TransAlta Renewables Reports Fourth Quarter and Full Year 2016 Results and Provides Outlook for 2017

Mar 8, 2017

CALGARY, Alberta (March 7, 2017) – TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) today reported its financial results for the three months and year ended December 31, 2016.

Comparable EBITDA(1) and comparable Cash Available For Distribution(1) (“Comparable CAFD”) for the fourth quarter was $121 million and $69 million, respectively.

Comparable EBITDA for the year was $407 million, significantly higher than the same period in 2015 due to a full year contribution from the acquisition of an economic interest in TransAlta’s Australian power generation and gas pipeline portfolio completed in May 2015 and the acquisition of the Canadian Assets (as defined below) in January 2016. Comparable CAFD for the year was $245 million ($1.10 per share) compared to $177 million ($1.08 per share) during the same period last year. Dividends paid for the year totaled $0.88 per share for a payout ratio of 80 per cent, compared to $0.81 per share in 2015 for a payout ratio of 75 per cent.

Net earnings for the quarter were $26 million ($107 million last year), including a $13 million loss due to the increase in valuation of the Class B shares ($7 million in 2015) and a $22 million loss due to the strengthening of the Australian dollar ($66 million gain in 2015). For the year, net loss totaled $2 million (net earnings of $195 million in 2015) including a $142 million loss due to the increase in the valuation of Class B shares (gain of $36 million last year) and a $35 million loss due to the strengthening of the Australian dollar (a gain of $52 million last year). Gain or loss on Class B shares valuation and changes in the Australian dollar are non-cash items.

Today, the Company also declared monthly dividends of $0.07333 per share for holders of record on April 3, 2017, May 1, 2017 and June 1, 2017 payable on each of April 28, 2017, May 31, 2017 and June 30, 2017, respectively.

“TransAlta Renewables continued to deliver on its growth and operational strategies in 2016, resulting in strong performance for the year,” said Brett Gellner, President and Chief Executive Officer of the Company. “Our focus for 2017 is to deliver the South Hedland project, deliver strong operational performance, and continue to look for value added growth opportunities.”

2017 Outlook

The following table outlines TransAlta Renewables financial targets for 2017:

In $CAD millions 2016 Results 2016 Outlook 2017 Outlook
Comparable EBITDA 407 365 – 390 425 – 450
Adjusted funds from operations 284 245 – 270 320 – 350
Comparable CAFD 245 210 – 235 235 – 260

The 2017 outlook is based on expected revenues from the PPAs, sale of green attributes, and the contribution from South Hedland which is expected to be commissioned mid-2017. We expect to invest $230 million to $250 million in 2017 to complete the construction of South Hedland.

Over the next 18 months we expect to raise between $425 million and $500 million in project level financing against a number of fully contracted assets. These financings will have repayment schedules aligned with the contracted cash flows of the underlying assets. Proceeds from these financings will be used to fund the remaining commitments at South Hedland, and to repay approximately $200 million of debt that is maturing in 2018.

We expect renewable energy production from our wind and hydro assets to be in the range of 3,500 to 3,900 GWh. Gas-fired generation primarily provides compensation for capacity, and accordingly, production is not a significant indicator of that business.

 2016 Highlights

On January 6, 2016 we invested in an economic interest based on the cash flows of TransAlta’s Sarnia’s cogeneration plant, Le Nordais wind farm, and Ragged Chute hydro facility for a combined value of approximately $540 million. We subsequently acquired direct ownership of the Canadian Assets on November 30, 2016.

We issued a non-recourse bond through our indirect wholly-owned subsidiary New Richmond Wind L.P. in the amount of $159 million in 2016.

Summary of Results

Q4 2016 compared to Q4 2015                                                                                           

  • Comparable EBITDA of $121 million compared to $94 million for the same period last year primarily due to the contribution of $18 million in the quarter from the economic interests in the Canadian Assets acquired in early 2016.
  • The increase in comparable EBITDA drove adjusted funds from operations of $91 million compared to $78 million for the same period last year.
  • Renewable energy production remained relatively stable as unplanned outages in Canadian Wind were offset by higher generation from Canadian Hydro.

Full year 2016 compared to full year 2015                                                                            

  • Comparable EBITDA for 2016 of $407 million is approximately $146 million greater than the same period last year. The acquisitions of economic interests in the Australian Assets in May 2015, and the investment, and subsequent purchase, of the Canadian Assets in 2016 increased our Comparable EBITDA through the addition of 1,036 MW of highly contracted capacity.
  • AFFO of $284 million and Comparable CAFD of $245 million increased over $80 million and $60 million, respectively, over 2015 primarily as a result of the Australian Asset and Canadian Assets acquisitions.
  • Reported net earnings (loss) attributable to common shareholders decreased as a result of the non-cash losses in the fair value of the Class B share liability of $142 million and loss on foreign exchange.
  • Renewable energy production(2) of 3,541 GWh compared to 3,262 GWh for the same period last year due the addition of the Canadian Assets acquired in 2015 and 2016, respectively.

 

The following table depicts key financial results and statistical operating data:

Fourth Quarter and Year Ended Dec. 31 2016 Highlights 

In $CAD millions, unless otherwise stated

3 months ended

Dec. 31, 2016

3 months ended

Dec. 31, 2015

Year Ended

Dec. 31, 2016

Year Ended

Dec. 31, 2015

Renewable energy production (GWh) (2) 975 983 3,541 3,262
Revenue 94 75 259 236
Net earnings (loss) attributable to common shareholders 26 107 (2) 195
Comparable EBITDA(1) 121 94 407 261
Adjusted funds from operations(1) 91 78 284 200
Comparable CAFD(1) 69 78 245 177
Net earnings (loss) per share attributable to common shareholders, basic and diluted 0.12 0.56 (0.01) 1.18
Adjusted funds from operations per share(1) 0.41 0.41 1.27 1.22
Comparable CAFD per share(1) 0.31 0.41 1.10 1.08
Dividends declared per common share(3) 0.29 0.21 0.96 0.82
Dividends paid per common share 0.22 0.21 0.88 0.81

 

The following tables provide further detail on the allocation of the comparable EBITDA between owned assets and assets in which TransAlta Renewables holds an economic interest; as well as a reconciliation to AFFO.

 

3 Months Ended December 31

($CAD millions)

2016 2015

Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total
Comparable EBITDA 64 57 121 60 34 94
Interest expense (12) (12) (9) (9)
Sustaining capital expenditures (4) (5) (9) (3) (2) (5)
Current income tax expense (1) (2) (3) (1) (1)
Distributions paid to subsidiaries’

non-controlling interest

(1) (1)
Unrealized risk management (gain) (1) (1) (2)
Currency adjustment (1) (1) 1 1
Other (3) (3) (1) (1)
AFFO 46 45 91 46 32 78

 

 

Year Ended December 31

($CAD millions)

2016 2015

Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total
Comparable EBITDA 176 231 407 171 90 261
Interest expense (48) (48) (35) (35)
Change in long-term receivable (15) (15)
Sustaining capital expenditures (11) (25) (36) (10) (8) (18)
Current income tax expense (5) (11) (16) (3) (3)
Distributions paid to subsidiaries’

non-controlling interest

(5) (5) (5) (5)
Unrealized risk management (gain) loss (1) 1
Currency adjustment (2) (2) (1) (1)
Other 2 (3) (1) 1 1
AFFO 108 176 284 119 81 200

TransAlta Renewables is in the process of filing its Annual Information Form, Audited Consolidated Financial Statements and accompanying notes, as well as the MD&A. These documents will be available today through TransAlta Renewables’ website at www.transaltarenewables.com or through SEDAR at www.sedar.com.

 About TransAlta Renewables Inc.

TransAlta Renewables is among the largest of any publicly traded renewable independent power producer (“IPP”) in Canada.  Our asset platform is diversified in terms of geography, generation and counterparties and consists of interests in 18 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities (including one currently under construction) and one natural gas pipeline, representing an ownership interest of 2,441 MW of net generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the State of Wyoming and the State of Western Australia. Our objectives are to (i) create stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.

Cautionary Statement Regarding Forward Looking Information

This MD&A and other reports and filings made with securities regulatory authorities include forward-looking statements.  All forward-looking statements are based on our beliefs as well as assumptions based on information available at the time the assumptions were made and on management’s experience and perception of historical trends, current conditions, 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”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “foresee”, “potential”, “enable”, “continue”, or other comparable terminology.  These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance to be materially different from that projected.

In particular, this MD&A contains forward-looking statements pertaining to our business and anticipated financial performance including, but not limited to: our strategy and focus for 2017, including as it pertains to delivering the South Hedland project and identifying growth opportunities; expected revenues from the Company’s power purchase agreements; sale of green attributes; the economic contribution from South Hedland; the commissioning of the South Hedland project on schedule and on budget, and expectations regarding the remaining investment tom complete the South Hedland project; the Company raising between $425 million and $500 million in project level financing against a number of fully contracted assets over the next 18 months, and the use of proceeds associated with such financings; the Company’s dividend policy, including its commitment to maintaining a payout ratio of approximately 80 to 85 per cent;  renewable energy production from our wind and hydro assets in 2017; and expected comparable EBITDA, adjusted FFO and comparable free cash flow ranges for 2017.

 Factors that may adversely impact our forward-looking statements include risks relating to: changes in general economic conditions, including interest rates; operational risks involving our facilities, including unplanned outages at such facilities; risks pertaining to the timing and cost of the construction and commissioning of the South Hedland facility; disruptions in the transmission and distribution of electricity; the effects of weather; disruptions in the source of water, wind, or gas required to operate our facilities; natural disasters; the threat of domestic terrorism, cyberattacks, and other man-made disasters; equipment failure and our ability to carry out repairs in a cost-effective or timely manner; industry risk and competition; fluctuations in the value of foreign currencies; the need for additional financing and the ability to access financing at a reasonable cost; structural subordination of securities; counterparty credit risk; insurance coverage; our provision for income taxes; legal and contractual proceedings involving the Corporation; reliance on key personnel; the regulatory and political environments in the jurisdictions in which we operate; increasingly stringent environmental requirements and changes in, or liabilities under, these requirements; and development projects and acquisitions.  The foregoing risk factors, among others, are described in further detail in the Risk Factors section of our 2017 Annual Information Form and our annual MD&A for the year ended December 31, 2016. All documents are available on SEDAR at www.sedar.com.

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.  The forward-looking statements included in this document are made only as of the date hereof and we do not undertake to publicly update these forward-looking statements to reflect new information, future events, or otherwise, except as required by applicable laws.  In light of these risks, uncertainties, and assumptions, the forward-looking events might occur to a different extent or at a different time than we have described, or might not occur.  We cannot assure that projected results or events will be achieved.

Note: All financial figures are in Canadian dollars unless noted otherwise.

NOTES

 (1) Comparable EBITDA refers to earnings before interest, taxes, depreciation and amortization including finance lease income and adjusted for certain other items. Adjusted funds from operations (AFFO) includes sustaining capital and distributions to non-controlling interests and excludes the effects of timing and working capital on distributions from subsidiaries of TransAlta in which the Company holds an economic interest. Comparable CAFD refers to AFFO less principal repayments of amortizing debt. These items are not defined under International Financial Reporting Standards (“IFRS”) and the way they are calculated changed during 2015. Presenting these items from period to period provides management and investors with the ability to evaluate earnings and cash flow trends more readily in comparison with prior periods’ results. Refer to the Non-IFRS Measures section of the Management’s Discussion and Analysis (“MD&A”) for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.

(2) Includes production from the Wyoming Wind and excludes Canadian and Australian gas-fired generation. Production is not a key revenue driver for gas-fired facilities as most of their revenues are capacity based.

(3) During 2016, thirteen dividends were declared.  The additional declaration does not impact the timing of the payment of dividends or the expectation that twelve monthly dividends are paid annually. 

For more information:

 

Investor Inquiries:                                                                  Media Inquiries:        

Jaeson Jaman                                                                          Stacey Hatcher

Manager, Investor Relations                                                   Manager, Communications

Phone: 1-800-387-3598 in Canada and U.S.                          Toll-free media number: 1-855-255-9184

Email: investor_relations@transalta.com                               Email: ta_media_relations@transalta.com

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