TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) announced today solid financial results which were in line with expectations for the three months and nine months ended Sept. 30, 2020.
"We had excellent results this quarter and saw strong EBITDA contribution from our newly-developed US wind farms at Big Level and Antrim," said John Kousinioris, President. "These assets are an important example of our renewables growth strategy in the US. The recent financing of our South Hedland asset ensures that we are well-funded and positioned to capitalize on any future organic and acquisition development opportunities."
Comparable EBITDA for the three months ended Sept. 30, 2020 increased by $10 million mainly due to higher Comparable EBITDA from Canadian Wind, US Wind and Solar and Australian Gas, partially offset by lower Comparable EBITDA from Canadian Hydro. Comparable EBITDA from Canadian Wind increased mainly due to higher production and the timing of recognition of carbon offset revenues. Comparable EBITDA from US Wind and Solar increased due to a full period of operations at the Big Level and Antrim facilities which were commissioned in Dec. 2019 and higher wind resources. Comparable EBITDA from Australian Gas increased due to the timing of legal fees and the strengthening of the Australian dollar relative to the Canadian dollar. Canadian Hydro Comparable EBITDA decreased mainly due to a prior year true-up of AESO transmission line losses, an outage at our St. Mary's facility and higher maintenance costs at our Bone Creek and Taylor facilities.
Comparable EBITDA for the nine months ended Sept. 30, 2020 increased by $16 million mainly due to higher Comparable EBITDA from US Wind and Solar and Australian Gas, partially offset by lower Comparable EBITDA from Canadian Wind, Canadian Hydro and Canadian Gas. The key drivers of the changes to Comparable EBITDA from US Wind and Solar, Australian Gas and Canadian Hydro for the nine months ended Sept. 30, 2020 were the same as for the three months ended Sept. 30, 2020. Comparable EBITDA from Canadian Gas decreased due to unfavourable market conditions in Ontario and Canadian Wind decreased due to the timing of carbon offset revenues, insurance proceeds received in 2019 and lower government incentives driven by the planned expiry of certain Wind Power Production Incentives in 2019.
AFFO for the three and nine months ended Sept. 30, 2020, increased by $7 million and $18 million, respectively, and CAFD for the three and nine months ended Sept. 30, 2020, increased by $6 million and $16 million, respectively, compared to the same periods in 2019, primarily due to higher Comparable EBITDA, higher provisions and lower sustaining capital expenditures, partially offset by higher tax equity distributions and higher current income tax expense.
Net earnings attributable to common shareholders for the three months ended Sept. 30, 2020, decreased by $18 million compared to the same period in 2019, as a result of an increase in unrealized losses due to the change in the fair value of financial assets partially offset by higher Comparable EBITDA from Canadian Wind and foreign exchange gains resulting from the strengthening Australian dollar relative to the Canadian dollar. The unfavourable change in fair value of financial assets is largely due to changes in cash flow assumptions accelerating the repayment of the underlying loan on the Preferred Shares Tracking the Amortizing Term Loan in Australia resulting from the South Hedland financing.
Net earnings attributable to common shareholders for the nine months ended Sept. 30, 2020, compared to the same period in 2019, decreased by $92 million, as a result of lower Comparable EBITDA from Canadian Wind, Canadian Hydro and Canadian Gas, a decrease in finance income, an increase in unrealized losses due to a change in the fair value of financial assets and an increase in income tax expense, offset by foreign exchange gains resulting from the strengthening Australian dollar relative to the Canadian dollar. Income tax expense increased period over period by $15 million, mainly due to the recognition in 2019 of a deferred income tax recovery of $18 million related to a decrease in the Alberta corporate tax rate. Variability in finance income and the change in fair value of financial assets is related to the classification of the distributions received from the Company's investments in its economic interests as return of capital or dividends received, timing of dividends declared on the Preferred Shares Tracking Australia Cash Flows, changes in fair value on the Preferred Shares Tracking the Amortizing Term Loan and foreign exchange impacts. Set out below are the key drivers of the changes arising from these investments:
COVID-19 Response Update
TransAlta Corporation ("TransAlta"), as the manager and operator of the Company's business and assets, continued to operate under its business continuity plan which ensured that: (i) TransAlta employees that could work remotely did so; and (ii) TransAlta employees that operate and maintain our facilities, and who were not able to work remotely, were able to work safely and in a manner that ensured they remained healthy. During the second and third quarters of 2020, TransAlta successfully brought employees that were working remotely back to the office without sacrificing health and safety standards. All of TransAlta's offices and sites follow strict health screening and physical distancing protocols with personal protective equipment readily available. TransAlta also maintains travel restrictions aligned to local jurisdictional guidance, enhanced cleaning procedures, revised work schedules, and other measures to protect staff and contractors. All of TransAlta Renewables' facilities remain fully operational and are capable of meeting customer needs. TransAlta Renewables continues to work and serve all of its customers and counterparties under the terms of the relevant contracts and the Company has not experienced interruptions to service requirements. Electricity and steam supply continue to remain a critical service requirement to all of the Company's customers and have been deemed an essential service in all of the jurisdictions in which TransAlta Renewables operates.
Although these are unprecedented times, the Company remains highly diversified with facilities that are highly contracted and located in various geographies. Our cash flows have been relatively unaffected in the quarter due to the high contractedness of our asset portfolio and financial strength of our customers. The Company continues to maintain a strong financial position in part due to its long-term contracts. The Company currently has access to $507 million in liquidity, including $24 million in cash.