CALGARY, March 1, 2018 /PRNewswire/ -
Fourth Quarter 2017 Highlights
- Funds from Operations up 9.5% to $219
million, or $0.76 per
share
- Free Cash Flow up 63% to $101
million, or $0.35 per
share
- Net debt reduction of $300
million
Full Year 2017 Highlights
- Funds from Operations up 9.5% to $804
million, or $2.79 per
share
- Free Cash Flow up 28% to $328
million, or $1.14 per
share
- Net debt reduction of $530
million to $3.4 million
- FFO / Debt ratio above 20% for the first time since 2011
TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA;
NYSE: TAC) today reported its fourth quarter and full year 2017
financial results, with free cash flow ("FCF") of $328 million for the full year. Funds from
operations ("FFO") increased 9.5% to $804
million for the full year compared to $734 million in 2016. FCF was above our Q2
revised guidance due to better than expected results from our coal
recovery plan in the second half of the year.
Comparable EBITDA from generation increased 13% year-over-year,
excluding Canadian Coal, due to strong performance in our Wind and
Solar, Australian Gas, Canadian Gas and US Coal segments.
Australian Gas celebrated the commissioning of the South Hedland
power station in July, the Canadian Gas segment benefitted from the
settlement of the contract indexation dispute with the Ontario
Electricity Financial Corporation ("OEFC"), and US Coal and Wind
and Solar successfully drove down their costs of generation.
As expected, the performance of our Canadian Coal segment, on a
year-over-year basis, was negatively impacted by higher coal costs,
and higher operating, maintenance, and administrative costs. In
2016, the Canadian Coal segment benefitted from the reversal of an
$80 million provision for the
Keephills outage in 2013.
"Solid performance by our operating team in 2017 allowed us to
deliver financial performance over our expectations," said
Dawn Farrell, President and Chief
Executive Officer. "By the end of 2018, our de-leveraging program
will be mostly complete, and we'll be poised to reconsider how we
allocate capital to enhance shareholder value."
With the early repayment of our US$500
million bond this month, the better than expected
performance from the business, and the strong outlook for 2018, we
are confident in the execution of our plan for 2018 to 2020 and are
therefore allocating more capital to our shareholders.
Consequently, the Company intends to seek Toronto Stock Exchange
("TSX") acceptance of a normal course issuer bid ("NCIB"). The
Board of Directors has authorized the repurchases of up to
14,000,000 of its common shares, representing approximately five
per cent of TransAlta's public float. Purchases under the NCIB are
expected to be made through open market transactions on the TSX and
any alternative Canadian trading platforms, based on the prevailing
market price. Any Common Shares purchased under the NCIB will be
cancelled.
At the end of the year our total net debt was approximately
$3.4 billion, down $530 million from the beginning of the year, due
to the scheduled repayment of a US$400
million Senior Note using existing liquidity. Our adjusted
FFO to adjusted net debt and adjusted net debt to comparable EBITDA
metrics improved significantly to 20.4 per cent and 3.6 times,
respectively.
2018 Outlook
TransAlta reaffirms its financial outlook
for 2018 which was released on December 6,
2017 and is outlined in the table below:
Measure
|
Low
|
High
|
Comparable
EBITDA(1)
|
$950
million
|
$1,050
million
|
FFO(1)
|
$725
million
|
$800
million
|
FCF(1)
|
$275
million
|
$350
million
|
FCF(1)
Including PPA Termination Payment
|
$475
million
|
$550
million
|
Sustaining and
Productivity Capital
|
$215
million
|
$235
million
|
Range of key power price assumptions:
Market
|
Power Prices
($/MWh)
|
Alberta
Spot
|
$50 to $60
|
Alberta
Contracted
|
$35 to $40
|
Mid-C Spot
(US$)
|
$20 to $25
|
Mid-C Contracted
(US$)
|
$47 to $53
|
Other assumptions relevant to 2018 outlook:
Canadian Coal
Capacity Factor
|
65% to 75%
|
Hydro/Wind
Resource
|
Long term
average
|
2018 Key Priorities
In addition to meeting the
financial targets set out in the outlook, everything we do in 2018
will move us closer to 100% clean power by 2025. Our teams are
focused on the following:
- Blending our coal with gas to reduce costs, emissions and
carbon tax expenses;
- Progressing the conversion of our coal plants to 100% natural
gas;
- Growing our renewables platform;
- Increasing our financial flexibility through the execution of
our de-leveraging program; and
- Continuing to lead in safety and environment performance.
Fourth Quarter Highlights
- Entered into a Letter of Intent with Tidewater Midstream and
Infrastructure Ltd. for the construction of a 120 kilometre natural
gas pipeline to TransAlta's generating units at Sundance and Keephills. The pipeline will facilitate
TransAlta's strategy to convert its coal units to natural gas.
- Announced the acceleration of the conversion of Sundance Units
3 to 6 and Keephills Units 1 and 2 from coal-fired generation to
gas-fired generation in the 2021 to 2022 timeframe, a year earlier
than originally planned.
- Clarified the optimization plan for the Sundance units in 2018 and 2019 to ensure that
two Sundance coal units can
operate at high capacity utilizations with lower costs through the
period to 2020.
- Gained carbon credits for existing renewable assets,
specifically our wind and hydro generation, under Alberta's output based allocation system for
carbon emissions which became effective January 1, 2018.
- TransAlta Renewables received approximately US$325 million from Fortescue Metals Group for
the repurchase of the Solomon power station, and used a portion of
those funds to redeem the outstanding $215
million convertible unsecured subordinated debentures held
by TransAlta.
Important Subsequent Events
- On February 20, 2018, TransAlta
Renewables entered into an arrangement to acquire two construction
ready wind projects, consisting of a 90 MW project in Pennsylvania and a 29 MW project in
New Hampshire, supported by
long-term contracts with highly creditworthy counterparties.
Fourth Quarter and Full Year Segmented Review
|
|
|
Comparable
EBITDA
(in CAD$ millions)
|
3 Months
Ended
|
Year
Ended
|
Dec. 31,
2017
|
Dec. 31,
2016
|
Dec. 31,
2017
|
Dec. 31,
2016
|
Canadian
Coal
|
66
|
178
|
324
|
473
|
U.S. Coal
|
21
|
14
|
89
|
41
|
Canadian
Gas
|
62
|
70
|
263
|
244
|
Australian
Gas
|
29
|
32
|
137
|
128
|
Wind and
Solar
|
78
|
66
|
214
|
195
|
Hydro
|
14
|
20
|
75
|
82
|
Energy
Marketing
|
25
|
13
|
45
|
52
|
Corporate
|
(20)
|
(19)
|
(85)
|
(71)
|
Total Comparable
EBITDA
|
275
|
374
|
1,062
|
1,144
|
- Canadian Coal: Comparable EBITDA for the year ended
Dec. 31, 2017 decreased $149 million compared to 2016, primarily due to
the impact in 2016 of the reversal of an $80
million provision for the Keephills outage in 2013. EBITDA for 2017 was
negatively impacted during the year by higher coal costs, and
higher OM&A costs.
- U.S. Coal: Comparable EBITDA increased $48 million compared to 2016 due to increased
sales volumes that led to increased margins from higher market
prices and higher contract rates. Lower coal transportation costs
and the favourable impact of mark-to-market on forward financial
contracts also had a positive impact to comparable EBITDA.
- Canadian Gas: Comparable EBITDA for 2017 increased by
$19 million compared to 2016,
primarily due to the settlement with the OEFC of the retroactive
adjustment to price indices at Ottawa and Windsor and the positive impact from the
mothballing of our Mississauga gas
facility. This was partially offset by a reduction in unrealized
mark-to-market positions for gas contracts and the lower earnings
at Windsor under a new peaking
contract.
- Australian Gas: Comparable EBITDA for the year increased by
$9 million compared to 2016, due to
the commissioning of the South Hedland power station and an
increase in customer load, partially offset by the early
termination of the lease for our Solomon power station.
- Wind and Solar: Comparable EBITDA for 2017 increased
$19 million compared to 2016,
primarily driven by higher volumes at contracted facilities, higher
prices on contracted and uncontracted assets, and lower costs on
some service agreements.
- Hydro: Comparable EBITDA for 2017 decreased $7 million compared to 2016. The decrease was due
to higher OM&A, and a $3 million
positive adjustment in 2016 relating to a prior year metering issue
at one of our facilities.
- Energy Marketing: Comparable EBITDA for 2017 from Energy
Marketing decreased $7 million
compared to 2016, due to unfavourable first quarter results which
were impacted by warm winter weather in the Northeast, significant
precipitation in the Pacific Northwest, and reduced margins from
our customer business.
- Corporate: Our Corporate overhead costs were $14 million higher in 2017 compared to 2016, due
to higher annual incentive compensation and our Greenlight
initiative costs, which we expect will translate into significant
long-term cost savings.
Consolidated Financial Highlights
Net loss
attributable to common shareholders was $190
million ($0.66 net loss per
share) compared to net earnings of $117
million ($0.41 net earnings
per share) in 2016. Earnings in 2017 were negatively impacted by
lower comparable EBITDA of $82
million, and $105 million due
to the reduction of the U.S. tax rate announced in December. Higher
depreciation of $34 million
year-over-year was due mostly to: $80
million higher depreciation at Canadian Coal due to the
shortening of the useful lives of Keephills 3 and Genesee 3, and higher depreciation at
Australian Gas of $20 million due to
the commissioning of South Hedland in July, partially offset by
lower depreciation at Canadian Gas of $62
million due primarily to the accelerated depreciation of the
Mississauga facility in 2016. Last
year, Canadian Gas included a $48
million positive impact in connection with the Mississauga re-contracting.
Total sustaining capital expenditures of $235 million were $35
million lower compared to 2016. Total capital expenditures
of $259 million, which includes
productivity capital expenditures, were $21
million lower than 2016 and in-line with our guidance for
the year. Our productivity capital includes funding for Project
Greenlight transformation initiatives, which are expected to reach
payback within two years and result in annual recurring
savings.
Fourth Quarter and Year Ended 2017 Highlights
|
|
|
In $CAD millions,
unless otherwise
stated
|
3 Months
Ended
|
Year
Ended
|
Dec. 31,
2017
|
Dec. 31,
2016
|
Dec. 31,
2017
|
Dec. 31,
2016
|
Adjusted availability
(%)(2,3)
|
88.4%
|
88.9%
|
86.8%
|
89.2%
|
Production (GWh)
(3)
|
10,374
|
10,624
|
36,900
|
38,157
|
Revenue
|
638
|
717
|
2,307
|
2,397
|
Comparable EBITDA
(1,4)
|
275
|
374
|
1,062
|
1,144
|
Net Earnings (loss)
attributable to common shareholders
|
(145)
|
61
|
(190)
|
117
|
FFO
(1,4)
|
219
|
200
|
804
|
734
|
Cash Flow from
Operating Activities
|
81
|
122
|
626
|
744
|
FCF
(1,4)
|
101
|
62
|
328
|
257
|
|
|
|
|
|
Net Earnings (loss)
per common share
|
($0.50)
|
$0.21
|
($0.66)
|
$0.41
|
FFO per share
(1,4)
|
$0.76
|
$0.69
|
$2.79
|
$2.55
|
FCF per share
(1,4)
|
$0.35
|
$0.22
|
$1.14
|
$0.89
|
Dividends declared
per common share
|
$0.04
|
$0.08
|
$0.12
|
$0.20
|
TransAlta is in the process of filing its Annual Information
Form, Audited Consolidated Financial Statements and accompanying
notes, as well as the associated Management's Discussion &
Analysis ("MD&A"). These documents will be available today on
the Investors section of TransAlta's website at www.transalta.com
or through SEDAR at www.sedar.com.
TransAlta will also be filing its Form 40-F with the U.S.
Securities and Exchange Commission. The form will be available
through their website at www.sec.gov. Paper copies of all documents
are available to shareholders free of charge upon request.
Conference call
We will hold a conference call and
webcast at 9:00 a.m. MST
(11:00 a.m. EST) tomorrow,
March 2, 2018, to discuss our fourth
quarter and full year 2017 results. The call will begin with
a short address by Dawn Farrell,
President and CEO, and Donald
Tremblay, 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 "Sally Taylor" as moderator.
Dial-in numbers:
Toll-free
North American participants call: 1-888-231-8191
Outside
of Canada & USA call: 1-647-427-7450
A link to the live webcast will be available on the Investor
Centre section of TransAlta's website at
http://www.transalta.com/powering-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
3757816 followed by the # sign. A transcript of the broadcast will
be posted on TransAlta's website once it becomes available.
Notes
(1) These items are not defined under
IFRS. Presenting these items from period to period provides
management and investors with the ability to evaluate earnings
trends more readily in comparison with prior periods' results.
Refer to the Comparable Funds from Operations and Comparable Free
Cash Flow and Earnings and Other Measures on a Comparable Basis
sections of the Company's MD&A for further discussion of these
items, including, where applicable, reconciliations to measures
calculated in accordance with IFRS.
(2) Availability and
production includes all generating assets (generation operations
and finance leases that we operate).
(3) Adjusted for
economic dispatching at U.S. Coal.
(4) During the fourth
quarter of 2017, we revised our approach to reporting adjustments
to arrive at FFO, mainly to better represent FFO as a cash metric.
Previously, FFO was adjusted to include, exclude, or to modify the
timing of cash impacts related to adjustments made in arriving at
comparable EBITDA. As a result, comparable EBITDA, FFO, and FCF for
2016 has been revised accordingly.
About TransAlta Corporation:
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. We provide municipalities, medium and large
industries, businesses and utility customers clean, affordable,
energy efficient, and reliable power. Today, we are 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 we have been
recognized by CDP (formerly Climate Disclosure Project) as an
industry leader on Climate Change Management. We are also 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 our web site
at transalta.com.
Cautionary Statement Regarding Forward Looking
Information
This news release contains forward looking statements,
including statements regarding the business and anticipated
financial performance of the Company that are based on the
Company's current expectations, estimates, projections and
assumptions in light of its experience and its perception of
historical trends. In some cases, forward-looking statements can be
identified by terminology such as "plans", "expects", "proposed",
"will", "anticipates", "develop", "continue", and similar
expressions suggesting future events or
future performance. In particular, this news release
contains forward looking statements including, without
limitation, statements pertaining to TransAlta's business and
anticipated future financial performance; our expected strategies
and opportunities; the ability to further our de-leveraging
throughout 2018, and any impact on dividends; ability to
successfully execute our plan for 2018 to 2020 in order to allocate
capital shareholders; the implementation of an NCIB, including the
approval of the proposed terms thereof by the TSX and the
repurchase of any common shares by the Company pursuant to the
NCIB; TransAlta's key priorities for 2018, including
blending our coal with gas and the resultant reduction in costs,
accelerating the conversion of our coal plants to natural gas,
growing our renewable platform and executing on our de-leveraging
program; our 2018 financial outlook, including expected comparable
EBITDA, FFO and free cash flow ranges; expected sustaining and
productivity capital expenditures for 2018; expected Canadian coal
capacity factor for 2018; power prices in Alberta and Mid-C; expectations
regarding governmental regulatory regimes and legislation and the
expected impact of such regimes and regulations on the Company; the
terms of any definitive agreement with Tidewater; the
acceleration of the conversion of Sundance Units 3 to 6 and
Keephills Units 1 and 2 from coal-fired generation to gas-fired
generation; ability to ensure that two Sundance coal units can operate at high
capacity utilizations with lower costs through the period to 2020;
ability to close the 29 MW wind project in New Hampshire; and the transformation
of TransAlta to a gas and renewables company. These
forward-looking statements are not historical facts but are
based on TransAlta's belief and assumptions based on information
available at the time the assumptions were made. These statements
are subject to a number of risks and uncertainties that may cause
actual results to differ materially from those contemplated by the
forward-looking statements. Some of the factors that could cause
such differences include: operational risks involving our
facilities; changes in market prices where we operate; unplanned
outages at generating facilities and the capital investments
required; equipment failure and our ability to carry out repairs in
a cost effective and timely manner; the effects of weather;
disruptions in the source of fuels, water or wind required to
operate our facilities; energy trading risks; failure to obtain
necessary regulatory approvals in a timely fashion; negative impact
to our credit ratings; legislative or regulatory developments and
their impacts, including as it pertains to the capacity market
being developed in Alberta;
increasingly stringent environmental requirements and their
impacts; increased competition; global capital markets activity
(including our ability to access financing at a reasonable cost);
changes in prevailing interest rates; currency exchange rates;
inflation levels and commodity prices; general economic conditions
in the geographic areas where TransAlta operates; disputes or
claims involving TransAlta or TransAlta Renewables, including those
pertaining to South Hedland and Solomon Power Stations; and
other risks and uncertainties discussed in the Company's materials
filed with the Canadian securities regulatory authorities from time
to time and as also set forth in the Company's MD&A and Annual
Information Form for the year ended December 31, 2017.
Readers 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. The financial outlook
that is contained in this news release was approved on March 1, 2018 and is being provided for the
purpose of giving the reader information about management's current
expectations and plans. 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.
SOURCE TransAlta Corporation