TransAlta Corporation · TSX:TA
TransAlta — Canaccord Capital's Victoria Investor Forum 2005
23 slides from TransAlta's conference presentation, February 2005
Slide 1: TransAlta Corporation – Canaccord Capital's Victoria Investor Forum
TransAlta Corporation Canaccord Capital’s Victoria Investor Forum February 2005
Slide 2: Forward looking statements
Forward looking statements This presentation may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. These statements are subject to a number of risks and uncertainties that may cause actual results to differ
Slide 3: Who we are
Who we are • Transitioned from an integrated regulated utility, to a wholesale generating company • 8,600 MW generating capacity in Canada, U.S. , Mexico and Australia • 80% of generation capacity currently contracted • Goal: generate sustainable, predictable earnings and cash flow • Current focus o
Slide 4: Where we are
Where we are ALBERTA PPA ASSETS 1 Sundance 9 Horseshoe 2 Keephills 10 Ghost 3 11 Bearspaw 12 Spe 4 0: 13° Thee Sisters 14° Barrier 6 Cascade ww 36 MY 15 Interlakes 7 Rundle N MW 16 Pocaterra 8 Kananaskis 5 My 9 MY CALIFORNI GEOTHERMAL ASSETS* imperial Valley (Calipatria, CA) 1 Elmore 7 Salton Sea tt
Slide 5: Transformation - financial
Transformation - financial Integrated Regulated Utility Generation & Marketing Company 1999 2000 2001 2002 2003 New Plants $2.2 Gains from divested assets: $ 3.1 B $0.6 Billion $6.8B Capital Acquisitions $2.4 Investments Cash flow net of dividends $ 1.6 B and distributions Maintenance & Other $2.2 $
Slide 6: Portfolio transformed – Now in execution phase
Portfolio transformed – Now in execution phase TransAlta’s Progress Towards Integration and Execution Years 2000-02 2003-04 2005-06 Megawatts 7200 to 7800 8600 to 8700 8800 Fuel diversity Coal 72% Coal 58% Coal 58% Gas 17% Gas 30% Gas 30% Renew 11% Renew 12% Renew 12% & hydro & hydro & hydro Market
Slide 7: Maintenance spending will peak in 2005 and trend lower
Maintenance spending will peak in 2005 and will trend lower, with more predictability, and increased efficiencies 2000 - 02 2003 - 04 2005 - 06 2007+ Total spend $mm 110 - 140 115 - 175 205 - 235 150 - 175 Capex/Opex % 60/40 70/30 70/30 70/30 Lost Avg. Gwh 2000 2300 - 2600 2900 - 3000 2300 - 2700 Pr
Slide 8: TransAlta's financial strategy – manage cyclicality
TransAlta’s financial strategy – manage cyclicality Balance acquisitions with new build. Maintain high contract cover. Minimize foreign exchange exposure. GROW STRENGTHEN INTEGRATE FINANCIAL CAPACITY Non-growth capex and dividend from Pay down debt and/or operating cash flow. buy back shares 8l
Slide 9: Financial results are increasingly transparent
Financial results are increasingly transparent TransAlta (Millions $Cdn) Q4 - 2004 2004 2003 2002 Reported net earnings $62 $170 $234 $200 Prior period regulatory decision - -15 - -2 Gain on sale of transmission - - - 120 Gain on sale of land - - 9 - Refinancing of foreign operations - - - 11 Gain o
Slide 10: Free cash flow is positive
Free cash flow is positive Millions $Cdn Q4 - 2004 Q4 - 2003 2004 2003 Comparable earnings $ 37 $ 29 $ 135 $ 130 Plus: depreciation & amortization 103 107 412 378 Less: maintenance and other capex 89 5 224 101 Less: scheduled debt repayment 12 27 51 138 Comparable free cash flow $ 39 $ 104 $ 272 $ 2
Slide 11: Results are seasonal
Results are seasonal TransAlta (Millions $Cdn) Q1 Q2 Q3 Q4 Revenue $701 $656 $743 $713 Comparable earnings $48 $16 $34 $37 Cash flow* $161 $107 $167 $152 Planned maintenance expenditures $14 $68 $63 $29 *From operations before changes in working capital 11l
Slide 12: Financial ratios continue to improve
Financial ratios continue to improve Cash flow to Interest • Improve to BBB+ ratios 6.0 5.0 • Sustain dividend 4.0 3.0 BBB+ BBB- • Modest growth Capex 2.0 1.0 0.0 2004 2005 2006 2007 2008 2009 Debt to Capital Cashflow to Debt BBB- 50% 35% BBB+ 30% 45% BBB+ 25% BBB- 40% 20% 15% 35% 10% 30% 5% 2004 20
Slide 13: Drivers of near-term earnings growth
Drivers of near-term earnings growth Actions Benefits Contract for Sarnia Higher operating income Recontract Centralia Higher operating income Genesee 3 and Wind Higher operating income Pay down debt Less interest Buy back shares Higher EPS Goal: increase returns on invested capital 13l
Slide 14: TransAlta Power, L.P.
TransAlta Power, L.P. Canaccord Capital’s Victoria Investor Forum February 2005
Slide 15: Presentation outline
Presentation outline • Structure of TransAlta Power • Business model / Distributions / Governance • Plant analysis • Conclusions 15l
Slide 16: TPW.UN Structure
TPW.UN Structure Public TA TransAlta 100% Power, L.P. 49.99% 50.01% TransAlta Cogeneration, L.P. Cogen Facilities 50% Sheerness 60% Fort Sask. 50% Meridian 100% Ottawa 100% Mississauga 100% Windsor 16l
Slide 17: TPW.UN Business model
TPW.UN Business model • Own assets with operating track record; steady / predictable cash flow; highly rated counterparties • Co invest with TransAlta to leverage expertise and minimize cost structure • Steady growth in manageable and accretive increments • Diversify fuel, market and customer risk 1
Slide 18: TPW.UN Distributions
TPW.UN Distributions Distributable cash Income before Tax + Depreciation - CAPEX - repayment of debt • When declaring distributions – Forecast future earnings ( including risks / opportunities) – Anticipate future CAPEX requirements – Assume acquisitions financed through new units / DRIP Distributio
Slide 19: TPW.UN Governance
TPW.UN Governance • 7 Member board ( 3 TransAlta management) • 5 Scheduled meetings per year; other as required • 3 Independent directors – Audit, governance, special committee – Fully utilize independent advisors – Must recommend all non-arm’s length transactions • Report annually against OSC guide
Slide 20: TPW.UN Highlights
TPW.UN Highlights • TransAlta Cogeneration = 807 MW • 97% Contracted (Average duration = 14 years) • 53% gas 47% coal • 56% (453MW) in Alberta, 14% (110 MW) in Saskatchewan and 30% (244MW) in Ontario Fort Saskatchewan Gas / Cogen Contract with DOW Meridian Gas/Cogen Ottawa Sheerness SaskPower/Husky
Slide 21: TPW.UN Plant Analysis
TPW.UN Plant Analysis 9% 47% Fort Sask. 14% Meridian Sheerness Mississauga 14% Ottawa Windsor 8% 8% Note: Percentages are based on Megawatts of capacity 21l
Slide 22: Sales & Supply contracts
Sales & Supply contracts 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Mississauga - 108MW PPA Fuel Commodity Fuel Intermediation Fuel Transportation Windsor - 68MW PPA Fuel Commodity Fuel Transportation Ottawa - 68MW PPA Fuel Commodity
Slide 23: Conclusions
Conclusions • Good assets in good markets • Sales contracts with high quality counterparties • History of growth in distributions over past 5 years • Intent to continue accretive growth • Strong governance model 23l
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