Transalta Corporation · TSX:TA
Transalta — Investor Presentation (December 2016)
37 slides from Transalta's investor presentation, December 2016
Slide 1: TransAlta Corporation Investor Presentation
TransAlta Corporation Investor Presentation December 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: Outline
Outline Overview 4 Industry Changes 6 Strategic Objectives 10 Growth Strategy 13 2016 Outlook 23 Financial Strategy 28 TransAlta Renewables 31 Appendix 35 3
Slide 4: TransAlta's Platform
TransAlta’s Platform 6 facilities in Alberta and the Pacific Coal: 4,931 MW Northwest 12 facilities in Canada and Australia; also 270km pipeline Gas: 1,323 MW RNW owns an economic interest in all Australian gas assets (425 MW) and the 506 MW gas facility in Ontario Wind & Solar: 27 facilities in Can
Slide 5: Our Highly Diversified Portfolio
Our Highly Diversified Portfolio • Highly diversified cash flows from five fuel types with facilities located in Canada, the United States and Australia • TransAlta is Canada’s largest generator of wind power and the largest generator of renewable energy in Alberta • Gas-fired and renewable assets a
Slide 6: Far-reaching Industry Changes
Far-reaching Industry Changes 6
Slide 7: Far-Reaching Industry Changes in Alberta
Far-Reaching Industry Changes in Alberta 1 Moving to a Capacity Market 2 Off-coal transition payments • Total payment of $524 million comprised of annual payments of ~$37 million commencing in 2017 and terminating in 2030. 3 Support for renewables growth 4 Framework and support for transition to coa
Slide 8: Capacity Market – A Stable Investment Environment
Capacity Market – A Stable Investment Environment TransAlta has advocated for, and is supportive of, a Capacity Market structure 1 Consultation and implementation over next 3 years; first auction taking place in 2021 for 2024 2 Allows both existing and new dispatachable generation to compete for cap
Slide 9: Transitioning Off Coal to Gas and Renewables
Transitioning Off Coal to Gas and Renewables Memorandum of Understanding Supports cooperation and collaboration with the Alberta Government to advance initiatives including: 1 Coal-to-gas Conversions 2 Support for Renewable Electricity • Fair treatment of existing renewable generation • Value of ren
Slide 10: Strategic Objectives
Strategic Objectives 10
Slide 11: Strategic Objectives
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 11
Slide 12: Executing Our Strategic Objectives
Executing Our Strategic Objectives 2015 2016 • Reduced costs by ~$50 million • Continued focus on delivering Operational with cost saving initiatives at strong operational, safety and Canadian Coal and Corporate Excellence financial performance • Best ever safety (IFR of 0.75) • Reposition our capit
Slide 13: Growth Strategy
Growth Strategy 13
Slide 14: South Hedland Power Station
South Hedland Power Station 150 MW Combined Cycle Gas Power Station in Western Australia • Commissioning expected on schedule and on budget in mid-2017 • Expected to generate ~$80 million of EBITDA on an annualized basis • Project has been funded without increasing our debt levels (total investment
Slide 15: Long-Term Investment Opportunities
Long-Term Investment Opportunities Alberta Gas-Fired and Renewables • Up to ~3,000MW’s of coal-to-gas conversions; extending life of coal facilities • Alberta’s Renewable Electricity Program – addition of 5,000MW of renewable energy capacity by 2030 Brazeau Pump Storage • 600 – 900MW’s expansion; br
Slide 16: Coal-to-Gas Conversion Attributes vs. Coal Generation
Coal-to-Gas Conversion Attributes vs. Coal Generation Competitive Capital • Utilizes existing capital, sites and transmission Costs • $125 - $150/KW cost for burner conversion Lower Operating • 40-50% lower operating & sustaining capital Cost • 65% lower carbon costs Ease of Conversion • 60 days req
Slide 17: Coal-to-Gas Conversion vs Sundance 7
Coal-to-Gas Conversion vs Sundance 7 Coal-to-Gas New CCGT Facility Conversion Cost $125 to $150/KW $1,500/KW Investment life 15 years 30 years Carbon Tax Higher Lower Capacity Backup Baseload Ramping Slower Faster Coal-to-Gas conversions provide higher returns over a shorter project life with less r
Slide 18: Brazeau Pumped Storage Opportunity
Brazeau Pumped Storage Opportunity – Expanding Our Alberta Hydro Platform 1 Leader in Alberta with 834 MW across 17 units 2 600 to 900 MW pumped storage expansion 3 Increases Brazeau capacity to 955 to 1,255 MW. 4 Low cost alternative to greenfield build out Brazeau 5 Investment of ~$1.8 billion to
Slide 19: Brazeau Hydro – Looking Forward
Brazeau Hydro – Looking Forward 1 2 1 New Turbines 2 New Dam 19
Slide 20: Brazeau Hydro – Benefits
Brazeau Hydro – Benefits Utilizes existing site and infrastructure Provides system support as wind build-out occurs Fast ramping Perpetual assets – existing fleet is 100 yrs. old 20
Slide 21: Brazeau Hydro – Our Action Plan
Brazeau Hydro – Our Action Plan Expected to be operational by the mid-2020’s Key Actions to support execution: • Refine engineering and capital costs • Initiate stakeholder consultation and permitting • Develop and receive a long-term contract from the Alberta Govt supporting the project • Apply for
Slide 22: Alberta Renewables – Our Competitive Advantage
Alberta Renewables – Our Competitive Advantage 1 Wind sites in Alberta that are near existing transmission and in advanced stages of development 2 300MW of renewable opportunities available for near-term AESO REP 3 Long-standing land owner relationships across Alberta 22
Slide 23: 2016 Outlook
2016 Outlook 23
Slide 24: 2016 Goals and Priorities
2016 Goals and Priorities Secure a mutually beneficial coal transition arrangement with the Alberta Government Continue to reposition our capital structure Continue to grow TransAlta Renewables Inc. Continued focus on delivering strong operational, safety and financial performance 24
Slide 25: 2016 Outlook
2016 Outlook 2016 Outlook Ranges ($M) Comparable EBITDA $990 $1,100 Comparable Funds from Operations $755 $835 Sustaining Capital (330) (350) Pfd Share/Other Distributions (175) (185) Comparable Free Cash Flow $250 $300 Comparable Free Cash Flow Per Share $0.86 $1.03 Annual Dividend $0.16 $0.16 Divi
Slide 26: 2016 YTD vs 2016 Guidance
2016 YTD vs 2016 Guidance Comparable EBITDA Comparable FFO $1,200 Guidance $1,000 Guidance $1,000 $800 $800 $600 $1,100 $600 $990 $835 $755 $400 $771 $400 $535 $200 $200 $- $- YTD Low High YTD Low High Comparable FCF CAD Coal Availability $400 90% Guidance Guidance $300 $200 85% 89% $300 87% $250 86
Slide 27: Contracted Portfolio Supports Stable EBITDA
Contracted Portfolio Supports Stable EBITDA Total portfolio contractedness1 Merchant exposure in Alberta and the MW Pacific NW 88% 85% 73% 70% 2016 Hedge prices AB ~$45 - $50/MWh 6,000 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 28: Financial Strategy
Financial Strategy 28
Slide 29: Finance & Treasury Overview
Finance & Treasury Overview Area of Focus Execution • Average liquidity of $1.3B since 2014; liquidity of $1.7B at Liquidity September 30, 2016 $2.5 $2.0 Cash C$ Billion $1.5 Available Liquidity $1.0 Committed Credit Facilities $0.5 $0.0 Dec 31/14 Mar 31/15 Jun 30/15 Sep 30/15 Dec 31/15 Mar 31/16 Ju
Slide 30: Repositioning our Capital Structure (2016 to 2018)
Repositioning our Capital Structure (2016 to 2018) • Financing plan is expected to result in the appropriate allocation of debt between TransAlta and TransAlta Renewables TOTAL Non- C$B Recourse Non-Recourse Recourse Recourse Current (March 31, 2016) $3.2 $0.1 $0.0 $0.7 $4.0 Project Financing $0.4 $
Slide 31: TransAlta Renewables
f renewables 31
Slide 32: Leveraging TransAlta Renewables Inc.
Leveraging TransAlta Renewables Inc. • TransAlta is the largest TransAlta Public shareholder of TransAlta Renewables Inc. and will maintain ~60-80% ownership • Unlocks the value of long-life contracted assets on attractive ~60-80% ~20-40% terms • Provides access to lower cost funding TransAlta Renew
Slide 33: TransAlta Renewables
TransAlta Renewables (TSX:RNW) • Provides stable, consistent returns through the ownership of highly contracted power generation and other infrastructure assets Enterprise Value¹ $4.5 Billion Market Cap.2 $3.4 Billion 2016E EBITDA $365 - $390 Million 2016E CAFD $210 - $235 Million Dividend Yield 6.4
Slide 34: 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 • ~$140M EBITDA • ~800 MW from 13 units in Alberta, representing
Slide 35: Appendix
Appendix 35
Slide 36: Financial Performance by Business Segment
Financial Performance by Business Segment (1) Business 2011 2012 2013 2014 2015 2016 (2) Segment YTD EBITDA ($M) Canadian Coal $273 $373 $311 $389 $393 $295 U.S. Coal $211 $148 $67 $65 $67 $27 Gas $275 $312 $332 $312 $330 $270 Wind $163 $151 $181 $179 $176 $129 Hydro $105 $127 $148 $87 $73 $62 Energ
Slide 37: Upcoming Debt Maturities
Upcoming Debt Maturities $800 (1) $167 $600 $400 (2) $520 $200 $400 $400 $400 $0 2017 2018 2019 2020 USD CAD (1) Debt related to RNW. (2) Includes USD$20 million of debt related to RNW. 37