Transalta Corporation · TSX:TA
Transalta — CIBC World Markets Institutional Investor Conference 2005
20 slides from Transalta's conference presentation, February 2005
Slide 1: CIBC World Markets Institutional Investor Conference
CIBC World Markets Institutional Investor Conference 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: 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 6: 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 7: TransAlta's success as a power company depends on managing cyclicality
TransAlta’s success as a power company depends on managing cyclicality MANAGING CYCLICALITY TransAlta’s Strengths Operational excellence Low cost assets and tradition of Strong financial capacity generation excellence Prudent growth expectations Real-time market knowledge and risk mitigati
Slide 8: Defining operational excellence
Defining operational excellence Measure Achieve highest availability 90% Manage fuel costs – coal and gas Increased Margins Continuous productivity Cost/MW Availability Maintaining financial capacity BBB- to BBB+ Maintenance planning and execution Reduced Volatility 8l
Slide 9: TransAlta's maintenance strategy provides four key benefits
TransAlta’s maintenance strategy provides four key benefits Strategic Actions Benefits Smooth out maintenance spending Ö Ensure that maintenance is (avoid lumpiness) by scheduling funded from ongoing cash flow. maintenance over a 10 year planning horizon. Negotiate long-term supplier Ö Purchase equi
Slide 10: Maintenance spending will peak in 2005 and will 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 11: TransAlta's Financial Strategy
TransAlta’s Financial Strategy ⇒ Manage perceived financial risks. ⇒ Manage through a cycle. ⇒ Build sustainable earnings and cash flow. ⇒ Reporting transparency ⇒ Rebuilding financial capacity 11l
Slide 12: 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 12l
Slide 13: Plant portfolio provides predictable earnings, cash flow and risk mitigation
Plant portfolio provides predictable earnings, cash flow and risk mitigation PPA Plants Long-term contracts Merchant 4000 Megawatts Capacity 3500 3000 2500 Flat ROCE 2000 Earnings and cash more Earnings and cash variable ROCE increases as plants flow track 1500 invested capital depreciate Earnings/c
Slide 14: Financial highlights for the year
Financial highlights for the year TransAlta (Millions $Cdn) 2004 2003 Net earnings $170 $234 per share $0.88 $1.26 Comparable earnings $135 $130 per share $0.70 $0.70 Cash flow* $588 $538 Interest coverage 4.1 3.3 Cash flow to debt 18.5% 17.2% *From operations before changes in working capital 14l
Slide 15: Free cash flow is positive
Free cash flow is positive Millions $Cdn 2004 2003 Comparable earnings $135 $130 Plus: depreciation & amortization 412 378 Less: maintenance and other capex 224 101 Less: scheduled debt repayment 51 138 Comparable free cash flow $272 $269 15l
Slide 16: 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 17: 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 Reduce debt/Repurchase equity Less interest/Higher EPS Goal: increase returns on invested capital 17l
Slide 18: Appendix
Appendix TransAlta
Slide 19: 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 19l
Slide 20: Financial results are increasingly transparent
Financial results are increasingly transparent TransAlta (Millions $Cdn) 2004 2003 2002 Reported net earnings $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 on Sale of Meridian Cog
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