Transalta Corporation · TSX:TA
Transalta — Investor Presentation (May 2024)
67 slides from Transalta's investor presentation, May 2024
Slide 1: Investor Presentation
gore transalta Investor Presentation May 2024
Slide 2: Disclaimer and forward-looking statements
Disclaimer and forward-looking statements TransAlta Corporation (“TransAlta” or the “Company”) is not making any offer or than 10%; capital allocation priorities; and ability to fund growth plan and sources of hostilities, the threat of terrorism, diplomatic developments or other similar events; inv
Slide 3: TransAlta at a glance
TransAlta at a glance 6,700 MW Diversified portfolio 78 generating facilities in Canada, $7.9 billion 112 years United States and Australia Enterprise value Generation experience Strong balance sheet and capital discipline Foundation of our ~$525 million focused strategy 2024 expected free cash flow
Slide 4: Who we are
A leader in clean electricity committed to a sustainable Who we are future and a responsible energy transition Our Strategy Our Values Customer needs Safety Operational excellence Innovation People Sustainability Shareholder value Respect Integrity Castle River, Alberta 4
Slide 5: Highly diversified portfolio of high-quality assets
Hydro Gas Wind and solar Energy Development marketing pipeline and capabilities Highly diversified portfolio of high-quality assets Stable contracted base with Alberta merchant upside 5
Slide 6: Fleet Overview
Fleet Overview Wind, Solar and Storage 36 Facilities Hydro 25 Facilities Natural Gas 17 Facilities Coal 1 Facility Technology: Wind Solar Hydro Battery Natural Gas Coal 6
Slide 7: Strategic position strengthened since 2021
Strategic position strengthened since 2021 CO2 Progressed Clean Simplified Corporate Advanced Carbon Expanded Alberta Electricity Growth Structure Transition Diversification +800 MW of wind +1.2 GW increase in -800 MW of thermal +1.8 GW of complementary and solar economic ownership of generation ret
Slide 8: Delivered exceptional results
Since our last Delivered Free Cash Flow1 Adjusted EBITDA1 Investor Day exceptional +29% results Free Cash Flow1 +64% increased by $350 Million EBITDA1 increased by 2021 2023 2021 2023 $370 Million Contractedness1,2 Emissions reductions Renewable capacity1,2 (MW) (Millions tonnes CO2) (MW) Contracted
Slide 9: Electrification presents significant opportunities
Electrification presents significant opportunities CO2 Global efforts to Policy responses Corporations Significant decarbonize are are fast‐tracking and investors are investment accelerating at a the emergence of a leading by required to meet rapid pace clean electricity committing to the challenge
Slide 10: Balanced approach required for success in energy transition
Balanced approach required for success in energy transition Affordability Energy Transition Reliability Decarbonization 10
Slide 11: Strategic priorities to 2028
Strategic 1 Optimize Alberta portfolio priorities 2 Execute Clean Electricity Growth Plan to 2028 Selective expansion of flexible generation 3 and reliability assets Maintain financial strength and capital 4 allocation discipline 5 Define next generation of power solutions 6 Lead in ESG and market p
Slide 12: Clean Electricity Growth Plan to 2028
Clean Electricity Growth Plan to 2028 Up to 1.75 GW $3.5 billion $350 million Clean electricity Growth capex New annual EBITDA 2024 2025 2028 5 GW 10 GW Development pipeline Development pipeline 12
Slide 13: Growing our renewable generation and contracted base
Evolution of the company Growing our Capacity (MW)1 Adjusted EBITDA (%) renewable generation +67% Renewables +61% 70% 42% Growing our contracted 2023 2028 base 2023 2028 Renewables Gas Renewables Gas Energy transition Energy marketing Energy transition Contracted +90% +177% EBITDA attributable to 72
Slide 14: Foundations for our success
Foundations for our success Optimization and trading expertise Highly credible developer Local presence Customer Focus Operational excellence Strong balance sheet Technological innovation 14
Slide 15: Sustainability targets
Sustainability targets Environmental goals Social goals Governance goals Net zero by 2045 Support for indigenous 50% female Board communities representation by 2030 Reduce GHG emissions by 1 75% by 2026 Reclaim mined land in Alberta 40% company-wide female and Washington State employment by 2030 Ver
Slide 16: Committed to emissions reductions
Committed to emissions reductions Combined emissions of TransAlta and Heartland2 TransAlta carbon reductions achieved to date1 (million tonnes CO2) 66% 21M 39.0 From 2015 levels Annual tonnes -75% from 2015 23.2 16.9 ~10% 0% Of Canada’s Paris Coal-fired emissions Agreement Target in Canada 2015 2020
Slide 17: 2024 performance
2024 performance Horseshoe, Alberta 17
Slide 18: Q1 2024 achievements and strategic initiatives
Q1 2024Atachievements Transaction A Glance and strategic initiatives Results and Growth and customer Strategic initiatives financial position solutions Adjusted EBITDA1 of $328 million Mount Keith 132kV expansion Advancing acquisition of 54% from renewables completed Heartland Generation FCF1 of $20
Slide 19: Alberta electricity portfolio
Alberta electricity portfolio Q1 2024 realized prices Quarterly realized merchant prices $300 $160 $140 $250 $120 $200 $100 Average spot $80 price in Q1 $150 2024 $60 $100 $40 $50 $20 $0 $0 Hydro Gas Wind Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Hydro Gas Wind Spot pri
Slide 20: TransAlta segmented results
TransAlta segmented results Three months ended March 31, 2024 ($millions) Adjusted EBITDA1 Q1 2024 Q1 2023 Hydro 87 106 Strong Wind and Solar 89 88 performance Gas 134 240 from Hydro and Gas fleet Energy Transition 26 54 Energy Marketing 20 39 Corporate (28) (24) Total 328 503 1 Adjusted EBITDA is a
Slide 21: Alberta hydro continues to perform to expectations
Alberta hydro continues to perform to expectations Hydro adjusted EBITDA 1 ($millions) Hydro volumes (GWh) 120 900 800 100 700 Volume (GWh) 600 80 $ millions 500 60 400 300 40 200 100 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 0 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 2023 2024 Q1 20
Slide 22: 2024 outlook
2024 outlook Windrise, Alberta 22
Slide 23: 2024 guidance affirmed
2024 guidance affirmed ($ millions) 2024 Outlook Adjusted EBITDA1 1,150 to 1,300 FCF1 450 to 600 Early look 2025 FCF ($/share) 1.47 to 1.96 expectations Sustaining capital 130 to 150 broadly in line with 2024 Market 2024 Outlook Alberta spot 75 to 95 ($/MWh) Mid-C spot 75 to 85 (US$/MWh) AECO gas pr
Slide 24: 2024 YTD share repurchases
2024 YTD share repurchases Highlights Returned $53 million of capital through the $53 million buyback of ~6 million common shares; 35% of up to $150 million 2024 program Balanced, prudent and disciplined Long-term shareholder value creation $150 approach to drives our investment and capital allocati
Slide 25: 2024 in-year priorities
2024 in-year priorities Windrise, Alberta 25
Slide 26: 2024 priorities
2024 priorities Safety, reliability Growth and commercial Strategic initiatives and availability Completed Mount Keith, Horizon Hill Progress CO2 emissions reduction to Improve leading and lagging safety and White Rock 75% from 2015 levels by 2026 performance, including TRIF of 0.0 Target 400 MW of
Slide 27: Heartland remains a compelling acquisition
Heartland remains a compelling acquisition Expands Aligned with Alberta flexible generation market strategy Attractive deal metrics Ownership in additional Enhances competitive positioning in 5.5x TEV1/EBITDA2 multiple at ~1.8 GW of assets response to changing dynamics closing ~$115 million annual a
Slide 28: Alberta market evolution
Alberta market evolution Big Horn, Alberta 28
Slide 29: Alberta business
Alberta business Maximize shareholder returns through active management of our diversified merchant portfolio Provide dynamic, cost-effective and low-carbon solutions to meet customer power demand and ESG goals Identify and evaluate market and technological sources for long-term growth Technology1:
Slide 30: Hedging and optimization increases our advantage
Hedging and optimization increases our advantage Ancillary services leader 112-year extensive operating expertise Trusted C&I Peaking supplier capacity Exceptional in-house forecasting and analytical capabilities Optimization expertise Integrated asset optimization and operations to ensure portfolio
Slide 31: Alberta regulatory change timeline
Alberta regulatory change timeline Restructured Energy Market Renewables (“REM”) industry REM design REM pause consultation and approval implementation implemented and design process Aug 2023 Feb 2024 Jul 1, 2024 2025 2026 Nov 30, 2027 Renewables Interim Interim pause ended Regulations in regulation
Slide 32: Alberta interim regulations
Alberta interim regulations July 1, 2024 to November 30, 2027 1 Icon Market power mitigation regulation 2 Icon Here Supply cushion regulation Do not expect the interim Requires the AESO to direct long lead time regulations to Creates offer limit for only gas-fired resources with offer control ≥ 5% a
Slide 33: Restructured Energy Market
Restructured Energy Market Icon State of play Icon TransAlta’s positioning Market Here Here requires low- cost, flexible Potential features: and fast- responding Changing energy landscape requires a long- Day-ahead market term focus generation for grid reliability Administrative scarcity pricing mec
Slide 34: Merchant electricity market evolution
Merchant electricity market evolution Higher average Lower average pricing pricing 2020 2025 2030 Moderate volatility Higher volatility Baseload generation Peaking generation and fleet diversity Lower carbon footprint Higher carbon footprint Optimization Hedging and optimization Grid reliability ser
Slide 35: Major supply shift continues
Major supply shift continues Alberta installed capacity and peak load (MW) 35,000 +185% Expected supply 30,000 growth in renewables 25,000 20,000 +140% 15,000 10,000 Expected supply growth in combined 5,000 cycle gas 0 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Cogeneration Renewables Storage
Slide 36: Prices expected to soften mid-decade with supply
Prices expected to soften mid-decade with supply Annual average power price forecast ($ per MWh) 162 149 102 47 2020 2021 2022 2023 YTD 2024 2025 2026 2027 2028 2029 2030 Actual Forecast Prices to decline before rebounding later in the decade 36
Slide 37: Intraday volatility of renewable supply
Intraday volatility of renewable supply Increasing renewable Renewable generation - maximum hourly change (MW) generation Increasing renewable generation will result in larger hour-to-hour changes in outputwill – challenging the reliability of the electricity system. result in larger hour-to-hour 2,
Slide 38: Wind penetration will increase volatility in price
Wind penetration will increase volatility in price September 2023 wind generation and power price volatility 900 High Low High 3,000 Supply surplus ($0/MWh) wind wind wind 800 2,500 Wind generation (MWh) Power price ($ per MWh) 700 600 2,000 500 1,500 400 300 1,000 200 500 100 0 0 Wind Generation Po
Slide 39: Increasing diversification of future portfolio
Increasing diversification of future portfolio Wind1 Hydro2 Storage3 Thermal Gas4 Peaking Gas4 Cogen Gas4 Assets 12 17 3 7 5 5 Capacity 734 MW 834 MW 350 MW 2,439 MW 387 MW 542 MW Baseload + Intermittent Baseload and Energy arbitrage / dispatchable – Peaking/ flexible Non-dispatchable Carbon-free pe
Slide 40: Comparison of technology capabilities
Comparison of technology capabilities Fast Baseload Fast Response Carbon Free Regulating Spinning Supplemental Technology Frequency Energy1 Energy1 Energy1 Reserve Reserve Reserve Response Hydro ✓ ✓ ✓ ✓ ✓ Wind / Solar ✓ Thermal CTG ✓ ✓ ✓ NGCC ✓ NG Peaking ✓ ✓ ✓ Storage ✓ ✓ Legend: TA capabil
Slide 41: Value of hydro portfolio
Value of hydro portfolio Key supplier of regulating reserves Market size of ancillary services to be in the range of $200M to $400M per year Merging conventional hydro and battery Brazeau storage expands optionality 350 MW Bighorn 120 MW Growth in electrification, demand, renewables and energy impor
Slide 42: Strong track record of realized pricing and optimization
Strong track record of realized pricing and optimization Realized energy and ancillary prices ($ per MWh) 50% 300 Average Realized Ancillary Price 250 to Spot 200 150 126% 100 Average Realized Energy Price 50 to Spot 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2021 2021 2021 2021 2022 2022 2022 2022 2023
Slide 43: Value of CTG portfolio
Value of CTG portfolio Operates in the high-value part of the offer curve – acting as super-peakers Sundance Key resources needed for market 401 MW reliability Keephills 858 MW Battle River2 550 MW Retirement and/or mothball decisions based on economics Sheerness2 600 MW Optimization and market expe
Slide 44: Thermal gas required when renewable resources are low
Thermal gas required when renewable resources are low Thermal gas capacity is Estimated thermal gas generation required (MW) required to meet Alberta demand and reliability Province loses 5.5 GW of capacity on Shortfall low renewable- resource days 1 44 1 Includes cogen NTG, CCGT and SCGT
Slide 45: Value of peaking portfolio
Value of peaking portfolio Rainbow 51 49 MW Peaking asset value to increase with intermittent generation Poplar Hill1 Valley View1 48 MW 100 MW Fast-ramping flexible units and combined with our hydro, coal-to-gas and storage cover the entire dispatch curve Joffre1 190 MW Best-in-class asset optimiza
Slide 46: Value of storage portfolio
Value of storage portfolio Strategically-located units will store surplus generation for discharge at peak periods Extremely valuable in ancillary services Brazeau PHES1 and fast-frequency response markets 900 MW Volatile price environment expected WaterCharger1 180 MW Tent Mountain PHES1 320 MW Opp
Slide 47: Strong hedge position through 2026
Strong hedge position through 2026 1,400 Expected 2024 Average MW per hour 1,200 1,000 thermal 800 production 600 400 largely 200 hedged 0 Q2 2024 Q3 2024 Q4 2024 2025 2026 Capacity Contract C&I and financial hedges Q2 2024 Q3 2024 Q4 2024 Full year 2025 Full year 2026 Hedged Price ($/MWh) 85 85 85
Slide 48: Growth execution
Growth execution Horizon Hill, Oklahoma 48
Slide 49: Our investment focus to 2028
Our investment focus to 2028 Renewables and Responsive and flexible New technology storage generation for reliability Expand core focus of onshore wind Optimize legacy gas generation Monitor and assess new to maximize cash flow and fund technologies such as storage, Expand position in solar renewabl
Slide 50: Our competitive advantage
Our competitive advantage Owner / operator business model Optimization and trading excellence Strong balance sheet Highly credible and Extensive wind platform capable developer Full life cycle capabilities and risk control Strong customer relationships Demonstrated ESG results 50
Slide 51: TransAlta project development lifecycle
TransAlta project development lifecycle Early-stage Advanced Construction development development Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Screening Development Definition Execution Closure Growth and Project Delivery Energy and Marketing Construction 51
Slide 52: Growing our fleet
Growing our fleet Clean Electricity Growth Plan progress (MW) 800 MW 800 delivered since 2021 Clean Electricity Growth Plan and strategic transactions (MW) 3 GW 1,844 through strategic transactions 800 1,187 3,831 52
Slide 53: Development pipeline
Development pipeline Pipeline expanded by >1.3 GW Since 2022 Surpassed goal of 5 GW pipeline By 2025 +26% New target to deliver 10 GW pipeline By 2028 53
Slide 54: Development pipeline: United States
Development pipeline Potential development (excluding prospects): 2,148 – 2,398 MW United States Project MW Technology State Stage FID Monument Road 152 Wind NE 2025 Swan Creek 126 Wind NE 2025 Dos Rios 242 Wind OK 2025 Old Town 185 Wind IL 2026 Cotton Belle 1 104 Solar TX 2026 Cotton Belle 2 81 Sol
Slide 55: Development pipeline: Canada
Development pipeline Potential development (excluding prospects): 1,747 – 2,597 MW Canada Project MW Technology Location Stage FID On Tempest 100 Wind AB hold On WaterCharger 180 Battery AB hold On Pinnacle 1 and 2 44 Gas AB hold New Brunswick Power 10 Battery NB 2025 Battery Sunhills Solar 170 Sola
Slide 56: Development pipeline: Australia
Development pipeline Potential Development (excluding prospects): 494 MW Australia Project MW Technology Location Stage FID Mt. Keith West N/A Transmission Mt Keith 2025 Network Upgrade SCE Capacity 94 Gas Kalgoorlie 2024 Expansion Port Boodarie Solar 50 Solar 2024 Hedland Southern Cross 120 Solar/W
Slide 57: Enhancing Value with Energy Marketing
Enhancing Value with Energy Marketing Le Nordias, Quebec 57
Slide 58: Aligning Growth and Energy Marketing
Aligning Growth and Energy Marketing Asset valuation Proprietary trading Aligned global team committed Pipeline management Market Asset optimization to accelerating interpretation value delivery of Specialty products Customer high-quality relationships portfolio through Growth Energy Marketing cross
Slide 59: Energy marketing capabilities
Energy marketing capabilities Electricity Natural Gas Emissions NWPP, CAISO, SPP, SWPP, IESO, Markets ISO-NE, NYISO, PJM, MISO, ERCOT Canada and US Canada and US Execution for TransAlta and third-party assets Diverse product Origination and knowledge base structured products provides key Real-time t
Slide 60: EBITDA contribution of over $650 million since 2019
Increasing volatility EBITDA contribution of over $650 across North American markets million since 2019 EBITDA contribution ($ million) Positioned to 183 deliver value in all market conditions 166 109 103 89 Tightly managed risk profile $135 million 2019 2020 2021 2022 2023 4-year average Adjusted E
Slide 61: Financial strategy and plan
Financial strategy and plan Brazeau, Alberta 61
Slide 62: Investment return targets
Investment return targets Required return evaluation criteria Investment size Disciplined capital allocation to enhance shareholder value Contractedness Project returns are assessed based on the unique Customer quality characteristics of each project Future business potential Targeting returns at 10
Slide 63: Simplified capital allocation
Simplified capital allocation Since 2021 Maintained strong credit metrics Returned $160 million in dividends Maintain balance sheet Dividend increased by 10% annually Fund the dividend Free Cash Deployed $1.4 billion towards the Clean Flow Electricity Growth Plan Execute on growth Invested $1.4 bill
Slide 64: Growth plan is well funded
Growth plan is well funded Consolidated sources and uses 2024-2028 Growth funding 2024-2028 6,000 5,000 Operating Debt cash flow will issued for growth fund equity 4,000 Clean Electricity requirements Growth $3.5 for growth Plan billion program $ millions 3,000 2,000 Free cash flow Heartland Common
Slide 65: Prudent capital management
Prudent capital management Share Valuation Credit ratings Dividend S&P BB+ $0.24 +10% CAGR $0.22 Moody’s Ba1 $0.20 DBRS BBB (low) $0.18 $0.17 $0.16 Debt/EBITDA 3.0 - 4.0x target 2019 2020 2021 2022 2023 2024 65
Slide 66: Diversified and resilient fleet
Diversified and resilient fleet Clean electricity leader with ESG focus 5 GW growth pipeline Strong financial position Antrim, New Hampshire 66
Slide 67: Questions & Answers
Questions & Answers Visit us at: www.transalta.com Investor_relations@transalta.com 67