Financial and Operating Highlights
- $305 million of comparable EBITDA
for the quarter. Excluding PPA Settlements (one-time additional
amount of $56 million), comparable
EBITDA was $249 million and in line
with 2018;
- $741 million of comparable EBITDA
for the nine months ended Sept. 30,
2019. Excluding PPA Settlements, comparable EBITDA was
$685 million, 7% lower than
2018;
- $170 million of free cash flow
("FCF") for the quarter. FCF from ongoing operations was
$114 million, a 21% increase to 2018
FCF;
- $314 million of FCF for the nine
months ended Sept. 30, 2019.
Excluding the PPA Settlements, FCF was $258
million, 4% lower than 2018;
- $114 million of operations,
maintenance, and administration ("OM&A") expense for the
quarter, a $6 million decrease, or 5%
compared to the same period in 2018;
- $348 million of OM&A expense
for the nine months ended Sept. 30,
2019, a $28 million decrease,
or 7% compared to the same period in 2018;
- Purchased and cancelled 735,000 common shares under the normal
course issuer bid ("NCIB") at an average price of $8.58 per common share, for a total cost of
$6 million. For the nine months ended
Sept. 30, 2019, we purchased and
cancelled 3,133,200 common shares for a total cost of $27 million; and
- Increased full year 2019 FCF outlook range to $300 - $340
million, from the previous range of $270 - $330
million.
Strategic Highlights
- Successful in our arbitration with the Balancing Pool,
receiving an additional $56 million
in PPA Settlements for the Sundance units which was the full amount we
were entitled to under the termination clauses in the PPA;
- Announced our Clean Energy Investment Plan, which includes
converting our existing Alberta
coal assets to natural gas and advancing our leadership position in
on-site generation and renewable energy. We are currently pursuing
opportunities of up to approximately $1.9
billion as part of this plan, including approximately
$800 million of renewable energy
projects already under construction;
- Issued Limited Notice to Proceed for the Keephills Unit 2
boiler conversion;
- Received Alberta Utilities Commission approval for the Windrise
project ahead of schedule;
- Entered into an agreement with SemCAMS Midstream ULC to
construct and operate a new cogeneration facility at the Kaybob
South No. 3 sour gas processing plant with a capital cost of
$105 to $115
million. SemCAMS will purchase 50 per cent of the plant at
commissioning, subject to the satisfaction of certain
conditions;
- Closed the previously announced agreement with Capital Power
Corporation to swap TranAlta's 50 per cent ownership interest in
the Genesee 3 facility for Capital Power's 50 per cent ownership
interest in the Keephills 3
facility; and
- Acquired two 230 MW Siemens F class gas turbines and related
equipment for $84 million to be
redeployed to our Sundance site as
part of the strategy to repower Sundance Unit 5 to a highly
efficient combined cycle unit.
CALGARY, Nov. 7, 2019
/CNW/ - 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 $11 million lower, excluding the PPA Settlements,
compared with the same period in 2018, mainly due to lower
comparable EBITDA, partially offset by lower distributions paid to
subsidiaries' non-controlling interests.
"Results for the quarter were stronger than expected and
demonstrated progress in our business transition," said
Dawn Farrell, President and Chief
Executive Officer. "We continue to be pleased with the Alberta thermal business which showed stronger
margins and availability performance. With the Pioneer Pipeline
contract now in place, we see further improvements in that business
segment. Our Clean Energy Investment Plan is tracking with two wind
farms to come on-line at the end of 2019 and the acceleration of
our gas repowering strategy due to the purchase of the Kineticor
assets," commented Mrs. Farrell.
Comparable
EBITDA
(in CAD$
millions)
|
3 Months
Ended
|
9 Months
Ended
|
Sept. 30,
2019
|
Sept. 30,
2018
|
Sept. 30,
2019
|
Sept. 30,
2018
|
Canadian
Coal(a)
|
79
|
73
|
208
|
184
|
U.S. Coal
|
35
|
17
|
44
|
67
|
Canadian
Gas
|
30
|
58
|
91
|
180
|
Australian
Gas
|
29
|
30
|
90
|
92
|
Wind and
Solar
|
35
|
34
|
151
|
151
|
Hydro
|
28
|
26
|
92
|
92
|
Energy
Marketing
|
31
|
31
|
63
|
27
|
Corporate
|
(18)
|
(19)
|
(54)
|
(59)
|
Total Comparable
EBITDA(a)
|
249
|
250
|
685
|
734
|
(a) Excludes $157
million in compensation from the Balancing Pool for the early
termination of the
Sundance B and C PPAs received in the first quarter of 2018 and the
$56 million received in the third quarter of 2019.
|
- Canadian Coal: Excluding the PPA Settlements, comparable EBITDA
for the three and nine months ended Sept.
30, 2019 was $6 million and
$24 million higher, respectively,
compared with the same periods in 2018. This largely reflects the
combined impact of higher prices in the first half of the year, and
lower fuel, carbon compliance, purchased power and OM&A
costs.
- U.S. Coal: Comparable EBITDA for the three months ended
Sept. 30, 2019, increased by
$18 million compared to the same
period in 2018, due to strong availability of units. Comparable
EBITDA for the nine months ended Sept. 30,
2019, was down $23 million
compared to the same period in 2018. During an isolated and extreme
pricing event in March, Centralia
was unable to commit one of its units to physical production for
day ahead supply due to an unplanned forced outage repair. As a
result, the Corporation incurred cash losses of $25 million on its day ahead hedging
position.
- Canadian Gas: Comparable EBITDA for the three and nine months
ended Sept. 30, 2019 decreased by
$28 million and $89 million, respectively, compared to the same
periods in 2018, mainly due to the Mississauga contract ending Dec. 31, 2018 and lower scheduled payments from
the Poplar Creek finance lease. Additionally, year-to-date results
have benefited from lower OM&A costs compared to the prior
year, and lower fuel costs at Sarnia due to less steam demand stemming from
customer planned outages. In the three and nine months ended
Sept. 30, 2018, comparable EBITDA
included $31 million and $103 million of EBITDA, respectively, from the
Mississauga and Poplar Creek
contracts.
- Australian Gas: Comparable EBITDA for the three and nine months
ended Sept. 30, 2019 was consistent
with the same periods in 2018, which was expected due to the nature
of our contracts.
- Wind and Solar: Comparable EBITDA for the three and nine months
ended Sept. 30, 2019 was consistent
with the same periods in 2018. In the third quarter, higher overall
production, higher sales of green attributes and lower OM&A
costs were offset by lower insurance proceeds. For the nine months
ended Sept. 30, 2019, higher sales of
green attributes and lower OM&A costs were offset by lower
production.
- Hydro: Total gross revenues decreased by $6 million for the three months ended
Sept. 30, 2019 compared to the same
period in 2018, due to unfavourable power and ancillary services
pricing. Total gross revenues increased by $6 million for the nine months ended Sept. 30, 2019 as favourable energy sales more
than offset lower ancillary services revenue. After net payments
relating to the Alberta hydro PPA,
comparable EBITDA for the three and nine months ended Sept. 30, 2019 was consistent with the same
periods in 2018.
- Energy Marketing: For the three months ended Sept. 30, 2019, comparable EBITDA was consistent
with the same period in 2018, due to strong results in both
periods. For the nine months ended Sept. 30,
2019, comparable EBITDA was $36
million higher compared to the same period in 2018 due to
strong results across all markets with particularly strong
performance from US Western and Eastern markets due to continued
high levels of volatility across North American power markets.
OM&A increased due to higher incentive costs related to
stronger performance. The Energy Marketing team was able to
capitalize on short term arbitrage opportunities in the markets we
trade.
- Corporate: During the three months ended Sept. 30, 2019, OM&A costs decreased by
$2 million, due to cost saving
efficiencies, partially offset by higher legal fees. For the nine
months ended Sept. 30, 2019, OM&A
costs decreased by $8 million,
primarily due to the year-to-date realized net gain of $8 million from the total return swap on our
share-based payment plans, payments on leases that were capitalized
on implementation of IFRS 16 and other cost saving efficiencies,
partially offset by higher legal fees. The losses on the total
return swap realized during the second and third quarters of 2019
partially offset the gain realized in the first quarter of 2019. A
portion of the settlement cost of our share-based payment plans is
fixed by entering into total return swaps, which are cash settled
every quarter.
2019 Outlook Update
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.
Measure
|
Revised
Outlook
|
Previous
Outlook
|
Comparable
EBITDA
|
No Change
|
$875 million to $975
million
|
FCF
|
$300 million to $340
million
|
$270 million to $330
million
|
Consolidated Earnings Review
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:
- Distributed planned maintenance expenditures across the entire
Hydro fleet; and
- Distributed expenditures across our Wind fleet, focusing on
planned component replacements.
Third Quarter and Nine Months Ended Sept. 30, 2019 and 2018 Financial and Operational
Highlights
In $CAD
millions, unless otherwise stated
|
3 Months
Ended
|
9 Months
Ended
|
Sept. 30,
2019
|
Sept. 30,
2018
|
Sept. 30,
2019
|
|
Sept. 30,
2018
|
Adjusted availability
(%)(3)
|
|
95.2
|
|
93.7
|
|
89.5
|
|
91.3
|
Production (GWh)
(3)
|
|
7,558
|
|
7,761
|
|
20,918
|
|
20,132
|
Revenue
|
|
593
|
|
593
|
|
1,738
|
|
1,627
|
Operations,
maintenance, and administration
|
|
114
|
|
120
|
|
348
|
|
376
|
Comparable EBITDA
(1,2,4)
|
|
305
|
|
250
|
|
741
|
|
891
|
Net earnings (loss)
attributable to common shareholders
|
|
51
|
|
(86)
|
|
(14)
|
|
(126)
|
FFO
(1,4)
|
|
244
|
|
204
|
|
568
|
|
710
|
Cash Flow from
Operating Activities
|
|
328
|
|
159
|
|
668
|
|
688
|
FCF
(1,4)
|
|
170
|
|
94
|
|
314
|
|
426
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
per common share
|
$
|
0.18
|
$
|
(0.30)
|
$
|
(0.05)
|
$
|
(0.44)
|
FFO per share
(1,4)
|
$
|
0.87
|
$
|
0.71
|
$
|
2.00
|
$
|
2.47
|
FCF per share
(1,4)
|
$
|
0.60
|
$
|
0.33
|
$
|
1.11
|
$
|
1.48
|
Dividends declared
per common share (5)
|
$
|
0.04
|
$
|
0.04
|
$
|
0.08
|
$
|
0.12
|
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.
Conference call
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.
Dial-in numbers - Third Quarter 2019
Results:
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/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.
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 Discussion of Consolidated Results
section of the Company's MD&A for further discussion of these
items, including, where applicable, reconciliations to measures
calculated in accordance with IFRS.
|
2.
|
During the first
quarter of 2019, we revised our approach to reporting adjustments
to arrive at comparable EBITDA, mainly to be more comparable with
other companies in the industry. Comparable EBITDA is now adjusted
to exclude the impact of unrealized mark-to-market gains or losses.
Both the current and prior period amounts have been adjusted to
reflect this change.
|
3.
|
Availability and
production includes all generating assets (generation operations
and finance leases that we operate).
|
4.
|
Includes $157
million received from the Balancing Pool for the early termination
of Sundance B and C PPAs in the first quarter of 2018 and $56
million received on settlement of the dispute with the Balancing
Pool in the third quarter of 2019.
|
5.
|
Dividends declared
vary year over year due to timing of dividend
declarations.
|
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. 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.
Forward Looking Statements
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.
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SOURCE TransAlta Corporation