Transalta Corporation · TSX:TA
Transalta — Investor Day (November 2012)
102 slides from Transalta's investor day presentation, Nov 28, 2012
Slide 1: Investor Day 2012
INVESTOR DAY 2012 POWER INFRASTRUCTURE
Slide 2: Forward looking statements
Forward looking statements This presentation contains 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 the
Slide 3: Today's agenda
Today’s agenda Overview Dawn Farrell Operations Hugo Shaw Marketing & Energy Trading Rob Schaefer Growth Canada gas Ken Stickland Australia Aron Willis M&A Brett Gellner Financial Brett Gellner Concluding remarks / Q & A Dawn Farrell 3
Slide 4: Dawn Farrell, President & CEO
Dawn Farrell President & CEO 4
Slide 5: Our vision
Our vision To be the most competitive low cost power infrastructure and energy marketer in our core markets 5
Slide 6: Our strategy and assets
Our strategy and assets We are diversified and well positioned to grow 5 fuel types; 3 key markets; significant growth …and we have significant knowledge in our Marketing and Energy Trading organization Information Generator services Merchant sales Marketing Customers Coal Gas Hydro Wind Geothermal
Slide 7: Secured cash flows are driven by our customers
Secured cash flows are driven by our customers 1 Contracts ,2 2 Megawatts (MW) 1 MW have been adjusted to reflect actual capability and reflects 2013 contracted levels 7 2 STC = Short-term contracts; LTC = Long-term contracts
Slide 8: Business Model
Business Model Operational excellence Long-term customers in availability & Generator services Marketing and Operations cost control Market information Energy Trading Energy Trading Growth Shared Services $ $ People Capital to support growth $ Financial Strategy Dividend & Growth 8 – 10% TSR 8
Slide 9: TransAlta today
TransAlta today What’s working: Operational excellence: Heritage assets in Alberta market are a significant source of future value for existing shareholders Asset planning has coal plants set up to run to end of life Wind/Hydro fleet size represents strong value in portfolio Gas portfolio st
Slide 10: Areas of focus
Areas of focus What we are improving: Operational excellence: Focus company on funds from operations to maximize competitiveness Alberta PPA’s: lengthen and better match cash / earnings to spending requirements Re-organize to take advantage of I.T. and face into demographics and competitive pr
Slide 11: Areas of focus
Areas of focus What we are assessing: Marketing & Energy Trading: The right size for our proprietary trading as markets evolve Growth: How to attract customers into long-term contracts in Alberta How to expand our Western US business How to compete for renewable assets given competitiveness
Slide 12: It's all about execution…
It’s all about execution… 2012 2012 Major Issues Accomplishments Complete end of life major Five planned major maintenance coal outages maintenance plan for coal completed; final planned outage on Sundance 5 almost complete Long-term contract signed for Centralia Re-contract Centralia Reduced
Slide 13: …goals…
…goals… Growth No. 1 generator & energy marketer Tracking: Sundance 7, MidAmerican 30% market position in Alberta partnership Top 5 player in PacNW by 2015 Add 1,500 MW Not tracking: Seeking M&A Grow Western U.S. Business opportunities Canada’s largest publicly traded Add 100 – 200 MW per year Addin
Slide 14: …and having a good plan
…and having a good plan Short-term focus (2013) Strategic objectives Financial objectives Deliver one greenfield project from MidAmerican Achieve $800 – $900 million in FFO partnership Maintain dividend Add $40 - $60 million of EBITDA from growth Strengthen balance sheet Return trading t
Slide 15: Where are the risks?
Where are the risks? Commodity prices Managing exposure to natural gas and power prices in the 2014 – 2018 timeframe Sundance A rebuild Low construction productivity in Alberta Final GHG regulations GHG and other pollutants need to be aligned to realize full value from new legislation Alberta
Slide 16: Where are the opportunities?
Where are the opportunities? Commodity prices Gas prices starting to show more strength and additional calls for upside Need for new generation supportive of longer- term Alberta power prices Australia Additional opportunities as we continue to establish our behind the fence generation experti
Slide 17: Our plan to 2021
1 Our plan to 2021 2012 2013 2014 2015 2016 2017 2018 2019 2021 Solomon Sun A Centralia Sun A Post PPA Lower Sust. Escalating price & volumes Post PPA Capex Base EBITDA Solomon, Sun A, Centralia Future Growth Post PPA Value 1. Illustrative only, depicts adding EBITDA of $40 - $60M / year 17 to achie
Slide 18: Driving shareholder value
Driving shareholder value Financial strength Operational Dividend excellence 1st Quartile TSR Greenfield cost performance Target: growth 8 – 10% / yr Energy Trading Acquisitions Optimized contracting and leverage 18
Slide 19: Hugo Shaw, EVP Operations
Hugo Shaw EVP Operations 19
Slide 20: Topics covered
Topics covered Generation operating model Goals and results Fleet update Coal Gas Hydro Wind Construction update Sustaining and growth capital estimates 20
Slide 21: Operating Model
Operating Model Asset plans Safety Front line communication Management & technical of change training Defined roles & Operational Maintenance accountabilities strategy excellence Plant Work engineering management practices Planning & Regulatory execution compliance 21
Slide 22: Goals and results
Goals and results Better than target: Consistent availability 89 – 90 % 90.3% YTD1 Better than target: Stable generation OM&A Offset inflation 5.5% lower YTD 2012 above yearly Lower major maintenance $30 million per outage target; Tracking for costs for coal in 2015 2013 Safety IFR2 less than 1.0 Be
Slide 23: Coal overview
Coal overview Maintenance Strategy Facility Capacity Implement Operating Model and ensure 100% Sundance 1,581 MW adherence to all processes and standards Keephills 1 & 2 806 MW Maintain boilers to achieve availability and Keephills 3 225 MW production targets to end-of- life with 24-30 Genesee 3
Slide 24: 2012 major maintenance work completed
2012 major maintenance work completed Boiler economizer replacement Keephills 1 & 2 Turbine retrofits and generator rotor replacements Boiler repairs / pieces of work – over 12,000 DCS installation in Kps 2 – 6 kilometers of new cable & 15,000 reconnections Total labor hours – 850,000 Sundan
Slide 25: Alberta coal unplanned outages
Alberta coal Improved maintenance practices have reduced unplanned outages unplanned outage losses and increased availability # of leaks Sundance and Keephills Boiler Leaks Availability NERC Average (Coal) Sundance and Keephills Availability 25
Slide 26: Canadian federal GHG emissions regulations
Canadian federal GHG emissions regulations Alberta coal unplanned outages Revised federal GHG regulations provide additional 43 years and approximately 89,000 GWh of production in TransAlta’s coal fleet Plant MW Annual GWh1 45 Year Rule Final Years Increase Additional Regulations GWh (1) Sundance 1
Slide 27: Gas overview
Gas overview Facility Name Capacity Ownership Net Technology (MW) (%) ownership (MW) Poplar Creek 356 100 356 Alstom 11N2 Fort Saskatchewan 118 30 35 GE 7EA Sarnia 506 100 506 Alstom 11N2 Mississauga 108 50 54 GE LM6000 Ottawa 68 50 34 GE LM6000 Windsor 68 50 34 GE LM6000 Centralia 248 100 248 GE LM
Slide 28: Gas major maintenance work
Gas major maintenance work 2012 Outages Maintenance strategy Poplar Creek GT5 Major Major overall including replacement of Implement Operating Model and compressor and turbine rotor blades ensure 100% adherence to all Outage duration 8 days shorter than plan processes and standards Fort Saskat
Slide 29: Inspection and major maintenance intervals
Inspection and major maintenance intervals Gas & Steam Turbine Legend 11N2 major maintenance schedule A & B - Minor inspections; 3 - 4 day outage Turbine Inspection Inspection Inspection Inspection interval & type interval & type interval & type interval & type C – Major overhaul; 25 - 32 day ou
Slide 30: Gas fleet performance well above industry standards
Gas fleet performance well above industry standards Availability by gas turbine technology NERC Average (Gas) 30
Slide 31: Hydro overview
Hydro overview Facility Capacity Facility Capacity Facility Capacity Facility Capacity Barrier 1 13 MW Horseshoe 1 – 4 14 MW Waterton 3 MW Appleton 1 MW Bearspaw 1 17 MW Interlakes 1 5 MW St. Mary 2 MW Moose Rapids 1 MW Bighorn 1 & 2 120 MW Kananaskis 1 - 3 19 MW Upper Mamquam 25 MW Skookumchuck 1 M
Slide 32: Hydro life extension strategy
Hydro life extension strategy Refurbish our hydro fleet for another 50 years of operation and add new capacity and production New control New runners Generator rewinds systems 32
Slide 33: Life extension progress
Life extension progress 2012 2013 - 2016 Spray 1 life extension 2013 - 2014 Constructability reviews Schedule and cost estimates Contracting Turbine runner replacement, generator rewind, control systems upgrades, balance of plant Pocaterra Penstock Spray detailed refurbishment replacement
Slide 34: Wind overview
Wind overview Facility Capacity Ownership Net Facility Capacity Ownership Net (%) Ownership (%) Ownership (MW) (MW) Kent Hills 150 83 124.5 Cowley Ridge 21 100 21 Le Nordais 99 100 99 Macleod Flatts 3 100 3 Melanchton 200 100 200 McBride Lake 75 50 37.5 Wolfe Island 198 100 198 Sinott 7 100 7 Ardenv
Slide 35: Wind maintenance strategy and availability
Wind maintenance strategy and availability Maintenance strategy Availability Implement Operating Model and ensure 100% adherence to all work 100% processes and standards 98% 96% Schedule and plan all routine 94% maintenance work in low wind 92% North American Benchmark by GL Garrad Hassan season
Slide 36: Sundance units 1 & 2 update
Sundance units 1 & 2 update 161 ft 118 ft Stats: 1.4 million labour hours 248 boiler wall panels (8ft x 40ft) 65 ft 15,000 tube welds Project management: 70% of water wall rebuild costs are fixed 0 ft Variable costs includes incentives/penalties tied to completion date and labour hours exp
Slide 37: New Richmond – construction update
New Richmond – construction update Progress 31 out of 33 concrete towers 12 turbines with nacelle 6 turbines pre-commissioned 8 cranes and average 200 workers/day on site Work completed 22 kilometers of roads and underground collector system Substation completed Schedule End of Dec: Na
Slide 38: Overall sustaining capital
Overall sustaining capital Setting up for sustained long-term operational excellence ($M) 2012e 2013e 2014e 2015e Sustaining $405 – 450 $295 – 335 $360 – 395 $340 – 375 Routine Capital $100 – 115 $90 – 100 $90 – 100 $85 – 95 Major Maintenance $265 – 285 $165 – 185 $220 – 240 $205 – 225 Mine Capital
Slide 39: 2013 Total major projects and growth
2013 Total major projects and growth Remaining Total ($M) for 2012 2013 e Project Cost Major Projects $25 - $45 $150 - $170 $190 (Sundance Units 1&2) New Richmond $70 - $115 $0 - $10 $205 Total major projects $95 - $160 $150 - $180 $395 and growth 39
Slide 40: Driving shareholder value
Driving shareholder value Operating model defined and being implemented across fleet to drive operational excellence Operational Safe work practices world class excellence Three year boiler reset completed – availability targets being achieved in coal fleet 1st Quartile cost TSR performance Ta
Slide 41: Rob Schaefer, EVP Corporate Development
Rob Schaefer EVP Corporate Development Source: NGX, Alberta Electric System Operator, Canaccord Genuity 41
Slide 42: Topics covered
Topics covered Marketing and Energy Trading operating model Market update Alberta Pacific Northwest Marketing strategy Alberta Pacific Northwest Energy Trading 42
Slide 43: Operating Model
Operating Model Market Intelligence People Proprietary Marketing & Generator Trading Sales services Real time Long-term Merchant Systems contracts bidding Term trading Alberta Economic Analytics dispatch PacNW Risk Dispatch Risk control management services Hedging Compliance 43
Slide 44: Marketing and Energy Trading covers TransAlta's core markets
Marketing and Energy Trading covers TransAlta’s core markets Alberta Desk East Desk West Desk 44
Slide 45: 2013 focus
2013 focus Proprietary trading: Back to basics Deliver $40 - $60 million in gross margin Marketing & sales: Increase contracting for merchant assets Add new long-term contracts in Centralia Add new long-term contracts in Alberta Grow commercial and industrial business Secure new Albert
Slide 46: Alberta market
Alberta market Weak relationship between natural gas and power prices Monthly Alberta power and AECO gas prices $CAD/MWh $CAD/mmbtu 46
Slide 47: Alberta forward market is a poor predictor of future spot market settles
Alberta forward market is a poor predictor of future spot market settles Forward prices tend to reflect spot fundamentals not future fundamentals Average annual Alberta power prices compared to historical forward Alberta power prices $/MWh 1Source: Canaccord Genuity 47 Data: NGX, Alberta Electric Sy
Slide 48: Price required to attract new generation
Price required to attract new generation1 AESO estimate that prices in the range of $55-$125 / MW are required to attract new combined cycle generation ¹ 48
Slide 49: Pacific Northwest; upside at Centralia as power prices come off their lows
Pacific Northwest; upside at Centralia as power prices come off their lows Power is highly correlated to gas with the Centralia 2013 – 2016 average annual gross exception of Q2 margin $USD/MWh $USD/mmbtu $M 200 $170 - $175 150 $140 - $145 $110 - $115 100 $80 - $85 50 0 2008 2009 2010 2011 2012 35 40
Slide 50: Alberta marketing
Alberta marketing Approach customized for each market segment 22% Commercial & small industrial Standard offers 55% Large industrial 1000 targeted customers and oil sands Commercial and 2 to 10 year term small industrial Customized offers ~25 targeted Large industrial customers and oil san
Slide 51: Building our customer base to drive stable revenues
Building our customer base to drive stable revenues Positioning for growth and PPA roll-off Competitive Advantages Alberta contracting targets MW 1,900 MW Strong market added relationships Low cost, diverse portfolio provides competitive advantages 600 MW added Trading capability provides tool
Slide 52: Strategy for contracting Centralia
Strategy for contracting Centralia Centralia contracting targets 2013 - 2025 MW T Total capacity Hedged Focused on adding more contracts 2013 – 2020 through a combination of Participation in Request for Proposals (RFPs) Capturing opportunities to hedge when market prices are supportive 52
Slide 53: Contracted position
Contracted position Hedge targets increased to support revenue certainty Total portfolio contractedness1 MW With the Puget Sound 82% 77% 75% 75% Energy contract our base portfolio is now 75% contracted Targeting higher contracting levels and longer-term contracts 2013 Contracted Prices AB $55 - $
Slide 54: Trading operation
Trading operation Refocus on strengths – trading around assets and lower risk proprietary opportunities Expect to see gross margins consistent with history of $40 to $60M per year $M 54
Slide 55: Driving shareholder value
Driving shareholder value Marketing & Energy Trading plays Operational excellence an important role in capturing market value for TransAlta’s merchant fleet 1st Quartile TSR Cost performance Target: Driving for more contracts to 8 – 10%/yr ensure revenue stability Refocusing proprietary tradin
Slide 56: Ken Stickland, Chief Business Development Officer
Ken Stickland Chief Business Development Officer 56
Slide 57: Topics covered
Topics covered Growth in our markets Canada - Immediate and long-term opportunities Alberta - Market drivers - Oil sands potential demand British Columbia - Market drivers - Potential LNG demand TransAlta’s growth strategy Strategy behind partnerships MidAmerican Update on Sundance 7
Slide 58: Significant opportunity for growth
Significant opportunity for growth Canadian power demand is estimated to grow by ~1.6% per year over the next decade Western Canadian growth is the strongest Immediate term, largest opportunity in three areas: Oil sands Alberta grid additions British Columbia LNG Medium term, opportunity
Slide 59: Alberta market drivers
Alberta market drivers Steady load growth across the province Declining reserve margins Two decades of ~3% annual load growth Alberta Interconnected Electric System (AIES) with AESO forecasting similar growth Reserve Margin, 2000 - 20171 rate going forward 200 to 400+ MW of new capacity needed e
Slide 60: Alberta potential power demand – oil sands
Alberta potential power demand – oil sands Over $350 billion of investment in oil sands by 20352 $10 $18 $56 $162 $118 $B Oil sands projects1 Investment in generation capacity in Estimated Load Canada 2010 – 20303 Project Status (MW) Projects in Operation 1,265 $122 $74 Projects Under Construction 4
Slide 61: British Columbia market drivers
British Columbia market drivers Average peak demand is forecasted to grow at a rate of ~3% per year through 2020 largely driven by increase in industrial demand BC Hydro is currently working under an extension to the Integrated Resource Plan, which identifies a short-term peak capacity gap from
Slide 62: British Columbia LNG – an opportunity to rival the oil sands
British Columbia market drivers British Columbia LNG – an opportunity to rival the oil sands: LNG in Kitimat and Prince Rupert Potential for 5-10 BCF / day of LNG projects in the next decade Horn River Electric powered compressors leads to lower emissions (GHG and NOx) With electric powered co
Slide 63: Partnering for growth
Partnering for growth Why partner? Why MidAmerican? Enhances our ability to pursue Builds on existing successful more and larger projects relationship at CEGen Diversifies investment risk in any Similar risk and return expectations one project Extensive natural-gas fired Reduces developm
Slide 64: Sundance 7
Sundance 7 Progressing with transmission interconnection process Progress update Turbine selection: Mitsubishi Site location: Sundance site Permitting Activities: 2014 Sun 7 COD: 2017 / 2018 Location Alberta Must be 75% contracted Fuel type Gas fired generation Gas reserves update Size Up
Slide 65: Driving shareholder value
Driving shareholder value Competitive advantages Well established presence in markets with strong fundamentals Operational excellence Extensive market knowledge and relationships 1st Quartile cost TSR Proven track record of providing performance Target: reliable low-cost power including 8 – 10
Slide 66: Aron Willis, Country Manager Australia
Aron Willis Country Manager Australia 66
Slide 67: Topics covered
Topics covered Overview of business Solomon acquisition Western Australia resources profile Growth strategy 67
Slide 68: Overview
Overview Our business Our customers Established in Western Australia in the early 1990’s Iron Ore Completed commissioning of our first power station in 1996 Completed the purchased of WMC Resources power generation assets in Gold 1999 Specialists in safe, reliable supply of power to remote m
Slide 69: Overview
Overview Our assets 6 power stations 480 MW installed capacity; 425 MW net to TA Gas turbine and diesel reciprocating engine technologies Over 500km of transmission and distribution infrastructure (125 MW) Centralized remote control of all facilities (112 MW) (59 MW) (110 MW) (37 MW) (37 M
Slide 70: Solomon acquisition
Solomon acquisition $318 million acquisition of Solomon Power Project (125 MW) to supply Electricity to Fortescue Metals Group 16-year Power Purchase Agreement with Fortescue; guaranteed value for 21 years either through a 5 year extension or sale of plant back to Fortescue Escalating capacity
Slide 71: Western Australia
Western Australia Economic engine $110.9 billion in mineral and petroleum exports in calendar year 2011 WA minerals and energy output accounts for 61% of Australia’s total exports 116,000 people employed in the mining and resources sector in the state Western Australia Mineral and Petroleum Ex
Slide 72: Demand growth – minerals and energy
Demand growth – minerals and energy Significant growth is forecast Current installed capacity of approximately 9 GW On-Grid ~6 GW Off-Grid ~3 GW Energy requirements for new mining projects and expansions driving a 58% increase in consumption to 2018 Our Assets Compound annual growth rate
Slide 73: Demand growth – by region
Demand growth – by region Three main target regions Pilbara: Major mining (hematite iron ore) and LNG investment, possibly new transmission MidWest: Magnetite Iron Ore creates high electricity demand, large port expansion and some new transmission Goldfields: Gold and nickel, potential to aggr
Slide 74: Growth strategy
Growth strategy Maintain our position as the leading behind-the-fence generator in Western Australia MW Double our size to 600 MW Target Solomon 74
Slide 75: Driving shareholder value
Driving shareholder value Competitive Advantages 15 years experience in Australia Operational excellence Operated throughout business cycles 1st Quartile cost performance 1st Quartile TSR Deep technical expertise cost Acquisitions performance Target: 8 – 10%/yr Proven track record of reliabi
Slide 76: Brett Gellner, Chief Financial Officer, M&A
Brett Gellner Chief Financial Officer M&A
Slide 77: Acquisitions have been an important part of our growth strategy
Acquisitions have been, and will continue to be, an important part of our growth strategy Year Asset/ Company Region Fuel $M¹ 1999/2002 Southern Cross W. Australia Natural $195 Gas/Diesel 2000 Centralia U.S. Coal US$585 2000/2002 Vision Quest Alberta Wind $70 2003 CE Gen U.S. Geo/Gas US$710 2009 Can
Slide 78: M&A Market: Observations
M&A Market: Observations Low interest rates and surplus capital resulting in low returns for high quality, highly contracted assets Non-strategic funds focused on cash equity returns versus “all-in” and accounting returns Tax structures/partnerships and leverage used to enhance equity returns
Slide 79: Key criteria
Key criteria Category Criteria Geographic regions Canada, Western U.S., Western Australia Fuel types Gas, Wind, Hydro, Geo Non-generation Assets Transmission & pipes if connected to generation Contracts > 10 years, or cost of service Counterparties Established with investment grade ratings or target
Slide 80: Significant wind opportunities in Western U.S.
Significant wind opportunities in Western U.S. Over 11,000 MW of existing wind generation RPS Levels and Targets - Washington State 2,800 MW 20% 0% Current 2020 Target 3,200 MW Western 30% RPS Levels and Targets - Oregon U.S. 0% Current 2020 2025 Target Target RPS Levels and Targets - California 35%
Slide 81: Driving shareholder value
Driving shareholder value Competitive advantages Proven track record of reliable, low cost power Operational excellence Access to multiple sources of capital TSR Market knowledge 1st Quartile cost Acquisitions performance Target: 8 – 10%/yr Development & construction risk Economies of scal
Slide 82: Brett Gellner, Chief Financial Officer, Financial
Brett Gellner Chief Financial Officer Financial
Slide 83: Topics covered
Topics covered Financial objectives 2013 Cash flow outlook Dividend coverage Dividend reinvestment programs Credit metrics Overall valuation 83
Slide 84: Financial objectives
Financial objectives Objectives Targets TSR = 8 – 10% / yr Dividend yield plus cash flow per share growth Drive shareholder value Add $40 - $60 million of EBITDA per year, on average Maintain financial strength & Investment grade credit ratings flexibility Access to multiple sources of cap
Slide 85: Proven track record of adding EBITDA
Proven track record of adding EBITDA Bone Creek Hydro $M Approx. $50 - $60 million of Keephills 3 Coal uprates EBITDA added per year Solomon acquisition since 2005 New Richmond wind farm Cost reductions Canadian Hydro 5 greenfield wind farms Sarnia contract Coal uprates Genesee
Slide 86: Reducing risk and enhancing value through diversification
Reducing risk and enhancing value through diversification 2008 2012 TA: 7,963 MW TA: 9,065 MW Renewables Renewables 15% 24% Gas Coal Coal 23% 62% 55% Gas 21% 86
Slide 87: Access to multiple sources of capital to fund growth
Access to multiple sources of capital to fund growth $300 million raised for Solomon, New Richmond, and debt Equity reduction ~70% participation rate in Dividend Reinvestment Program $780 million raised to-date, receiving 50% equity treatment Preferred shares Potential for $200 - $300 millio
Slide 88: 2013 Outlook
2013 Outlook $ millions Funds from operations1 $800 - $900 Trading gross margin² $40 - $60 Sustaining capex3 $295 - $335 Availability Cdn Coal 90 – 91% Gas ~93% Wind ~96% Hydro production 2,100 GWh Wind production – East 1,690 GWh Wind production – West 1,260 GWh Alberta power prices $55
Slide 89: 2013 Estimated excess cash flow and dividend coverage
2013 Estimated excess cash flow and dividend coverage Free cash flow more than enough to cover dividends 2013 Excess Cash Flow 2013 Dividend Coverage (% of FCF2) $M Excludes DRP¹ proceeds Significant excess cash flow available for debt retirement and/or growth (including funding of Sundance A) ¹ Div
Slide 90: Financing growth projects
Financing growth projects1 Equity cash requirements very manageable for large scale, greenfield combined cycle gas plant $ millions Capital cost $1,300 Debt financing2 ($910 - $650) Equity required $390 - $650 Partners’ interest ($195 - $325) TA’s equity requirements $195 - $325 Years to construct 3
Slide 91: Medium-term upside potential from Sundance A
Medium-term upside potential from Sundance A Sundance A expected to generate cumulative incremental EBITDA in the range of $120 to $280 million in the 2018-2019 timeframe once the PPA expires Estimated incremental annual Common dividends as % of FCF1 $M EBITDA Post Sun A PPA Post Sundance A PPA Repr
Slide 92: Longer-term upside potential from Alberta PPA plants
Longer-term upside potential from Alberta PPA plants Expiry of the Alberta Coal and Hydro PPAs is expected to provide significant EBITDA and dividend coverage upside $M Estimated incremental annual Common dividends as % of FCF1 EBITDA Post 2020 2021 Post PPA Cumulative potential upside Represents FF
Slide 93: Dividend reinvestment programs: key features
Dividend reinvestment programs: key features Current participation rate of ~70% bringing in ~$200 mm of equity per year Standard Program Premium Program Investors receive additional Investors receive cash, shares of TA instead of cash which is funded by new dividend shares issued to the market
Slide 94: Dividend reinvestment programs: key advantages & disadvantages
Dividend reinvestment programs: key advantages & disadvantages Advantages Disadvantages Lower cost than raising equity through Dilutive to shareholders if used solely capital markets for debt retirement Short-term debt reduction provides Target cash flow per share growth some interest saving
Slide 95: Credit metrics
Credit metrics Cash flow to debt Cash flow to interest Prefs treated at 50/50 debt/equity Prefs treated at 100% equity 1. LTM – Last 12 months adjusted for one-time payment associated with Sundance 1 & 2 decision 95
Slide 96: Actions taken to enhance balance sheet and risk profile
Actions taken to enhance balance sheet and risk profile Issued preferred and common share equity Implemented premium DRIP program Termed out US$400 million of debt at lowest rate in recent company history Exited lower performing and non-core assets Entered into long-term contract at Centra
Slide 97: Trading levels ($M / installed capacity)
Trading levels ($M / installed capacity) On a per megawatt (MW) basis, TransAlta is trading well below most other power generation companies in Canada 97
Slide 98: Driving shareholder value
Driving shareholder value Financial strategy remains unchanged Financial strength Focused on delivering cash flow to Operational excellence Dividend fund dividend and growth, and maintain investment grade ratings 1st Quartile Significant cash flow upside from TSR Greenfield cost Target: growth
Slide 99: Appendix
Appendix TransAl ta
Slide 100: Bond Maturity Profile
Bond Maturity Profile CAD $M 800 USD Debt CAD Debt 600 520 400 - - 300 500 200 - 400 400 300 251 200 177 120 27 0 - - - - - - - - - - - 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025- 2040 1 Excluding drawn credit facilities of $1,309 million and amortizing debt of $38 million at S
Slide 101: 2013 Estimated excess cash flow and dividend coverage
2013 Estimated excess cash flow and dividend coverage Significant excess cash flow available for debt retirement and/or growth (including funding of Sundance A) 2013 Estimated Cash Flow/Dividend Coverage Sensitivity Analysis FFO Scenario $ 750 $ 800 $ 850 $ 900 $ 950 Sustaining Capex (mid point) $ (
Slide 102: Advanced development pipeline
Advanced development pipeline Projects in advanced development NET TransAlta TARGET LOCATION PROJECT CAPACITY FUEL TYPE CAPEX RANGE COMMERCIAL MW $ MM OPERATION DATE Alberta Oil sands cogeneration Up to 150 Gas-fired $300 - $325 2016 - 2017 Alberta Sundance 7 Up to 400 Gas-fired $600 - $700 2017 - 2