Transalta Corporation · TSX:TA
Transalta — Investor Presentation (May 2009)
40 slides from Transalta's investor presentation, May 2009
Slide 1: TransAlta Investor Presentation
Investor Presentation May 2009 TransAlta Investor Presentation
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 Value Proposition Strategy Operational Excellence Environmental Leadership Markets & Outlook
Slide 4: Value proposition
Value proposition Yield plus steady and disciplined growth Providing a strong dividend payout ratio: target of 60 - 70% of comparable EPS Comparable earnings per share and cash flow growth Disciplined capital allocation Committed to paying a dividend Growth balanced against dividends and sha
Slide 5: TransAlta's strategy
TransAlta’s strategy Wholesale generator & marketer in Western Canada and U.S. Strong long-term market fundamentals Knowledge base provides competitive advantage CANADA Disciplined Growth Short Term: 2009 - 2012 Thermal uprates Renewables: wind & geothermal Medium-term: 2013 - 2015 GENER
Slide 6: Balanced and disciplined capital allocation supports value creation through market cycles
Balanced and disciplined capital allocation supports value creation through market cycles Priority Direction Action Provide shareowners sustainable Board policy is to target a payout ratio of 60 - 70% of Dividend dividend growth comparable EPS 2008 annual dividend increased 8% to $1.08 2009 an
Slide 7: Solid track record of results
Solid track record of results Comparable earnings per share Cash flow from operations $1.75 $1,000 $922 22% $1.46 $900 56% $1.50 CF Growth $778 CAGR $1.31 $800 $675 $1.25 $1.16 $700 $591 $620 $600 $1.00 $500 $0.82 $400 $0.75 $0.66 $300 $0.50 $200 $100 $0.25 $0 2004 2005 2006 2007 2008 2004 2005 2006
Slide 8: Strong balance sheet + stable credit ratios + solid liquidity
Strong balance sheet + stable credit ratios + solid liquidity = long-term financial strength and stability Cash flow to total debt Cash flow to interest 35% 8 30% 7 Min 25% 6 25% 20% 5 4 Min 15% 4x 3 10% 2 5% 1 0% 0 2005 2006 2007 2008 2005 2006 2007 2008 $BB Committed credit lines 60% Debt to total
Slide 9: 2009 Outlook
2009 Outlook POSITIVES CHALLENGES Approximately 95% contracted for 2009; 85% for Current market conditions put downward pressure 2010; PPAs provide cash flow stability on price and demand growth: Q1 AB: $63 vs. $77 in 2008 Energy Trading gross margins of $65 - $85 Q1 PACNW: $35 vs. $70 in 2008 milli
Slide 10: Base operations expected to provide comparable EPS growth and strong cash flow
Base operations expected to provide comparable EPS growth and strong cash flow in 2009 and 2010 2009 objectives are to deliver single digit comparable EPS growth, cash flow of $750 - $850M and maintain balance sheet strength Comparable earnings per share Cash flow from operations 2004 – 2008 2004 –
Slide 11: Alberta reserve margin tightness underpins pricing
Alberta reserve margin tightness underpins pricing Load growth dependent on economic recovery and oil Steady price growth in various natural gas scenarios sands expansion; supply growth also somewhat dependent Alberta Power Prices (CAD $/MWh) Reserve margin will likely remain lower than other region
Slide 12: PacNW forward prices tracking natural gas movements
PacNW forward prices tracking natural gas movements Steady price growth in various natural gas scenarios Demand weak in short-term due to recession PacNW Power Prices (USD $/MWh) Market continues to see increased reliance on natural gas $80 New supply is mostly wind Intermittent nature may create
Slide 13: Alberta PPAs and long-term contracts provide the base of our contracted position
Alberta PPAs and long-term contracts provide the base of our contracted position Hedge strategy is to contract an average of 90% of adjusted capacity for TransAlta’s fleet Total MWs 9,000 8,000 7,000 Merchant contracting 6,000 Strategy targets 25% / yr 5,000 4,000 3,000 Alberta PPAs & LTC 2,000 1,00
Slide 14: Alberta & PacNW open merchant positions are managed for earnings certainty
Alberta & PacNW open merchant positions are managed to provide for greater earnings certainty Disciplined hedging strategy provides for more secure earnings and cash profile in a volatile and cyclical commodity market Merchant 3,000 MWs 2,500 2,000 1,500 2009 2010 2011 2012 Contracts Contracts Contr
Slide 15: Operational excellence = optimal performance
Operational excellence = optimal performance AB Thermal historical availability within optimum range of 87 – 90% 100% Availability mix 98% 96% 94% 92% Target fleet availability 90% 88% 86% 84% Coal Gas & Hydro / Wind Cogen Geothermal Alberta Thermal Availability TransAlta Fleet Availability 88% 88%
Slide 16: Alberta Thermal: Plans expected to deliver higher availability by mid-2009
Alberta Thermal: Plans expected to deliver higher availability by mid-2009 Majority of AB Thermal maintenance work is planned for the first half of 2009; remain focused on optimizing capital spend 2009 Availability 2008 Maintenance in 2nd half 2008 improved 90% Est. 88 - 89%; full year performance
Slide 17: Growth investments deliver long-term sustainable cash flow and earnings growth
Growth investments deliver long-term sustainable cash flow and earnings growth Sun 5 Uprate Blue Trail Summerview Keephills 3 Keephills 1 and Ardenville Projects II 2 Uprates Location Alberta Alberta Alberta Alberta Alberta Alberta Type Efficiency Uprate Wind Wind Supercritical Coal Efficiency Uprat
Slide 18: Environmental leadership
Environmental leadership TransAlta is competitively positioned to mitigate emission costs through early engagement, a portfolio of initiatives, and pass through contracts Cost pass through Continuous under change-in-law improvement at provisions existing facilities Emissions Management Active acquis
Slide 19: CCS Pilot: Project Pioneer
CCS Pilot: Project Pioneer We are advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2013 Project Pioneer Largest commercial scale pilot in North America First project in the world to have an integrated underground storage system Potential
Slide 20: Carbon Capture and Storage
Project Pioneer – leading the world in CCS We are advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2013 Carbon Capture and Storage CO2 returned Energy Input (oil/gas) Energy Input (coal)
Slide 21: Investment highlights - 2010+
Investment highlights - 2010+ Long-term value proposition remains the same Strong balance sheet, solid financial outlook and low to moderate risk business model; contracting strategy provides high degree of earnings protection Long-term market fundamentals for Western Canada and Western U.S. remain
Slide 22: Investment highlights - 2010+
Investment highlights - 2010+ Long-term industry opportunities outweigh short-term market risks Projects under construction tracking well: Sundance 5 uprate (53 MW) Blue Trail wind farm (66 MW) Summerview II (66 MW) Keephills 3 (225 MW) Keephills 1 and 2 uprates (46 MW) Ardenville (72 MW
Slide 23: Appendix
Appendix
Slide 24: Performance goals
Performance goals Financial Measures 2009 Goals Q1 2009 Q1 2008 Review ratios Achieve top decile Decreased due to higher planned and Availability 90 - 92% 86.4% 91.8% operations unplanned outages at AB Thermal Improve Safety Injury Frequency Rate 10%/yr Annual Metric Annual Metric TBD Enhance Q1 hig
Slide 25: Q1 2009 – Higher plant maintenance lowers results
Q1 2009 – Higher plant maintenance lowers results Comparable earnings of $0.18 per share down from $0.50 a year ago Over 700 GWh of planned maintenance completed in the quarter 328 GWh of lost production from the Sundance 4 derate; force majeure claim in progress Net earnings per share of $0.21
Slide 26: Q1 2009 - Comparable earnings
Q1 2009 - Comparable earnings Results (MM) Q1 2009 Q1 2008 Net Earnings $42 $33 Sale of assets at Centralia, net of tax - (4) Change in life of Centralia parts, net of tax 1 5 Other income (7) - Writedown of Mexican investment, net of tax - 65 Earnings on a comparable basis $36 $99 Weighted average
Slide 27: Q1 2009 - Results
Q1 2009 - Results Results (MM) Q1 2009 Q1 2008 Revenue $756 $803 Gross margin $381 $433 Operating Income $85 $189 Comparable Earnings $36 $99 Net Earnings $42 $33 Comparable earnings per share $0.18 $0.50 Basic and diluted earnings per share $0.21 $0.17 Cash flow from operating activities $83 $237 C
Slide 28: Q1 2009 – Net earnings
Q1 2009 – Net earnings (MM) Q1 2009 Net Earnings, 2008 $33 Decrease in Generation gross margins (50) Mark-to-market movements - Generation (2) Increase in operations, maintenance, and admin costs (39) Increase in depreciation expense (13) Decrease in equity loss 97 Decrease in income tax expense 10
Slide 29: Q1 2009 – Highlights
Q1 2009 – Highlights Dividend Increase January 29, TransAlta’s Board of Directors increased the quarterly dividend by two cents to $0.29 per share to yield an annual dividend of $1.16 versus $1.08 Keephills Units 1 and 2 Uprates January 29, TransAlta announced two 23 MW efficiency uprates at Unit 1
Slide 30: Free Cash Flow
Free Cash Flow (MM) Q1 2009 Q1 2008 Cash flow from operating activities $83 $237 Add (Deduct): Sustaining capital expenditures (69) (83) Dividends on common shares (54) (51) Distribution to subsidiaries’ non-controlling interest (16) (17) Non-recourse debt repayments (1) - Timing of contractually sc
Slide 31: Minimal debt refinancing
Minimal debt refinancing (MM) 2009 2010 2011 2012 2013 Thereafter Total TAC CDN MTN’s (CDN$) $205 $225 $251 $681 USD MTN’s (US$) $300 $300 $500 $1,100 Other (CDN$) $39 $32 $29 $30 $29 $171 $330 Total (CDN$) 1, 2 $244 $32 $254 $397 $396 $1,033 $2,356 1) Updated to reflect CDN/US foreign exchange valu
Slide 32: Sustaining capex spend
Sustaining capex spend Focus of 2009 capital: improving AB Thermal availability, increasing productivity and completing the Centralia transition (MM) 2008 2009e 2010e Sustaining $465 $340 - 390 $270 - 315 Routine $135 $115 – 135 $100 - 115 Productivity $32 $40 – 45 Mine $100 $35 - 45 $40 - 50 Centra
Slide 33: Achieving the right balance between spend and availability
Achieving the right balance between spend and availability Typical coal asset Lost production days are costly Easy to over capitalize Very costly over time Unplanned outage days are more costly Potentially 2 - 5 times equivalent planned repair costs Availability Matrix Sources of Outages “Sweet
Slide 34: Growth capex spend
Growth capex spend Growth capex highest in 2009 as Keephills 3 labour peaks; Sun 5 and Blue Trail are commissioned, and Summerview is substantially completed (MM) Total 2008 2009e 2010e Growth $ 1,404 $5412 $485 - 550 TBD Keephills 31 $888 $336 $235 - 255 Blue Trail $115 $26 $85 - 90 $75 $13 $50 - 6
Slide 35: 2009 - 2013 Development plan
2009 - 2013 Development plan Projects Announced ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & PERMITS TURBINE TOTAL PROJECT PPA / COMMERCIAL MW SITE CONTROL Applied Secured SECURED COST $ MM LTC OPERATION DATE Alberta Blue Trail 66 Wind 9 9 9 $115 2009 Alberta Sundance 5 53 Coa
Slide 36: Alberta - First GHG compliance successfully completed
Alberta - First GHG compliance successfully completed The majority of environmental costs are flowed through to PPA holders under change of law provisions. Alberta consumers’ electricity price will reflect higher cost of compliance Alberta Climate Change Regulation Impact on TransAlta Emissions inte
Slide 37: Federal framework is tougher and requires more expensive compliance options than Alberta
Federal framework is tougher and requires more expensive compliance options than Alberta Near-term compliance through purchase and trading of offsets and credits. Investment in new technologies key for long-term Proposed Greenhouse Gas Regulation Existing plants: 18% intensity reduction starting in
Slide 38: Fleet costs from environmental regulation
Fleet costs from environmental regulation In the next decade, over 75% of emissions compliance costs are transferred by pass through mechanisms; shareowners are protected ENVIRONMENTAL OPERATING COST FORECAST MM$'s/yr $600 Costs only Env. costs for all units Price effects before pass through $500 no
Slide 39: Alberta has significant sequestration capacity
Alberta has significant sequestration capacity TransAlta’s plants are located above geology that is capable of storing CO2 TransAlta’s Thermal Alberta CO2 Sequestration Fleet Capacity: • EOR – 1,000 Mt • Depleted reservoirs – 3,000 Mt • Coalbed methane resources – 5,000 Mt • Deep saline aquifers – 1
Slide 40: powering on
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