PR Newswire
CALGARY, Aug. 9, 2017
CALGARY, Aug. 9, 2017 /PRNewswire/ - TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA; NYSE: TAC) today reported second quarter 2017 comparable EBITDA(1) of $268 million, funds from operations ("FFO")(1) of $187 million, and free cash flow ("FCF")(1) of $30 million. Comparable EBITDA and FFO for the second quarter are the highest second quarter results in over five years, and increased by $20 million and $12 million, respectively, over the same period last year.
The second quarter results reflect strong performance across our portfolio. US Coal benefited from favourable mark-to-market impacts on financial contracts, higher contracted revenue, and lower costs for purchased power; Wind and Solar profited from stronger wind resources in eastern Canada and lower operating expenses; Hydro benefitted from higher water resources; and the gross margin from Energy Marketing returned to historic levels. Canadian Coal, as expected, was negatively impacted by lower realized price on uncontracted volumes and higher coal costs compared to last year.
Free cash flow was down by $26 million and $15 million for the three and six months ended June 30, 2017, respectively, due to the timing of capital expenditures, higher productivity capital spending relating to our corporate transformation, and higher distributions to our partner in TransAlta Cogeneration L.P.
"The business operated as predicted with some upside in our renewables portfolio," said Dawn Farrell, President and Chief Executive Officer. "The highlight for this reporting period is the commissioning of the South Hedland power station which will increase our dividend from TransAlta Renewables from $120 million to $150 million on an annualized basis. However, expected headwinds in the back half of the year and additional productivity capital spending have lowered our free cash flow guidance by approximately ten per cent on an annualized basis," commented Mrs. Farrell.
Second Quarter Highlights
Important Subsequent Events
2017 Fiscal Outlook Update
During the first half of the year, emerging labour constraints at our Highvale mine have impacted productivity, significantly reducing our coal inventory and causing coal supply constraints for our facilities in Alberta. The shortfall affects our coal-fired Sundance generating Units 1 to 6 and Keephills Units 1 to 3. We expect additional mining costs at our Highvale mine operations for the remainder of 2017, and a shorter-term reduction in the power generation at Sundance and Keephills, in order to rebuild our coal inventory. Also, higher productivity capital and higher distributions to non-controlling interests have negatively impacted FCF.
The following table outlines TransAlta's updated financial targets for 2017:
Measure |
Revised Outlook |
Previous Outlook |
Comparable EBITDA |
$1,025 to $1,100 million |
$1,025 to $1,135 million |
FFO |
$765 to $820 million |
$765 to $855 million |
FCF |
$270 to $310 million |
$300 to $365 million |
Dividend |
$0.16 per share, 15%-17% payout of FCF |
$0.16 per share, 13%-15% payout of FCF |
Second Quarter 2017 Review by Segment
Comparable EBITDA |
3 Months Ended |
6 Months Ended | ||
June 30, 2017 |
June 30, 2016 |
June 30, 2017 |
June 30, 2016 | |
Canadian Coal |
85 |
93 |
176 |
196 |
U.S. Coal |
34 |
18 |
44 |
14 |
Canadian Gas |
57 |
56 |
145 |
121 |
Australian Gas |
32 |
33 |
63 |
64 |
Wind and Solar |
42 |
36 |
110 |
97 |
Hydro |
28 |
25 |
42 |
43 |
Energy Marketing |
12 |
6 |
8 |
29 |
Corporate |
(22) |
(19) |
(46) |
(37) |
Total Comparable EBITDA |
268 |
248 |
542 |
527 |
Consolidated Earnings Review
Reported net loss attributable to common shareholders for the second quarter of 2017 was $18 million ($0.06 loss per share) compared to net earnings of $6 million ($0.02 earnings per share) during the same period in 2016. Year-to-date, reported net earnings were down $86 million ($0.30 loss per share). For both the quarter and year-to-date, the income related to the Off-Coal Agreement payments were offset by the Sundance Unit 1 impairment charge of $20 million recognized in the quarter and higher net earnings attributable to non-controlling interests. Additionally, the comparative net earnings for 2017 are negatively impacted by higher depreciation on Keephills 3 and Genesee 3, which were expected to run beyond 2030 and therefore have had their useful lives shortened.
Operating Review
Adjusted availability for the three and six months ended June 30, 2017 was 84.0 per cent and 86.2 per cent, respectively, compared to 86.5 per cent and 89.4 per cent for the same periods in 2016. Higher planned outages at Canadian and US Coal, and planned outages at our Sarnia cogeneration plant and Windsor plant, were the main causes of the decreases.
Production for the three and six months ended June 30, 2017 was 7,707 GWh and 16,758 GWh, respectively, compared to 7,899 GWh and 16,766 GWh for the same periods in 2016. The cessation of operations at our Mississauga cogeneration facility effective Jan. 1, 2017, and planned major maintenance at US Coal, were the main drivers of the production decrease in the second quarter of 2017. This was partially offset by higher generation at Alberta Hydro and Wind, as well as stronger customer demand in Australia.
Second Quarter 2017 Financial and Operational Highlights
In $CAD millions, unless otherwise stated |
3 Months Ended |
6 Months Ended | ||
June 30, 2017 |
June 30, 2016 |
June 30, 2017 |
June 30, 2016 | |
Adjusted availability (%)(2) |
84.0 |
86.5 |
86.2 |
89.4 |
Production (GWh)(2) |
7,707 |
7,899 |
16,758 |
16,766 |
Revenue |
503 |
492 |
1,081 |
1,060 |
Comparable EBITDA(1) |
268 |
248 |
542 |
527 |
Net earnings (loss) attributable to common shareholder |
(18) |
6 |
(18) |
68 |
FFO(1) |
187 |
175 |
389 |
372 |
Cash Flow from Operating Activities |
63 |
119 |
344 |
394 |
FCF(1) |
30 |
56 |
125 |
140 |
Net earnings (loss) per common share attributable to common shareholders |
(0.06) |
0.02 |
(0.06) |
0.24 |
FFO per share(1) |
0.65 |
0.61 |
1.35 |
1.29 |
FCF per share(1) |
0.10 |
0.19 |
0.43 |
0.49 |
Dividends declared per common share |
0.04 |
0.04 |
0.04 |
0.08 |
The complete report for the quarter, including Management Discussion and Analysis ("MD&A") and unaudited interim financial statements, as well as our quarterly presentation, will be available on the Investors section of our website: www.transalta.com.
Conference call
We will hold a conference call and webcast at 9:00 a.m. MT (11:00 a.m. ET) on Thursday, August 10, 2017 to discuss our second quarter 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, investors and other interested parties. 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: 1-647-427-7451
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 53257141 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 International Financial Reporting Standards ("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 Reconciliation of Non-IFRS Measures sections of this quarter's MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS. |
(2) Adjusted for economic dispatching at U.S. Coal. |
About TransAlta
TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. TransAlta maintains a low-to-moderate risk profile by operating a highly contracted portfolio of assets in Canada, the United States and Australia. TransAlta's focus is to efficiently operate wind, hydro, solar, natural gas and coal facilities in order to provide customers with a reliable, low-cost source of power. For over 100 years, TransAlta has been a responsible operator and a proud contributor to the communities in which it works and lives. TransAlta has been recognized on CDP's Canadian Climate Disclosure Leadership Index (CDLI), which includes Canada's top 20 leading companies reporting on climate change, and has been selected by Corporate Knights as one of Canada's Top 50 Best Corporate Citizens and is recognized globally for its leadership on sustainability and corporate responsibility standards by FTSE4Good.
For more information about TransAlta, visit our web site at www.transalta.com or follow us on Twitter @TransAlta.
Cautionary Statement Regarding Forward Looking Information
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "may", "will", "project", "should", "believe", "plans", "intends" and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to: our ownership in TransAlta Renewables and receipt of additional dividends from TransAlta Renewables; the intention to retire Sundance Unit 1, mothball Sundance Unit 2, and convert Sundance Units 3 to 6 and Keephills Units 1 and 2 from coal-fired to gas-fired generation between 2021 to 2023; the revised outlook for 2017, including as it pertains to Comparable EBITDA, FFO and FCF; the investment by TransAlta Renewables of approximately $37 million in five new for the Kent Hills wind farm, and the timing of construction and funding associated therewith; the contribution to EBITDA from South Hedland; the satisfaction of all requisite performance criteria to declare commercial operation at South Hedland under the PPA with FMG; the expiry of the credit facilities; the potential termination of the Alberta PPAs and the receipt of a termination payment of approximately $231 million; the repurchase by FMG of the Solomon power station, the gross proceeds to be received therefrom and the use of proceeds received from the repurchase of such facility; the return to normalized gross margin for Energy Marketing; and the impact of labour constraints at our Highvale mine on coal supply, mining costs and power generation at Sundance and Keephills. By their nature, forward-looking information requires us to make assumptions and are subject to inherent risks and uncertainties. There is significant risk that predictions and other forward-looking information will not prove to be accurate and readers are cautioned not to place undue reliance on our forward-looking information as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, expectations, estimates or intentions expressed in the forward-looking information. Some of the factors that could cause such differences include: operational risks involving our facilities; changes in market prices where we operate; equipment failure and our ability to carry out repairs in a cost effective and timely manner, including unplanned outages at generating facilities and associated capital investments; the effects of weather; disruptions in the source of fuels, including coal, gas, water or wind required to operate our facilities and our ability to resolve the impact of labour constraints at our Highvale mine; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; legislative or regulatory developments and their impacts, including development of regulations facilitating coal-to-gas conversions; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); disputes with counterparties; changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where we operate; deterioration of credit markets; impediments to the construction and commissioning of the Kent Hills expansion; disputes with counterparties including the potential for, and outcome of, any contractual disputes, including as it pertains to South Hedland; and the outcome of any 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 for the year ended December 31, 2016 and 2017 Annual Information Form. 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. 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.
SOURCE TransAlta Corporation