Transalta Corporation · TSX:TA
Transalta — Non-Deal Roadshow (December 2009)
36 slides from Transalta's roadshow presentation, December 2009
Slide 1: Our plan for lower carbon sustainable value creation
Our plan for lower carbon sustainable value creation December 2009 1
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 ] Markets & Contracting ] Financial outlook ] Growth strategy ] Investment Highlights – 2010+ 3
Slide 4: TransAlta value proposition
TransAlta value proposition Sustainable and consistent shareholder value creation Yield plus steady and disciplined growth ] Strong dividend and payout ratio targeting 60 - 70% of EPS ] Earnings per share and cash flow growth Low to moderate risk profile ] Diversified contracting strategy with diver
Slide 5: Value proposition driven by a sound strategy
TransAlta strategy Value proposition driven by a sound strategy ] Wholesale generator & marketer in Western Canada and U.S.; renewable focus CANADA across Canada ] Low cost, predictable UNITED STATES operations Generation Facilities: Coal-fired plants 4,967 MW ] Diversity of fuels and long-term Gas-
Slide 6: Executing on our strategic priorities will drive near and long-term value
Strategic imperatives Executing on our strategic priorities will drive near and long- term value Near-term focus Executing on our strategy ] Increased productivity ] Signed new Sarnia contract DRIVE THE BASE ] Operational stability ] Finalized Centralia fuel transition ] Portfolio optimization ] Imp
Slide 7: Portfolio at a glance
Portfolio at a glance We have a unique portfolio of assets and are well advanced on our strategy to reposition our coal fleet and green our portfolio 2009 2013 TA: 7,963 MW TA & KHD: 8,776 MW 8,920 MW Renewables Renewables Fuel Type 15% Renewables 24% 22% Coal Gas Coal Coal Gas 55% 23% 62% Gas 57% 2
Slide 8: Acquisition of Canadian Hydro positions us as leading renewable provider
Executing on our strategy Acquisition of Canadian Hydro has positioned us as the leading publicly traded provider of renewable energy in Canada Total generation (MW) 8,776 Renewable Capacity Renewables (MW) 1,966 In Canada (MW)1 Renewables (%) 22% 2000 Renewables under 153 1800 construction (MW) 160
Slide 9: Earnings profile
Earnings profile Increasing contribution from natural gas & renewables should lead to multiple expansion EBITDA 22% TransAlta contractedness by fuel type 2009E 53% MW 7,000 6,000 25% 5,000 Renewables 4,000 Gas 3,000 2,000 28% Coal 1,000 0 2012E Long-Term & Medium-Term Contracts 52% (70% of portfolio
Slide 10: Market outlook: Alberta
Market outlook: Alberta Forward prices remain soft, but longer-term fundamentals of the Alberta market remain strong; oil sands recovery will drive load growth Reserve margins Power prices Reserve (CAD$/MWh) MWs Margin $100 14,000 20% 12,000 $90 10,000 15% $80 8,000 6,000 10% $70 4,000 5% $60 2,000
Slide 11: Market outlook: PacNW
Market outlook: PacNW Reserve margins to increase in the short-term due to demand Alberta reserve margins destruction; expanding natural as load remains gas recovery flat;driver for forward pricing is key economic and oil sands recovery needed to drive load growth Reserve margins Power prices Reserv
Slide 12: PPAs, long & medium-term contracts
PPAs, long & medium-term contracts Alberta PPAs and long-term contracts provide solid base for stable earnings and support TransAlta’s low to moderate risk business strategy ] Protecting the value of TransAlta’s generation Total and investment grade balance sheet MWs 9,000 8,000 Merchant contracting
Slide 13: Merchant hedging strategy
Merchant MWs Merchant hedging strategy designed to minimize impacts of adverse market conditions while allowing for upside potential Merchant MWs 3,500 Year ~% Avg. Current Forward 3,000 Contracted Contract Price Price (Oct. 27) 2,500 2009 95 AB: $60 - 65 AB: $45 - 50 PACNW: $50 - 55 PACNW: $30 - 35
Slide 14: Earnings and cash flow profile
Earnings and cash flow profile Medium and long-term contracts underpin earnings and cash flow expectations Comparable earnings per share Cash flow from operations $1.75 $M $1,400 $1.46 $1.40 $1.50 $1.31 $1,200 $9/mmbtu $1.25 $1.16 $1,000 $922 $7/mmbtu $0.98 $778 $800 $675 $1.00 $0.82 $620 $650 $5/mm
Slide 15: Capital plan and funding
Capital plan and funding We remain disciplined in how we manage our balance sheet and allocate capital Capital Allocation Plan 2010 - 2012 Sources of capital: ~$3.0 billion Dividend Growth Investment Provide shareholders Projects must deliver $3,000 Cash flow from sustainable dividend unlevered, fre
Slide 16: Financial strength
Financial strength Execute our plan while maintaining long-term financial strength and stability 35% Cash flow to debt Cash flow to interest 30% 8 7 25% Range: 6 20% 20 - 25% 5 Range: 15% 4 4 - 5x 10% 3 2 5% 1 0% 0 2006 2007 2008 2009e 2006 2007 2008 2009e Debt to capital $B Committed credit lines 6
Slide 17: Growth strategy
Growth strategy Growth strategy has shifted to accelerate near-term investments in renewables and focus on multiple options for long-term sustainability 2008 2009 2009 - 2013 ] Renewable growth in the west ] Canadian Hydro accelerated growth of • Wind renewables • Geothermal Short-term ] Co-generati
Slide 18: Advanced development
Advanced development Near-term, further growth will be financed through a balance of debt and equity appropriate for investment grade ratings Under Construction: Advanced development: CANADA 6 Facilities 13 Facilities Wind 471 MW Wind 135 MW Hydro 18 MW Hydro 134 MW Coal 271 MW Geothermal 87 MW Net
Slide 19: Investment highlights - 2010 Outlook
Investment highlights - 2010 Outlook Near-term value creation driven by productivity, cost control, and improved Alberta coal plant performance ] Outlook for earnings and cash flow growth improving despite uncertainty given low commodity prices in core markets ] Approximately 87% contracted for 2010
Slide 20: Investment highlights 2010+
Investment highlights 2010+ Long-term expansion of renewables and repositioning of coal will create sustainable value ] Strategic imperatives in place that under pin our plan for lower carbon sustainable value creation ] Advancing on key strategies to reposition coal and green the portfolio with opt
Slide 21: Appendix
Appendix TransAlta’
Slide 22: Near-term earnings outlook
Near-term earnings outlook Earnings growth expected due to operational improvements and sustainable cost savings; outlook more positive with return of demand and higher natural gas prices EPS AB Prices PNW Prices Estimates $/MWh $/MWh 2009 2012 Low Case $45 - $55 $35 - $45 $1.00 $1.25 Medium $55 - $
Slide 23: Performance goals
Performance goals Financial Measures 2009 Goals Q3 2009 Q3 2008 Review ratios Decreased due to higher unplanned Achieve top outages at Centralia Thermal and Availability 90 - 92% 83.9% 86.0% decile operations higher unplanned outages at Alberta Thermal Improve Safety Injury Frequency Rate 10%/yr Ann
Slide 24: Q3 2009 results highlights
Q3 2009 Increased results from Canadian Generation and OM&A savings partially offset by lower results from Centralia Thermal and Energy Trading ] Comparable net earnings per share of $0.34 versus comparable earnings of $0.32 in Q3 2008 • Accelerated major maintenance program resulting in positive pe
Slide 25: Comparable earnings
Q3 2009 Comparable earnings Results ($M) Q3 2009 Q3 2008 YTD YTD Q3’09 Q3’08 Net earnings $66 $61 $102 $141 Sale of assets at Centralia, net of tax - - - (4) Change in life of Centralia parts, net of tax - 1 1 8 Settlement of commercial issue, net of tax - - (6) - Writedown of Mexican investment, ne
Slide 26: Q3 2009 results
Q3 2009 Results ($M) Q3 2009 Q3 2008 YTD YTD Q3’09 Q3’08 Revenue $666 $791 $2,007 $2,302 Gross margin $380 $398 $1,107 $1,207 Operating income $120 $124 $219 $406 Comparable earnings $66 $62 $97 $210 Net Earnings $66 $61 $102 $141 Comparable earnings per share $0.34 $0.32 $0.49 $1.06 Basic and dilut
Slide 27: Net earnings
Q3 2009 Net earnings Q3 2009 YTD Q3’09 Net earnings, 2008 $61 $141 Increase (decrease) in Generation gross margins 4 (69) Mark-to-market movements - Generation (8) 13 Decrease in COD gross margins (14) (44) Decrease (increase) in operations, maintenance, 17 (51) and admin costs Increase in depreciat
Slide 28: Free Cash Flow
Free Cash Flow Q3 2009 Q3 2008 YTD YTD ($M) Q3’09 Q3’08 Cash flow from operating activities $194 $202 $334 $610 Add (Deduct): Sustaining capital expenditures (116) (97) (294) (294) Dividends on common shares (58) (58) (169) (163) Distribution to subsidiaries’ non-controlling interest (7) (25) (40) (
Slide 29: Debt profile supports balance sheet
Debt profile supports balance sheet Minimal debt refinancing over the short-term provides ample financial flexibility (CDN $M) $1,200 1, 2 $1,000 $800 $600 $400 1 1 $200 2 2 $0 2009 2010 2011 2012 2013 2014 2015 2016 2017 Thereafter 2018 CDN MTN's US MTN's 1) Based on Q2 2009 CDN/US foreign exchange
Slide 30: Sustaining capital
Sustaining capital Sustaining capex spend declines in 2010 due to lower major maintenance and levels out in 2011 and beyond ($M) 2009e 2010e 2011e 2012e Sustaining $340 - 390 $275 - 315 $310 - 355 $310 - 360 Routine $130 - 150 $100 - 115 $115 - 130 $115 - 130 Productivity $40 - 45 $5 - 10 $5 -10 $5
Slide 31: 2010 Major maintenance plan
Major maintenance 2010 Major maintenance plan Natural Gas and ($M) Coal Renewables Total Capitalized $65 - 70 $65 - 70 $130 - 140 Expensed $60 - 65 $0 - 5 $60 - 70 Total $125 - 135 $65 - 75 $190 - 210 GWh lost 1,775 - 1,850 325 - 350* 2,100 - 2,200 * Natural gas fleet only 31
Slide 32: Road to 90% fleet availability
Road to 90% fleet availability Organization, maintenance plans and spend now aligned to deliver consistent 90% fleet availability Availability mix % 98% 98 96% 96 94% 94 92% NERC (gas) Max 92 90% 90 Fleet Target Availability 88% 88 86 86% NERC (coal) Average 84 84% 82 82% Sun 1/2 Sun 3/4 Sun 5/6 Kee
Slide 33: Growth capital
Growth capital Delivering on growth and creating long-term shareholder value Completed 2009e 2010e 2011e 2012e Total Blue Trail $85 - 90 - - - $115 1 Total $85 - 90 $115 In Progress 2009e 2010e 2011e 2012e Total Sun 5 uprate $55-65 - - - $80 2 Bone Creek* $25 - 30 $20 - 25 $57 3 Summerview II $80 -
Slide 34: Advanced development
Advanced development1 Almost 700 MW of renewable energy in advanced development for TransAlta’s 2010 - 2013 pipeline Projects in Advanced Development ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & AND PERMITS TURBINE CAPEX RANGE PPA / COMMERCIAL MW SITE CONTROL Applied Secured S
Slide 35: Macro issues impacting our industry
Macro issues impacting our industry Having flexibility and options will create value given environmental, regulatory and technological uncertainties Canada U.S. Timing ] Wait for U.S. system to be determined ] Likely protracted process into 2010-11 ] Absolute-based cap & trade with ] Potential for E
Slide 36: Project Pioneer
Project Pioneer Advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2015 Project Pioneer ] Largest scale pilot in North America ] First project in the world to have an integrated underground storage system ] Potential to remove 90% of CO2 f