Transalta Corporation · TSX:TA
Transalta — Edison Electric Institute International Utility Conference 2010
29 slides from Transalta's conference presentation, Mar 16, 2010
Slide 1: Our plan for lower carbon sustainable value creation
Our plan for lower carbon sustainable value creation Edison Electric Institute International Utility Conference March 16, 2010 Brian Burden Chief Financial Officer 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. All forward-looking statements are based on our beliefs and assumptions based on information available at t
Slide 3: Outline
Outline ] About Us ] Our Strategy ] Markets & Contracting ] Capital Allocation & Growth Strategy ] 2010 Outlook 3
Slide 4: 2010 by the facts
Sustainable & consistent shareholder value creation 2010 by the facts ] Canada’s largest publically traded wholesale power generator Region MW International 26% ] 2,000 MW of renewable energy; Western Canada Canada’s leading provider Eastern 60% Canada 14% Fuel Type MW ] Highly levered to growth Ren
Slide 5: 2010 by the numbers
Executing on our strategy 2010 by the numbers 89% contracted for 2010, leverage to power price recovery in key markets Earnings growth $850 - $950 million >50% EBITDA from low Return to low double Cash flow from operations carbon generation digit earnings and and growing; should EBITDA growth in $30
Slide 6: Strategic imperatives
Strategic imperatives Executing on our strategic priorities will drive near and long-term value ] Drive the base • Increase productivity • Drive operational stability CANADA • Optimize portfolio ] Green our portfolio UNITED STATES • Accelerate renewable investment Generation Facilities: • Advance na
Slide 7: Market outlook: Alberta
Market outlook: Alberta Forward prices are soft but longer-term fundamentals of the Alberta market remain strong; oil sands recovery will drive load growth Reserve margins Power prices Reserve Margin (CAD$/MWh) MWs 14,000 16% $100 12,000 14% $90 10,000 12% 8,000 10% $80 6,000 8% $70 4,000 6% $60 2,0
Slide 8: Market outlook: PacNW
Market outlook: PacNW Reserve margins to increase in the short-term due to demand destruction; forward pricing continues to track natural gas prices Reserve margins Power prices Reserve MWs (USD$/MWh) Margin 29,000 70% $80 65% 27,000 60% $70 25,000 55% 23,000 50% $60 45% 21,000 40% $50 19,000 35% 30
Slide 9: PPAs, long & medium-term contracts
PPAs, long & medium-term contracts Alberta PPAs and long-term contracts provide solid base for stable earnings and support TransAlta’s low to moderate risk business strategy ] Protecting the value of TransAlta’s generation Total and investment grade balance sheet MWs 9,000 8,000 Merchant contracting
Slide 10: Merchant MWs
Merchant MWs Merchant hedging strategy designed to minimize impacts of adverse market conditions while allowing for upside potential Merchant MWs 3,500 3,000 Year ~% Avg. Current Forward Contracted Contract Price Price 2,500 (Jan 14, 2010) 2010 89 AB: $60 - 65 AB: $45 - $50 2,000 PACNW: $55 - 60 PAC
Slide 11: Capital plan and funding
Capital plan and funding We remain disciplined in how we manage our balance sheet and allocate capital Capital Allocation Plan Sources & Uses of Capital 2010 – 2012 Dividend Growth Investment Available Provide shareholders Projects must deliver $600M Dividends sustainable dividend unlevered, free ca
Slide 12: Growth strategy
Growth strategy Growth strategy has shifted to accelerate near-term investments in renewables and focus on multiple options for long-term sustainability Short-term: 2010 - 2013 ] Canadian Hydro acquisition accelerated growth of renewables 5 Facilities Under Construction: ] Pan-Canadian approach Wind
Slide 13: Executing on our strategy
Executing on our strategy TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth Kent Hills 2 Ardenville Bone Creek Keephills 3 Keephills 1 and 2 Projects Uprates Location New Brunswick Alberta British Columbia Alberta Alberta Type Wind Wind Hydro Supercritical Co
Slide 14: Canada's leading provider of renewable energy
Executing on our strategy Canada’s leading provider of renewable energy Renewable Capacity In Canada (MW)1 Over $1.9 billion 2,000 invested in renewable energy 1,500 in 2009 1,000 500 0 TA GLH.UN BAM.A EMA FTS IEF.UN TRP BPT.UN EP.UN Wind Hydro Biomass Renewables Renewables 23% 24% Renewables will a
Slide 15: Environmental leadership: Project Pioneer
Environmental leadership Advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2015 Project Pioneer ] Largest scale pilot in North America; awarded over $770M of government funding ] First project in the world to have an integrated undergroun
Slide 16: 2010 Outlook
2010 Outlook Well positioned to improve results in 2010 ] Drive the base: • Targeting low double digit comparable EPS and EBITDA growth • Approximately 89% of portfolio contracted for 2010 providing a high degree of earnings protection • Target 90% fleet availability for 2010 • Energy trading expect
Slide 17: Appendix
Appendix TransAlta’
Slide 18: Performance goals
Performance goals Financial 2009 Measures 2009 Review ratios Goals Lower availability due to higher planned and unplanned Achieve top decile Availability 90 - 92% 85.1% outages at Alberta Coal and higher unplanned outages operations at Centralia Thermal. Improve Safety Injury Frequency Rate 10%/yr 1
Slide 19: Q4 and YE 2009 results
Q4 and YE 2009 Results ($M) Q4 2009 Q4 2008 2009 2008 Revenue $763 $808 $2,770 $3,110 Gross margin $435 $410 $1,542 $1,617 Operating income $159 $127 $378 $533 Comparable earnings $84 $79 $181 $290 Net Earnings $79 $94 $181 $235 Comparable earnings per share $0.40 $0.40 $0.90 $1.46 Basic and diluted
Slide 20: Comparable earnings
Q4 and YE 2009 Comparable earnings Results ($M) Q4 2009 Q4 2008 2009 2008 Net earnings $79 $94 $181 $235 Sale of assets at Centralia, net of tax - - - (4) Change in life of Centralia parts, net of tax - 3 1 12 Write-down of mining development costs, 10 - 10 - net of tax Settlement of commercial issu
Slide 21: Net earnings
Q4 and YE 2009 Net earnings Q4 2009 2009 Net earnings, 2008 $94 $235 Increase (decrease) in Generation gross margins 36 (33) Mark-to-market movements - Generation 3 16 Decrease in COD gross margins (14) (58) Decrease (increase) in operations, maintenance, 21 (30) and admin costs Increase in deprecia
Slide 22: Free cash flow
Free cash flow ($M) Q4 ‘09 Q4 ‘08 2009 2008 Cash flow from operating activities $246 $428 $580 $1,038 Add (Deduct): Sustaining capital expenditures (187) (171) (380) (465) Dividends on common shares (57) (49) (226) (212) Distribution to subsidiaries’ non-controlling interest (18) (29) (58) (98) Non-
Slide 23: Financial strength
Financial strength Execute our plan while maintaining long-term financial strength and stability 35% Cash flow to debt Cash flow to interest 8 30% 7 25% Range: 6 20% 20 - 25% 5 Range: 15% 4 4 - 5x 3 10% 2 5% 1 0% 0 2006 2007 2008 2009 2006 2007 2008 2009 Debt to capital $B Committed credit lines 60%
Slide 24: Debt profile supports balance sheet
Debt profile supports balance sheet Minimal debt refinancing over the short-term provides ample financial flexibility CAD (M) $1,000 1 $800 1 1 $600 $400 1 1 $200 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter CDN MTN's US MTN's 1) Based on Dec. 31, 2009 FX rate of $1.0525 CAD / US 24
Slide 25: 2009 Sustaining capital
2009 Sustaining capital Sustaining capex supports operational objectives ($M) 2009 2010e 2011e Sustaining $380 $295 - 340 $310 - 355 Routine capital $158 $120 - 140 $115 - 130 Productivity capital $44 $10 - 15 $5 - 10 Mine $42 $25 - 30 $35 - 40 Centralia modifications $21 - - Major Maintenance $115
Slide 26: 2010 Major maintenance plan
Major maintenance 2010 Major maintenance plan Natural Gas and ($M) Coal Renewables Total Capitalized $70 - 75 $70 - 80 $140 - 155 Expensed $60 - 65 $0 - 5* $60 - 70 Total $130 - 140 $70 - 85 $200 - 225 GWh lost 1,770 - 1,780 360 - 370* 2,130 - 2,150 * Natural gas fleet only 26
Slide 27: Growth capital
Growth capital Delivering on growth and creating long-term shareholder value Completion Completed MW 2009 2010e 2011e 2012e Total Date Blue Trail 66 $87 $1131 Q4 2009 Sun 5 uprate 53 $60 $ 772 Q4 2009 Summerview 2 66 $81 $15 - 25 $1233 Q1 2010 Total 185 $228 $15 - 25 $313 Target In Progress MW 2009
Slide 28: Advanced development
Advanced development1 Over 600 MW of renewable energy in advanced development for TransAlta’s 2010 - 2013 pipeline Projects in Advanced Development ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & AND PERMITS TURBINE CAPEX RANGE PPA / COMMERCIAL MW SITE CONTROL Applied Secured SEC
Slide 29: Macro issues impacting our industry
Macro issues impacting our industry Having flexibility and options will create value given environmental, regulatory and technological uncertainties Canada U.S. Timing ] Wait for U.S. system to be determined ] Likely protracted process into 2010-11 ] Absolute-based cap & trade with ] Potential for E
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