TransAlta Renewables Reports Second Quarter 2017 Results

CALGARY, Alberta (August 9, 2017) – TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) announced today its 2017 second quarter financial results, with Comparable EBITDA(1) of $98 million, a $9 million increase over last year, driven primarily by strong generation from our wind portfolio and unrealized mark-to-market gains on our gas supply contracts that represent an economic hedge but do not qualify for hedge accounting. For the year-to-date, Comparable EBITDA totalled $209 million compared to $203 million for the comparative period, up $6 million, mainly due to increased Comparable EBITDA from our wind portfolio and strong performance from all other business segments.

Cash available for distribution(1) (“CAFD”) increased $5 million and $6 million for the three and six months ended June 30, 2017, respectively, compared to the same period in 2016. The increase is primarily due to increased Comparable EBITDA and lower current income taxes. Net earnings increased $37 million and $100 million for the three and six months ended June 30, 2017, respectively, compared to last year. The impact to net earnings attributable to the decrease in the fair market value of our class B shares, was $22 million and $42 million for the three and six month periods, respectively. Year-to-date, foreign exchange gains increased earnings by $63 million, offset by higher depreciation.

During and subsequent to the quarter, the final stages of construction and commissioning of our South Hedland facility were completed. The facility achieved commercial operations on July 28, 2017 and is expected to contribute approximately $80 million of EBITDA on an annualized basis from 25-year power purchase agreements (“PPA”). The project was completed on budget and, as a result of commissioning of the facility, we announced an increase of the monthly dividend by approximately 7 per cent effective September 29, 2017.

“TransAlta Renewables delivered another quarter of continued solid performance from our portfolio of highly contracted assets,” said Brett Gellner, President and Chief Executive Officer. “The successful commissioning of South Hedland and expansion of our Kent Hills wind farm demonstrates our ongoing focus to invest in highly contracted assets with strong counterparties.”

Second Quarter Highlights and Subsequent Events

  • Achieved commercial operations of the 150 MW South Hedland natural gas fired power station, located in the Pilbara Region of Western Australia.
  • Announced the investment of approximately $37 million in five new towers, adding 17 MW of capacity to the existing Kent Hills wind farm. The expansion is supported by a long-term contract with New Brunswick Power Corporation, and will bring total operating capacity of the Kent Hills wind farm to approximately 167 MW. In conjunction with the expansion, New Brunswick Power Corporation has extended the term of the initial PPA for Kent Hills from 2033 to 2035. We expect the Kent Hills wind farm to support between $240 and $275 million of project financing. Construction of the expansion is expected to begin in the spring of 2018.
  • Entered into a syndicated credit agreement giving us access to $500 million in direct borrowings. In conjunction with the new credit agreement, the existing $350 million credit facility provided by TransAlta Corporation was cancelled.
  • Fortescue Metals Group (“FMG”) announced that, in their view, the South Hedland power station has not yet satisfied the requisite performance criteria under FMG’s contract to declare commercial operation, which was declared by Horizon Power on July 28, 2017. FMG has a long-term PPA with TransAlta, for approximately 25% of the generation from South Hedland effective upon commissioning. In our view, all conditions to establish commercial operations, have been fully satisfied under the terms of the PPA with FMG. We continue to confer with FMG on the issue.
  • Received notice that FMG intends to repurchase the Solomon power station from TEC Pipe Pty Ltd., a wholly owned subsidiary of TransAlta Corporation, a right that FMG has under the PPA. Gross proceeds to TransAlta Renewables from the repurchase is estimated to be approximately US$335 and will be utilized to repay the credit facility used to fund the development of the South Hedland power station, for other future growth opportunities, and for general corporate purposes.

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

Second Quarter 2017 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

Renewable energy production (GWh)(2)

886

804 1,896

1,885

Revenue

112

52 241

120

Comparable EBITDA(1)

98

89 209

203

Adjusted funds from operations(1)

64

55 147

137

Cash available for distribution(1)

43

38 126

120

Net earnings (loss) attributable to common shareholders

22

(15) 49

(51)

Net earnings (loss) per share attributable to common shareholders, basic and diluted

0.10

(0.07) 0.22

(0.23)

Adjusted funds from operations per share(1)

0.29

0.25 0.66

0.61

Cash available for distribution per share(1)

0.19

0.17 0.56

0.54

Dividends paid per common share

0.22

0.22 0.44

0.44

Dividends declared per common share

0.15

0.22 0.37

0.44

 

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 June 30

($CAD millions)

2017

2016
Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total

Comparable EBITDA

64

34 98 34 55

89

Interest expense

(12)

(12) (12)

(12)

Change in long term receivable

(6) (6) (6)

(6)

Sustaining capital expenditures

(9)

(3) (12) (3) (7)

(10)

Current income tax expense

(1)

(1) (3) (3)

(6)

Distributions paid to subsidiaries’

non-controlling interest

(2)

(2) (1)

(1)

Unrealized risk management (gain)

(2)

(2)

Currency adjustment

(1) (1)

Other

2

2 1

1

AFFO

40

24 64 16 39

55

 

 

6 Months Ended June 30

($CAD millions)

2017

2016
Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total

Comparable EBITDA

138

71 209 84 119

203

Interest expense

(24)

(24) (24)

(24)

Change in long term receivable

(15) (15) (15)

(15)

Sustaining capital expenditures

(14)

(4) (18) (4) (11)

(15)

Current income tax expense

(3)

(3) (3) (6)

(9)

Distributions paid to subsidiaries’

non-controlling interest

(3)

(3) (3)

(3)

Unrealized risk management (gain)

(1)

(1) (1)

(1)

Currency adjustment

(3) (3) (1)

(1)

Other

5

5 2

2

AFFO

98

49 147 52 85

137

 

A complete copy of TransAlta Renewables’ second quarter report including MD&A and unaudited financial statements is available through TransAlta Renewables’ website at www.transaltarenewables.com or at SEDAR at www.sedar.com.

 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 the deduction of sustaining capital expenditures and distributions to non-controlling interests and excludes the effects of timing and working capital on distributions from subsidiaries of TransAlta Corporation in which the Company holds an economic interest. CAFD refers to AFFO less principal repayments of amortizing debt. 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 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 Farm 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.

 About TransAlta Renewables Inc.

TransAlta Renewables is among the largest of any publicly traded renewable independent power producers (“IPP”) in Canada. Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 18 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities 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 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”, “expects”, “proposed”, “will”, “anticipates”, “develop”, “continue”, and similar expressions suggesting future events or future performance. In particular, this news release contains forward-looking statements, including certain financial outlooks, pertaining to, without limitation, the following: the EBITDA contribution of South Hedland; the commencement of construction for the Kent Hills expansion and its ability to support project financing of between $240 million and $275 million; the Company’s ability to access up to $500 million in direct borrowings pursuant to the credit agreement; the satisfaction of all conditions under the PPA with FMG for South Hedland; the gross proceeds to be received pursuant to FMG’s repurchase of the Solomon power station and the use of proceeds associated with any such repurchase.   These forward-looking statements are not historical facts but reflect the Company’s current expectations concerning future plans, actions and results. These statements are subject to a number of risks and uncertainties that could cause actual plans, actions and results to differ materially from current expectations including, but not limited to: changes in tax, environmental, and other laws and regulations; competitive factors in the power industry; operational breakdowns, failures, or other disruptions; changes in economic and market conditions; potential delays in the commissioning or construction of the Kent Hills expansion; 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 the Company’s expectations only as of the date of this news release. The purpose of the financial outlooks contained herein is to give the reader information about management’s current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. 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 noted otherwise.

For more information:

Investor Inquiries: Media Inquiries:
Sally Taylor 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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