TransAlta Renewables Reports Third Quarter 2017 Results and Changes to Management and Board

Nov 2, 2017

CALGARY, Alberta (November 2, 2017) – TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) announced today its 2017 third quarter financial results, with Comparable EBITDA(1) of $96 million, a $13 million increase over last year, driven by the South Hedland power station achieving commercial operation on July 28, 2017.  For the year-to-date, Comparable EBITDA totaled $306 million compared to $286 million for the comparative period, up $20 million, mainly due to increased Comparable EBITDA from our Australian Gas and Canadian Wind portfolios and stable performance from all other business segments.

Cash available for distribution(1) (“CAFD”) increased $15 million and $20 million for the three and nine months ended September 30, 2017, respectively, compared to 2016. Net earnings decreased $96 million for the three months ended September 30, 2017, compared to last year. During the quarter, the impairment of the Australian Tracking Preferred shares of $114 million and higher foreign exchange losses of $56 million, were partially offset by the fair value change on the Class B shares liability of $85 million.

“Despite lower wind resources in the quarter, TransAlta Renewables delivered solid results which were further buoyed by the commissioning of the South Hedland power station,” said Brett Gellner, President and designated Chief Executive Officer. “Growth in our asset base and cash flows continues to be our focus going forward.”

Third 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.
  • Increased the monthly dividend by approximately 7 per cent effective September 29, 2017.
  • 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.
  • Kent Hills Wind LP, a subsidiary of the Company, completed a private placement bond offering for $260 million in proceeds which will be used to fund a portion of the construction costs for the Kent Hills expansion and has been used to redeem all of the unsecured debentures issued by a wholly owned subsidiary, Canadian Hydro Developers, Inc.
  • 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. In our view, all conditions to establish commercial operations have been fully satisfied under the terms of the Power Purchase Agreement (“PPA”) with FMG.
  • Received approximately US$325 from FMG for the repurchase of the Solomon power station, which will be utilized to repay the credit facility used to fund the development of the South Hedland power station, and to repay the $215 million of convertible unsecured debentures held by TransAlta. The repayment of the convertible debentures will reduce TransAlta Renewables’ interest expense by approximately $9.7 million per year in each of the years 2018 to 2020, and eliminates the potential for additional common shares to be issued in 2021 upon conversion.

Management and Board Changes

TransAlta Renewables Inc. announced today the appointment of John Kousinioris as President of the Company, and a member of the Board of Director.  Mr. Kousinioris is the Chief Legal and Compliance Officer for TransAlta Corporation and will take on this role in addition to his duties at TransAlta Corporation.

Brett Gellner will remain on the Board of Directors of TransAlta Renewables, and as Chief Investment Officer of TransAlta Corporation. Mr. Gellner will dedicate his time to evaluating and pursuing growth opportunities for both TransAlta Corporation and TransAlta Renewables.

Mr. Kousinioris replaces Aron Willis on the Board of Directors of the Company.  Mr. Willis will continue in his role as Senior Vice-President, Gas & Renewables for both TransAlta Corporation and the Company.

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

Third Quarter 2017 Highlights

In $CAD millions, unless otherwise stated

3 Months Ended

9 Months Ended
Sept. 30, 2017 Sept. 30, 2016 Sept. 30, 2017

Sept. 30, 2016

Renewable energy production (GWh)(2)

604

682 2,500

2,566

Revenue

94

45 335

165

Comparable EBITDA(1)

96

83 306

286

Adjusted funds from operations(1)

70

55 217

193

Cash available for distribution(1)

70

55 196

176

Net earnings (loss) attributable to common shareholders

(73)

23 (24)

(28)

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

(0.30)

0.10 (0.10)

(0.13)

Adjusted funds from operations per share(1)

0.29

0.25 0.94

0.87

Cash available for distribution per share(1)

0.29

0.25 0.85

0.79

Dividends paid per common share

0.22

0.22 0.66

0.66

Dividends declared per common share

0.23

0.22 0.60

0.66

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 September 30

($CAD millions)

2017

2016

Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total

Comparable EBITDA

49

47 96 28 55

83

Interest expense

(14)

(14) (12)

(12)

Change in long term receivable

9 9

Sustaining capital expenditures

(7)

(6) (13) (4) (9)

(13)

Current income tax expense

(2)

(2) (1) (3)

(4)

Distributions paid to subsidiaries’

non-controlling interest

(1)

(1) (2)

(2)

Unrealized risk management gain

1

1 3

3

Realized foreign exchange gain

1

1 1

1

Reserves and other

(4) (4)

Other

(3)

(3) (1)

(1)

AFFO

24

46 70 9 46

55

 

 

9 Months Ended September 30

($CAD millions)

2017

2016

Owned

Assets

Economic

Interest

Total Owned

Assets

Economic

Interest

Total

Comparable EBITDA

187

119 306 112 174

286

Interest expense

(38)

(38) (36)

(36)

Change in long term receivable

(6) (6) (15)

(15)

Sustaining capital expenditures

(21)

(10) (31) (7) (20)

(27)

Current income tax expense

(5)

(5) (4) (9)

(13)

Distributions paid to subsidiaries’

non-controlling interest

(4)

(4) (5)

(5)

Unrealized risk management gain

2

2

Realized foreign exchange gain

2

2

Reserves and other

(4) (4)

Currency adjustment

(4) (4) (1)

(1)

Other

1

1 2

2

AFFO

122

95 217 62 131

193

 

A complete copy of TransAlta Renewables’ third 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 use of proceeds arising from the Kent Hills project financing; of the 2017 financial outlook including Comparable EBITDA, AFFO and CAFD; 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 arising from such repurchase, including to repay the $215 million convertible debentures; and the impact the repayment of the convertible debentures will have on the Company’s interest expense  interest expense.   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. Phone: Toll-free media number: 1-855-255-9184
Email: investor_relations@transalta.com Email: ta_media_relations@transalta.com
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