Slide 1: Investor Update
TransAlta Investor Update August 2005
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. These statements are subject to a number of risks and uncertainties that may cause actual results to differ
Slide 3: Financial highlights
Financial highlights YTD YTD TransAlta (millions $Cdn) Q2 '05 Q2 '04 2005 2004 Earnings from continuing operations $25 $16 $77 $63 per share $0.13 $0.08 $0.39 $0.33 Comparable earnings $25 $8 $77 $58 per share $0.13 $0.04 $0.39 $0.30 Cash flow from operations $104 $86 $242 $270 Debt to capital 46.1%
Slide 4: Free cash flow
Free cash flow millions $Cdn Q2 ‘05 Q2 ‘04 YTD 2005 YTD 2004 Cash flow from operating activities $ 104 $ 86 $ 242 $ 270 Less: maintenance and other capex 105 36 118 45 Less: scheduled debt repayment 15 18 22 38* Less: distribution to NCI 17 -3 36 2 Comparable free cash flow $ -33 $ 35 $ 51 $ 185 *Ne
Slide 5: Operating performance…solid with major maintenance
Operating performance…solid with major maintenance YTD YTD Q2 '05 Q2 '04 2005 2004 Availability (%) 84.1 85.2 88.7 90.1 Production (GWhs) 12,124 12,088 25,230 25,461 Major maintenance (millions $Cdn) Capital $ 50 36 56 45 Operating $ 28 32 32 36 Total $ 78 68 88 81 Lost production (GWhs) 1,442 1,316
Slide 6: What lies ahead?
What lies ahead?
Slide 7: Contracting remains high … for stability
Contracting remains high … for stability At 2004 Investor Days we reaffirmed our minimum of 75% forward contracting levels TransAlta contracting levels 1) Current contracting levels: ~ 80% in 2006 - 2007 10,000 ~ 70% in 2008 - 2010 Capability in MWs 8,000 2) Recontracting plans have 6,000 83% specif
Slide 8: Sarnia merchant upside
Sarnia merchant upside Portfolio capacity 2005 - 2006 upside Centralia • Government directive issued Coal 16% 15th June 2005 to OPA Centralia Gas (BHP) 3% • Initial discussions held with Sarnia 7% OPA promising All other • Expect to conclude OPA negotiations and OEB review by year-end • Anticipate d
Slide 9: Centralia Coal contracting upside
Centralia Coal contracting upside Portfolio Capacity #DIV/0! MIDC Onpeak calender 2008 Centralia $62 Coal 16% $57 Centralia US$/MWh $52 Gas (BHP) $47 Sarnia $42 All other 2004 2005 $37 $32 Nov-02 Oct-03 Oct-04 Oct-04 Oct-04 Nov-04 Nov-04 Nov-04 Nov-04 Jul-04 Aug-04 Aug-04 Dec-04 Dec-04 Jan-05 Jan-05
Slide 10: Centralia coal costs
Centralia coal costs Just In Time Fueling 20.00 Operator Score Card $18.30/MWh 19.00 18.00 17.00 $18.50/MWh US $/MWh 16.00 Kopiah Expansion 15.00 - Increase efficiency 14.00 $15.00/MWh 13.00 12.00 Global market costs New truck shovel increasing fleet 11.00 - diesel - tires 10.00 2000 - 2003 2003 - 2
Slide 11: Earnings power of TransAlta's business model
Earnings power of TransAlta’s business model $ millions unless noted 2004 - 2005 2006 - 2007 Comparable earnings per share $0.70 - $0.80 $1.00 - $1.25 Comparable earnings $135 - $160 $200 - $225 Plus: depreciation, amortization, and non-controlling interests $455 - $495 $525 - $550 Less: maintenance
Slide 12: Alternatives for cash
Alternatives for cash 1) Pay down debt First priority until credit metrics achieved 2) Buy back shares Improve ROE 3) Expand assets selectively
Slide 13: TransAlta's financial strategy – manage cyclicality
TransAlta’s financial strategy – manage cyclicality Balance acquisitions with new build Maintain high contract cover Diversify markets and fuels GROW STRENGTHEN FINANCIAL INTEGRATE CAPACITY Non-growth capex Pay down debt and/or and dividend from buy back shares operating cash flow
Slide 14: Appendix
Appendix TransAlta
Slide 15: Financial ratios
Financial ratios Non-Recourse Debt Debt to Capital Recourse Debt 60% BBB - Baa3 55% BBB low Forecast 50% BBB + BBB high 45% Baa1 40% 35% 30% 25% 20% 2003 2004 2005 2006 2007 2008 2009
Slide 16: Improving credit ratios
Improving credit ratios C a s h F lo w to In te r e s t 7 x F o re c a s t 6 x 5 x B B B + B B B h ig h 4 x B a a 1 3 x B B B - B a a 3 2 x B B B lo w 1 x 0 x 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 C a s h F lo w to T o ta l A v e ra g e D e b t 3 5 .0 % F o re c a s t 3 0 .0 % B B
Slide 17: Debt maturity
Debt maturity Debt Maturity Schedule 500 Repayment (C$ Millions 450 400 175 350 300 250 250 50 125 200 83 399 399 100 150 205 225 100 150 175 125 115 110 50 100 100 50 0 1 04 05 06 07 08 09 10 11 12 13 23 29 33 48 20 20 20 20 20 20 20 20 20 20 20 20 20 >2 0 Year *see next page for legend
Slide 18: Debt maturity cont.
Debt maturity cont. Debt Maturity Schedule Legend Date Amount Date Amount Due Aug 2033 (TAU) $ 50 Due Oct 2029 (TAC) $ 110 Due July 2023 (TAU) $ 100 Due July 2012 (TAC US) $ 399 Due 2048 (TAC Due 2048 (TAC $ 175 $ 125 Preferreds) Preferreds) Due 2050 (TAC $ 175 Due June 2011 (TAC) $ 225 Preferreds)