TransAlta Renewables Reports Third Quarter 2020 Results
CALGARY, AB, Oct. 30, 2020 /PRNewswire/ -
Third Quarter 2020 Highlights
-- Comparable EBITDA((1) )of $96 million, a $10 million or 12 per cent
improvement to the same period in 2019
-- Adjusted funds from operations ("AFFO")((1)) of $76 million, a $7
million or 10 per cent improvement to the same period last year
-- Cash available for distribution ("CAFD")((1)) of $73 million or $0.27
per share in the third quarter, an increase of eight per cent on a per
share basis as compared to the same period in 2019
Year-to-Date 2020 Highlights
-- Comparable EBITDA((1)) of $329 million, a $16 million increase over the
same period last year
-- Adjusted funds from operations ("AFFO")((1) )of $261 million, a $18
million improvement to the same period in 2019
-- Cash available for distribution ("CAFD")((1)) of $232 million or $0.87
per share in the quarter, an increase of six per cent as compared to the
same period last year
Subsequent Events
-- Achieved commercial operation of WindCharger, Alberta's first
utility-scale battery storage project. The project was acquired by
TransAlta Renewables in Aug. 2020
-- On Oct. 22, 2020, TEC Hedland Pty Ltd. ("TEC"), which owns the South
Hedland Power Station, closed an AU$800 million senior secured note
offering, by way of private placement, which is secured by, among other
things, a first ranking charge over all assets of TEC. TransAlta
Renewables owns an indirect economic interest in TEC which forms part of
its Australian cash flows. The notes bear interest at 4.07 per cent per
annum, payable quarterly, and mature on Jun. 30, 2042 with principal
repayments starting on Mar. 31, 2022
-- On Oct. 22, 2020, Southern Cross Energy ("SCE") amended and extended its
current power purchasing agreement ("PPA") with BHP Billiton Nickel West
Pty. Ltd. SCE is composed of four generation facilities with a combined
capacity of 245 MW in the Goldfields region of Western Australia. The
Company owns an indirect economic interest in SCE which forms part of
its Australian cash flows. The amendment extends the term of the PPA
from Dec. 31, 2023 to Dec. 31, 2038
-- The Company will suspend its Dividend Reinvestment Program ("DRIP")
following the payment of the dividend on Oct. 30, 2020
TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) announced today solid financial results which were in line with expectations for the three months and nine months ended Sept. 30, 2020.
"We had excellent results this quarter and saw strong EBITDA contribution from our newly-developed US wind farms at Big Level and Antrim," said John Kousinioris, President. "These assets are an important example of our renewables growth strategy in the US. The recent financing of our South Hedland asset ensures that we are well-funded and positioned to capitalize on any future organic and acquisition development opportunities."
Comparable EBITDA for the three months ended Sept. 30, 2020 increased by $10 million mainly due to higher Comparable EBITDA from Canadian Wind, US Wind and Solar and Australian Gas, partially offset by lower Comparable EBITDA from Canadian Hydro. Comparable EBITDA from Canadian Wind increased mainly due to higher production and the timing of recognition of carbon offset revenues. Comparable EBITDA from US Wind and Solar increased due to a full period of operations at the Big Level and Antrim facilities which were commissioned in Dec. 2019 and higher wind resources. Comparable EBITDA from Australian Gas increased due to the timing of legal fees and the strengthening of the Australian dollar relative to the Canadian dollar. Canadian Hydro Comparable EBITDA decreased mainly due to a prior year true-up of AESO transmission line losses, an outage at our St. Mary's facility and higher maintenance costs at our Bone Creek and Taylor facilities.
Comparable EBITDA for the nine months ended Sept. 30, 2020 increased by $16 million mainly due to higher Comparable EBITDA from US Wind and Solar and Australian Gas, partially offset by lower Comparable EBITDA from Canadian Wind, Canadian Hydro and Canadian Gas. The key drivers of the changes to Comparable EBITDA from US Wind and Solar, Australian Gas and Canadian Hydro for the nine months ended Sept. 30, 2020 were the same as for the three months ended Sept. 30, 2020. Comparable EBITDA from Canadian Gas decreased due to unfavourable market conditions in Ontario and Canadian Wind decreased due to the timing of carbon offset revenues, insurance proceeds received in 2019 and lower government incentives driven by the planned expiry of certain Wind Power Production Incentives in 2019.
AFFO for the three and nine months ended Sept. 30, 2020, increased by $7 million and $18 million, respectively, and CAFD for the three and nine months ended Sept. 30, 2020, increased by $6 million and $16 million, respectively, compared to the same periods in 2019, primarily due to higher Comparable EBITDA, higher provisions and lower sustaining capital expenditures, partially offset by higher tax equity distributions and higher current income tax expense.
Net earnings attributable to common shareholders for the three months ended Sept. 30, 2020, decreased by $18 million compared to the same period in 2019, as a result of an increase in unrealized losses due to the change in the fair value of financial assets partially offset by higher Comparable EBITDA from Canadian Wind and foreign exchange gains resulting from the strengthening Australian dollar relative to the Canadian dollar. The unfavourable change in fair value of financial assets is largely due to changes in cash flow assumptions accelerating the repayment of the underlying loan on the Preferred Shares Tracking the Amortizing Term Loan in Australia resulting from the South Hedland financing.
Net earnings attributable to common shareholders for the nine months ended Sept. 30, 2020, compared to the same period in 2019, decreased by $92 million, as a result of lower Comparable EBITDA from Canadian Wind, Canadian Hydro and Canadian Gas, a decrease in finance income, an increase in unrealized losses due to a change in the fair value of financial assets and an increase in income tax expense, offset by foreign exchange gains resulting from the strengthening Australian dollar relative to the Canadian dollar. Income tax expense increased period over period by $15 million, mainly due to the recognition in 2019 of a deferred income tax recovery of $18 million related to a decrease in the Alberta corporate tax rate. Variability in finance income and the change in fair value of financial assets is related to the classification of the distributions received from the Company's investments in its economic interests as return of capital or dividends received, timing of dividends declared on the Preferred Shares Tracking Australia Cash Flows, changes in fair value on the Preferred Shares Tracking the Amortizing Term Loan and foreign exchange impacts. Set out below are the key drivers of the changes arising from these investments:
-- A reduction in finance income of $17 million was as a result of lower
dividends received on the Preferred Shares Tracking Australia Cash Flows
which were impacted by the early redemption of AU$45 million of the
Preferred Shares Tracking the Amortizing Term Loan
-- A higher foreign exchange gain of $59 million, as a result of the
strengthening of the Australian and US dollars relative to the Canadian
dollar since year-end
-- An unfavourable change in fair value of $104 million, relating to cash
flow assumptions accelerating the repayment of the underlying loan and
an increase in discount rates on the Preferred Shares Tracking the
Amortizing Term Loan
COVID-19 Response Update
TransAlta Corporation ("TransAlta"), as the manager and operator of the Company's business and assets, continued to operate under its business continuity plan which ensured that: (i) TransAlta employees that could work remotely did so; and (ii) TransAlta employees that operate and maintain our facilities, and who were not able to work remotely, were able to work safely and in a manner that ensured they remained healthy. During the second and third quarters of 2020, TransAlta successfully brought employees that were working remotely back to the office without sacrificing health and safety standards. All of TransAlta's offices and sites follow strict health screening and physical distancing protocols with personal protective equipment readily available. TransAlta also maintains travel restrictions aligned to local jurisdictional guidance, enhanced cleaning procedures, revised work schedules, and other measures to protect staff and contractors. All of TransAlta Renewables' facilities remain fully operational and are capable of meeting customer needs. TransAlta Renewables continues to work and serve all of its customers and counterparties under the terms of the relevant contracts and the Company has not experienced interruptions to service requirements. Electricity and steam supply continue to remain a critical service requirement to all of the Company's customers and have been deemed an essential service in all of the jurisdictions in which TransAlta Renewables operates.
Although these are unprecedented times, the Company remains highly diversified with facilities that are highly contracted and located in various geographies. Our cash flows have been relatively unaffected in the quarter due to the high contractedness of our asset portfolio and financial strength of our customers. The Company continues to maintain a strong financial position in part due to its long-term contracts. The Company currently has access to $507 million in liquidity, including $24 million in cash.
Third Quarter Ended Sept. 30, 2020 Highlights
In $CAD millions,
unless otherwise
stated 3 Months Ended 9 Months Ended
Sept. 30, 2020 Sept. 30, 2019 Sept. 30, 2020 Sept. 30, 2019
Renewable energy
production (GWh)(2) 864 706 3,135 2,574
---
Revenues 95 89 308 327
---
Net earnings
attributable to
common shareholders 6 24 39 131
---
Comparable EBITDA(1) 96 86 329 313
---
Adjusted funds from
operations 76 69 261 243
---
Cash flow from
operating
activities 65 75 218 258
---
Cash available for
distribution 73 67 232 216
---
Net earnings per
share attributable
to common
shareholders, basic
and diluted 0.02 0.09 0.15 0.50
---
Adjusted funds from
operations per
share(1) 0.29 0.26 0.98 0.92
---
Cash available for
distribution per
share(1) 0.27 0.25 0.87 0.82
---
Dividends declared
per common share 0.23 0.23 0.70 0.70
---
Dividends paid per
common share(3) 0.23 0.23 0.70 0.70
---
The following tables provide further detail on the allocation of the Comparable EBITDA between owned assets and assets in which TransAlta Renewables holds an economic interest; as well as a reconciliation to AFFO.
3 Months Ended
Sept. 30 2020 2019
($CAD millions)
Owned
Assets Economic Total Owned Assets Economic Total
Interest Interest
---
Comparable EBITDA 51 45 96 50 36 86
---
Interest expense (9) (9) (10) (10)
---
Sustaining capital (6) (6) (5) (2) (7)
expenditures
---
Current income tax
expense (1) (1) (2) (2)
---
Tax equity
distributions (4) (4) (1) (1)
---
Distributions paid
to (1) (1)
subsidiaries' non-
controlling
interest
---
Realized foreign
exchange (2) (2)
loss
---
Provisions 3 3
Currency
adjustment, (2) (2) 2 3 5
reserves, interest
income
and other
---
AFFO 38 38 76 35 34 69
---
9 Months Ended
Sept. 30 2020 2019
($CAD millions)
---
Owned
Assets Economic Total Owned Assets Economic Total
Interest Interest
---
Comparable EBITDA 182 147 329 195 118 313
---
Interest expense (29) (29) (30) (30)
---
Sustaining capital (12) (3) (15) (22) (5) (27)
expenditures
---
Current income tax
expense (1) (8) (9) (1) (6) (7)
---
Tax equity
distributions (16) (16) (4) (4)
---
Distributions paid
to (4) (4) (4) (4)
subsidiaries' non-
controlling
interest
---
Realized foreign
exchange (3) (3) (4) (4)
loss
---
Provisions 4 4
---
Insurance recovery (4) (4)
---
Currency
adjustment, 4 4 6 4 10
reserves, interest
income
and other
---
AFFO 141 120 261 136 107 243
---
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.
AFFO includes the deduction of
sustaining capital expenditures and
distributions to non-controlling
interes
ts and excludes
the effects of timing and working
capital on distributions from
subsidiaries of TransAlta in which
the Company holds an economic
interest. CAFD 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 and may not be comparable to
similar measures presented by other
issuers and should not be considered
in isolation or as a substitute for
measures prepared in accordance with
IFRS. Refer to the Non-IFRS
Measures and Reconciliation of Non-
IFRS Measures sections 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 Canadian
Wind, Canadian Hydro and US Wind and
Solar 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.
(3) Includes DRIP payments.
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 23 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities, one solar facility, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,537 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Pennsylvania, New Hampshire, 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, pertaining to, without limitation, the following: the potential impact of COVID-19 on the Company, and the actions to be undertaken by the Company or TransAlta in response to the COVID-19 pandemic; the electricity and steam that is being provided by the Company continuing to be an essential service in the jurisdictions in which we operate; the Company being positioned to capitalize on future growth opportunities; and the Company continuing to have access to liquidity. Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions 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 the impact of COVID-19 and the associated general economic downturn, the impact of which will largely depend on the overall severity and duration of COVID-19 and the general economic downturn, which cannot currently be predicted, and which present risks including, but not limited to: more restrictive directives of government and public health authorities; reduced labour availability impacting our ability to continue to staff the Company's operations and facilities; impacts on the Company's ability to realize its growth goals, including acquiring assets from TransAlta; decreases in short-term and/or long-term electricity demand; increased costs resulting from the Company's efforts to mitigate the impact of COVID-19; deterioration of worldwide credit and financial markets that could limit the Company's ability to obtain external financing to fund its operations and growth expenditures; a higher rate of losses on accounts receivables due to credit defaults; further disruptions to the Company's supply chain; impairments and/or write-downs of assets; and adverse impacts on the Company's information technology systems and the Company's internal control systems, including increased cybersecurity threats. Other factors that may adversely impact the Company's forward-looking statements include, but are not limited to, risks relating to: operational risks involving the Company's facilities, including unplanned outages at such facilities; disruptions in the transmission and distribution of electricity; the effects of weather and other climate-related risks; disruptions in the source of water, wind, solar or gas resources required to operate our facilities; natural disasters; equipment failure and our ability to carry out repairs in a cost-effective or timely manner; and industry risks and competition. The foregoing risk factors, among others, are described in further detail in the Company's Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2019, which are available on SEDAR at www.sedar.com. 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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SOURCE TransAlta Renewables Inc
