Transalta Corporation · TSX:TA
Transalta — CIBC 14th Annual Whistler Institutional Investor Conference 2011
30 slides from Transalta's conference presentation, Jan 20, 2011
Slide 1: CIBC 14th Annual Whistler Institutional Investor Conference
CIBC 14th Annual Whistler Institutional Investor Conference January 20, 2011 Brett Gellner Chief Financial Officer
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. All forward-looking statements are based on our beliefs and assumptions based on information available at t
Slide 3: Outline
Outline ] Value proposition and strategy ] Near and longer-term upside potential ] Financial strength and capital allocation 3
Slide 4: Canada's largest publically traded wholesale power generator & marketer
Value proposition and strategy Canada’s largest publically traded wholesale power generator & marketer Yield, upside potential, and steady disciplined growth CANADA Low-to-moderate risk profile UNITED STATES Financial strength Generation Facilities: Coal-fired plants 4,688 MW Gas-fired plants 1,843
Slide 5: Strategy: The last 10 years
Strategy: The last 10 years Diversified growth & optimization have driven a 55% increase in gross margins Acquired Acquired Acquired Acquired Constructed Transitioned Divested Renegotiated Canadian Retired Constructed Centralia Vision Quest CE Gen Genesee 3 to PRB coal Mexico Sarnia Hydro Wabamun Ke
Slide 6: Significantly increased renewable portfolio
Strategy: The last 10 years Significantly increased renewable portfolio MW Renewable Portfolio Capacity 2,500 2,000 1,500 1,000 500 0 2000 2005 2010 2011e Hydro Wind Geothermal Biomass 6
Slide 7: Funds from operations have grown despite lower market prices
Diversification and contracting drives growth Funds from operations have grown despite lower market prices Funds From Operations vs. Weighted Average Price / Merchant MWh Produced $MM $/MWh 7
Slide 8: Next 10 years
Next 10 years Near Term Long Term 2011 - 2014 2014 - 2020 ] Continue to drive productivity and ] Information technology & strategic lower costs suppliers drive productivity Drive Drive the the Base Base ] Sustain improved operational ] Prepare transition from PPAs performance ] Deliver on 304 MW of
Slide 9: Alberta market
Alberta market Forward prices remain soft due to low natural gas prices and capacity additions, long-term fundamentals remain strong, driven by oil sands recovery $/MWh Positives Alberta Power Prices1 $100 $90 Actuals Current Market ] Alberta Economics: GDP growth to range from $80 2.1% - 5.5% annua
Slide 10: PacNW market
PacNW market Improvements in demand; forward price recovery driven by natural gas Positives US$/MWh PacNW Power Prices1 $70 Actuals Current Market $60 ] Demand destruction slowing down; -1.8% for ] +$1 / MMBtu = ~$7 - $9 / MWh 2010 versus -3.2% last year $50 $40 ] 1.9% demand growth per year for the
Slide 11: Hedging strategy provides leverage to power price recovery
Significant upside to price plus growth in the medium-term Hedging strategy provides leverage to power price recovery Merchant Portfolio Contractedness Avg. Incremental EBITDA From Merchant $MM Higher Prices (2011 – 2014)2 MWs $250 3,500 At a 10% ROCE, 200 MW 3,000 2012 2013 growth can add another 2
Slide 12: End of PPAs will provide significant EBITDA upside
Significant upside potential End of PPAs will provide significant EBITDA upside as production reverts back to TransAlta Est. Estimated Incremental EBITDA in 2021 EBIT $MM $750 - $1,250 M 2 $1,750 $1,500 $1,250 $1,250 $1,000 $1,000 $750 $500 $250 $- 1 $60 $70 $80 $90 $100 $110 $120 Alberta Power Pric
Slide 13: Excellent long-term potential from PPA facilities
Excellent long-term potential from PPA facilities $MM Potential EBITDA Cumulative Potential Upside $2,500 from PPA Expiry (2018 – 2029)1,2 Price Upside Post PPA Value ($/MWh) $60 $2.1 B TA Base1 $120 $8.5 B Value $- 2010 2010 2021 2021 1 Excludes upside from incremental growth, replacement opportuni
Slide 14: Canada's 45 year plan provides significant future investment opportunities
Opportunity Canada’s 45 year plan provides significant future investment opportunities in Alberta alone Investment Opportunities MW (TransAlta Fleet Only) 7,000 6,000 5,000 TransAlta AB Portfolio Growth 5,400 MW at 4,000 Market Prices 3,000 Replacement Opportunity* 2,000 $10 - $15 B Investment Oppor
Slide 15: Cash flow / funds from operations
Cash flow / funds from operations Cash flow accounts for tax pool benefits, adds back non-cash accounting charges, and captures future value of PPA expiry ] Captures the benefit of our significant tax pools and attractive tax treatment of renewables ] Adds back non-cash accounting charges (e.g. dep`
Slide 16: Strong near-term cash flows
Strong near-term cash flows Expecting $800 - $900 M in funds from operations for 2011 Funds from Operations Dividend Coverage $MM 2.0 – 2.5x $1,000 3.0 $900 $800 - $900 M2.5 $800 FFO range $700 2.0 $600 $500 1.5 $400 $300 1.0 $200 0.5 $100 $0 0.0 2006 2007 2008 2009 2010e 2006 2007 2008 2009 2010e S
Slide 17: Capital allocation plan
Capital allocation plan We remain disciplined in how we manage our balance sheet and allocate capital 2011 - 2013 ($B) Funds from operations $ 2.8 Sustaining capex $ (1.3) Dividends $ (0.8) DRASP $ 0.2 NCI $ (0.2) Total $ 0.7 Balance sheet enhancement Growth 17
Slide 18: Appendix
Tra nsAl ta \ Appendix Multiple Fuel Sources wy, Singular Value is
Slide 19: Performance goals
Performance goals Performance Goals Financial ratios Measures 2010 Goals Q3 2010 Q3 2009 Review Increased availability due to lower planned and unplanned outages at Achieve top decile our Sundance plant, lower planned Availability 90% 91.0% 83.9% operations outages at our Mississauga and Windsor fac
Slide 20: Q3 2010 - Highlights
Q3 2010 - Highlights Results ($M) Q3 Q3 YTD YTD 2010 2009 2010 2009 Revenue $700 $666 $2,008 $2,007 Gross margin $380 $380 $1,137 $1,107 Operating income $98 $120 $287 $219 Comparable earnings $38 $66 $126 $97 Net earnings $38 $66 $156 $102 Comparable earnings per share $0.17 $0.34 $0.57 $0.49 Basic
Slide 21: Q3 2010 Comparable earnings
Q3 2010 Comparable earnings Results ($M) Q3 Q3 YTD YTD 2010 2009 2010 2009 Net earnings $38 $66 $156 $102 Income tax recovery related to the resolution of certain - - (30) - outstanding tax matters Settlement of commercial issue, net of tax - - - (6) Change in life of Centralia parts, net of tax - -
Slide 22: Q3 2010 Net earnings
Q3 2010 Net earnings Q3 2010 YTD 2010 Net earnings, 2009 $66 $102 Increase in Generation gross margins 4 50 Decrease in Energy Trading gross margins (4) (20) (Increase) decrease in OM&A costs (5) 44 Increase in depreciation expense (15) (2) Increase in net interest expense (13) (28) (Increase) decre
Slide 23: Free cash flow
Free cash flow Q3 Q3 YTD YTD ($M) 2010 2009 2010 2009 Cash flow from operating activities $230 $194 $502 $334 Add (Deduct): Sustaining capital expenditures (59) (116) (202) (294) Cash dividends paid on common shares (49) (58) (169) (169) Distribution to subsidiaries’ non-controlling interests (15) (
Slide 24: Debt profile
Debt profile Minimal debt refinancing over the short-term provides ample financial flexibility (CDN $M) $1,000 $800 $600 $400 $200 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter 1 CDN MTN's US MTN's 1 Based on Sept. 30, 2010 FX rate of $1.03 CAD/US 24
Slide 25: Maintaining investment grade ratios
Maintaining investment grade ratios Execute our plan while maintaining long-term financial strength and stability Cash flow to debt Cash flow to interest 35% 8 30% 7 25% Range: 6 5 Range: 20% 20 - 25% 4 4 - 5x 15% 3 10% 2 5% 1 0% 0 2006 2007 2008 2009 Q3 2006 2007 2008 2009 Q3 2010 2010 Debt to capi
Slide 26: Sustaining capital
Sustaining capital 2011 - 2013 Sustaining capital plan1 ($M) 2011e 2012e 2013e Sustaining $355 - 395 $435 - 480 $340 - 385 Routine Capital $120 - 135 $115 - 130 $115 - 130 Major Maintenance $210 - 230 $280 - 300 $190 - 210 Mine Capital $25 - 30 $40 - 50 $35 -45 Other Repowering / Life Extension $55
Slide 27: Major maintenance
Major maintenance 2011 Major maintenance plan1 Natural Gas and ($M) Coal Renewables Total Capitalized $135 - 150 $75 - 80 $210 - 230 GWh lost 1,850 – 1,860 630 - 640 2,480 – 2,500 1 Based on IFRS 27
Slide 28: Executing on our growth strategy
Executing on our growth strategy TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth Projects Bone Creek Keephills 3 Keephills 1 and 2 Sundance 3 Uprate Uprates Location British Columbia Alberta Alberta Alberta Type Hydro Supercritical Coal Efficiency Uprates E
Slide 29: Advanced development pipeline
Advanced development pipeline Projects in Advanced Development ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & AND PERMITS TURBINE CAPEX RANGE PPA / COMMERCIAL MW SITE CONTROL Applied Secured SECURED $ MM LTC OPERATION DATE Quebec New Richmond** 66 Wind 9 9 9 $180 - $210 PPA/LTC
Slide 30: Growth capital outlook 2011 - 2012
Growth capital outlook 2011 - 2012 All projects tracking on time and on budget Completed MW 2010 2011e 2012e Total Summerview 2 66 $10 - 15 $1181 Kent Hills 2 54 $80 - 85 $1002 Ardenville 69 $105 - 115 $1353 189 $195 - 215 $353 In Progress MW 2010e 2011e 2012e Total Bone Creek 18 $50 - 55 $484 Keeph
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