Transalta Corporation · TSX:TA
Transalta — Investor Presentation (January 2024)
71 slides from Transalta's investor presentation, January 2024
Slide 1: Investor Presentation January 2024
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Slide 2: Disclaimer and forward-looking statements
Disclaimer and forward-looking statements TransAlta Corporation (“TransAlta” or the “Company”) is not making any offer or invitation of any generation facilities; TransAlta’s acquisition of Heartland, including timing of closing and the staff our operations and facilities; disruptions to our supply
Slide 3: TransAlta at a glance
TransAlta at a glance 6,400 MW Diversified portfolio 76 generating facilities in Canada, $8.7 billion 112 years United States and Australia Enterprise value Generation experience Strong balance sheet and capital discipline Foundation of our ~$900 million focused strategy 2023 expected free cash flow
Slide 4: Who we are
Who we are A leader in clean electricity committed to a sustainable future and a responsible energy transition Our Strategy Our Values Customer needs Safety Operational excellence Innovation People Sustainability Shareholder value Respect Integrity Braley, Massachusetts 4
Slide 5: Highly diversified portfolio of high-quality assets
Hydro Gas Wind and solar Energy Development marketing pipeline and capabilities Highly diversified portfolio of high-quality assets Stable contracted base with Alberta merchant upside 5
Slide 6: Fleet Overview
Fleet Overview Wind, Solar and Storage 33 Facilities Hydro 25 Facilities Natural Gas 17 Facilities Coal 1 Facility Technology: Wind Solar Hydro Battery Natural Gas Coal Wind Under Construction 6
Slide 7: Strategic position strengthened since 2021
Strategic position strengthened since 2021 CO2 Progressed Clean Simplified Corporate Advanced Carbon Expanded Alberta Electricity Growth Structure Transition Diversification +800 MW of wind +1.2 GW increase in -800 MW of thermal +1.8 GW of complementary and solar economic ownership of generation ret
Slide 8: Delivered exceptional results
Since our last Delivered Free Cash Flow1 Adjusted EBITDA1 Investor Day exceptional +59% results Free Cash Flow1 +66% increased by $360 Million EBITDA1 increased by 2021 2023 2021 2023 $650 Million Contractedness1,2 Emissions reductions Renewable capacity1,2 (MW) (Millions tonnes CO2) (MW) Contracted
Slide 9: Electrification presents significant opportunities
Electrification presents significant opportunities CO2 Global efforts to Policy responses Corporations Significant decarbonize are are fast‐tracking and investors are investment accelerating at a the emergence of a leading by required to meet rapid pace clean electricity committing to the challenge
Slide 10: Balanced approach required for success in energy transition
Balanced approach required for success in energy transition Affordability Energy Transition Reliability Decarbonization 10
Slide 11: Strategic priorities to 2028
Strategic 1 Optimize Alberta portfolio priorities 2 Execute Clean Electricity Growth Plan to 2028 Selective expansion of flexible generation 3 and reliability assets Maintain financial strength and capital 4 allocation discipline 5 Define next generation of power solutions 6 Lead in ESG and market p
Slide 12: Clean Electricity Growth Plan to 2028
Clean Electricity Growth Plan to 2028 Up to 1.75 GW $3.5 billion $350 million Clean electricity Growth capex New annual EBITDA 2024 2025 2028 5 GW 10 GW Development pipeline Development pipeline 12
Slide 13: Evolution of the company
Evolution of the company Growing our Capacity (MW)1 Adjusted EBITDA (%) renewable generation +67% Renewables +61% 70% 42% Growing our contracted 2023 2028 base 2023 2028 Renewables Gas Renewables Gas Energy transition Energy marketing Energy transition +90% Contracted +177% EBITDA attributable to 72
Slide 14: Foundations for our success
Foundations for our success Optimization and trading expertise Highly credible developer Local presence Customer Focus Operational excellence Strong balance sheet Technological innovation 14
Slide 15: Sustainability targets
Sustainability targets Environmental goals Social goals Governance goals Net zero by 2045 Support for indigenous 50% female Board communities representation by 2030 Reduce GHG emissions by 1 75% by 2026 Reclaim mined land in Alberta 40% company-wide female and Washington State employment by 2030 Ver
Slide 16: Committed to emissions reductions
Committed to emissions reductions Combined emissions of TransAlta and Heartland2 TransAlta carbon reductions achieved to date1 (million tonnes CO2) 76% 32M 39.0 From 2005 levels Annual tonnes -75% from 2005 23.2 19.2 15.8 ~10% 0% Of Canada’s Paris Coal-fired emissions Agreement Target in Canada 2015
Slide 17: Recognized as a global leader
Recognized as a global leader TransAlta Corporation received an A-, which is in the Leadership band. This is above the thermal power generation sector average of B.” Ranking Overall TransAlta Corporation received an AA, which is the second highest rating given by MSCI on ESG related business practic
Slide 18: 2023 performance
2023 performance Horseshoe, Alberta 18
Slide 19: Q3 2023 At A Glance
Q3 2023 At Transaction Achievements A Glance Q3 2023 Results and Growth and Strategic Financial Position Customer Solutions Initiatives Adjusted EBITDA1 of 418 MW of advanced-stage TransAlta Renewables $453 million development projects acquisition adds proportionate capacity of +1.2 GW FCF1 of $228
Slide 20: Attractive Deal Metrics for Heartland Transaction
Attractive Deal Metrics for Heartland Transaction Annual Average TEV1/EBITDA2 EBITDA2 Cost per kW3 Contracted Cash Multiple at Closing Flows Contribution ~5.5x ~$115 $357 ~55% Multiple Million Per kW Revenue Adds 1,844 MW of complementary flexible capacity 1 TEV is an abbreviation of total enterpris
Slide 21: Heartland Transaction at a Glance
Heartland Transaction at a Glance November 2023 2024 Purchase price of $390 million Subject to customary Transaction closes plus $268 million of low-cost closing conditions and debt regulatory approvals Financed using available liquidity 21
Slide 22: TransAlta Segmented Results
TransAlta Segmented Results 3 and 9 Months Ended September 30, 2023 ($millions) Q3 2023 Q3 2022 Adjusted EBITDA1 YTD 2023 YTD 2022 Alberta Gas 150 245 Hydro 403 394 fleet 37 42 Wind and Solar 175 219 continues 254 195 Gas 660 365 to have 29 51 Energy Transition 96 67 exceptional 13 53 Energy Marketi
Slide 23: Alberta Electricity Portfolio
Alberta Electricity Portfolio Q3 2023 Realized Prices Alberta Hedging Q4 2023 2024 128% 114% Price $89 / MWh $84 / MWh AB Hydro average AB Gas average Energy real i z ed merch an t real i z ed merch an t Volume 1,697 GWh 6,642 GWh en ergy pri ce to en ergy pri ce to spot i n Q3 2023 spot i n Q3 2023
Slide 24: Strong Performance from Alberta Hydro
Strong Performance from Alberta Hydro Hydro Adjusted EBITDA 1 ($millions) Hydro Volumes (GWh) 900 300 800 250 700 Volume (GWh) 600 200 $ millions 500 150 400 300 100 200 50 100 - 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q3 2021 Q3 2022 Q3 2023 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 TA EBIT
Slide 25: 2023 in-year priorities
2023 in-year priorities Windrise, Alberta 25
Slide 26: 2023 Priorities
2023 Priorities Safety, Reliability Growth and Commercial Strategic Initiatives and Availability Progress 418 MW advanced-staged Accelerate CO2 emissions reduction to Achieve strong safety performance projects 75% from 2015 levels by 2026 Complete Garden Plain, Northern Achieve strong fleet availabi
Slide 27: 2024 outlook
2024 outlook Windrise, Alberta 27
Slide 28: 2024 guidance
2024 guidance ($ millions) 2024 Outlook Adjusted EBITDA1 1,150 to 1,300 FCF1 450 to 600 Sustaining Capital 130 to 150 Market 2024 Outlook Alberta Spot 75 to 95 ($/MWh) Mid-C Spot 85 to 95 (US$/MWh) AECO Gas Price 2.50 to 3.00 ($/GJ) 28 1 Adjusted EBITDA and Free Cash Flow are non-IFRS measures. Cert
Slide 29: Alberta market evolution
Alberta market evolution Big Horn, Alberta 29
Slide 30: Alberta business
Alberta business Maximize shareholder returns through active management of our diversified merchant portfolio Provide dynamic, cost-effective and low-carbon solutions to meet customer power demand and ESG goals Identify and evaluate market and technological sources for long-term growth Technology1:
Slide 31: Hedging and optimization increases our advantage
Hedging and optimization increases our advantage Ancillary services leader 112-year extensive operating expertise Trusted C&I Peaking supplier capacity Exceptional in-house forecasting and analytical capabilities Optimization expertise Integrated asset optimization and operations to ensure portfolio
Slide 32: Merchant electricity market evolution
Merchant electricity market evolution Higher average Lower average pricing pricing 2020 2025 2030 Moderate volatility Higher volatility Baseload generation Peaking generation and fleet diversity Lower carbon footprint Higher carbon footprint Optimization Hedging and optimization Grid reliability ser
Slide 33: Major supply shift continues
Major supply shift continues Alberta installed capacity and peak load (MW) 35,000 +185% Expected supply 30,000 growth in renewables 25,000 20,000 +140% 15,000 10,000 Expected supply growth in combined 5,000 cycle gas 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Cogeneration Renewables Storage
Slide 34: Prices expected to soften mid-decade with supply
Prices expected to soften mid-decade with supply Annual average power price forecast ($ per MWh) 162 149 102 47 2020 2021 2022 2023 YTD 2024 2025 2026 2027 2028 2029 2030 Actual Forecast Prices to decline before rebounding later in the decade 34
Slide 35: Intraday volatility of renewable supply
Intraday volatility of renewable supply Increasing renewable Renewable generation - maximum hourly change (MW) generation Increasing renewable generation will result in larger hour-to-hour changes in outputwill – challenging the reliability of the electricity system. result in larger hour-to-hour 2,
Slide 36: Wind penetration will increase volatility in price
Wind penetration will increase volatility in price September 2023 wind generation and power price volatility 900 High Low High 3,000 Supply surplus ($0/MWh) wind wind wind 800 2,500 Wind generation (MWh) Power price ($ per MWh) 700 600 2,000 500 1,500 400 300 1,000 200 500 100 0 0 Wind Generation Po
Slide 37: Increasing diversification of future portfolio
Increasing diversification of future portfolio Wind1 Hydro2 Storage3 Thermal Gas4 Peaking Gas4,5 Cogen Gas4 Assets 15 17 3 7 5 5 Capacity 1,134 MW 834 MW 350 MW 2,439 MW 431 MW 542 MW Baseload + Intermittent Baseload and Energy arbitrage / dispatchable – Peaking/ flexible Non-dispatchable Carbon-fre
Slide 38: Comparison of technology capabilities
Comparison of technology capabilities Fast Baseload Fast Response Carbon Free Regulating Spinning Supplemental Technology Frequency Energy1 Energy1 Energy1 Reserve Reserve Reserve Response Hydro Wind / Solar Thermal CTG NGCC NG Peaking Storage Legend: TA capabil
Slide 39: Value of hydro portfolio
Value of hydro portfolio Key supplier of regulating reserves Market size of ancillary services to be in the range of $200M to $400M per year Merging conventional hydro and battery Brazeau storage expands optionality 350 MW Bighorn 120 MW Growth in electrification, demand, renewables and energy impor
Slide 40: Strong track record of realized pricing and optimization
Strong track record of realized pricing and optimization Realized energy and ancillary prices ($ per MWh) 50% 300 Average Realized 250 Ancillary Price to Spot 200 150 100 126% Average 50 Realized Energy Price 0 to Spot Q1 2021Q2 2021Q3 2021Q4 2021Q1 2022Q2 2022Q3 2022Q4 2022Q1 2023Q2 2023Q3 2023 Hyd
Slide 41: Value of CTG portfolio
Value of CTG portfolio Operates in the high-value part of the offer curve – acting as super-peakers Sundance Key resources needed for market 401 MW reliability Keephills 858 MW Battle River2 550 MW Retirement and/or mothball decisions based on economics Sheerness2 600 MW Optimization and market expe
Slide 42: Thermal gas required when renewable resources are low
Thermal gas required when renewable resources are low Thermal gas capacity is Estimated thermal gas generation required (MW) required to meet Alberta demand and reliability Province loses 5.5 GW of capacity on Shortfall low renewable- resource days 1 42 1 Includes cogen NTG, CCGT and SCGT
Slide 43: Value of peaking portfolio
Value of peaking portfolio Rainbow 51 49 MW Peaking asset value to increase with intermittent generation Poplar Hill1 Valley View1 48 MW 100 MW Fast-ramping flexible units and Pinnacle2 combined with our hydro, coal-to-gas 44 MW and storage cover the entire dispatch curve Joffre1 190 MW Best-in-clas
Slide 44: Value of storage portfolio
Value of storage portfolio Strategically-located units will store surplus generation for discharge at peak periods Extremely valuable in ancillary services Brazeau PHES1 and fast-frequency response markets 900 MW Volatile price environment expected WaterCharger1 180 MW Tent Mountain PHES1 320 MW Opp
Slide 45: Hedging strategy aligned with market outlook
Hedging strategy aligned with mar market outlook Expected 2024 Power positions 2024-2026 (average MW per hour) production mostly hedged 1,200 1,000 +600 MW of 800 sales achieved through 2025 600 hedging 400 program 200 0 2024 2025 2026 Capacity contract Commercial and industrial Hedges 45
Slide 46: Alberta portfolio provides solid cash flows for 2024
Alberta portfolio provides solid cash flows for 2024 Alberta portfolio expected to 2024E adjusted EBITDA guidance 2024E Alberta fleet production (GWh) contribute $500 to $600 million or ~45% of 2024 adjusted EBITDA target 10,450 GWh $1,150 to $1,300 $5 per MWh million 2022-2024E fleet production (GW
Slide 47: Growth execution
Growth execution Horizon Hill, Oklahoma 47
Slide 48: Our investment focus to 2028
Our investment focus to 2028 Renewables and Responsive and flexible New technology storage generation for reliability Expand core focus of onshore wind Optimize legacy gas generation Monitor and assess new to maximize cash flow and fund technologies such as storage, Expand position in solar renewabl
Slide 49: Our competitive advantage
Our competitive advantage Owner / operator business model Optimization and trading excellence Strong balance sheet Highly credible and Extensive wind platform capable developer Full lifecycle capabilities and risk control Strong customer relationships Demonstrated ESG results 49
Slide 50: TransAlta project development lifecycle
TransAlta project development lifecycle Early-stage Advanced Construction development development Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Screening Development Definition Execution Closure Growth and Project Delivery Energy and Marketing Construction 50
Slide 51: Growing our fleet
Growing our fleet Clean Electricity Growth Plan progress (MW) 800 MW delivered since 2021 800 3 GW through strategic transactions Clean Electricity Growth Plan and strategic transactions (MW) 1,844 800 1,187 3,831 400 MW in advanced stage 51
Slide 52: Successful pipeline growth
Successful pipeline growth Pipeline expanded by >2.7 GW Development pipeline (MW) Since 2021 On track to achieve +84% 5 GW pipeline By 2025 4,837 New target to deliver 10 GW pipeline By 2028 52
Slide 53: Development pipeline
Development pipeline Potential Development (excluding prospects): 2,235 – 2,485 MW United States Project MW Technology State Stage FID Monument Road 152 Wind NE 2025 Swan Creek 126 Wind NE 2025 Dos Rios 242 Wind OK 2025 Old Town 185 Wind IL 2025 Cotton Belle 1 96 Solar TX 2025 Quick Draw 174 Wind TX
Slide 54: Development pipeline
Development pipeline Potential Development (excluding prospects): 2,181 – 3,031 MW Canada Project MW Technology Location Stage FID Tempest 100 Wind AB 2024 WaterCharger 180 Battery AB 2024 Pinnacle 1 & 2 44 Gas AB 2024 Riplinger 300 Wind AB 2025 SunHills Solar 170 Solar AB 2025 McNeil Solar 57 Solar
Slide 55: Development pipeline
Development pipeline Potential Development (excluding prospects): 421 MW Australia Project MW Technology Location Stage FID Mt. Keith West 321 Transmission Mt Keith 2023 Network Upgrade Mt. Keith Capacity 94 Gas Mt Keith 2023 Additions Mt. Keith Wind 100 Wind Mt Keith 2024 Port Boodarie Solar 50 Sol
Slide 56: WaterCharger
Largest battery installation in Alberta, providing energy optimization and key reliability service to the WaterCharger Alberta system First Nation equity Location Ghost Hydro Facility partnership Technology Battery Storage Funding secured through Canada’s Smart Renewables Chemistry Lithium-Ion Phosp
Slide 57: Pinnacle
Fast dispatch gas-fired Pinnacle peaking facility, will respond to periods of high demand Acquired gas Location Keephills reciprocating engines at significant discount Fuel Natural Gas Leverages existing infrastructure at Contract Type Merchant Keephills site Size 44 MW Positioning for a more volati
Slide 58: Mt Keith Expansion
Mt Keith Efficient gas-fired generating capacity to meet Expansion customer’s growing demand and to enable increased renewable generation Developing under the Location Mount Keith BHP Nickel West PPA Adding synchronous Fuel Gas condenser capability to improve grid stability Contract Type 13-year PPA
Slide 59: Hancock Prospecting Joint Development Agreement
Hancock Strategic development partnership to provide Prospecting reliable supply to Hancock Prospecting Joint Development + Agreement Hancock Prospecting is a large and diversified Australian company and fourth largest iron ore producer in the country Partnership builds on expertise in reliable supp
Slide 60: Enhancing Value with Energy Marketing
Enhancing Value with Energy Marketing Le Nordias, Quebec 60
Slide 61: Aligning Growth and Energy Marketing
Aligning Growth and Energy Marketing Asset valuation Proprietary trading Aligned global team committed Pipeline management Market Asset optimization to accelerating interpretation value delivery of Specialty products Customer high-quality relationships portfolio through Growth Energy Marketing cross
Slide 62: Energy marketing fulfils key roles
Energy marketing fulfils key roles Asset Asset Segment optimization growth profitability Manages optimization Provides market insights Track record of generating and commodity risk for to the growth and M&A teams strong segment Ontario and US assets revenues 62
Slide 63: Energy marketing capabilities
Energy marketing capabilities Electricity Natural Gas Emissions NWPP, CAISO, SPP, SWPP, IESO, Markets ISO-NE, NYISO, PJM, MISO, ERCOT Canada and US Canada and US Execution for TransAlta and third-party assets Diverse product Origination and knowledge base structured products provides key Real-time t
Slide 64: EBITDA contribution of over $630 million since 2019
Increasing volatility EBITDA contribution of over $630 across North American markets million since 2019 EBITDA contribution ($ million) Positioned to 183 deliver value in all market conditions 166 103 89 Tightly managed 95 risk profile $135 million 2019 2020 2021 2022 2023 4-year average Adjusted EB
Slide 65: Financial strategy and plan
Financial strategy and plan Brazeau, Alberta 65
Slide 66: Investment return targets
Investment return targets Required return evaluation criteria Investment size Disciplined capital allocation to enhance shareholder value Contractedness Project returns are assessed based on the unique Customer quality characteristics of each project Future business potential Targeting returns at 10
Slide 67: Simplified capital allocation
Simplified capital allocation Since 2021 Maintained strong credit metrics Returned $160 million in dividends Maintain balance sheet Dividend increased by 10% annually Fund the dividend Free Cash Deployed $1.4 billion towards the Clean Flow Electricity Growth Plan Execute on growth Invested $1.4 bill
Slide 68: Growth plan is well funded
Growth plan is well funded Consolidated sources and uses 2024-2028 Growth funding 2024-2028 6,000 5,000 Operating Debt cash flow will issued for growth fund equity 4,000 Clean Electricity requirements Growth $3.5 for growth Plan billion program $ millions 3,000 2,000 Free cash flow Heartland Common
Slide 69: Prudent capital management
Prudent capital management Share Valuation Credit ratings Dividend S&P BB+ $0.24 +10% CAGR $0.22 Moody’s Ba1 $0.20 DBRS BBB (low) $0.18 $0.17 $0.16 Debt/EBITDA 3.0 - 4.0x target 2019 2020 2021 2022 2023 2024 69
Slide 70: Diversified and resilient fleet
Diversified and resilient fleet Clean electricity leader with ESG focus 4.8+ GW growth pipeline Strong financial position Antrim, New Hampshire 70
Slide 71: Questions & Answers
Questions & Answers Visit us at: www.transalta.com Investor_relations@transalta.com 71