12% 100% Compa
Slide 33: Strong balance sheet + stable credit ratios + solid liquidity = long-term financial strength
Strong balance sheet + stable credit ratios + solid liquidity = long-term financial strength and stability 35% Cash flow to total debt 8 Cash flow to interest 30% 7 Min 6 25% 25% 5 20% Min 4 15% 4x 3 10% 2 5% 1 0% 0 2005 2006 2007 2008 2005 2006 2007 2008 $BB 60% $2.5 Committed credit lines Debt to
Slide 34: 2009 - 2013 Development plan
2009 - 2013 Development plan Projects Announced ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & PERMITS TURBINE TOTAL PROJECT PPA / COMMERCIAL MW SITE CONTROL Applied Secured SECURED COST $ MM LTC OPERATION DATE Alberta Blue Trail 66 Wind 9 9 9 $115 2009 Alberta Sundance 5 53 Coa
Slide 35: Alberta - First GHG compliance successfully completed
Alberta - First GHG compliance successfully completed ] The majority of environmental costs are flowed through to PPA holders under change of law provisions. Alberta consumers’ electricity price will reflect higher cost of compliance Alberta Climate Change Regulation Impact on TransAlta Tough standa
Slide 36: Federal framework is tougher and requires more expensive compliance options than Alberta
Federal framework is tougher and requires more expensive compliance options than Alberta ] Near-term compliance through purchase and trading of offsets and credits. Investment in new technologies key for long-term Proposed Greenhouse Gas Regulation • Existing plants: 18% intensity reduction starting
Slide 37: Fleet costs from environmental regulation
Fleet costs from environmental regulation ] In the next decade, over 75% of emissions compliance costs are transferred by pass through mechanisms; shareowners are protected ENVIRONMENTAL OPERATING COST FORECAST MM#039;s/yr $600 Env. costs for all units Costs only before pass through $500 Price effects