Slide 1: TransAlta Investor Presentation June 2014
June 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 • ~9,000 MW spanning multiple fuels and Leading Diversified Power markets Generation Company • ~65 facilities • ~2,200 MW of renewable energy • 100 years of operating history Proven Track Record • Disciplined approach to capital allocation • Highly contracted asset base Soun
Slide 5: Our Business
Our Business Canada’s largest publicly traded wholesale power generator & marketer with over 100 years of operating experience Coal: 4,930 MW Diversified asset base with ~65 facilities strategically positioned in Canada, Western U.S. and Western Australia Gas: Total fleet capacity of ~9,00
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 1Net Capacity Ownership Interest. Includes 100% of TransAlta Renewables’ assets. 7
Slide 8: Executing the Strategy
Executing the Strategy Strategic initiatives since 2013 Created TransAlta Renewables Inc. as a competitive growth vehicle Re-contracted ~835 MW of capacity under long-term agreements and expanded C&I Energy Services business Advanced Sundance 7 and our Fort McMurray West 500kV transmission pro
Slide 9: 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 2014 225 MW 125 MW 68 MW 144 MW 150 MW Ke
Slide 10: Creation of TransAlta Renewables
Creation of TransAlta Renewables One of the Largest Publicly-Traded Renewable Companies in Canada 29 1,255 $ 1.3 $2.0 renewable power megawatts installed billion total billion assets generation facilities generating capacity market capitalization High Quality Diversified Portfolio 5 Operating Region
Slide 11: Highly Contracted Portfolio
Highly Contracted Portfolio Hedge targets increased to support revenue certainty Total Portfolio Contractedness1 MW 90% 81% 80% 78% 2014 Contracted Prices AB ~ $55/ MWh Pac NW ~ $40/ MWh 2015 Contracted Prices AB ~ $50-$55/ MWh Pac NW ~ $40-$45/ MWh ¹ Capacity adjusted volumes 11
Slide 12: Financial Review & Outlook
Financial Review & Outlook 12
Slide 13: Performance Highlights
Performance Highlights (in $CAD millions) Q1 2014 Q1 2013 Change Comparable EBITDA $310 $268 $42 Funds from Operations $238 $193 $45 Free Cash Flow $139 $114 $25 Sustaining Capital $64 $51 $13 Availability 91.5% 91.5% - Q1 2014 commentary Comparable EBITDA increased over last year driven by strong
Slide 14: Fleet Availability
Fleet Availability Strong availability supported by lower unplanned outages Availability Unplanned Outage Rate Q1 2014 Q1 2013 Q1 2014 Q1 2013 Sundance / Keephills PPA 85.5% 81.3% 6.9% 14.2% Centralia 98.3% 94.9% 1.7% 5.1% Other Coal 92.6% 96.9% 7.4% 3.1% Gas 96.1% 97.7% 3.5% 1.6% Wind 94.2% 93.9% 5
Slide 15: Key Priorities for 2014
Key Priorities for 2014 • Comparable EBITDA of $1,015 - • Complete Coal $1,065 million Action Plan • FFO of $743 - $793 • Deliver consistent million results • Protect investment • Availability of 88 – grade rating 90% • Grow EBITDA by • Sustaining capital of FINANCIAL OPERATIONAL $350 million $40 -
Slide 16: Canadian Coal Improvements
Canadian Coal Improvements Raising the bar at CDN Coal New leadership with proven experience in similar vintage and type of assets: Substantial cost reductions Management of structural change across entire portfolios in response to very challenging power market conditions Implementation of C
Slide 17: Markets and Growth
Markets and Growth 17
Slide 18: Markets where TransAlta is Positioned for Growth
Markets where TransAlta is Positioned for Growth Alberta Western U.S. GDP growth of 2 – 3% per year ~1.4% annual load growth over next 6,000 MW of new generation by ten years 20221 California: 15,000 MW by 2020 Cogen and combined cycle WECC: 25,000-30,000 MW by 2020 Strong load growth
Slide 19: Recent Growth Progress
Recent Growth Progress Sundance 7 Continued development of Sundance 7 with the filing of AUC permits and completing a Request for Interest from engineering companies for the construction contract TAMA Transmission Successfully qualified to compete in the next phase of the Fort McMurray West 500
Slide 20: 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 21: Historical Power Prices in Alberta
Historical Power Prices in Alberta Since deregulation, AB Pool prices have averaged $65 / MWh Source: AESO 21
Slide 22: 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 23: Funding Growth & Credit Rating
Funding Growth & Credit Rating Growth will be funded supporting Investment Grade credit metrics $100 - $150 million annually in Free Cash Flow Dividend re-investment proceeds Secondary offering of TransAlta Renewables Drop downs to TransAlta Renewables Asset sales Preferred shares Debt
Slide 24: Long-term Upside Potential
Long-term Upside Potential Significant increase in cash flows once Alberta legislated PPAs expire ¹Illustrative representation of estimated average EBITDA over period. Actual EBITDA could vary from those shown due to a number of factors 24
Slide 25: Focused on Creating Value
Focused on Creating Value 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 Significant upside p