Transalta Corporation · TSX:TA
Transalta — Investor Presentation (March 2014)
28 slides from Transalta's investor presentation, March 2014
Slide 1: TransAlta Investor Presentation March 2014
March 2014 TransAlta Investor Presentation 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 in 2014, 2015 and subsequent years. All forward looking statements are based on our beliefs and assumptions
Slide 3: Strategic & Financial Objectives
Strategic & Financial Objectives 3
Slide 4: TransAlta – Key Messages
TransAlta – Key Messages • Over 9,000 MW spanning multiple fuels Leading Diversified Power and markets Generation Company • Over 65 facilities • ~2,200 MW of renewable energy • 100 years of operating history Proven Track Record • Disciplined approach to capital allocation • Highly contracted asset b
Slide 5: Our Business
Our Business Canada’s largest publicly traded wholesale power generator & marketer with over 100 years of operating experience Coal: 4,931 MW1 Diversified asset base with over 65 facilities strategically positioned in Canada, Western U.S. and Western Australia Gas: Total fleet capacity of
Slide 6: Positioned For Growth & Value Creation
Positioned For Growth & Value Creation Objectives for driving long-term value for shareholders Optimize base business Invest in profitable growth Re-contract to stabilize cash Growth through acquisitions and flows and extend asset life greenfield Continuously manage operating Disciplined ret
Slide 7: Strategic Evolution of TransAlta
Strategic Evolution of TransAlta 20001 Actively shifting our business mix by growing renewables 20141 as 1Net Capacity Ownership Interest. Includes 100% of TransAlta Renewables’ assets. 7
Slide 8: TransAlta's 5-Year Growth Track Record
TransAlta’s 5-Year Growth Track Record Disciplined growth with a focus on contracted assets 2008 2009 2010 2010 2011 80 MW 694 MW 123 MW 132 MW 19 MW Kent Hills Canadian Hydro Ardenville / Kent Hills 2 Summerview 2 / Blue Trail Bone Creek 2011 2012 2013 2013 450 MW 125 MW 68 MW 144 MW Western Austra
Slide 9: Executing the Strategy
Executing the Strategy Strategic Initiatives since 2012 – Realigned Centralia’s cost structure to lower market prices and entered into long- term contract with Puget Energy – Invested or announced ~$730 million in Long-term Contracted growth delivering ~$80 million per year in EBITDA – Created Tra
Slide 10: Positioned for Growth
Positioned for Growth TransAlta has flexibility to deliver growth using two strong companies Lower payout ratio at TransAlta and significant post Alberta PPA cash flows supports re-investment in growth and strong balance sheet TransAlta Renewables Inc. well positioned to grow, creating value f
Slide 11: Creation of TransAlta Renewables
Creation of TransAlta Renewables1 ~80% owned by TransAlta Corporation High Quality Diversified Portfolio 5 Operating Regions British Alberta Columbia 4 hydro 4 hydro 21 MW 77 MW 10 wind Bone Creek 19MW 417 MW Ontario Upper Mamquam 25MW Pingston 23MW Cowley North 20MW Summerview Two 66MW 4 hydro Queb
Slide 12: Financial Review & Outlook
Financial Review & Outlook 12
Slide 13: 2013 Year in Review
2013 Year in Review • Comparable EBITDA of $1,023 mm, • Fleet Availability of 88% compared in line with 2012 with target of 89-90% • Free Cash Flow of $295 mm, • Unplanned outages at Canadian increase of $37 mm from 2012 Coal did not meet expectations • Sustaining Capital of $341 mm • Safety IFR < 1
Slide 14: 2013 Performance Highlights
2013 Performance Highlights 2011 2012 2013 (in $ millions, except as otherwise noted) Comparable EBITDA $1,045 $1,015 $1,023 Funds from Operations $809 $788 $729 Free Cash Flow $417 $258 $295 Sustaining Capital $319 $439 $341 Adjusted Availability1 88.2% 90.0% 87.8% 2013 Comparable EBITDA in line
Slide 15: 2013 Business Segment Performance
2013 Business Segment Performance Comparable EBITDA ($ millions) Business Unit 2012 2013 Primary Drivers Generation Segment U.S. Coal $148 $66 • Lower prices and expiring contracts Cdn Coal $373 $309 • Higher unplanned outages Gas $312 $327 • Growth Hydro $127 $147 • Higher volumes & prices Wind $15
Slide 16: Key Priorities for 2014
Key Priorities for 2014 Operations Restore performance of Canadian Coal Commercial Pursue long-term contracts for Centralia and growth in Alberta Start processes to secure long-term contract extensions in Ontario and Australia Protect TransAlta’s rights under Alberta legislated PPAs Growth
Slide 17: 2014 Outlook
2014 Outlook EBITDA in line with 2013 Significant dividend coverage Financial Outlook Comparable EBITDA $ 1,015 $ 1,065 Cash Interest $ (235) $ (235) Cash taxes $ (30) $ (30) Others $ (7) $ (7) Funds from Operations (FFO) $ 743 $ 793 Sustaining Capital $ (350) $ (350) Pfd Share/Other Distributio
Slide 18: Highly Contracted with Upside Potential
Highly Contracted with Upside Potential Hedge targets increased to support near-term revenue certainty Total Portfolio Contractedness1 MW 88% 78% 77% 76% CONTRACTED PRICES 2014 AB ~ $55/ MWh Pac NW ~ $40/ MWh 2015 AB ~ $50 - $55/ MWh Pac NW ~ $40 - $45/ MWh ¹Capacity adjusted volumes. Includes 100%
Slide 19: Strong Near and Long-term Cash Flows
Strong Near and Long-term Cash Flows $ millions Range of Potential Cash Flows Dividend and payout FFO Range $ 750 $ 775 $ 800 $ 825 ratio aligned to Sustaining Capital¹ $ (350) $ (350) $ (350) $ (350) business objectives, Pfd Share/Other Distributions $ (100) $ (100) $ (100) $ (100) Free Cash Flow
Slide 20: Markets and Growth
Markets and Growth 20
Slide 21: Markets where TransAlta is Positioned for Growth
Markets where TransAlta is Positioned for Growth Alberta Western U.S. Alberta expected to remain the strongest economy in Load growth of ~1.4% / year over next ten years in Canada both PacNW and California 3.7% GDP growth rate over the last 20 years State level RPS targets are a key driver a
Slide 22: Alberta – Strong Fundamentals
Alberta – Strong Fundamentals Alberta Interconnected Electric System (AIES) Alberta continues to Reserve Margin, 2000 - 20181 see considerable demand growth due to industrial and mining activities, and their indirect impacts Also, significant retirements in capacity in next 10 years: 800 MW of
Slide 23: Historical Power Prices in Alberta
Historical Power Prices in Alberta Since deregulation, AB Pool prices have averaged $65 / MWh Source: AESO 23
Slide 24: Alberta Forward Market
Alberta Forward Market AB forward market is a poor predictor of future spot market settles Forward prices tend to reflect spot fundamentals not future fundamentals Average annual Alberta power prices compared to historical forward Alberta power prices $/MWh Data: NGX, Alberta Electric System Operato
Slide 25: Future EBITDA Growth
Future EBITDA Growth Secured in 2014 Actively Pursuing Full year of 68 MW New Richmond wind farm Renewables 144 MW Wyoming Wind Farm Acquisitions in Canada, U.S. and Australia Escalation on Solomon contract Secured 2015 + Gas Australian gas pipeline (COD 2015) Sundance 7 combined cylce i
Slide 26: Summary
TransAlta Summary
Slide 27: Attractive Valuation, Balance Sheet Strength
Metrics Relative to Comparable Companies Attractive Valuation Balance Sheet Strength TEV/2014E EBITDA Debt¹/2014E EBITDA 16.0x 10.0x TA Corp TA Corp 14.0x TA Renewables 9.0x TA Renewables Other Companies 8.0x Other Companies 12.0x 7.0x 10.0x 6.0x 8.0x 5.0x 6.0x 4.0x 3.0x 4.0x 2.0x 2.0x 1.0x 0.0x 0.0
Slide 28: Strategy Unchanged, Ability to Execute Enhanced
Strategy Unchanged, Ability to Execute Enhanced Integrated approach to driving long-term shareholder value Diversified and highly contracted portfolio Attractive and sustainable dividend Strong balance sheet and free cash flow Well positioned for growth in markets with strong fundamentals