Slide 1: Fourth Quarter and Full Year 2014 Results & 2015 Outlook
Fourth Quarter and Full Year 2014 Results & 2015 Outlook February 19, 2015 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: Agenda
Agenda Strategic & Financial Objectives and Initiatives 2014 Year in Review 2015 Key Priorities and Outlook 3
Slide 4: Strategic & Financial Objectives and Initiatives
Strategic & Financial Objectives and Initiatives 4
Slide 5: 2014 Strategic Objectives
2014 Strategic Objectives 1. Deliver Operational Excellence • Achieve our financial, safety and operational goals across the fleet • Improve our Canadian Coal operations 2. Strengthen Our Financial Position 3. Grow Our Portfolio of Assets • Deliver an average of $40-$60 million of additional EBITDA
Slide 6: Executing the Strategy – Operational Excellence
Executing the Strategy – Operational Excellence Delivered on our financial, safety and operational goals: • Delivered expected FFO and FCF • Achieved adjusted availability of 90.5% - our strongest fleet availability since 2003 • Delivered record safety performance with an IFR of 0.86 Improved our Ca
Slide 7: Executing the Strategy – Strengthen Financial Position
Executing the Strategy – Strengthen Financial Position • Reduced net debt by $500 million since year-end 2013 • Received an investment grade credit rating from Fitch Ratings • Investment grade ratings were confirmed by all rating agencies • Re-contracted 700 MW since 2011, and added an additional 70
Slide 8: Executing the Strategy – Grow Our Portfolio
Executing the Strategy – Grow Our Portfolio Deliver an average of $40-$60 million of additional EBITDA per year from growth • $650 million in committed long-term contracted growth underway, adding $90 million of annualized EBITDA in 2017 • Started construction of our 150 MW South Hedland gas-fired f
Slide 9: Proven Track Record of Growth
Proven Track Record of Growth Capital Invested in Growth $M $650M in committed capital ~$90M in incremental EBITDA $4.0 billion of growth during last five years $650 million of growth underway 9
Slide 10: 2014 Year in Review
TransAlta 2014 Year in Review
Slide 11: 2014 Fourth Quarter Comparable EBITDA ($M)
2014 Fourth Quarter Comparable EBITDA ($M) Business Unit Q4 2013 Q4 2014 Key Drivers • Lower coal costs following integration of Highvale mine in 2013 and continued Canadian Coal $68 $118 improved operational performance • Gain on settlement of dispute in prior years • Increased margins as we furthe
Slide 12: 2014 Business Segment Comparable EBITDA ($M)
2014 Business Segment Comparable EBITDA ($M) Business Unit 2013 2014 Key Drivers Generation Segment Canadian Coal $309 $386 • Increased availability and reduced costs • Increased margins offset by favorable U.S. Coal $66 $62 adjustments related to prior period gross margins included in 2013 Gas $327
Slide 13: 2014 Comparable FFO and FCF
2014 Comparable FFO and FCF Comparable Free cash flow in line with 2013 at $295 million 2013 2014 Comparable EBITDA $1,023 $1036 Interest ($238) ($236) Cash taxes ($39) ($33) Other adjustments ($17) ($5) Comparable FFO $729 $762 Sustaining Capital ($341) ($342) Preferred Share Dividends ($38) ($41)
Slide 14: Strengthening our Financial Position
Strengthening our Financial Position $M 18% FFO / Debt1 Net Debt 4,400 17% 4,200 16% 4,000 Impact of Foreign 3,800 Exchange 15% 3,600 14% 3,400 13% 3,200 12% 3,000 2013 2014 2013 2014 $500 million reduction in net debt since YE 2013 ¹ Assumes 50/50 treatment of Preferred shares and reported net debt
Slide 15: Sustaining Capital
Sustaining Capital 2014 sustaining capital of $342 million at the lower end of our $335-365 million target and in line with 2013 $M 15
Slide 16: 2015 Priorities and Outlook
2015 Priorities and Outlook 16
Slide 17: Key Priorities for 2015
Key Priorities for 2015 Strategic Objectives Initiatives Full fleet availability target of 89-91% Drive continued cost and availability improvements at Alberta Coal Operational Excellence Achieve another year of record safety Strengthen financial position through executing funding plan to pay down d
Slide 18: 2015 Financial Outlook
2015 Financial Outlook Range of Key Assumptions Power Prices Alberta Spot ($/MWh) $ 44 - $ 49 Alberta Contracted ($/MWh) $ 50 - $ 55 Mid-C Spot (US$/MWh) $ 27 - $ 32 Mid-C Contracted (US$/MWh) $ 40 - $ 45 Other Fleet Availability 89% - 91% Hydro / Wind Resource - P50 - 18
Slide 19: 2015 Sustaining Capital
2015 Sustaining Capital $ Millions 2014 2015 Forecast Routine $116 $100 – $110 Major Maintenance $162 $180 – $190 Mine Capital(1) $45 $20 – $25 Finance Leases $10 $10 – $15 Total Sustaining Capital $333 $310 – $340 Total Sustaining Capital $342 $335 – $370 including flood-recovery capital 1 Includes
Slide 20: 2015 Financial Outlook
2015 Financial Outlook 2015 Outlook Range Comparable EBITDA $ 1,000 $ 1,040 Cash Interest (210) (195) Cash Taxes (35) (40) Others (35) (35) Funds from Operations $ 720 $ 770 Sustaining Capital (310) (340) Free Cash Flow (FCF) $ 410 $ 430 Pfd Share/Other Distributions (145) (160) Free Cash Flow (FCF)
Slide 21: TransAlta
TransAlta Q&A. Questions, Answers