TransAlta Reports Full Year and Fourth Quarter 2023 Results and Announces Enhanced Share Repurchase Program
- TransAlta demonstrated exceptional financial performance in 2023 with an adjusted EBITDA of $1,632 million, a slight increase from 2022. Free Cash Flow was $890 million, or $3.22 per share, compared to $3.55 per share in 2022. Cash flow from operating activities also saw a significant increase to $1,464 million. Earnings before income taxes improved to $880 million, and net earnings attributable to common shareholders rose to $644 million.
- The company announced a 9% increase in the common share dividend, marking the fifth consecutive annual dividend increase. They returned $87 million to common shareholders through share buybacks during the year. TransAlta also reported strong safety performance in 2023, with a record Total Recordable Injury Frequency of 0.30 and an operational adjusted availability of 88.8%.
- TransAlta made significant progress in its energy projects, including completing the Kent Hills rehabilitation program and energization activities at the Horizon Hill and White Rock wind facilities. They achieved commercial operation of the Northern Goldfields solar and battery storage project, which is fully contracted with BHP for 15 years and expected to reduce emissions by 12%.
- The company announced strategic growth targets to 2028, aiming to add up to 1.75 GW of new capacity with an investment of $3.5 billion. They also entered into agreements with Hancock Prospecting Pty Ltd. to develop clean energy solutions and acquired Heartland Generation and TransAlta Renewables to enhance their strategic position.
- TransAlta's financial results for the fourth quarter of 2023 showed a decrease in adjusted EBITDA to $289 million compared to $541 million in the same period in 2022. Free Cash Flow also decreased to $121 million, or $0.39 per share, from $315 million or $1.17 per share in 2022. The company reported a net loss before income taxes of $35 million and a net loss attributable to common shareholders of $84 million.
- None.
Insights
The financial results of TransAlta Corporation indicate a robust performance, with Adjusted EBITDA remaining stable year-over-year and a significant increase in Net Earnings attributable to common shareholders. This suggests effective cost management and operational efficiency. The Free Cash Flow (FCF) per share decreased slightly, which could be attributed to increased investments or changes in working capital requirements. The decision to increase the common share dividend by 9% reflects confidence in the company's financial health and a commitment to shareholder returns, which is typically viewed positively by the market.
TransAlta's strategy to repurchase shares is a signal that the company believes its shares are undervalued. This could potentially lead to an EPS accretion, as the number of shares outstanding decreases. However, investors should consider the opportunity cost of this capital allocation decision against potential investments in growth or debt reduction. The acquisition of Heartland Generation and the completion of the TransAlta Renewables acquisition demonstrate strategic moves to consolidate and expand operations, likely contributing to the company's revenue diversification and stability.
It is important to note that the energy sector is highly regulated and subject to market volatility. TransAlta's focus on renewable energy and storage, as well as clean energy solutions in collaboration with Hancock, aligns with global trends towards sustainability and could position the company favorably in the long term. However, the capital-intensive nature of the energy industry means that these investments may take time to yield returns.
TransAlta's operational updates, including the commissioning of wind facilities and the completion of solar and battery storage projects, indicate a strategic shift towards renewable energy, which is in line with consumer and regulatory trends pushing for a greener energy mix. The 10-year PTC sale agreements provide a stable and predictable revenue stream, which is attractive to investors seeking certainty in future cash flows. The PTC, or Production Tax Credit, is an incentive given by the government to renewable energy producers, which can be sold to other entities, often enhancing project viability.
The company's strategic growth targets, aiming to add up to 1.75 GW of new capacity by 2028, suggest an aggressive expansion in the renewables sector. While this presents significant growth potential, it also introduces risks related to project execution and capital funding. Investors should monitor the company's ability to manage these risks while achieving its growth objectives. The focus on customer-centered renewables and storage could provide competitive advantages in an increasingly decentralized energy market.
The acquisition of Heartland Generation and the assumption of its low-cost debt highlight an important aspect of corporate transactions in the energy sector. Regulatory approvals will be crucial, as will the integration of the new assets into TransAlta's existing operations. The anticipated synergies and long-term contracts with creditworthy counterparties suggest a positive outlook on the transaction's value creation potential. However, the legal complexities and due diligence associated with such acquisitions are significant and could impact the timeline and final valuation of the deal.
TransAlta's joint development agreement with Hancock to develop clean energy solutions demonstrates the importance of strategic partnerships in the energy sector. Such agreements often involve complex negotiations around intellectual property, cost-sharing and revenue distribution. The successful execution of this agreement could lead to innovative energy solutions and strengthen TransAlta's position in the clean energy market.
Full Year 2023 Financial Highlights
- Key financial guidance and targets increased twice during 2023
- Adjusted EBITDA(1) of
$1,632 million $1,634 million - Free Cash Flow ("FCF")(1) of
$890 million $3.22 $3.55 - Cash flow from operating activities of
$1,464 million $587 million - Earnings before income taxes of
$880 million $527 million - Net earnings attributable to common shareholders of
$644 million $640 million - Announced a 9 per cent increase to the common share dividend, representing the fifth consecutive annual dividend increase
- Returned
$87 million
Fourth Quarter 2023 Financial Highlights
- Adjusted EBITDA of
$289 million $541 million - FCF of
$121 million $0.39 $315 million $1.17 - Cash flow from operating activities of
$310 million $351 - Net loss before income taxes of
$35 million $42 million - Net loss attributable to common shareholders of
$84 million $79 million
Other Business Highlights and Updates
- Announced an enhanced common share repurchase program for 2024 of up to
$150 million - Achieved strong safety performance in 2023, including a record annual Total Recordable Injury Frequency of 0.30
- Strong operational adjusted availability of
88.8% - Maintained emissions intensity at 0.41 tCO2e/MWh from 2022 levels
- Entered into 10-year transfer agreements with an AA- rated customer for the sale of approximately 80 per cent of the expected production tax credits to be generated from the
White Rock and Horizon Hill wind facilities - Completed the Kent Hills rehabilitation program in the first quarter of 2024. All 50 turbines have returned to commercial operation
- Energization activities are underway at the Horizon Hill and
White Rock wind facilities with commercial operations expected to be achieved in the first quarter of 2024 - Completion of the Mount Keith 132kV expansion project is expected to be achieved in March 2024. The expansion of the transmission system in
Western Australia supports the Northern Goldfields-based operations of BHP Nickel West ("BHP") - Achieved commercial operation of the 48 MW Northern Goldfields solar and battery storage project in November 2023. The facilities are fully contracted with BHP for a term of 15 years and are expected to reduce BHP's emissions by 12 per cent at their Mt. Keith and Leinster operations
- Announced updated strategic growth targets to 2028, including adding up to 1.75 GW of new capacity to the Company's fleet by investing approximately
$3.5 billion $350 million - Entered into a joint development agreement with Hancock Prospecting Pty Ltd. ("Hancock") to define, develop and operate clean energy solutions
- Entered into a definitive share purchase agreement to acquire Heartland Generation and its entire business operations in
Alberta andBritish Columbia for approximately$658 million - Completed the acquisition of TransAlta Renewables Inc. ("TransAlta Renewables") for total consideration paid of
$1.3 billion $800 million - Acquired a 50 per cent interest in the Tent Mountain 320 MW pumped hydro development project
"2023 was another year of exceptional performance for our Company led by record financial and safety results. During the year, we generated strong free cash flow of
"During the year, we deployed
"We are focused on making balanced capital allocation decisions that enhance value for our shareholders and will remain disciplined in executing our ambitious Clean Electricity Growth Plan with a focus on securing appropriate risk-adjusted returns. We will not grow simply for the sake of growth and to meet targets. Given the current market price of our common shares, which we consider to be undervalued, we will look to enhance returns and shareholder value through our dividend and share repurchases in 2024 of up to
"Our generating portfolio continues to perform well and is expected to generate between
"Turning to growth, our Mount Keith transmission expansion, along with our Horizon Hill and
"Strong free cash flow will, over time, continue to fund our transition to a higher proportion of contracted renewables and toward the path of higher share price valuation. As I look forward, there is every reason to believe that our success will continue in 2024 and beyond."
Change to Board of Directors
The Honourable Rona Ambrose has decided that she will not stand for re-election and will retire from the Board of Directors ("the Board") following the annual shareholder meeting on April 25, 2024. The Board extends its gratitude for her service to the Company. She has been a valuable contributor to the Board since 2017 and we thank her for her leadership and insights during her tenure, especially as Chair of the Governance, Safety and Sustainability Committee of the Board.
Production Tax Credit ("PTC") Sale Agreements
On Feb. 22, 2024, the Company entered into 10-year transfer agreements with an AA-rated customer for the sale of approximately 80 per cent of the expected PTCs to be generated from the
Normal Course Issuer Bid and Automatic Share Purchase Plan
On Dec. 19, 2023, the Company entered into an Automatic Share Purchase Plan ("ASPP") in order to facilitate repurchases of TransAlta's common shares under its Normal Course Issuer Bid ("NCIB"). Under the ASPP, the Company's broker may purchase common shares from the effective date of the ASPP until the end of the ASPP. All purchases of common shares made under the ASPP will be included in determining the number of common shares purchased under the NCIB. The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (b) Feb. 24, 2024; or (c) the Company terminates the ASPP in accordance with its terms.
During the year ended Dec. 31, 2023, the Company purchased and cancelled a total of 7,537,500 common shares, at an average price of
The NCIB provides the Company with a capital allocation alternative with a view to ensuring long-term shareholder value. The Board and management believe that, from time to time, the market price of the common shares might not be reflective of the underlying value and purchases of common shares for cancellation under the NCIB may provide an opportunity to enhance shareholder value.
Northern Goldfields Solar Achieves Commercial Operation
On Nov. 22, 2023, the Company announced that the 48 MW Northern Goldfields solar and battery storage facilities achieved commercial operation. The facilities consist of the 27 MW Mount Keith solar facility, the 11 MW Leinster solar facility, the 10 MW Leinster battery energy storage system and interconnecting transmission infrastructure, all of which are now integrated into TransAlta's existing 169 MW Southern Cross Energy North remote network in
TransAlta Announces Growth Targets to 2028
On Nov. 21, 2023, the Company held its 2023 Investor Day event and announced it had updated its strategic growth targets to 2028, which strengthens the Company's commitment to being a leader in clean electricity by delivering customer-centred power solutions. The growth targets include: adding up to 1.75 GW of new capacity to the Company's fleet by investing approximately
TransAlta Declares 9 Per Cent Dividend Increase
On Nov. 21, 2023, the Board approved an annualized
TransAlta Enters Joint Development Agreement with Hancock
On Nov. 21, 2023, the Company entered into a joint development agreement with Hancock,
TransAlta to Acquire Heartland Generation from Energy Capital Partners
On Nov. 2, 2023, the Company announced that it had entered into a definitive share purchase agreement with an affiliate of Energy Capital Partners, the parent of Heartland Generation Ltd. and Alberta Power (2000) Ltd. (collectively, "Heartland"), pursuant to which TransAlta will acquire Heartland and its entire business operations in
The purchase price for the acquisition is
The assets are expected to add approximately
TransAlta Completes Acquisition of TransAlta Renewables to Simplify Structure and Enhance Strategic Position
On Oct. 5, 2023, the Company completed the acquisition of TransAlta Renewables pursuant to the terms of the previously announced arrangement agreement between the parties (the "Arrangement"). TransAlta acquired all of the outstanding common shares of TransAlta Renewables ("RNW Shares") not already owned, directly or indirectly, by TransAlta and certain of its affiliates, resulting in TransAlta Renewables becoming a wholly owned subsidiary of the Company. Prior to the Arrangement, TransAlta and its affiliates collectively held 160,398,217 RNW Shares, representing 60.1 per cent of the issued and outstanding RNW Shares, with the remaining 106,510,884 RNW Shares held by TransAlta Renewables shareholders ("RNW Shareholders") other than TransAlta and its affiliates.
The Arrangement was approved by RNW Shareholders at a special meeting of shareholders held on Sept. 26, 2023, and by the Court of King's Bench of
TransAlta Tops Newsweek's Inaugural List of World's Most Trustworthy Companies
On Sept. 14, 2023, the Company announced that it ranked first on Newsweek's inaugural "World's Most Trustworthy Companies 2023" list for the Energy and Utilities category. The list identifies the top 1,000 companies in 21 countries and across 23 industries. Newsweek's 2023 World's Most Trustworthy Companies were chosen based on a holistic approach to evaluating three pillars of public trust – customers, investors and employees. The list was compiled based on an extensive survey of over 70,000 participants, gathering 269,000 evaluations of companies that people trust as a customer, as an investor or as an employee.
Garden Plain Wind Facility Achieved Commercial Operation
In August 2023, the Garden Plain wind facility was commissioned adding 130 MW to our gross installed capacity. The facility is fully contracted with Pembina Pipeline Corporation and PepsiCo Canada, with a weighted average contract life of approximately 17 years.
Tent Mountain Pumped Hydro Development Project
On April 24, 2023, the Company acquired a 50 per cent interest in the Tent Mountain Renewable Energy Complex ("Tent Mountain"), an early-stage 320 MW pumped storage hydro development project located in southwest
The Company and Evolve own the Tent Mountain project within a special purpose partnership that is jointly managed, with the Company acting as project developer. The partnership is actively seeking an offtake agreement for the energy and environmental attributes that will be generated by the facility.
$ millions, unless otherwise stated | Year Ended | Three Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Operational information | ||||
Adjusted availability (%) | 88.8 | 90.0 | 86.9 | 89.5 |
Production (GWh) | 22,029 | 21,258 | 5,783 | 6,005 |
Select financial information | ||||
Revenues | 3,355 | 2,976 | 624 | 854 |
Adjusted EBITDA(1) | 1,632 | 1,634 | 289 | 541 |
Earnings (loss) before income taxes | 880 | 353 | (35) | 7 |
Net earnings (loss) attributable to common | 644 | 4 | (84) | (163) |
Cash flows | ||||
Cash flow from operating activities | 1,464 | 877 | 310 | 351 |
Funds from operations(1) | 1,351 | 1,346 | 229 | 459 |
Free cash flow(1) | 890 | 961 | 121 | 315 |
Per share | ||||
Net earnings (loss) per share attributable to | 2.33 | 0.01 | (0.27) | (0.61) |
Funds from operations per share(1),(2) | 4.89 | 4.97 | 0.74 | 1.71 |
FCF per share(1),(2) | 3.22 | 3.55 | 0.39 | 1.17 |
Dividends declared per common share | 0.22 | 0.21 | 0.12 | 0.11 |
Weighted average number of common shares | 276 | 271 | 308 | 269 |
$ millions | Year Ended | Three Months Ended | ||
Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 | |
Hydro | 459 | 527 | 56 | 133 |
Wind and Solar | 257 | 311 | 82 | 92 |
Gas | 801 | 629 | 141 | 264 |
Energy Transition | 122 | 86 | 26 | 19 |
Energy Marketing | 109 | 183 | 14 | 63 |
Corporate | (116) | (102) | (30) | (30) |
Adjusted EBITDA | 1,632 | 1,634 | 289 | 541 |
Earnings (loss) before income taxes | 880 | 353 | (35) | 7 |
For the year ended Dec. 31, 2023, the Company demonstrated strong performance mainly due to the continued strong market conditions in
Total production for the year ended Dec. 31, 2023, was 22,029 GWh compared to 21,258 GWh for the same period in 2022, an increase of 771 GWh or 4 per cent, primarily due to:
- Production from the
Centralia facility within the Energy Transition segment experienced fewer planned and unplanned outage hours compared to the prior year and was able to dispatch during periods of higher merchant pricing for the region; - Strong production in the Gas segment that was both higher than the prior year as well as higher than expectations for the year. The Gas segment was available during periods of supply tightness, allowing our facilities to operate during periods of peak pricing; partially offset by
- The Gas segment being unfavourably impacted by relatively mild weather in the fourth quarter of 2023, due to warmer than average weather conditions compared to the same period in 2022 which had tighter supply due to the extreme cold weather in
Alberta .
Production for the renewables fleet for the year ended Dec. 31, 2023, was 6,012 GWh compared to 6,236 GWh for the same period in 2022, a decrease of 224 GWh or 4 per cent, primarily due to:
- Lower than average renewable resources in the year that impacted production in both the Hydro and the Wind and Solar segments;
- Hydro production was further impacted by lower availability due to increased planned maintenance outages compared to 2022; partially offset by
- The addition of the Garden Plain wind facility, the partial return to service of the Kent Hills wind facility, and the addition of the Northern Goldfields solar and battery storage facilities during the year.
Adjusted availability for the year ended Dec. 31, 2023, was 88.8 per cent, compared to 90.0 per cent in 2022, a decrease of 1.2 percentage points, primarily due to:
- Planned outages in the Hydro segment, mainly at our Alberta Hydro Assets; and
- Planned outages at Sundance Unit 6, Sheerness Unit 1, Keephills Units 2 and 3 and
Sarnia in the Gas segment; partially offset by - Lower planned outages at Centralia Unit 2 in the Energy Transition segment; and
- The partial return to service of the Kent Hills wind facilities.
Adjusted EBITDA for the year ended Dec. 31, 2023, was
- Hydro adjusted EBITDA decreased by
$68 million - Wind and Solar adjusted EBITDA decreased by
$54 million Alberta , lower wind resource across the operating fleets, and lower liquidated damages recognized at the Windrise wind facility, partially offset by the commercial operation of the Garden Plain wind facility, the Northern Goldfields solar facilities and the partial return to service of the Kent Hills wind facilities; - Gas adjusted EBITDA increased by
$172 million Alberta spot prices, lower natural gas commodity costs and higher production, partially offset by lower thermal revenues, higher carbon prices and higher carbon costs and fuel usage related to production; - Energy Transition adjusted EBITDA increased by
$36 million - Energy Marketing adjusted EBITDA decreased by
$74 million - Corporate adjusted EBITDA decreased by
$14 million 14% per cent, compared to 2022, primarily due to increased spending to support strategic and growth initiatives and higher costs associated with the relocation of the Company's head office.
Cash flow from operating activities totalled
- Higher gross margin on lower natural gas costs included in fuel and purchased power, partially offset by lower revenues net of unrealized gains and losses from risk management activities and higher carbon compliance costs;
- Higher OM&A from increased spending on strategic and growth initiatives, higher costs associated with the relocation of the Company's head office, and increased costs due to inflationary pressures;
- Lower current income tax expense as previously restricted non-capital loss carryforwards were utilized to offset taxable income;
- Higher interest income on higher cash balances and favourable interest rates; and
- Favourable change in non-cash operating working capital balances with lower accounts receivable and collateral provided as a result of declining volatility in the market and market prices, partially offset by lower accounts payable and collateral received related to derivative instruments.
Free Cash Flow totalled
- Higher distributions paid to subsidiaries' non-controlling interests as related to timing of distributions paid to TransAlta Cogeneration LP ("TA Cogen"), partially offset by lower distributions paid to TransAlta Renewables;
- Higher sustaining capital expenditures due to higher planned major maintenance costs for the Hydro and Gas segments, which were partially offset by lower planned major maintenance in Wind and Solar and Energy Transition segments;
- Lower provisions being accrued compared to the prior year without settlement;
- Adjusted EBITDA items noted above, partially offset by
- Higher cash balances and favourable interest rates increasing interest income; and
- Lower current income tax expense as previously restricted non-capital loss carryforwards were utilized to offset taxable income.
Earnings before income taxes totalled
Net earnings attributable to common shareholders totalled
- Adjusted EBITDA items discussed above;
- Unrealized mark-to-market losses in 2022;
- Lower income tax expense due to a recovery relating to the reversal of previously derecognized Canadian deferred tax assets and lower US non-deductible expenses relating to the US operations, partially offset by higher earnings from Canadian operations;
- Higher asset impairment reversals due to decommissioning and restoration provisions for retired assets being favourably impacted by a change in timing of expected cash outflows partially offset by lower discount rates;
- Increased interest income due to higher cash balances and favourable interest rates; and
- Higher depreciation and amortization due to revisions to useful lives on certain facilities and commercial operation of new facilities.
During the fourth quarter of 2023, weather impacts were relatively mild compared to the prior period and the fourth quarter of 2022, which had extreme cold weather in
Production for the three months ended Dec. 31, 2023, was 5,783 GWh compared to 6,005 GWh for the same period in 2022. The decrease of 222 GWh, or 4 per cent was primarily due to:
- Lower dispatch of the Alberta Gas assets due to warmer temperatures;
- Lower availability, partially offset by
- Higher production in the Wind and Solar segment with the addition of the Garden Plain wind facility.
Adjusted availability for the three months ended Dec. 31, 2023, was 86.9 per cent compared to 89.5 per cent for the same period in 2022, a decrease of 2.6 percentage points primarily due to:
- Planned outages in the Gas segment and Hydro segment, partially offset by
- Higher availability for the Wind and Solar segment, mainly due to the partial return to service of the Kent Hills wind facilities; and
- Lower unplanned outages in the Energy Transition segment.
Adjusted EBITDA for the three months ended Dec. 31, 2023, was
- Hydro adjusted EBITDA decreased by
$77 million Alberta market and lower ancillary services volumes; - Wind and Solar adjusted EBITDA decreased by
$10 million Alberta , lower wind resource inEastern Canada and the US and higher OM&A due to new long-term service agreements, partially offset by higher revenues related to the partial return to service of the Kent Hills facilities and the addition of the Garden Plain wind facility and Northern Goldfields solar and battery storage facilities; - Gas adjusted EBITDA decreased by
$123 million Alberta market, lower thermal revenues due to lower steam revenue pricing at theSarnia facility compared to 2022, and higher OM&A with the inventory write-down at theSundance andKeephills 2 facilities; - Energy Transition adjusted EBITDA increased by
$7 million - Energy Marketing adjusted EBITDA decreased by
$49 million - Corporate adjusted EBITDA was consistent with the same period in 2022.
FCF totalled
- Lower adjusted EBITDA items noted above, partially offset by
- Lower distributions paid to subsidiaries' non-controlling interests on lower net earnings in TA Cogen and no dividends paid to TransAlta Renewables shareholders.
Loss before income taxes for the three months ended Dec. 31, 2023, was
Net loss attributable to common shareholders for the three months ended Dec. 31, 2023, was
- Adjusted EBITDA items discussed above;
- Lower income tax expense due to lower earnings before tax in 2023 and the reduction of non-deductible expenses in the US;
- Lower depreciation and amortization from the revision of useful lives on certain facilities, partially offset by commercial operation of new facilities; and
- Gains on sale of assets decreased compared to the same period in 2022, due to certain sales of gas generation assets in 2022.
Alberta Electricity Portfolio
For the three months and year ended Dec. 31, 2023, the
- The commercial operation of the Garden Plain wind facility in the third quarter of 2023;
- Hedged production with higher power prices for the year ended Dec. 31, 2023, compared to 2022, primarily due to the opportunity to secure additional margins with strategic hedges for the hydro assets;
- Higher production from our Gas assets due to strong market conditions in the first half of 2023, partially offset by lower water resources in the Alberta Hydro assets.
Gross margin for the three months and year ended Dec. 31, 2023, was
- Higher power price hedges, partially offsetting the impacts of lower
Alberta spot prices and lower natural gas prices compared to 2022; partially offset by - Lower ancillary services revenues due to the Alberta Electric System Operator procuring lower volumes given its decision to reduce the cumulative volume of imports into
Alberta .
- Moderate temperatures in the last six months of the year compared with the prior year;
- Higher total renewable generation in the
Alberta market from new wind and solar facilities and higher wind resources during the fourth quarter of 2023; and - Lower natural gas prices.
Hedged volumes for the three months and year ended Dec. 31, 2023, were 1,742 GWh and 7,550 GWh at an average price of
We expect to maintain adequate available liquidity under our committed credit facilities. As at Dec. 31, 2023, we had access to
2024 Financial Guidance
The following table outlines our expectations on key financial targets and related assumptions for 2024 and should be read in conjunction with the narrative discussion that follows and the Governance and Risk Management section of the MD&A for additional information:
Measure | 2024 Target | Updated Target 2023 | 2023 Actuals |
Adjusted EBITDA | |||
FCF | |||
FCF per share | |||
Annual dividend per share |
The Company's outlook for 2024 may be impacted by a number of factors as detailed further below.
Market | 2024 Assumptions | Updated Target 2023 | 2023 Actuals |
Mid-C spot (US$/MWh) | |||
AECO gas price ($/GJ) |
Other assumptions relevant to the 2024 outlook
2024 Expectations | |
Energy Marketing gross margin | |
Sustaining capital | |
Corporate cash taxes | |
Cash interest |
Hedging assumptions | 2024 |
Hedged production (GWh) | 8,152 |
Hedge price ($/MWh) | |
Hedged gas volumes (GJ) | 62 million |
Hedge gas prices ($/GJ) |
TransAlta will hold a conference call and webcast at 9:00 a.m. MST (11:00 a.m. EST) today, February 23 2024, to discuss our fourth quarter and year end 2023 results. The call will begin with a short address by John Kousinioris, President and Chief Executive Officer, and Todd Stack, EVP 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.
Dial-in number - Full-Year and Fourth Quarter 2023 Conference Call
Toll-free North American participants call: 1-888-664-6392
A link to the live webcast will be available on the Investor Centre section of TransAlta's website at https://transalta.com/investors/presentations-and-events/. If you are unable to participate in the call, the instant replay is accessible at 1-888-390-0541 (
Notes | |
(1) | These items are not defined and have no standardized meaning under IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings (loss) trends more readily in comparison with prior periods' results. Please refer to the Non-IFRS Measures section of this earnings release for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS. |
(2) | Funds from operations ("FFO") per share and free cash flow ("FCF") per share are calculated using the weighted average number of common shares outstanding during the period. Refer to the Additional IFRS Measures and Non-IFRS Measures section of the MD&A for the purpose of these non-IFRS ratios. |
We use a number of financial measures to evaluate our performance and the performance of our business segments, including measures and ratios that are presented on a non-IFRS basis, as described below. Unless otherwise indicated, all amounts are in Canadian dollars and have been derived from our consolidated financial statements prepared in accordance with IFRS. We believe that these non-IFRS amounts, measures and ratios, read together with our IFRS amounts, provide readers with a better understanding of how management assesses results.
Non-IFRS amounts, measures and ratios do not have standardized meanings under IFRS. They are unlikely to be comparable to similar measures presented by other companies and should not be viewed in isolation from, as an alternative to, or more meaningful than, our IFRS results.
Adjusted EBITDA
Each business segment assumes responsibility for its operating results measured by adjusted EBITDA. Adjusted EBITDA is an important metric for management that represents our core operational results. Interest, taxes, depreciation and amortization are not included, as differences in accounting treatments may distort our core business results. In addition, certain reclassifications and adjustments are made to better assess results, excluding those items that may not be reflective of ongoing business performance. This presentation may facilitate the readers' analysis of trends.
Funds From Operations ("FFO")
FFO is an important metric as it provides a proxy for cash generated from operating activities before changes in working capital and provides the ability to evaluate cash flow trends in comparison with results from prior periods. FFO is a non-IFRS measure.
Free Cash Flow ("FCF")
FCF is an important metric as it represents the amount of cash that is available to invest in growth initiatives, make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or repurchase common shares. Changes in working capital are excluded so FFO and FCF are not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and timing of receipts and payments. FCF is a non-IFRS measure.
Non-IFRS Ratios
FFO per share, FCF per share and adjusted net debt to adjusted EBITDA are non-IFRS ratios that are presented in the MD&A. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF and Key Non-IFRS Financial Ratios sections of the MD&A for additional information.
FFO per share and FCF per share
FFO per share and FCF per share are calculated using the weighted average number of common shares outstanding during the period. FFO per share and FCF per share are non-IFRS ratios.
Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below.
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the three months ended Dec. 31, 2023:
Three months ended Dec. 31, 2023 $ millions | Hydro | Wind & | Gas | Energy | Energy | Corporate | Total | Equity | Reclass | IFRS |
Revenues | 77 | 94 | 246 | 175 | 39 | — | 631 | (7) | — | 624 |
Reclassifications and adjustments: | ||||||||||
Unrealized mark-to-market (gain) loss | (2) | 20 | 53 | 7 | (19) | — | 59 | — | (59) | — |
Realized gain on closed exchange | — | — | 23 | — | 4 | — | 27 | — | (27) | — |
Decrease in finance lease receivable | — | — | 15 | — | — | — | 15 | — | (15) | — |
Finance lease income | — | — | 2 | — | — | — | 2 | — | (2) | — |
Unrealized foreign exchange gain | — | — | 1 | — | — | — | 1 | — | (1) | — |
Adjusted revenues | 75 | 114 | 340 | 182 | 24 | — | 735 | (7) | (104) | 624 |
Fuel and purchased power | 5 | 8 | 127 | 138 | — | — | 278 | — | — | 278 |
Reclassifications and adjustments: | ||||||||||
Australian interest income | — | — | (1) | — | — | — | (1) | — | 1 | — |
Adjusted fuel and purchased power | 5 | 8 | 126 | 138 | — | — | 277 | — | 1 | 278 |
— | — | 27 | — | — | — | 27 | — | — | 27 | |
Gross margin | 70 | 106 | 187 | 44 | 24 | — | 431 | (7) | (105) | 319 |
OM&A | 13 | 25 | 56 | 18 | 10 | 29 | 151 | (1) | — | 150 |
Taxes, other than income taxes | 1 | 1 | — | — | — | 1 | 3 | — | — | 3 |
Net other operating income | — | (3) | (10) | — | — | — | (13) | — | — | (13) |
Reclassifications and adjustments: | ||||||||||
Insurance recovery | — | 1 | — | — | — | — | 1 | — | (1) | — |
Adjusted net other operating income | — | (2) | (10) | — | — | — | (12) | — | (1) | (13) |
Adjusted EBITDA(2) | 56 | 82 | 141 | 26 | 14 | (30) | 289 | |||
Equity income | 3 | |||||||||
Finance lease income | 2 | |||||||||
Depreciation and amortization | (132) | |||||||||
Asset impairment reversals | (26) | |||||||||
Interest income | 12 | |||||||||
Interest expense | (66) | |||||||||
Foreign exchange loss | (7) | |||||||||
Loss before income taxes | (35) | |||||||||
(1) | The |
(2) | Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release. |
The following table reflects adjusted EBITDA by segment and provides reconciliation to loss before income taxes for the three months ended Dec. 31, 2022:
Three months ended Dec. 31, 2022 $ millions | Hydro | Wind & | Gas | Energy | Energy | Corporate | Total | Equity | Reclass | IFRS |
Revenues | 159 | 98 | 276 | 281 | 44 | — | 858 | (4) | — | 854 |
Reclassifications and adjustments: | ||||||||||
Unrealized mark-to-market (gain) loss | 1 | 23 | 238 | (7) | 12 | — | 267 | — | (267) | — |
Realized gain on closed exchange | — | — | 7 | — | 20 | — | 27 | — | (27) | — |
Decrease in finance lease receivable | — | — | 12 | — | — | — | 12 | — | (12) | — |
Finance lease income | — | — | 4 | — | — | — | 4 | — | (4) | — |
Unrealized foreign exchange gain | — | — | — | — | (1) | — | (1) | — | 1 | — |
Adjusted revenues | 160 | 121 | 537 | 274 | 75 | — | 1,167 | (4) | (309) | 854 |
Fuel and purchased power | 5 | 11 | 196 | 234 | — | — | 446 | — | — | 446 |
Reclassifications and adjustments: | ||||||||||
Australian interest income | — | — | (1) | — | — | — | (1) | — | 1 | — |
Adjusted fuel and purchased power | 5 | 11 | 195 | 234 | — | — | 445 | — | 1 | 446 |
— | — | 27 | — | — | — | 27 | — | — | 27 | |
Gross margin | 155 | 110 | 315 | 40 | 75 | — | 695 | (4) | (310) | 381 |
OM&A | 22 | 18 | 57 | 19 | 12 | 30 | 158 | (1) | — | 157 |
Taxes, other than income taxes | — | 5 | 2 | 2 | — | — | 9 | (1) | — | 8 |
Net other operating income | — | (5) | (8) | — | — | — | (13) | 3 | — | (10) |
Adjusted EBITDA(2) | 133 | 92 | 264 | 19 | 63 | (30) | 541 | |||
Equity income | 4 | |||||||||
Finance lease income | 4 | |||||||||
Depreciation and amortization | (188) | |||||||||
Asset impairment charges | (5) | |||||||||
Interest income | 10 | |||||||||
Interest expense | (77) | |||||||||
Foreign exchange loss | (13) | |||||||||
Gain on sale of assets and other | 46 | |||||||||
Earnings before income taxes | 7 | |||||||||
(1) | The |
(2) | Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release. |
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the year ended Dec. 31, 2023:
Year ended Dec. 31, 2023 $ millions | Hydro | Wind & | Gas | Energy | Energy | Corporate | Total | Equity | Reclass | IFRS |
Revenues | 533 | 357 | 1,514 | 751 | 220 | 1 | 3,376 | (21) | — | 3,355 |
Reclassifications and adjustments: | ||||||||||
Unrealized mark-to-market | (4) | 16 | (67) | (5) | 23 | — | (37) | — | 37 | — |
Realized gain (loss) on closed | — | — | 10 | — | (91) | — | (81) | — | 81 | — |
Decrease in finance lease | — | — | 55 | — | — | — | 55 | — | (55) | — |
Finance lease income | — | — | 12 | — | — | — | 12 | — | (12) | — |
Unrealized foreign exchange loss | — | — | 1 | — | — | — | 1 | — | (1) | — |
Adjusted revenues | 529 | 373 | 1,525 | 746 | 152 | 1 | 3,326 | (21) | 50 | 3,355 |
Fuel and purchased power | 19 | 30 | 453 | 557 | — | 1 | 1,060 | — | — | 1,060 |
Reclassifications and adjustments: | ||||||||||
Australian interest income | — | — | (4) | — | — | — | (4) | — | 4 | — |
Adjusted fuel and purchased power | 19 | 30 | 449 | 557 | — | 1 | 1,056 | — | 4 | 1,060 |
— | — | 112 | — | — | — | 112 | — | — | 112 | |
Gross margin | 510 | 343 | 964 | 189 | 152 | — | 2,158 | (21) | 46 | 2,183 |
OM&A | 48 | 80 | 192 | 64 | 43 | 115 | 542 | (3) | — | 539 |
Taxes, other than income taxes | 3 | 12 | 11 | 3 | — | 1 | 30 | (1) | — | 29 |
Net other operating income | — | (7) | (40) | — | — | — | (47) | — | — | (47) |
Reclassifications and adjustments: | ||||||||||
Insurance recovery | — | 1 | — | — | — | — | 1 | — | (1) | — |
Adjusted net other operating | — | (6) | (40) | — | — | — | (46) | — | (1) | (47) |
Adjusted EBITDA(2) | 459 | 257 | 801 | 122 | 109 | (116) | 1,632 | |||
Equity income | 4 | |||||||||
Finance lease income | 12 | |||||||||
Depreciation and amortization | (621) | |||||||||
Asset impairment reversals | 48 | |||||||||
Interest income | 59 | |||||||||
Interest expense | (281) | |||||||||
Foreign exchange loss | (7) | |||||||||
Gain on sale of assets and other | 4 | |||||||||
Earnings before income taxes | 880 | |||||||||
(1) | The |
(2) | Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release. |
The following table reflects adjusted EBITDA by segment and provides reconciliation to earnings before income taxes for the year ended Dec. 31, 2022:
Year ended Dec. 31, 2022 $ millions | Hydro | Wind & | Gas | Energy | Energy | Corporate | Total | Equity | Reclass | IFRS |
Revenues | 606 | 303 | 1,209 | 714 | 160 | (2) | 2,990 | (14) | — | 2,976 |
Reclassifications and adjustments: | ||||||||||
Unrealized mark-to-market loss | 1 | 104 | 251 | 10 | 12 | — | 378 | — | (378) | — |
Realized gain (loss) on closed | — | — | (4) | — | 47 | — | 43 | — | (43) | — |
Decrease in finance lease receivable | — | — | 46 | — | — | — | 46 | — | (46) | — |
Finance lease income | — | — | 19 | — | — | — | 19 | — | (19) | — |
Unrealized foreign exchange gain | — | — | — | — | (1) | — | (1) | — | 1 | — |
Adjusted revenues | 607 | 407 | 1,521 | 724 | 218 | (2) | 3,475 | (14) | (485) | 2,976 |
Fuel and purchased power | 22 | 31 | 641 | 566 | — | 3 | 1,263 | — | — | 1,263 |
Reclassifications and adjustments: | ||||||||||
Australian interest income | — | — | (4) | — | — | — | (4) | — | 4 | — |
Adjusted fuel and purchased power | 22 | 31 | 637 | 566 | — | 3 | 1,259 | — | 4 | 1,263 |
— | 1 | 83 | (1) | — | (5) | 78 | — | — | 78 | |
Gross margin | 585 | 375 | 801 | 159 | 218 | — | 2,138 | (14) | (489) | 1,635 |
OM&A | 55 | 68 | 195 | 69 | 35 | 101 | 523 | (2) | — | 521 |
Taxes, other than income taxes | 3 | 12 | 15 | 4 | — | 1 | 35 | (2) | — | 33 |
Net other operating income | — | (23) | (38) | — | — | — | (61) | 3 | — | (58) |
Reclassifications and adjustments: | ||||||||||
Insurance recovery | — | 7 | — | — | — | — | 7 | — | (7) | — |
Adjusted net other operating income | — | (16) | (38) | — | — | — | (54) | 3 | (7) | (58) |
Adjusted EBITDA(2) | 527 | 311 | 629 | 86 | 183 | (102) | 1,634 | |||
Equity income | 9 | |||||||||
Finance lease income | 19 | |||||||||
Depreciation and amortization | (599) | |||||||||
Asset impairment charges | (9) | |||||||||
Interest income | 24 | |||||||||
Net interest expense | (286) | |||||||||
Foreign exchange gain | 4 | |||||||||
Gain on sale of assets and other | 52 | |||||||||
Earnings before income taxes | 353 | |||||||||
(1) | The |
(2) | Adjusted EBITDA is not defined and has no standardized meaning under IFRS. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release. |
The table below reconciles our cash flow from operating activities to our FFO and FCF:
Three Months Ended | Year Ended | |||
$ millions, unless otherwise stated | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 |
Cash flow from operating activities(1) | 310 | 351 | 1,464 | 877 |
Change in non-cash operating working | (135) | 64 | (124) | 316 |
Cash flow from operations before | 175 | 415 | 1,340 | 1,193 |
Adjustments | ||||
Share of adjusted FFO from joint | (2) | 1 | 8 | 8 |
Decrease in finance lease receivable | 15 | 12 | 55 | 46 |
Clean energy transition provisions and | 4 | 7 | 11 | 42 |
Realized gain (loss) on closed positions | 27 | 21 | (81) | 37 |
Other(3) | 10 | 3 | 18 | 20 |
FFO(4) | 229 | 459 | 1,351 | 1,346 |
Deduct: | ||||
Sustaining capital(1) | (74) | (67) | (174) | (142) |
Productivity capital | (1) | (1) | (3) | (4) |
Dividends paid on preferred shares | (12) | (12) | (51) | (43) |
Distributions paid to subsidiaries' non- | (19) | (61) | (223) | (187) |
Principal payments on lease liabilities | (2) | (3) | (10) | (9) |
FCF(4) | 121 | 315 | 890 | 961 |
Weighted average number of common | 308 | 269 | 276 | 271 |
FFO per share(4) | 0.74 | 1.71 | 4.89 | 4.97 |
FCF per share(4) | 0.39 | 1.17 | 3.22 | 3.55 |
(1) | Includes our share of amounts for |
(2) | During 2022, to support the employees affected by the closure of the Highvale mine and our transition off coal to cleaner sources, the Company made a voluntary special contribution of |
(3) | Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from the equity-accounted joint venture. |
(4) | These items are not defined and have no standardized meaning under IFRS. Refer to the Non-IFRS Measures section in this earnings release. |
The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF:
Three Months Ended | Year Ended | |||
$ millions, unless otherwise | Dec. 31, 2023 | Dec. 31, 2022 | Dec. 31, 2023 | Dec. 31, 2022 |
Adjusted EBITDA(1)(4) | 289 | 541 | 1,632 | 1,634 |
Provisions | (1) | 20 | (1) | 25 |
Net interest expense(2) | (41) | (49) | (164) | (200) |
Current income tax recovery | 5 | (29) | (50) | (65) |
Realized foreign exchange gain | 9 | (18) | (4) | — |
Decommissioning and restoration | (15) | (12) | (37) | (35) |
Other non-cash items | (17) | 6 | (25) | (13) |
FFO(3)(4) | 229 | 459 | 1,351 | 1,346 |
Deduct: | ||||
Sustaining capital(4) | (74) | (67) | (174) | (142) |
Productivity capital | (1) | (1) | (3) | (4) |
Dividends paid on preferred | (12) | (12) | (51) | (43) |
Distributions paid to subsidiaries' | (19) | (61) | (223) | (187) |
Principal payments on lease | (2) | (3) | (10) | (9) |
FCF(4) | 121 | 315 | 890 | 961 |
(1) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures of this earnings release and reconciled to earnings (loss) before income taxes above. |
(2) | Net interest expense includes interest expense for the period less interest income. |
(3) | These items are not defined and have no standardized meaning under IFRS. FFO and FCF are defined in the Non-IFRS financial measures and other specified financial measures section of in this earnings release and reconciled to cash flow from operating activities above. |
(4) | Includes our share of amounts for |
TransAlta is in the process of filing its Annual Information Form, Audited Consolidated Financial Statements and accompanying notes, as well as the associated Management's Discussion & Analysis ("MD&A"). These documents will be available today on the Investors section of TransAlta's website at www.transalta.com or through SEDAR at www.sedarplus.ca.
TransAlta will also be filing its Form 40-F with the US Securities and Exchange Commission. The form will be available through their website at www.sec.gov. Paper copies of all documents are available to shareholders free of charge upon request.
TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in
For more information about TransAlta, visit our web site at transalta.com.
This news release contains "forward-looking information", within the meaning of applicable Canadian securities laws, and "forward-looking statements", within the meaning of applicable
The forward-looking statements contained in this news release are based on many assumptions including, but not limited to, the following material assumptions: no significant changes to applicable laws and regulations beyond those that have already been announced; those assumptions contained in the Company's 2024 Outlook, including as it pertains to power and gas prices; no material adverse impacts to long-term investment and credit markets; no significant changes to the decommissioning and restoration costs; no significant changes to the integrity and reliability of our assets; and no significant changes to the Company's debt and credit ratings. Forward-looking statements 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 forward-looking statements contained in this news release include, risks relating to: fluctuations in power prices, including merchant pricing in
Note: All financial figures are in Canadian dollars unless otherwise indicated.
View original content:https://www.prnewswire.com/news-releases/transalta-reports-full-year-and-fourth-quarter-2023-results-and-announces-enhanced-share-repurchase-program-302069727.html
SOURCE TransAlta Corporation
FAQ
What were TransAlta's adjusted EBITDA and free cash flow for the full year 2023?
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