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

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

PR Newswire

CALGARY, Nov. 7, 2019

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 /PRNewswire/ - 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 3 Months 9 Months
(in CAD$ millions) Ended Ended
Sept. Sept. Sept. Sept.
30, 30, 30, 30,
2019 2018 2019 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.

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November 07, 2019 07:09 ET (12:09 GMT)