Post on 15-Jul-2020
11
TransAlta Renewables Inc.
Investor Presentation
January 2018
22
This presentation may include forward-looking statements or information (collectively referred to herein as “forward-looking statements”) within the meaning of
applicable securities legislation. All forward-looking statements are based on TransAlta Renewables Inc.’s (the “Company”) beliefs as well as assumptions based
on information available at the time the assumptions were made and on management’s experience and perception of historical trends, current conditions, and
expected future developments, as well as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts, but only predictions
and generally can be identified by the use of statements that include phrases such as “may”, “will”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “project”,
“foresee”, “potential”, “enable”, “continue”, or other comparable terminology. These statements are not guarantees of the Company’s future performance and are
subject to risks, uncertainties, and other important factors that could cause our actual performance to be materially different from that projected. In particular, this
presentation contains forward-looking statements pertaining to, without limitation, the following: ability to realize drop-downs and third party growth opportunities;
the continued support and sponsorship of TransAlta Corporation; the cash outlook for 2017; the Kent Hills expansion, including the costs and timing of
completion; the forecasted government policies and regulations, competitiveness, customer requirements and diversified system expected to contribute to future
growth and the Company’s ability to benefit from such factors; the Company’s strategic focus and potential sources of capital; the Company’s ability to develop
and construct the identified Canadian wind and Australian solar projects and the capital costs associated with such projects, including Garden Plains Wind,
Cowley Ridge Wind Repower, Antelope Coulee Wind and Goonumbla Solar Farm; and the development and construction of Brazeau Energy Storage, including
the size, timing and costs thereof.
These forward-looking statements are not historical facts but reflect 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: changes in tax, environmental, and other laws and regulations; the regulatory and political environments in the jurisdictions in which we operate;
adverse regulatory developments, including unanticipated impacts on existing generation; environmental requirements and changes in, or liabilities under, these
requirements; changes in general economic conditions including interest rates; operational risks involving our facilities, including unplanned outages at such
facilities; disruptions in the transmission and distribution of electricity; disputes with counterparties, including as it pertains to the commercial operation at South
Hedland; the effects of weather; disruptions in the source of fuels, water, or wind required to operate our facilities; risks pertaining to our relationship with
TransAlta Corporation; competitive factors in the power industry; operational breakdowns, failures, or other disruptions; changes in economic and market
conditions; potential delay in construction and commissioning of the Kent Hills expansion; 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 and the Annual Information
Form for the year ended December 31, 2016. 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 presentation. The purpose of the financial outlooks contained herein is to give the reader information about
management's current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. 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.
The Company evaluates its performance and the performance of our business segments using a variety of measures. Certain of the financial measures
discussed in this presentation are not defined under International Financial Reporting Standards (IFRS) and, therefore, should not be considered in isolation or
as an alternative to IFRS measures when assessing the financial performance or liquidity of the Company. These non-IFRS measures 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 Company’s MD&A, which is available on the Company’s website or under the Company’s profile on www.sedar.com for further discussion of these Items,
including, where applicable, reconciliations to measures calculated in accordance with IFRS.
Unless otherwise specified, all dollar amounts are expressed in Canadian dollars.
Forward Looking Statements
33
TransAlta Renewables at a Glance
Note: EBITDA and CAFD are not defined under IFRS. For further information on non-IFRS financial measures we use, see the section entitled “Non-IFRS Measures” contained in our Management
Discussion and Analysis1 Enterprise value calculated as: market capitalization + total debt (book value) + non-controlling interests (book value) - cash and cash equivalents. Balance sheet data as at September 30, 2017
and includes Solomon proceeds 2 Based on closing price on the Toronto Stock Exchange as of January 4, 2018
Enterprise Value1,2 $4.1 Billion
Market Cap.2 $3.3 Billion
2017 EBITDA (guidance) $425 - 450 Million
2017 CAFD (guidance) $235 - $260 Million
Dividend Yield 7.1%
TransAlta’s Ownership 64%
# of
Assets
Net
MW
Percent of
Generation
Cash Flow
Wind 18 1,248 49%
Natural Gas 7 956 47%
Hydro 13 112 4%
Total 38 2,316 100%
Significant Scale Highly Diversified
44
Investment Highlights
38 facilities across multiple regions and spanning
various technologiesHighly Diversified
12 year weighted average contract lifeHighly Contracted
Portfolio
1.7x Net Debt/EBITDA
Raised over $0.9 billion of low cost project debt, with
additional capacity
Strong Balance Sheet
and Access to
Competitive Capital
$2.4 billion of acquisitions since IPO
~80% Total Shareholder return since IPO
Proven Track Record of
Growth and Value
Creation
Excellent source of drop-down and third party growth
opportunities
Strong Sponsorship
from TransAlta
Corporation
55
Highly Contracted Facilities
Akolkolex, BCSouth Hedland, WA
Kent Hills, NBSummerview 1, ABSummerview 2, AB
Ardenville, ABBlue Trail, AB
Soderglen, ABMacleod Flats, AB
Le Nordais, QCNew Richmond, QC
Taylor, ABBelly River, AB
Waterton, ABSt. Mary, AB
Cowley North, ABSinnott, AB
Bone Creek, BCGaletta, ON
Appleton, ONMoose Rapids, ON
Wolfe Island, ONRagged Chute, ON
Wyoming Wind, WYCastle River, ABMelancthon, ON
Misema, ONParkeston, WA
Upper Mamquam, BCSarnia, ON
McBride Lake, ABSouthern Cross, WA
Pingston, BC
0 5 10 15 20 25 30
Remaining Contracted Years
Average capacity
weighted contract life of
~12 years
66
Significant Increase in Cash Available For Distribution
Cash Available for Distribution refers to the amount of cash generated from operations after deducting sustaining capital and distributions to non-controlling interests, excluding the effects of timing and working capital on distributions from subsidiaries of TransAlta in which
the Company holds an economic interest and less principal repayments of amortizing debt. Outlook based on expected revenues from PPAs and the sale of green attributes. Renewable energy production from wind/hydro assets expected to range from 3,500 to 3,900
GWh including economic interests. Gas-fired generation provides compensation for capacity and production is not a significant indicator of this business.
$82
$177
$245
$235 - $260
$0
$50
$100
$150
$200
$250
$300
2014 2015 2016 2017 Outlook
Mil
lio
ns
77
Strong Performance Since IPO
• ~$2.4 billion in new assets
• Significantly increased dividend and public float
• Added to the S&P/TSX Composite Index in 2016
• Completed over $0.9 billion of project level financing
-10%
0%
10%
20%
30%
40%
50%
60%
Aug-13 Aug-14 Aug-15 Aug-16 Aug-17
RNW S&P TSX
Share Price Performance Since Aug, 2013
88
Strong Dividend Growth
$0.75 $0.77
$0.84 $0.88
$0.94
$0.00
$0.20
$0.40
$0.60
$0.80
$1.00
At IPO 2014 2015 2016 2017
~9%
Australian
Assets
~5%
Three
Canadian
Projects
~7%
South
Hedland
~3%
Wyoming
Wind
(Aug 2013)
Annual Dividend Per Share
99
Attractive Dividend Yield
0% 2% 4% 6% 8%
1 Based on the closing price as of January 4, 2018.2 Other companies include Algonquin Power, Brookfield Renewables, Enbridge Income Fund, Innergex, Northland Power, NRG Yield, NextEra Energy Partners, Pattern Energy. Source: FactSet
Average (~5.1%)
RNW Peers²
Dividend Yield
1010
Proven Growth Track Record
$2.4 billion in investments
2014 144 MW Wyoming wind acquisition
575 MW Australian Assets investments
2015
506 MW Sarnia gas investment
98 MW Le Nordais wind investment
7 MW Ragged Chute hydro investment
2017 150 MW South Hedland gas
17 MW Kent Hills 3 wind expansion
1111
South Hedland Power Station
150 MW Combined Cycle Gas Power
Station in Western Australia
• Commercial operation began in July
2017
• Highly contracted until 2042 with
Horizon Power (AA+ rating)
• Expected to generate ~$80 million
of EBITDA on an annualized basis
1212
Kent Hills 3
Expansion of the existing Kent Hills
Wind Farm in New Brunswick
• Five additional turbines adding
17 MW of capacity, bringing total
capacity to 167 MW
• The entire wind farm is now fully
contracted until 2035 with New
Brunswick Power
• Issued $260 million project level
debt secured by cash flows
1313
Drivers of Future Growth
Renewable targets
Carbon pricing
Thermal environmental regulations
Government Policies
and Regulations
Low gas prices and abundant supply
More cost competitive renewables
Technological improvements
Competitiveness
Desire for renewable energy
Behind-the-fence needs
Customer
Requirements
Highly dispatchable generation to complement growth
in intermittent generation
Minimize exposure to any one technology or fuel type
Diversified System
1414
U.S. Opportunity
• Wind and solar represent only ~10% of US capacity
• Natural gas generation needed to replace coal with dispatchable generation
390328
312
447
0
200
400
600
800
1,000
1,200
2002 2016
Generation capacity US (GW)
Coal/Other Nuclear Hydro Solar Wind Gas
Decline in
coal
Wind & Solar
only 10%
Significant
Growth in
Natural Gas
Source: US Dept. of Energy, Staff Report on electricity Markets and Reliability, August 2017
1515
Growth & Financing Strategy
• Primarily focused on North
America and Australia
• Renewables and gas fired
generation
• Highly contracted facilities
• Greenfield, brownfield and
acquisitions
• Early staged projects are often
less competitive and provide
higher returns
Strategic Focus
• $500 million of project debt
potentially available from
existing assets
• Proceeds from Solomon
handback
• Internally generated excess
cash flow
• New assets can support project
debt
• $500 million credit facility put in
place at RNW
• Partners
• New equity
Potential Source of Capital
1616
Significant Growth Opportunities
Actively Evaluating with TransAlta over $5 billion in Opportunities
Greenfield
• Near-term: Renewable calls in Alberta and
Saskatchewan, and opportunities in Australia and Pacific
Northwest
• Long-term: Over 5,000 MW of additional renewables
potential in Western Canada
Third-party Acquisitions
• Attractive opportunities in North America
• Strong cost of capital and balance sheet to compete
• Proceeds from Solomon can be used to fund growth
Potential Drop-downs
from TransAlta
• 800 MW of hydro in Alberta
• 400 MW of gas in Alberta & Ontario
• 90 MW wind and solar in Eastern Canada and the U.S.
• $2.5 billion Alberta Brazeau pumped hydro project
1717
Alberta wind projects remain candidates for future REP procurements or third party
contracting; Antelope Coulee prepared for up-coming Saskatchewan RFP.
Canadian Wind Projects
Edmonton
Calgary
Saskatoon
Regina
Hanna
Pincher Creek
Swift Current
Garden Plains Wind
Location30 km north of Hanna, Alberta
Capacity 130MW
Proposed
In-Service Date
Future Alberta REP calls or third
party contracting
Capital Costs $260 mm
Other Details Wind resource data dating back
to 2009
Partnerships with landowners
since 2011
Antelope Coulee Wind
Location 35 km southwest of Swift
Current, Saskatchewan
Capacity Up to 200MW
Proposed
In-Service DateApril 2021
Capital Costs $400 mm
Other Details Wind resource data dating back
to 2008
Cowley Ridge Wind Repower
Location Northwest of Pincher Creek,
Alberta
Capacity 20MW
Proposed
In-Service Date
Future Alberta REP calls or
third party contracting
Capital Costs $40 mm
Other Details Site of original Cowley Ridge
Wind Farm which was built in
1993 and dismantled in 2016
Long-term understanding of
wind resource
1818
Australian Growth
TransAlta continues to build on its already significant Australian presence
Perth
Sydney
AUSTRALIA
Goonumbla
Goonumbla Solar Farm
Location350km North-West of Sydney in New South
Wales
Capacity 70MW
Proposed
In-Service
Date
2019
Capital
Costs$140 mm
Other Details
Site is permitted under the New South
Wales Major Project Planning
Development process
Engaged Tier 1 EPC contractor to
undertake construction and operation
and maintenance
Interconnection agreements are in place
Currently securing offtake agreements
1919
Edmonton
Bonnyville
Grande Prairie
Hinton
Camrose
Wetaskiwin
Red Deer
Drumheller
Calgary
Lethbridge
Medicine Hat
Ft. McMurray
100 km
60 mi
Big Horn 1&2 – 120MW
Abraham
Lake
Rocky
Mountain House
Brazeau Dam
355MW
Brazeau Gorge
Brazeau
Canal
Brazeau
Reservoir
Edmonton
Water Flow
Water Flow
Water Flow
Brazeau Energy Storage
SIGNIFICANT VALUE
Unique one-of-a-kind pumped storage
hydro project
Up to 900 MW/5,000 MWh
Investment of $2.5 billion
Significant economic and employment
benefits
Targeting 2025/2026 operating date
Requires long-term contract
2020
Brazeau Pumped Hydro – Significant System Benefits
Brazeau Pumped Hydro
Storage
Fast Ramping
Load Following
Wind Firming
Avoided Curtailment
Voltage and Inertia Support
Supports Transition to Clean Energy and a Low Cost, Reliable Electricity
System
2121
TransAlta’s Brazeau Pumped Hydro Opportunity
Leverages existing infrastructure
Existing power house
Proposed pumped hydro
2222
Brazeau: Significant Work Completed and Underway
Engaged Owner’s Engineer, providing Class 5 Estimate
Conducted initial geotechnical work
Started engagement with First Nations
Started environmental field studies
Engaged with Governments, Communities, Unions, Regulators and NGOs
2323
Investment Highlights
Strong Core Business
with a proven track
record
Positioned for growth
and further valuation
creation
Diversified: Hydro, Wind, Gas; Canada, U.S. and
Australia
12 year weighted average contract life
1.7x Net Debt/EBITDA
Raised $0.9 billion of low cost project debt, with
additional capacity
$2.4 billion of acquisitions since IPO
~80% Total Shareholder Return since IPO
Access to growth capital
Source of growth opportunities with TransAlta
Corporation sponsorship
U.S. market fundamentals will drive development and
acquisition opportunities