Slide 1: TransAlta Corporation Investor Presentation
TransAlta Corporation Investor Presentation May 2017 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation includes 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 ba
Slide 3: Positioning TransAlta for Growth
Positioning TransAlta for Growth 2016 Cash Flow From Generation(2) 60% of Total 64% of Cash Flow From Generation driven by Gas, Wind, and Solar Cash Flows 22% Are Gas / Gas Natural gas / wind / solar portfolio is 87% contracted(3) on a weighted- Wind / Solar average capacity basis with a weighte
Slide 4: TransAlta's Global Generation Portfolio
PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 10/05/2017 8:04 PM TransAlta’s Global Generation Portfolio 4
Slide 5: TransAlta At A Glance
TransAlta At A Glance Exchanges TSX / NYSE MAP OF OPERATIONS Coal / Future CTG Solar Enterprise Value1,2 $8.5B Hydro Wind Market Cap.2 $2.0B Gas Corporate Offices 2017 Comparable EBITDA (guidance) $1,025 - 1,135 mm 2017 Comparable FFO (guidance) $765 - 855 mm 2017 Comparable FCF (guidance) $300 - 36
Slide 6: Natural Gas
Natural Gas OVERVIEW 100% of generation contracted WESTERN CANADA 9 year weighted average contract life(1,2) EASTERN Total net capacity of 1,473MW; 898MW in CANADA Canada and 575MW in Australia(1) AUSTRALIA Approximately 85 – 90% of our portfolio is not exposed to natural gas price volatilit
Slide 7: Wind / Solar
Wind / Solar OVERVIEW 71% of generation contracted WESTERN 13 year weighted average contract life(1) CANADA Total net capacity of 1,339MW EASTERN CANADA Canada’s largest generators of wind power Experienced developer and operator of wind in Alberta WESTERN GROWTH OPPORTUNITIES U.S. Near-
Slide 8: Hydro
Hydro OVERVIEW 96% of generation contracted WESTERN 4 year weighted average contract life(1) CANADA CANADA EASTERN Total net capacity of 926MW CANADA Own and operate over 90% of Alberta’s hydro (834MW) Ancillary services essential for market stability GROWTH OPPORTUNITIES Alberta PPAs hi
Slide 9: US Coal
US Coal OVERVIEW 28% of capacity contracted with Puget Sound Energy which expires in 2025 Centralia facility total net capacity of 1,340MW Two 670MW units currently scheduled for retirement as coal facilities in 2020 and 2025 WASHINGTON Merchant generation sold in US PacNW market Flexibili
Slide 10: Canadian Coal / Future CTG
Canadian Coal / Future CTG OVERVIEW Total net capacity of 3,593MW 22% of Alberta’s total capacity, supplying ALBERTA approximately 30% of Alberta’s energy 76% of generation contracted PPA’s expire at end of 2020 in advance of the transition to the new capacity market GROWTH OPPORTUNITIES ~
Slide 11: Alberta's Power Market Transition: A Multi-Billion Dollar Opportunity
PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 10/05/2017 8:04 PM Alberta’s Power Market Transition: A Multi-Billion Dollar Opportunity 11
Slide 12: Significant Changes Driving Alberta Opportunity
Significant Changes Driving Alberta Opportunity Summary of Changes Alberta Market Implications 6,200MW Replacing 6,200MW of baseload coal Coal with 5,000MW of intermittent Generation 0MW renewables Phase Out Current 2030 Significant requirement for back-up Requirement to eliminate coal emissions
Slide 13: Summary of Alberta Opportunity Timing
Summary of Alberta Opportunity Timing 2017 2018 2019 2020 2021 2022 2023+ New Market Structure Federal Gas Emissions Regulation Clarity Expected Capacity Market Expected Off-Coal Payments Coal-to-Gas Sundance Unit 1 Retired Conversion of Sundance Units 3 to 6 and Keephills Units Sundance Unit 1 Moth
Slide 14: Renewables Buildout Will Require Back-up Generation
Renewables Buildout Will Require Back-up Generation Targeted Implied Thermal or Required Coal Renewable Pump Storage Hydro Retirements Capacity Required Capacity 6,200MW 5,000MW Assumed “We can see that those who invest in 95%(1) 37.5%(1) renewables and then also have competitive Capacity Factor c
Slide 15: Current Policies Supportive of CTG Conversions
Current Policies Supportive of CTG Conversions Public Policy Favors Conversions Support Clean Energy Lower Electricity Prices Pricing carbon is the new reality CTG are most economic back up to support intermittent renewables CTG conversions provide 40% CTG immediate reduction in emissions It
Slide 16: CTG Well-Placed in the Merit Order
CTG Well-Placed in the Merit Order ILLUSTRATIVE MERIT ORDER Today(1) Illustrative 2024(1,2,3,4) Supply (MW) Supply (MW) Assuming wind and hydro at full capacity Assuming wind and hydro at full capacity Assuming wind Assuming wind Other and hydro not and hydro not Other Simple Cycle dispatching dispa
Slide 17: Substantial Economic Advantage For CTG Conversions vs. CCGT
Substantial Economic Advantage For CTG Conversions vs. CCGT • CTG conversions will be able to enter the market faster, at lower capital cost and with substantially less risk than new CCGT CTG Conversion New Combined Cycle Facility Build Cost (per KW) $125 – $150 $1,500 – $1,700 Time to Build 60 days
Slide 18: Abundance of Affordable Natural Gas to Supply CTG
Abundance of Affordable Natural Gas to Supply CTG Western Canadian Production (1) AECO C$/GJ (RHS) Nymex $C/GJ (RHS) Material excess supply Opportunity for long-term supply 20.0 Historical Forecast $6 contracts at today’s low pricing Canadian Natural Gas Production (bcf/d) 18.0 Strong producti
Slide 19: New Market Structure Supports CTG Conversions
New Market Structure Supports CTG Conversions KEY MARKET PRINCIPLES WHAT IT MEANS FOR THE MARKET CTG and/or coal likely to be marginal Energy price clears based on marginal cost producer most of the time between 2021 – of marginal producer 2025 (see slide 16) Energy Market Margin with CTG unit
Slide 20: CTG Conversions: Proven Technology
CTG Conversions: Proven Technology MW Converted Timeframe “Fuel switching is an attractive and economical option for utilities that must Harding Street maintain a certain generating capacity in 450MW 2016 their fleet […]” Unit 7 – Power Engineering “A number of coal plants nationwide have converted
Slide 21: Factors Driving Early CTG Conversion
Factors Driving Early CTG Conversion Early Conversion Benefits Expected 2021-2023 Timing Expected Near-Term ~70% savings upon conversion Carbon Costs Significant savings upon conversion driven by lower fixed operating expenses and Operating Expenses and sustaining capital expenditures (including avo
Slide 22: CTG and Market Redesign Support Coal Cash Flows
CTG and Market Redesign Support Coal Cash Flows CASH FLOW FROM GENERATION (CANADIAN COAL VS. CTG) High CTG conversions expected to replace and potentially improve cash flow from existing $224 mm Canadian Coal $210 mm Flat Alberta PPAs currently earning capacity- equivalent price of approximately
Slide 23: Hydro EBITDA Expected to Increase Post-PPA
Hydro EBITDA Expected to Increase Post-PPA Under new Alberta market construct hydro will have ability to earn both energy and capacity revenue Storage hydro will be able to bid higher assumed capacity than run-of-river Potential to unlock significantly higher EBITDA under reasonable power pric
Slide 24: Strongly Positioned For The Future
PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 10/05/2017 8:04 PM Strongly Positioned For The Future 24
Slide 25: Positioned to Seize Opportunities in Targeted Markets
Positioned to Seize Opportunities in Targeted Markets Capital Expected Opportunity Capacity Expenditures COD $210 - 230 mm(1) Short-Term South Hedland 150MW (Cost to Complete) Mid-2017 Goonumbla Solar Farm 80MW $160 mm Mid-2018 Alberta Wind Projects 150MW $300 mm December 2019 Medium-Term Saskatchew
Slide 26: Australian Opportunities
Australian Opportunities South Hedland Goonumbla Solar Farm Location South Hedland, Western Australia Location 350km North-West of Sydney in New South Wales Capacity 80MW Capacity 150MW Proposed Expected mid-2018 mid-2017 In-Service Date In-Service Date Capital Costs $160 mm Capital Costs $585 mm(1)
Slide 27: Canadian Wind Projects
Canadian Wind Projects Garden Plains Wind Location 30 km north of Hanna, Alberta Capacity 130MW Proposed December 2019 In-Service Date Capital Costs $260 mm Other Details Wind resource data dating back to 2009 Partnerships with landowners Antelope Coulee Wind since 2011 Location 35 km southwest of S
Slide 28: Brazeau Investment Supports System Reliability
Brazeau Investment Supports System Reliability Developing Brazeau pump storage solution to support 600 – 900MW pumped storage project adoption of renewables in Alberta Currently engaging in discussions with the Government of $1.8 – 2.5B Alberta in pursuit of a long-term contract investment Env
Slide 29: Enhancing Growth Through Sponsored Vehicle
Enhancing Growth Through Sponsored Vehicle COMMENTARY ADVANTAGE FOR TRANSALTA Attractive portfolio of highly contracted Majority shareholder (64% own.)(2) in $3.9B Significant renewables and gas-fired assets (2,440MW market cap(3) entity capacity)(1) Source of Value Provides stable and predict
Slide 30: Outlook and Priorities
PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 10/05/2017 8:04 PM Outlook and Priorities 30
Slide 31: Tangible Factors Driving Cash Flow Growth
Tangible Factors Driving Cash Flow Growth $440 mm $365 mm $400 mm Hydro Upside Brazeau $300 mm Wind RFP in Alberta South Hedland and Saskatchewan $250 mm(1) (Full Year) Other LT Growth South Hedland Project Greenlight (Partial Year) Interest Expense MSA Settlement Higher Margin on Off-Coal Payment A
Slide 32: Proactively Addressing Up-coming Debt Maturities
Proactively Addressing Up-coming Debt Maturities Adjusted Net Debt to Comparable EBITDA Adjusted FFO to Adjusted Net Debt 25% 18% 18% LEVERAGE REDUCING 16% 17% 17% 20% 4.6x 4.3x 4.1x 3.8x 3.6x 3.5x 3.0x Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Target USD CAD MANAGING MATURITIES Maturities to be settl
Slide 33: Executing Our Strategic Objectives
Executing Our Strategic Objectives 2016 2017 Work MOU to work collaboratively to advance the objectives Work with Alberta Government to secure a long-term of the Alberta Climate Leadership Plan: contract for Brazeau Collaboratively CTG conversions with Contribute to the design of a new capac