Transalta Corporation · TSX:TA
Transalta — Investor Presentation (January 2020)
24 slides from Transalta's investor presentation, January 2020
Slide 1: TransAlta Corporation January 2020 Investor Presentation
TransAlta Corporation January 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 information", within the meaning of applicable Canadian securities laws, and "forward-looking statements", within the meaning of applicable United States securities laws, including the United States Private
Slide 3: TransAlta Summary
TransAlta Summary Corporate Snapshot Enterprise Value1 $8.2 Billion Market Capitalization1 $2.5 Billion Dividend Yield1 1.8% 2019E EBITDA (guidance) $875M - $975M 2019E FCF2 (guidance) $350M - $380M 73 generating facilities with 8,057 MW of capacity spanning multiple technologies and regions TECHNOL
Slide 4: Strong Financial and Market Performance
Strong Financial and Market Performance AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN CONSOLIDATED FREE CASH FLOW1 ($ MILLIONS) FOR LAST THREE YEARS2 $400 14% $367 $350 12% $311 $300 10% $257 $250 8% $200 6% $150 4% $100 $50 2% $0 0% 2016 2017 2018 TransAlta S&P/TSX Capped S&P TSX Utilities FCF per share
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 Four years of voluntary integrated reporting • Empirical evidence shows that Environmental, Social and Governance (ESG) performance is correlated with financial performance BOARD TENURE BOARD AND EXECUTIVE TEAM DIVERSITY Diversified Board and senior 3-5 yrs management tea
Slide 7: ESG Rankings and Recognition
ESG Rankings and Recognition • Voluntary reporting since 2010 • Industry and North American leader on climate change management, performance and Carbon Disclosure disclosure Project Indices • Current Score: B (Management) • Industry and North American Average Score: C (Awareness) Task Force on Clima
Slide 8: Key Strategic Priorities
Key Strategic Priorities Successfully execute conversion strategy Deliver $800 million of announced renewables growth Advance and expand our on-site generation business Increase our presence in the US renewables market Maintain a strong financial position 8
Slide 9: Significant Growth Underway
Significant Growth Underway Capital Expected Expected Projects Owned MW Invested6 Returns COD (CAD$ millions) Big Level Wind 90 $225 - $240 High single digit Commissioned RNW Antrim Wind 29 $100 - $110 High single digit Commissioned Skookumchuck 67 $150 - $160 High single digit H1 2020 Wind1 Potenti
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 • Sundance 5, the future repowered combined cycle unit, will either co-fire until repowered or potentially be converted to 100% gas via a boiler conversion,
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 Unit • Significantly extends life of the fleet ✓ Issued LNTP for Keephills 2 Unit • Significantly lowers operating, capital and ✓ K3/G3 non-operating interest swap ca
Slide 12: Emission Savings Pay for Boiler Conversions in < 1.5 Years
Emission Savings Pay for Boiler Conversions in < 1.5 Years EMISSION COSTS PER MWH $25 $20 • ~$18/MWh CO2, NOx, SOx $15 and mercury savings from $10 converting from coal to gas $5 $- Coal Boiler Conversion - Gas Fuel EMISSION SAVINGS AND PAYBACK – 400 MW UNIT • $25 to $50 million per year in $60 1.6
Slide 13: Competitive Variable Costs
Competitive Variable Costs • TransAlta’s conversion strategy will result in a highly competitive fleet VARIABLE FUEL AND EMISSIONS COSTS¹ ($/MWH) $40 REPOWERED COMBINED BOILER CONVERSION CYCLE $35 $30 $25 $20 $15 $10 $5 $- Coal $1.50/GJ $2.00/GJ $2.50/GJ $1.50/GJ $2.00/GJ $2.50/GJ Gas Price Gas Pric
Slide 14: Positioned for Future in Renewables
Positioned for Future in Renewables • TransAlta/TransAlta Renewables has more than doubled its renewable fleet since 2008 • Our existing presence and expertise position us well to participate in the growing demand for renewable energy GROWTH IN RENEWABLE GENERATION (MW) 3,000 2,500 2,000 1,500 1,000
Slide 15: RNW Growth Focus
RNW Growth Focus On-Site and Cogeneration Renewables Expand our fleet of on-site generation Focus our renewables growth efforts on the projects in Canada, the U.S. and Australia U.S. corporate market ⚫ Extensive history of on-site generation ⚫ Added five wind farms and a solar farm extends back to t
Slide 16: Growth Projects EBITDA
Growth Projects EBITDA EBITDA GENERATED BY NEW ASSETS ($ 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 17: 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 17
Slide 18: Prudent Capital Allocation and Dividend Policy
Prudent Capital Allocation and Dividend Policy 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 Dividends Capital² • Share Buyback New dividend policy Dividend po
Slide 19: Success in Reducing Senior Recourse Debt
Success in Reducing Senior Recourse Debt • Targeted $1.2 billion of net senior recourse debt expected to be reached in 2020 TRANSALTA SENIOR RECOURSE DEBT ($ BILLIONS) $3.4 $3.5 $3.0 $2.8 $2.5 $2.3 $2.0 $1.8 $1.5 $1.4 $1.2 $1.0 $0.5 $0.0 2015 2016 2017 2018 2019E 2020E 19
Slide 20: Deconsolidated Balance Sheet - Debt Metrics
Deconsolidated Balance Sheet - Debt Metrics • Debt/EBITDA target of ≤3.0x achieved post PPA TAC DECONSOLIDATED DEBT/EBITDA METRIC1 Achieve target with further debt 5x reduction and increased cash flows 4x Brookfield investment Non-recourse debt Target 3x Debt/EBITDA Brookfield investment of ≤3x Pref
Slide 21: Deconsolidated Sources and Uses
Deconsolidated Sources and Uses DECONSOLIDATED SOURCES AND USES 2020-2023 ($ 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: 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 23: 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 24: Visit us at the Investor Centre on TransAlta.com
Visit us at the Investor Centre on TransAlta.com Investor_relations@transalta.com 1-800-387-3598 24