TransAlta Reports Solid Third Quarter 2019 Results and Revises Upward Full Year Outlook

  • Aug 24, 2021
  • TransAlta

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TransAlta Corporation (“TransAlta” or the “Company”) (TSX: TA) (NYSE: TAC) today reported its third quarter 2019 financial results, which reflect solid operational and financial performance for the quarter. As a result of strong operational performance year-to-date and our expectations for the balance of the year, we have increased our full year 2019 FCF outlook.

Comparable EBITDA for the three and nine months ended Sept. 30, 2019, excluding the PPA Settlements, decreased $1 million and $49 million, respectively, compared to the same periods in 2018. Strong performance at the Canadian Coal and Energy Marketing segments significantly offset reductions in EBITDA at Canadian Gas that were expected as the long-term Mississauga PPA rolled off at the end of 2018 and the Poplar Creek PPA stepped down. At Canadian Coal, comparable EBITDA improved in the nine months ended Sept. 30, 2019 compared to the same period in 2018, due to the combined impact of higher realized prices on greater merchant production, increased co-firing resulting in lower fuel, carbon compliance and purchased power costs as well as lower OM&A costs. In addition, performance from our Energy Marketing segment was stronger than the same periods in 2018, particularly from US Western and Eastern markets due to continued high levels of volatility across North America power markets. Comparable EBITDA for the nine months ended Sept. 30, 2019 was negatively impacted by the unplanned outage at US Coal during the first quarter of 2019.

FCF, after adjusting for the PPA Settlements, was $20 million higher for the three months ended Sept. 30, 2019 compared to the same period in 2018, mainly due to timing of sustaining capital expenditures and strong results, despite significant cash flow declines from the Mississauga and Poplar Creek PPAs. For the nine months ended Sept. 30, 2019, FCF was $11 million lower, excluding the PPA Settlements, compared with the same period in 2018, mainly due to lower comparable EBITDA, partially offset by lower distributions paid to subsidiaries’ non-controlling interests.

“Results for the quarter were stronger than expected and demonstrated progress in our business transition,” said Dawn Farrell, President and Chief Executive Officer. “We continue to be pleased with the Alberta thermal business which showed stronger margins and availability performance. With the Pioneer Pipeline contract now in place, we see further improvements in that business segment. Our Clean Energy Investment Plan is tracking with two wind farms to come on-line at the end of 2019 and the acceleration of our gas repowering strategy due to the purchase of the Kineticor assets,” commented Mrs. Farrell.

During the first nine months of the year, we have experienced stronger than anticipated results from our Canadian Coal segment. This is due to the combined impact of higher realized prices, lower fuel, carbon compliance and purchased power costs as the Pioneer Pipeline transported first gas four months ahead of schedule, as well as lower OM&A costs. Year-to-date results combined with our forecast provide us with the confidence to revise our FCF outlook.

Net earnings attributable to common shareholders for the three and nine months ended Sept. 30, 2019 were $51 million and a loss of $14 million, respectively. Increased earnings was largely due to the $56 million PPA Settlement received during the third quarter of 2019 as well as the reversal of a previous impairment at the Centralia plant of $151 million, which was partially offset by the $109 million increase for the decommissioning and restoration liability at the Centralia mine and the $18 million write-off of project development costs. Excluding the PPA Settlements and impairment charges and reversals in 2019 and 2018, net loss for the three and nine months ended Sept. 30, 2019 was $18 million and $83 million, respectively, which are improvements over 2018. Stronger earnings are attributable to stronger performance at Canadian Coal and Energy Marketing, strong year-to-date Alberta pricing, the Alberta tax rate reduction, lower OM&A costs, and lower interest expense, partially offset by other gains and losses.

For the nine months ended Sept. 30, 2019, total sustaining capital expenditures of $111 million were $13 million higher compared to 2018 primarily due to higher planned major maintenance in the Canadian Coal segment. There were no planned maintenance outages on operated power plants in Canadian Coal for 2018. Total capital expenditures of $118 million, which includes productivity capital expenditures, were $8 million higher than 2018 and in-line with the Company’s guidance for the year.

Significant planned major outages at TransAlta’s operated units for the remainder of 2019 include the following:

Third Quarter and Nine Months Ended Sept. 30, 2019 and 2018 Financial and Operational Highlights

TransAlta is in the process of filing its Consolidated Financial Statements and accompanying notes, as well as the associated Management’s Discussion & Analysis (“MD&A”). These documents will be available November 7, 2019 on the Investors section of TransAlta’s website at www.transalta.com or through SEDAR at www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.

TransAlta will hold a conference call and webcast at 9:00 a.m. MST (11:00 a.m. EST) today, November 7, 2019, to discuss our third quarter 2019 results. The call will begin with a short address by Dawn Farrell, President and CEO, and Todd Stack, Chief Financial Officer,followed by a question and answer period for investment analysts and investors. A question and answer period for the media will immediately follow. Please contact the conference operator five minutes prior to the call, noting “TransAlta Corporation” as the company and “Chiara Valentini” as moderator.

Toll-free North American participants call: 1-888-231-8191

A link to the live webcast will be available on the Investor Centre section of TransAlta’s website at https://transalta.com/investors/events-and-presentations. If you are unable to participate in the call, the instant replay is accessible at 1-855-859-2056 (Canada and USA toll free) with TransAlta pass code 5275707 followed by the # sign. A transcript of the broadcast will be posted on TransAlta’s website once it becomes available.

TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada’s largest producers of wind power and Alberta’s largest producer of hydro-electric power. For over 100 years, TransAlta has been a responsible operator and a proud community-member where its employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and has been recognized by CDP (formerly Climate Disclosure Project) as an industry leader on Climate Change Management. TransAlta is proud to have achieved the Silver level PAR (Progressive Aboriginal Relations) designation by the Canadian Council for Aboriginal Business.

For more information about TransAlta, visit its web site at transalta.com.

This News Release 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 Securities Litigation Reform Act of 1995 (collectively referred to herein as “forward-looking statements”). All forward-looking statements are based on our beliefs as well as assumptions based on information available at the time the assumption was made and on management’s experience and perception of historical trends, current conditions, results and expected future developments, as well as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements that include phrases such as “may”, “will”, “can”; “could”, “would”, “shall”, “believe”, “expect”, “estimate”, “anticipate”, “intend”, “plan”, “forecast” “foresee”, “potential”, “enable”, “continue” or other comparable terminology. These statements are not guarantees of our future performance, events or results and are subject to a number of significant risks, uncertainties and other important factors that could cause our actual performance, events or results to be materially different from that set out in the forward-looking statements. More particularly, and without limitation, this news release contains forward-looking statements relating to: Clean Energy Investment Plan and the investment in our Alberta thermal fleet and renewable energy projects already under construction; the construction and operation of a new cogeneration facility at the Kaybob South No. 3 sour gas processing plant with a capital cost of $105 to $115 million; SemCAMS purchase of 50 per cent of the plant at commissioning; redeploying the two 230 MW Siemens F class gas turbines and related equipment to our Sundance site as part of the strategy to repower Sundance Unit 5 to a highly efficient combined cycle unit; achieving our 2019 free cash flow outlook range of $300 – $340 million; the Antrim and Big Level wind farm coming on-line at the end of 2019; statements under the heading “2019 Outlook update”, including as it pertains to guidance on Comparable EBITDA and free cash flow; and significant planned major outages at TransAlta’s operated units for the remainder of 2019, including distributed planned maintenance expenditures across the entire Hydro fleet and distributed expenditures across our Wind fleet, focusing on planned component replacements.

These statements are based on TransAlta’s beliefs and assumptions based on information available at the time the assumptions were made, including assumptions pertaining to: the Company’s ability to successfully defend against any existing or potential legal actions or regulatory proceedings; no significant changes to regulatory, securities, credit or market environments; key assumptions pertaining to power prices remaining unchanged; our ownership of or relationship with TransAlta Renewables Inc. not materially changing; and the anticipated benefits and financial results generated on the coal-to-gas conversions, repowerings and the Company’s other strategies. The forward-looking statements are subject to a number of risks and uncertainties that may cause actual performance, events or results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include: the outcomes of existing or potential legal actions or regulatory proceedings not being as anticipated, including those pertaining to the Brookfield investment; fluctuations in demand, market prices and the availability of fuel supplies required to generate electricity; changes in the current or anticipated legislative, regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; and other risks and uncertainties contained in the Company’s Management Proxy Circular dated March 26, 2019 and its Annual Information Form and Management’s Discussion and Analysis for the year ended December 31, 2018, filed under the Company’s profile with the Canadian securities regulators on www.sedar.com and the U.S. Securities and Exchange Commission on www.sec.gov. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements, which reflect TransAlta’s expectations only as of the date of this news release. In light of these risks, uncertainties and assumptions, the forward-looking statements might occur to a different extent or at a different time than we have described, or might not occur at all. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Note: All financial figures are in Canadian dollars unless otherwise indicated.