TransAlta Renewables Reports Second Quarter 2018 Results
CALGARY, Alberta (August 2, 2018)
Second Quarter 2018 Financial Highlights
- Comparable EBITDA(1) of $98 million was in line with last year;
- Adjusted funds from operations(1) increased $9 million or 14 per cent over Q2 2017; and
- Cash available for distribution(1) increased $8 million or 19 per cent year-over-year.
TransAlta Renewables Inc. (“TransAlta Renewables” or the “Company”) (TSX: RNW) today reported its financial results for the three and six month periods ended June 30, 2018. Comparable EBITDA for quarter and six months ended June 30, 2018 was $98 million and $209 million, respectively, which was consistent with last year. In the Australian Gas portfolio, the commissioning of the South Hedland Power Station in July 2017 was offset by the termination of the Solomon Power Station contract in November 2017. Higher contract prices in Canadian Wind offset the unfavourable market and hedging impacts at Canadian Gas.
Cash available for distribution (“CAFD”) for the second quarter was $51 million, an increase of $8 million or 19 per cent compared to the same period last year. For the six months ended June 30, 2018, CAFD increased to $147 million compared to $126 million for the same period last year. Lower sustaining capital expenditures and changes in long-term receivables was partially offset by higher interest expense for both the three and six month periods ending June 30, 2018.
Reported net earnings attributable to common shareholders for the three months ended June 30, 2018 increased $43 million primarily as a result of higher finance income of $35 million this year, related to the repurchase of the Solomon Power Station, and a $18 million higher foreign exchange gain, which was partially offset by a $5 million increase in interest expense and a $5 million negative change in fair value of financial assets. Reported net earnings attributable to common shareholders for the six months ended June 30, 2018 increased $82 million, primarily as a result of the negative fair value change relating to the Class B shares liability of $46 million recorded in the prior year and higher finance income of $50 million in the current year, which was partially offset by a $7 million lower foreign exchange gain, a $3 million increase in interest expense and a $4 million change in fair value of financial assets.
“The stable financial performance in the quarter highlights the strength of our highly contracted asset base,” said John Kousinioris, President. “Our focus continues to be on developing the previously announced projects and further growing the business for our shareholders.”
Second Quarter Highlights
- During the first quarter, we announced that we had entered into an arrangement to acquire two construction-ready projects in the Northeast United States. The wind development projects consist of: (i) a 90 MW project located in Pennsylvania which has a 15-year PPA (“Big Level”) and (ii) a 29 MW project located in New Hampshire with two 20-year PPAs (“Antrim”). A subsidiary of TransAlta Corporation (“TransAlta”) acquired Big Level on March 1, 2018, whereas the acquisition of Antrim remains subject to certain closing conditions, including the receipt of a favourable regulatory ruling. On April 20, 2018, we acquired an economic interest in Big Level through the acquisition of $39 million of tracking preferred shares of a subsidiary of TransAlta. Pursuant to the arrangement with TransAlta, we expect to fund the total estimated construction and acquisition costs of US$240 million through the subscription of additional tracking preferred shares or interest bearing promissory notes. The commercial operation date for both projects is expected during the second half of 2019.
- Effective May 9, 2018, Donald Tremblay, the former Chief Financial Officer, left TransAlta Corporation and TransAlta Renewables for personal reasons. Todd Stack, has been appointed CFO for TransAlta Renewables.
- On May 31, 2018, we announced the acquisition of an economic interest in the 50 MW Lakeswind Wind Farm in Minnesota and in the 21 MW solar projects located in Massachusetts, from TransAlta. In addition, we acquired ownership of the 20 MW Kent Breeze Wind Farm located in Ontario. The total purchase price for the three assets, which have an average weighted contract life of 15 years, was $166 million, including the assumption of $62 million of tax equity obligations and project debt.
- On May 31, 2018, the Board of Directors approved the implementation of a dividend reinvestment plan (“DRIP”) for Canadian holders of common shares of TransAlta Renewables. Commencing with the dividend payable on July 31, 2018, eligible shareholders may elect to automatically reinvest monthly dividends into additional common shares of the Corporation. Eligible shareholders are not required to participate in the DRIP. TransAlta does not intend to participate in the DRIP.
- On June 22, 2018, we issued 11,860,000 Common Shares at a price of $12.65 per share for gross proceeds of approximately $150 million. The shares were issued under a bought deal offering through a syndicate of underwriters. The net proceeds were used by the Company to partially repay drawn amounts under its credit facility, which were drawn to fund recent acquisitions. The additional liquidity under the credit facility will be used for general corporate purposes, including ongoing construction costs associated with such acquisitions. TransAlta did not purchase any additional Common Shares and owns approximately 61 per cent of the outstanding Common Shares of the Company.
The following table depicts key financial results and statistical operating data:
Second Quarter 2018 Highlights
|In $CAD millions, unless otherwise stated||Three Months Ended||Six Months Ended|
|June 30, 2018||June 30, 2017||June 30, 2018||June 30, 2017|
|Renewable energy production (GWh)(2)||874||886||1,878||1,896|
|Adjusted funds from operations(1)||73||64||170||147|
|Cash available for distribution(1)||51||43||147||126|
|Net earnings attributable to common shareholders||65||22||131||49|
|Net earnings per share attributable to common shareholders, basic and diluted||0.26||0.10||0.52||0.22|
|Adjusted funds from operations per share(1)||0.29||0.29||0.68||0.66|
|Cash available for distribution per share(1)||0.20||0.19||0.59||0.56|
|Dividends paid per common share||0.23||0.22||0.47||0.44|
|Dividends declared per common share||0.23||0.15||0.47||0.37|
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 Adjusted funds from operations (“AFFO”).
Three Months Ended June 30
|Change in long term receivable||–||–||–||–||(6)||(6)|
|Sustaining capital expenditures||(7)||–||(7)||(9)||(3)||(12)|
|Current income tax expense||(1)||–||(1)||(1)||–||(1)|
|Distributions paid to subsidiaries
|Unrealized risk management (gain) loss||–||–||–||(2)||–||(2)|
|Realized foreign exchange gain (loss)||(1)||–||(1)||–||–||–|
6 Months Ended June 30
|Change in long term receivable||–||–||–||–||(15)||(15)|
|Sustaining capital expenditures||(12)||(1)||(13)||(14)||(4)||(18)|
|Current income tax expense||(3)||–||(3)||(3)||–||(3)|
|Distributions paid to subsidiaries
|Unrealized risk management (gain) loss||(1)||–||(1)||(1)||–||(1)|
|Realized foreign exchange gain (loss)||(1)||–||(1)||–||–||–|
A complete copy of TransAlta Renewables’ second quarter report, including Management’s Discussion and Analysis (“MD&A”) and unaudited financial statements, is available through TransAlta Renewables’ website at www.transaltarenewables.com or at SEDAR at www.sedar.com.
(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 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 in which the Company holds an economic interest. Cash available for distribution refers to adjusted funds from operations 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 MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.
(2) Includes production from US Wind and Solar and excludes Canadian and Australian gas-fired generation. Production is not a key revenue driver for our 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 20 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities, one solar facility and one natural gas pipeline, representing an ownership interest of 2,407 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Wyoming, Massachusetts, Minnesota and the State of Western Australia. Our objectives are to (i) provide 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: our strategy and growth plans, including focusing on developing the previously announced projects and further growth of the business; the acquisition of the economic interest in Antrim and the satisfaction of the closing conditions associated therewith; the total estimated construction and acquisitions costs of Big Level and Antrim and the anticipated sources of funding such construction costs; the commercial operation date for Big Level and Antrim; the expectation that the tracking shares will provide us with cash flows broadly equal to the pre-tax net earnings of Big Level and Antrim; TransAlta’s intention not to participate in the DRIP; and the additional liquidity under the credit facility being used for general corporate purposes, including ongoing construction costs associated with such acquisitions. 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: competitive factors in the renewable power industry; operational breakdowns, failures, or other disruptions; changes in economic and market conditions; continued access to debt, tax equity, and capital markets; changes in tax, environmental, and other laws and regulations; 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, 2017 and 2018 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 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.
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