CALGARY, AB, May 13, 2021 /CNW/ -
First Quarter 2021 Highlights
- Comparable EBITDA(1) of $310
million, an increase of $90
million or 41 per cent compared to the same period in
2020
- Free cash flow ("FCF")(1) of $129 million or $0.48 per share compared to $109 million or $0.39 per share, a 23 per cent increase on a per
share basis, for the same period in 2020
- Hydro segment delivered $77
million of comparable EBITDA, an increase of $51 million or 96 per cent compared to the same
period in 2020
- Adjusted availability was 88.6 per cent compared to 92.8 per
cent for the same period in 2020
Other Highlights
- On Dec. 31, 2020, all power
purchase arrangements ("Alberta PPAs") with the Alberta Balancing
Pool for TransAlta's Alberta Hydro facilities, Keephills Units 1
and 2 and Sheerness Units 1 and 2, expired and these facilities
began fully merchant operations in the Alberta electricity
market
- Completion of Sundance Unit 6 and Sheerness Unit 1 conversions
to gas-fired generation
- Commenced gas conversion of Keephills Unit 2 with planned
completion during the second quarter of 2021
- Windrise wind project construction was 84 per cent complete as
of March 31, 2021
- Extended $1.25 billion Syndicated
Credit facility to June 2025 and
converted the facility into a Sustainability Linked Loan aligning
the cost of borrowing to TransAlta's greenhouse gas emissions
reductions and gender diversity targets
Subsequent Events & Updates
- Launched 130 MW Garden Plain wind project with an 18-year power
purchase agreement with Pembina Pipeline Corporation for 100 MW of
renewable electricity and associated environmental attributes
- Completed 10-year contract extension at Sarnia cogeneration facility with large
industrial off-taker
- Settled the litigation with Mangrove Partner's Master Fund
Ltd.
TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA)
(NYSE: TAC) today reported its financial results for the quarter
ended March 31, 2021.
"TransAlta delivered excellent results during the first quarter,
ahead of our financial expectations. Our strong performance was led
by our Alberta Hydro fleet as we experienced the first few months
of fully merchant operations in the Alberta electricity market. Our
strategically diversified fleet of hydro, wind, energy storage and
thermal assets demonstrated its competitiveness and continued value
in the new market structure," said John
Kousinioris, President and Chief Executive Officer. "Our
Energy Marketing segment also had an exceptional start to the year
with favourable trading results across North America. Given these exceptional
results, we expect performance to track to the upper end of the
range of our 2021 guidance."
Set out below are additional highlights from the quarter as well
as more details regarding the Company's financial results and
liquidity and financial position.
Financial Results
The Company reported an exceptional
first quarter 2021 result with comparable EBITDA(1) of
$310 million compared to $220 million in the same period of 2020. Funds
from operations ("FFO")(1) were $211 million for the quarter compared to
$172 million in the same period of
2020.
Comparable EBITDA for the three months ended March 31, 2021 increased by $90 million compared with the same period in
2020, largely due to higher comparable EBITDA at the Hydro and
Energy Marketing segments and lower expenses in the Corporate
segment. The Hydro segment's strong performance was due to higher
average merchant prices in the Alberta power market coupled with
the expiry of the Alberta PPAs, which resulted in the elimination
of the net obligation payments provided to the Alberta Balancing
Pool in the prior period. The Energy Marketing segment also
had exceptional performance resulting from favourable short-term
trading of both physical and financial power and gas products
across all North American markets. The Corporate segment
reported lower expenses driven by receipt of the Canada Emergency Wage Subsidy ("CEWS") funding
and realized gains from a total equity swap that hedged the
employee share-based incentive plans. This was partially offset by
lower performance at the Centralia
segment due to an unplanned outage occurring during a period of
higher merchant pricing in the first quarter of 2021.
FCF(1), one of the Company's key financial metrics,
totaled $129 million for the three
months ended March 31, 2021, an
increase of $20 million compared to
the same period in 2020, driven primarily by the higher comparable
EBITDA noted above. FCF reflects the after-tax performance as well
as the impact of the settlement of provisions and higher
distributions paid to subsidiaries' non-controlling interests.
Operations, maintenance and administration ("OM&A") expenses
for the three months ended March 31,
2021 decreased by $23 million compared to the same
period in 2020 as variability caused by the total return swap
resulted in a favourable period-over-period change of
$18 million and the receipt of CEWS funding of
$8 million provided a further benefit. Excluding the
impact of the total return swap and CEWS funding, OM&A expenses
increased slightly due to increased staff costs, legal expenses and
higher insurance premiums.
Liquidity and Financial Position
The Company continues
to maintain a strong financial position in part due to our
long-term contracts and hedged positions. At the end of the first
quarter, TransAlta had access to $2.1
billion in liquidity including $648
million of cash and cash equivalents.
Alberta Electricity Portfolio
On Dec. 31, 2020, the Alberta PPAs expired and,
effective Jan. 1, 2021, the
applicable facilities began operating on a fully merchant basis in
the Alberta market, forming a core part of our Alberta electricity
portfolio optimization activities. The variability in production by
facility is driven by the diversity in our fuel types, which
enables portfolio management, and allows for maximization of
operating margins. The Alberta portfolio includes hydro, wind,
energy storage and thermal units. A portion of the baseload
generation in the portfolio can be hedged to provide cash flow
certainty.
In the three months ended March 31,
2021, the Hydro and Alberta Thermal segments achieved
realized power prices of $122/MWh and
$87/MWh respectively compared to the
Alberta spot price, which averaged $95/MWh. The Company was able to benefit during
higher-priced periods by optimizing dispatch in the Hydro segment
while our hedging positions at Alberta Thermal minimized
unfavourable market pricing during lower priced hours in the
quarter.
Other Activities
Conversion to Gas
On Feb. 1, 2021, we announced the completion of
TransAlta's first conversion to gas-fired generation at Sundance
Unit 6. The Sheerness Unit 1 conversion to gas was also completed
in the quarter and was returned to service on March 31, 2021. The Keephills Unit 2 gas
conversion is currently in progress with planned completion in the
second quarter.
During the quarter, we advanced detailed engineering for the
Sundance 5 repowering
project. As a result of the detailed design review, the
Company's cost estimate for the project has increased and is now in
the estimated range of $900 to
$950 million. Project costs
have increased to account for changes in final design. In addition,
a decision was made to upgrade the high-pressure turbine as part of
the repowering scope to allow for maximum operating flexibility in
the unit going forward. The Company expects to issue full notice to
proceed later this year and the target completion date for
Sundance 5 is now estimated for H1
2024.
Windrise Wind
Construction activities on the
Windrise wind project continues to advance with procedures in place
to protect the construction team during the COVID-19 pandemic. The
construction schedule has been modified to reflect a
COVID-19-related delay in the delivery of the wind turbine
components. The project began receiving wind turbine generators on
site in mid-Oct. 2020. The bulk of
the major equipment has been delivered to site and turbine erection
activities have commenced. The project has advanced significantly
and, as at the end of March 2021, was
approximately 84% complete. In addition, the main transmission line
is progressing well and remains on track for energization during
the second quarter. The project is tracking to be completed during
the second half of 2021.
Sarnia Recontracting
On May 12, 2021, the Company executed an Amended and
Restated Energy Supply Agreement with one of its large industrial
customers at the Sarnia
cogeneration facility which provides for the supply of electricity
and steam. This agreement will extend the term of the
original agreement from Dec. 31, 2022
to Dec. 31, 2032. However, if
the Company is unable to enter into a new contract with the Ontario
Independent Electricity System Operator ("IESO") or enter into
agreements with its other industrial customers at the Sarnia cogeneration facility that extend past
Dec. 31, 2025, then this agreement
will automatically terminate on Dec.
31, 2025. The current contract with the IESO in
respect of the Sarnia cogeneration
facility expires on Dec. 31, 2025.
The Company is in active discussions with the three other existing
industrial off-takers regarding extensions to their supply of
electricity and steam from the Sarnia cogeneration facility on comparable
terms.
Kaybob Cogeneration
The Company will not be
proceeding with the Kaybob cogeneration facility as a result of
Energy Transfer Canada ULC's ("ET Canada"), formerly known as
SemCAMS Midstream ULC, purported termination of the agreements to
develop, construct and operate the 40 MW cogeneration facility at
the Kaybob South No. 3 sour gas processing plant. As a result, the
Company has recorded an impairment of $27
million in the first quarter of 2021. TransAlta has
commenced an arbitration seeking full compensation for ET Canada's
wrongful termination of the agreements. A hearing for this matter
has not yet been scheduled.
COVID-19 Response Update
The World Health Organization
declared a Public Health Emergency of International Concern
relating to COVID-19 on Jan. 30,
2020, which they subsequently declared, on March 11, 2020, as a global pandemic.
The Company continues to operate under its business continuity
plan, which focused on ensuring that: (i) employees who can work
remotely do so; and (ii) employees who operate and maintain our
facilities, and who are not able to work remotely, are able to work
safely and in a manner that ensures they remain healthy. During the
second and third quarters of 2020, the Company successfully brought
employees who were working remotely back to the office without
compromising health and safety standards. In December 2020, as a result of rising COVID-19
case counts in the Province of Alberta and in light of office
attendance restrictions eventually imposed by the Government of
Alberta, staff at TransAlta's head office returned to remote work
protocols. All of TransAlta's offices and sites follow strict
health screening and social distancing protocols with personal
protective equipment readily available and in use. Further,
TransAlta maintains travel bans aligned to local jurisdictional
guidance, enhanced cleaning procedures, revised work schedules,
contingent work teams and the reorganization of processes and
procedures to limit contact with other employees and contractors
on-site.
All of our facilities continue to remain fully operational and
are capable of meeting our customers' needs. The Company continues
to work and serve all of our customers and counterparties under the
terms of their contracts. We have not experienced interruptions to
service requirements. Electricity and steam supply continue to
remain a critical service requirement to all of our customers and
have been deemed an essential service in our jurisdictions.
The Company continues to maintain a strong financial position
due in part to its long-term contracts and hedged positions and its
ample financial liquidity.
Segment Results
First Quarter 2021
Segmented Results
Comparable EBITDA (C$ millions)
|
3 Months
Ended
|
March 31,
2021
|
March 31,
2020
|
Hydro
|
77
|
26
|
Wind and
Solar
|
76
|
74
|
North American
Gas
|
35
|
29
|
Australian
Gas
|
32
|
30
|
Alberta
Thermal
|
43
|
44
|
Centralia
|
12
|
33
|
Energy
Marketing
|
43
|
13
|
Corporate
|
(8)
|
(29)
|
Total Comparable
EBITDA(1)
|
310
|
220
|
- Hydro: Comparable EBITDA for the three months ended
March 31, 2021, increased by
$51 million compared with the same
period in 2020. On Dec. 31, 2020, the
Alberta PPAs expired and, effective Jan. 1,
2021, all of TransAlta's Alberta Hydro facilities began
operating on a merchant basis in the Alberta power market. The
Company was able to optimize revenues on the merchant facilities
through increased water flow during periods of higher realized
prices in the Alberta market and benefited from the elimination of
payment obligations to the Alberta Balancing Pool. This was
partially offset by lower ancillary service volumes.
- Wind and Solar: Comparable EBITDA for the three months
ended March 31, 2021, increased by
$2 million compared with the same
period in 2020 primarily due to the added Skookumchuck facility and higher pricing in
Alberta, which was partially
offset by lower production due to weaker wind resources from the
balance of the fleet.
- North American Gas: Comparable EBITDA for the three months
ended March 31, 2021, increased by
$6 million compared to the same period in 2020 primarily due
to the acquisition of the Ada facility and higher realized pricing
in Alberta.
- Australian Gas: Comparable EBITDA for the three months
ended March 31, 2021, increased by
$2 million compared with the same
period in 2020. The increase was mainly due to the timing of legal
fees and the strengthening of the Australian dollar relative to the
Canadian dollar.
- Alberta Thermal: Comparable EBITDA for the three months
ended March 31, 2021, decreased by
$1 million compared to the same period in 2020. Higher Alberta pricing was offset by lower
production and higher fuel and carbon compliance costs.
- Centralia: Comparable
EBITDA for the three months ended March 31,
2021, decreased by $21 million
compared to the same period in 2020 primarily due to an outage
occurring during a period of higher merchant pricing in the first
quarter of 2021.
- Energy Marketing: Comparable EBITDA for three months ended
March 31, 2021, increased by
$30 million compared to the same
period in 2020 resulting from favourable short-term trading of both
physical and financial power and gas products across all North
American markets.
- Corporate: Corporate costs for the three months ended
March 31, 2021, decreased by
$21 million compared to the same
period in 2020. These changes were primarily due to the receipt of
CEWS funding and realized gains from the total return swap. A
portion of the settlement cost of our employee share-based payment
plans is hedged by entering into total return swaps, which are cash
settled every quarter.
Consolidated Financial Highlights
Net loss attributable to common shareholders, for the three
months ended March 31, 2021, was
$30 million compared to net earnings
of $27 million in the same period in
2020. The decrease was largely due to higher fuel and purchased
power costs, asset impairments, an increase in tax expense and
higher earnings related to non-controlling interests. This decrease
was partially offset by higher revenues, favourable changes in
foreign exchange rates and lower OM&A.
Total sustaining capital expenditure of $34 million was $5
million higher compared to 2020 primarily due to higher
planned major maintenance at our Alberta Thermal segment.
First Quarter 2021 Highlights
In C$ millions,
unless otherwise stated
|
3 Months
Ended
|
|
March 31,
2021
|
|
March 31,
2020
|
Comparable
EBITDA(1)
|
$
|
310
|
$
|
|
220
|
Free cash
flow(1)
|
$
|
129
|
$
|
|
109
|
Adjusted availability
(%)
|
88.6
|
|
|
92.8
|
Production
(GWh)
|
5,541
|
|
|
6,486
|
Revenues
|
$
|
642
|
$
|
|
606
|
Fuel and purchased
power(2)
|
$
|
243
|
$
|
|
193
|
Carbon
compliance(2)
|
$
|
50
|
$
|
|
45
|
Operations,
maintenance and administration
|
$
|
105
|
$
|
|
128
|
Net loss attributable
to common shareholders
|
$
|
(30)
|
$
|
|
27
|
Cash flow from
operating activities
|
$
|
257
|
$
|
|
214
|
Funds from
operations(1)
|
$
|
211
|
$
|
|
172
|
Net loss per share
attributable to common shareholders,
basic and diluted
|
$
|
(0.11)
|
$
|
|
0.10
|
Funds from operations
per share(1)
|
$
|
0.78
|
$
|
|
0.62
|
Free cash flow per
share(1)
|
$
|
0.48
|
$
|
|
0.39
|
Dividends declared
per common share
|
$
|
—
|
|
0.0425
|
Dividends declared
per preferred share(3)
|
$
|
—
|
$
|
|
0.2562
|
TransAlta is in the process of filing its unaudited interim
Consolidated Financial Statements and accompanying notes, as well
as the associated Management's Discussion & Analysis
("MD&A"). These documents will be available May 13, 2021 on the Investor Centre of
TransAlta's website at www.transalta.com or through SEDAR at
www.sedar.com and EDGAR at www.sec.gov/edgar.shtml.
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 EBITDA, Funds from Operations and Free Cash Flow and
Earnings and Discussion of Consolidated Financial Results sections
of the MD&A for further discussion of these items, including,
where applicable, reconciliations to measures calculated in
accordance with IFRS.
(2) In the first quarter of
2021, carbon compliance costs have been reclassified from fuel and
purchase power costs and disclosed separately. Prior periods have
been adjusted for comparative purposes.
(3) Weighted
average of the Series A, B, C, E, and G preferred share dividends
declared. Dividends declared vary year over year due to timing of
dividend declarations.
Conference call
TransAlta will hold a conference call
and webcast at 9:00 a.m. MT
(11:00 a.m. ET) today, May 13, 2021, to discuss our first quarter 2021
results. The call will begin with a short address by John Kousinioris, President and Chief Executive
Officer, and Todd Stack, Executive
Vice President, Finance and 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.
First Quarter 2021 Conference
Call:
Toll-free North American participants call:
1-888-231-8191
Webcast link:
https://produceredition.webcasts.com/starthere.jsp?ei=1454542&tp_key=0857bc2acf51fba21d14
Related materials 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 passcode 9990399
followed by the # sign. A transcript of the broadcast will be
posted on TransAlta's website once it becomes available.
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 hydroelectric 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, having
recently achieved an A- score.
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", "will", "develop",
"continue", and similar expressions suggesting future events or
future performance. In particular, this news release contains
forward-looking statements, pertaining to, without limitation, the
following: the conversion of Keephills Unit 2 and the timing
thereof; the potential impact of COVID-19 on the Company and the
actions to be undertaken by the Company in response to the COVID-19
pandemic; the Windrise wind project and the timing for commercial
operation; the Sundance 5
repowering, including the total costs thereof and the expected
timing for completion; the Garden Plain wind project; and the
dispute with ET Canada and the ability of the Company to recover
full compensation from ET Canada. The forward-looking
statements contained in this news release are based on many
assumptions and are subject to a number of significant risks and
uncertainties that could cause actual plans, performance, results
or outcomes to differ materially from current expectations. Factors
that may adversely impact what is expressed or implied by the
forward-looking statements contained in this news release include
risks relating to the impact of COVID-19, the impact of which will
largely depend on the overall severity and duration of COVID-19,
which cannot currently be predicted, and which present risks
including, but not limited to: more restrictive directives of
government and public health authorities; reduced labour
availability impacting our ability to continue to staff the
Company's operations and facilities; impacts on the Company's
ability to realize its growth goals; decreases in short-term and/or
long-term electricity demand and lower power pricing; increased
costs resulting from the Company's efforts to mitigate the impact
of COVID-19; deterioration of worldwide credit and financial
markets; a higher rate of losses on accounts receivables due to
credit defaults; further disruptions to the Company's supply chain;
impairments and/or write-downs of assets; and adverse impacts on
the Company's information technology systems and the Company's
internal control systems, including increased cybersecurity
threats. Other factors that may adversely impact the Company's
forward-looking statements include, but are not limited to:
operational risks involving the Company's facilities, including
unplanned outages at such facilities; disruptions in the
transmission and distribution of electricity; the effects of
weather and other climate-related risks; disruptions in the source
of water, wind, solar or gas resources required to operate our
facilities; ability to secure regulatory approvals for projects
under development and construction; natural disasters; equipment
failure and our ability to carry out repairs in a cost-effective or
timely manner; and industry risks and competition. The foregoing
risk factors, among others, are described in further detail in the
Company's Management's Discussion and Analysis and Annual
Information Form for the year ended Dec. 31,
2020, which are available on SEDAR at www.sedar.com. Readers
are cautioned not to place undue reliance on these forward-looking
statements, which reflect the Company's expectations only as of the
date of this news release. The Company 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