Transalta Corporation · TSX:TA
Transalta — Scotia Capital Investor Presentation May 2005
20 slides from Transalta's conference presentation, May 2005
Slide 1: Scotia Capital Investor Presentation
Scotia Capital Investor Presentation May 2005
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. These statements are subject to a number of risks and uncertainties that may cause actual results to differ
Slide 3: Who we are
Who we are • Transitioned from an integrated regulated utility to a wholesale generating company • 8,600 MW generating capacity in Canada, U.S., Mexico and Australia • 80% of generation capacity currently contracted • Goal: generate sustainable, predictable earnings and cash flow • Current focus on
Slide 4: Where we are
Where we are ALBERTA PPA ASSETS SUN D A N CE 9 HO RSESHO E 2,020MW 14 MW 2 KEEPH ILLS 10 GH OST 766 MW 51 MW 3 SHEERN ESS 11 BEA RSPAW POPLAR CREEK FORT SASKATCHEWAN (For t M cM u r r ay, AB) 764 MW 17 MW (Fort Saskat chew an, AB) 356 M W 25% owned 118 M W t ot al 12 SPRAY (30% ow ned) 4 BRA ZEA U 1
Slide 5: Portfolio transformed – now in execution phase
Portfolio transformed – now in execution phase TransAlta’s Progress Towards Integration and Execution Years 2000-02 2003-04 2005-06 Megawatts 7200 to 7800 8600 to 8700 8800 Fuel diversity Coal 72% Coal 58% Coal 58% Gas 17% Gas 30% Gas 30% Renew 11% Renew 12% Renew 12% & hydro & hydro & hydro Market
Slide 6: Transformation - financial
Transformation - financial Integrated Regulated Utility Generation & Marketing Company 1999 2000 2001 2002 2003 New plants Gains from divested $2.2 B $ 3.1 B $6.8B assets: $0.6 Billion Capital Acquisitions Cash flow net of Investments $2.4 B $ 1.6 B dividends and distributions Maintenance $ 0.5 B Ne
Slide 7: TransAlta’s success as a power company depends on managing cyclicality
TransAlta’s success as a power company depends on managing cyclicality MANAGING CYCLICALITY TransAlta’s Strengths Operational excellence Low cost assets and tradition of Strong financial capacity generation excellence Prudent growth expectations Real-time market knowledge and risk mitigati
Slide 8: Defining operational excellence
Defining operational excellence Measure Achieve highest availability 90% Manage fuel costs: coal and gas Increased margins Continuous productivity Cost/MW Availability BBB- to Maintaining financial capacity BBB+ Reduced Maintenance planning and execution volatility
Slide 9: TransAlta’s maintenance strategy provides four key benefits
TransAlta’s maintenance strategy provides four key benefits Strategic Actions Benefits Smooth out maintenance Ö Ensure that maintenance is spending (avoid lumpiness) funded from ongoing cash flow by scheduling maintenance over a 10 year planning horizon Negotiate long-term Ö Purchase equipment and l
Slide 10: Maintenance spending will peak in 2005 and will trend lower
Maintenance spending will peak in 2005 and will trend lower, with more predictability, and increased efficiencies 2000 - 02 2003 - 04 2005 - 06 2007+ Total spend $mm 110 - 140 115 - 175 205 - 235 150 - 175 Capex/Opex % 60/40 70/30 70/30 70/30 Lost Avg. Gwh 2000 2300 - 2600 2900 - 3000 2300 - 2700 pr
Slide 11: TransAlta’s Financial Strategy
TransAlta’s Financial Strategy ⇒ Manage perceived financial risks ⇒ Manage through a cycle ⇒ Build sustainable earnings and cash flow ⇒ Reporting transparency ⇒ Rebuilding financial capacity
Slide 12: TransAlta’s financial strategy – manage cyclicality
TransAlta’s financial strategy – manage cyclicality Balance acquisitions with new build Maintain high contract cover Minimize foreign exchange exposure GROW STRENGTHEN FINANCIAL INTEGRATE CAPACITY Non-growth capex Pay down debt and/or and dividend from buy back shares operating cash flow
Slide 13: Plant portfolio provides predictable earnings, cash flow and risk mitigation
Plant portfolio provides predictable earnings, cash flow and risk mitigation PPA Plants Long-term contracts Merchant 4000 3500 Megawatts Capacity 3000 2500 Flat ROCE 2000 Earnings and cash Earnings and ROCE increases as plants more variable 1500 cash flow track depreciate invested capital Earnings/c
Slide 14: Financial highlights
Financial highlights Annual Annual TransAlta (Millions $Cdn) Q1 '05 Q1 '04 2004 2003 Net earnings $52 $47 $170 $234 per share $0.27 $0.25 $0.88 $1.26 Comparable earnings $52 $49 $135 $130 per share $0.27 $0.26 $0.70 $0.70 Cash flow* $172 $160 $588 $538 Debt to capital 45.6% 45.6% 46.3% 47.7% Cash fl
Slide 15: Free cash flow is positive
Free cash flow is positive Millions $Cdn Q1 - 2005 Q1 - 2004 2004 2003 Cash flow from operating activities $ 160 $ 185 $ 613 $ 527 Less: maintenance and other capex 38 63 224 101 Less: scheduled debt repayment 9 16 51 138 Less: distribution to NCI 18 5 48 39 Comparable free cash flow $ 95 $ 101 $ 29
Slide 16: Financial ratios continue to improve
Financial ratios continue to improve Cash Flow to Interest 7x Forecast 6x BBB + Improve to BBB+ ratios 5x BBB high Baa1 4x Sustain dividend 3x BBB - Baa3 BBB low 2x Modest growth capex 1x 0x 2003 2004 2005 2006 2007 2008 2009 Non-Recourse Debt Debt to Capital Recourse Debt Cash Flow to Total Average
Slide 17: Drivers of near-term earnings growth
Drivers of near-term earnings growth Actions Benefits Contract for Sarnia Higher operating income Recontract Centralia Higher operating income Genesee 3 and wind Higher operating income Reduce debt/repurchase equity Less interest/higher EPS Goal: increase returns on invested capital
Slide 18: Appendix
Appendix TransAlta
Slide 19: Results are seasonal
Results are seasonal TransAlta (Millions $Cdn) 2004 Q1 Q2 Q3 Q4 Revenue $701 $656 $743 $713 Comparable earnings $48 $16 $34 $37 Cash flow* $161 $107 $167 $152 Planned maintenance expenditures $14 $68 $63 $29 *From operations before changes in working capital
Slide 20: Financial results are increasingly transparent
Financial results are increasingly transparent TransAlta (Millions $Cdn) 2004 2003 2002 Reported net earnings $170 $234 $200 Prior period regulatory decision -15 - -2 Gain on sale of transmission - - 120 Gain on sale of land - 9 - Refinancing of foreign operations - - 11 Gain on sale of Meridian Cog
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