Slide 1: TransAlta Corporation May 2020 Investor Presentation
TransAlta Corporation May 2020 Investor Presentation 1
Slide 2: Forward Looking Statements and Non-GAAP Measures
Forward Looking Statements and Non-GAAP Measures 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
Slide 3: TransAlta Summary
TransAlta Summary Corporate Snapshot Enterprise Value1 $7.9 Billion Market Capitalization1 $2.1 Billion Dividend Yield1 2.2% 2020E EBITDA (guidance) $925 - $1,000M 2020E FCF2 (guidance) $325M - $375M 73 generating facilities with 8,051 MW of capacity spanning multiple technologies and regions TECHNO
Slide 4: Strong Financial and Market Performance
Strong Financial and Market Performance AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN CONSOLIDATED FREE CASH FLOW1 ($ MILLIONS) FOR LAST THREE YEARS2 $400 5% $379 $367 $350 $311 4% $300 $250 3% $200 2% $150 $100 1% $50 $0 0% 2017 2018 2019 TransAlta S&P/TSX Capped S&P TSX Utilities FCF per share $1.14 $1.
Slide 5: Investment in TransAlta Renewables
Investment in TransAlta Renewables ~$150 million in dividends Converted Contracted Contracted Hydro Centralia & Energy Alberta Renewable On-site Assets Other Marketing Assets Assets Generation Portfolio run by a single leadership team Provides operational and financial synergies driving competitive
Slide 6: ESG Leadership at TransAlta
ESG Leadership at TransAlta • GHG reductions of 21 million tonnes of CO2e since 2005 (50% reduction) • Prevention of over 1.6 million tonnes of CO2e emissions in 2019 through renewable energy generation • Revenue of ~$28 million in 2019 from the sale of environmental attributes • Community Investmen
Slide 7: ESG Reporting, Rankings and Recognition
ESG Reporting, Rankings and Recognition • Five years of voluntary integrated reporting • Reporting on over 80 social and environmental KPI’s • Utilizing leading ESG reporting frameworks • Voluntary climate change reporting since 2010 • Current CDP score: B (Management) / North American average score
Slide 8: Sustainability Targets
Sustainability Targets Environmental Goals Social Goals Governance Goals • Minimize environmental incidents • Transition to clean • Reclaim land utilized for energy by 2025: • Strengthen gender Conversion and repowering equality: equal pay for mining in both Alberta of existing coal fleet with women
Slide 9: Key Strategic Priorities - 2020
Key Strategic Priorities - 2020 Successfully execute conversion strategy Deliver on announced renewables growth Advance and expand our on-site generation business Increase our presence in the US renewables market Maintain a strong financial position Keeping TransAlta People protected and resilient u
Slide 10: Targeted Conversion Plans
Targeted Conversion Plans • Base plan involves three boiler conversions in the 2020 to 2021 period, and one unit repowered into combined cycle • Options for Sundance 3, Sundance 4, Keephills 1, and Sundance 5 prior to being repowered will be evaluated in the 2020/2021 timeframe and be based on long-
Slide 11: Significant Benefits from Converting to Gas
Significant Benefits from Converting to Gas Benefits Achieved Milestones • Attractive investment returns ✓ Issued FNTP for Sundance 6 and Keephills 2 • Significantly extends life of the fleet • Significantly lowers operating, capital and ✓ Advanced Keephills 3 conversion carbon costs ✓ K3/G3 non-ope
Slide 12: Emission Savings Pay for Boiler Conversions in < 1.2 Years
Emission Savings Pay for Boiler Conversions in < 1.2 Years EMISSION COSTS PER MWH(1) $35 $30 $25 • ~$22/MWh CO2, NOx, SOx $20 and mercury savings from $15 converting from coal to gas $10 $5 $- Coal Boiler Conversion - Gas Fuel EMISSION SAVINGS AND PAYBACK – 400 MW UNIT(1) • $30 to $60 million per ye
Slide 13: Competitive Variable Costs
Competitive Variable Costs • TransAlta’s conversion strategy will result in a highly competitive fleet VARIABLE FUEL AND EMISSIONS COSTS¹ ($/MWH) $45.00 BOILER CONVERSION REPOWERED COMBINED CYCLE $40.00 Fuel $35.00 Emissions¹ $30.00 $25.00 $20.00 $15.00 $10.00 $5.00 $- Coal $1.50/GJ $2.00/GJ $2.50/G
Slide 14: Growth Projects Underway
Growth Projects Underway Capital Invested5 Expected Expected Projects Owned MW (CAD$ millions) Returns COD Skookumchuck Wind1 67 $150 - $160 High single digit H2 2020 Windrise Wind 207 $270 - $285 High single digit H2 2021 WindCharger Battery2 10 $7 - $8 Low/Mid teens H2 2020 Kaybob Cogen3 40 $105 -
Slide 15: Growth Projects EBITDA
Growth Projects EBITDA EBITDA GENERATED BY NEW ASSETS ($ MILLIONS) $60 $50 $40 SemCAMS¹ ² Windrise¹ $30 Windcharger¹ Skookumchuck¹ Big Level/Antrim³ $20 $10 $0 2020 2021 2022 1) Potential drop-down candidates to TransAlta Renewables. 2) Reflects 50% of total project EBITDA as SemCAMS has 50% option
Slide 16: Positioned for Future in Renewables
Positioned for Future in Renewables • TransAlta/TransAlta Renewables has more than doubled its renewable fleet since 2008 • Our existing presence and expertise position us well to participate in the growing demand for renewable energy GROWTH IN RENEWABLE GENERATION (MW) 3,000 2,500 2,000 1,500 1,000
Slide 17: RNW Growth Focus
RNW Growth Focus On-Site and Cogeneration Renewables Expand our fleet of on-site generation Focus our renewables growth efforts on the projects in Canada, the U.S. and Australia U.S. corporate and institutional market ⚫ Extensive history of on-site generation ⚫ Added five wind farms and a solar farm
Slide 18: Funding Plan – TransAlta Renewables
Funding Plan – TransAlta Renewables New projects supported by project-level debt Tax equity will be utilized for U.S. projects that have tax credits Opportunity to raise debt against currently unencumbered assets Additional sources of capital include: • Excess cash flows • DRIP • Partnerships 18
Slide 19: Prudent Capital Allocation and Dividend Policy
Prudent Capital Allocation and Dividend Policy • Announced 6% dividend increase for common shares in January 2020 Deconsolidated FFO¹ 25 – 35% 6 – 8% 8 – 10% 10 – 15% 30 – 50% Sustaining & • Clean energy Preferred Share Common Share investments Productivity Amortizing Debt • Debt Reduction Dividends
Slide 20: Success in Reducing Senior Recourse Debt
Success in Reducing Senior Recourse Debt TRANSALTA SENIOR RECOURSE DEBT ($BILLIONS) $3.5 $3.0 $2.5 $2.0 $1.5 $1.2 billion recourse debt $1.0 target $0.5 $0.0 2015 2016 2017 2018 2019 2020E • Repositioned balance sheet to the size for operating in a merchant environment • Consistent reduction in corp
Slide 21: Deconsolidated Sources and Uses
Deconsolidated Sources and Uses DECONSOLIDATED SOURCES AND USES 2020-2023 ($ MILLIONS) $3,000 Cash on Hand $2,500 Cash (Ending 2019) NCI Distributions Amortizing Debt Share Buyback Debt Issuance1 Preferred Dividend $2,000 Common Dividend Brookfield Investment 2020 Bond $1,500 RNW Dividend 2022 Bond
Slide 22: Highly Diversified Asset Base
Highly Diversified Asset Base 2020 CONTRACTED/MERCHANT EBITDA ALBERTA HEDGE POSITION (BOY 2020) Bal 2020 AB Thermal Baseload Merchant 5-10% Merchant Generation 74% Hedged(1) Hedged Price $52 ($/MWh)(1) Long-term contracts, $1/MWh EBITDA sensitivity +/-$3.5 hedges and first quarter ($ Millions) resul
Slide 23: COVID-19 Response
COVID-19 Response ⚫ Initiated business continuity plan in early March ▪ Remote working arrangements ▪ Travel bans Employees and ▪ Health screening ▪ Revised schedules Contractors ▪ Enhanced cleaning arrangements ▪ Contingent work teams ⚫ Implemented virtual healthcare program ⚫ Ensured facilities re
Slide 24: Attractive Equity Entry Point
Attractive Equity Entry Point • Market is assigning a very low multiple to TransAlta’s thermal fleet based on the current market prices for TransAlta Renewables and value of TransAlta’s Hydro assets • Merchant U.S. power companies trade closer to 6 – 8x EBITDA, implying a significant uplift in Trans
Slide 25: Why Invest in TransAlta
Why Invest in TransAlta • Strategy of 100% Clean Energy unchanged – execution well underway • Strong cash flows with significant upside potential • TransAlta’s fleet will be a competitive low-cost generator in the Alberta energy-only market • TransAlta Renewables well positioned to fund and particip
Slide 26: Visit us at the Investor Centre on www.transalta.com
Visit us at the Investor Centre on www.transalta.com Investor_relations@transalta.com 1-800-387-3598 26