TransAlta Corporation (TransAlta) (TSX:TA) (NYSE:TAC) today
reported a comparable loss(1) for the second quarter 2012 of $22
million ($0.10 per share) versus comparable earnings(1) of $65
million ($0.29 per share) for the same period in 2011. The loss is
largely due to Energy Trading results and higher planned major
maintenance in the quarter compared to the same period last year.
Lower prices in the Alberta and Pacific Northwest markets were also
a factor.
Comparable EBITDA(1,2) for the second quarter 2012 was $193
million compared to $262 million in the second quarter of 2011.
Funds from operations(1,2) (FFO) for the second quarter of 2012
were $150 million compared to $226 million in the second quarter of
2011, excluding the $204 million one-time impact of the arbitration
panel's decision on Sundance units 1 and 2 described in our press
release dated July 23, 2012. The net loss attributable to common
shareholders for the quarter was $797 million ($3.51 per share)
compared to net earnings of $12 million ($0.05 per share) in the
second quarter of 2011.
Strong Generation performance
Comparable Generation gross margins remained strong in the
quarter and were in line with the same period last year, despite
the higher major maintenance and lower prices.
"Our Generation fleet continues to perform well and is helping
us offset some very difficult market conditions," said Dawn
Farrell, TransAlta President and CEO. "Having solid base operations
allows us to drive our strategy forward. We continue to look beyond
any one quarter and focus on the long-term potential of this
company."
TransAlta remains on track to deliver on its fleet availability
goal of 89 - 90 per cent for the year
Fleet availability in the second quarter 2012 increased to 81.6
per cent compared to 76.9 per cent over the same period last year.
In addition, TransAlta has now completed four of six major
maintenance outages as planned on its coal units, and remains on
track to deliver on its fleet availability goal of 89 - 90 per cent
for the full year.
"Our fleet availability remained very strong throughout the
quarter and improved over last year despite higher planned outages
on our Alberta coal fleet," said Mrs. Farrell.
(1)Comparable earnings (loss), comparable earnings (loss) per
share, comparable EBITDA, and funds from operations, are not
defined under International Financial Reporting Standards ("IFRS").
Presenting these measures from period to period provides
supplemental information to help management and shareholders
evaluate earnings trends in comparison with prior periods' results.
Refer to the Non-IFRS Measures section of the Management's
Discussion and Analysis ("MD&A") for further discussion of
these items, including, where applicable, reconciliations to net
earnings (loss) attributable to common shareholders, operating
income (loss), and cash flow from operating activities.
(2) Comparable EBITDA and funds from operations are key
supplemental performance measures for TransAlta which provide
additional information regarding the company's ability to cover its
capital requirements and dividends as well as strengthen its
balance sheet and finance growth.
TransAlta continues to generate strong cash flows and has ample
liquidity
For the full year, TransAlta continues to target FFO at the low
end of its previously stated range of $800 - $900 million excluding
the one-time net penalty associated with the Sundance decision. FFO
at these levels, combined with available liquidity and the
contribution from TransAlta's dividend reinvestment plan, currently
at an approximate 70 per cent participation level, are sufficient
to cover its dividend and sustaining capital program in 2012.
Highlights - TransAlta second quarter 2012
Financial
-- Funds from operations of $150 million or ($0.66) per share, excluding
the impact of the arbitration panel's decision on Sundance units 1 and 2
-- Comparable loss of $22 million or ($0.10) per share
-- Net earnings (loss) attributable to common shareholders for the quarter
of ($797) million or $(3.51) per share
-- Dividends paid of $0.29 per share to common shareholders
-- Approximately 70 per cent participation in our dividend reinvestment
plan, resulting in an estimated annualized cash savings of approximately
$185 million
Operating
-- Coal: Comparable gross margins from TransAlta's coal fleet remained flat
at $188 million despite higher planned outages at Alberta Coal
-- Gas: Comparable gross margins from TransAlta's gas fleet increased
slightly quarter over quarter as a result of strong availability and
reduced gas input costs
-- Renewables: Comparable gross margins declined $9 million quarter over
quarter to primarily due to lower prices in Alberta and lower wind
volumes in Eastern Canada.
-- Energy Trading: Gross margins decreased $48 million quarter over
quarter. Second quarter losses came from Eastern Trading which was
negatively impacted by record temperatures and several unscheduled
outages in the U.S. Northeast.
Major maintenance
-- TransAlta has completed the majority of its 2012 major maintenance
program for its coal fleet. Major maintenance outages at Keephills 1 and
2, Centralia and Sheerness have been completed. The remaining coal major
maintenance outages are on track.
Growth
-- 68 MW New Richmond wind farm in Quebec; target completion by Q4 2012
Significant events
Sundance Units 1 & 2
On July 23, 2012 TransAlta reported the independent arbitration
panel considering TransAlta's decision in December 2010 to shut
down two units at its Sundance generating station had allowed the
company's claim of force majeure. This decision validates
TransAlta's belief the units failed due to issues beyond its
control.
TransAlta also sought to have the Power Purchase Arrangement
(PPA) terminated for economic reasons, as provided for under the
legislation. The panel did not agree with this claim. TransAlta
will immediately start the work to safely restore the units to
service.
Based on the arbitration panel's decision, under International
Financial Reporting Standards (IFRS), TransAlta has written down
its Sundance Units 1 and 2 by $43 million in the second quarter of
2012. This write down, combined with the net penalty from the
arbitration has been recorded in the second quarter, resulting in a
net earnings impact of $184 million.
Centralia
On July 25, 2012, TransAlta reported that its subsidiary
TransAlta Centralia Generation LLC had entered into an 11-year
agreement to provide electricity from its Centralia, Washington
power plant to Puget Sound Energy ("PSE"). This contract
significantly reduces TransAlta's merchant exposure in the Pacific
Northwest. The agreement is subject to approval by the Washington
Utilities and Transportation Commission.
Under IFRS, and taking into consideration TransAlta's existing
contracts, the new contract with PSE and management's expectations
for forward market electricity pricing in the Pacific Northwest,
TransAlta has written down the carrying value of the Centralia
Thermal plant by $347 million in the second quarter of 2012.
TransAlta also wrote down the associated tax assets by $169 million
in the second quarter 2012.
The reduction in the value of the deferred tax asset will result
in an increase in the Company's overall effective tax rate from an
accounting perspective; however, from a cash flow perspective,
TransAlta does not expect to pay any cash taxes for Centralia
through to the end of the plant's economic life in 2025.
The following table depicts key financial results and statistical operating
data:
Second Quarter 2012 Highlights:
----------------------------------------------------------------------------
3 months 3 months 6 months 6 months
In millions, unless otherwise ended June ended June ended June ended June
stated 30, 2012 30, 2011 30, 2012 30, 2011
----------------------------------------------------------------------------
Availability (%) 81.6 76.9 86.7 83.7
----------------------------------------------------------------------------
Production (GWh) 8,274 8,878 17,715 18,982
----------------------------------------------------------------------------
Revenue 407 515 1,063 1,333
----------------------------------------------------------------------------
Gross margin(1) 256 328 725 936
----------------------------------------------------------------------------
Operating income (loss)(1) (394) 58 (222) 417
----------------------------------------------------------------------------
Net earnings (loss) attributable
to common shareholders (797) 12 (708) 216
----------------------------------------------------------------------------
Comparable earnings (loss)(2) (22) 65 23 140
----------------------------------------------------------------------------
Basic and diluted net earnings
(loss) per common share (3.51) 0.05 (3.13) 0.97
----------------------------------------------------------------------------
Comparable earnings (loss) per
share(2) (0.10) 0.29 0.10 0.63
----------------------------------------------------------------------------
Comparable earnings before
interest, taxes, depreciation,
and amortization (EBITDA)(2) 193 262 445 535
----------------------------------------------------------------------------
Funds from operations(2) 150 226 339 452
----------------------------------------------------------------------------
Funds from operations per
share(2) 0.66 1.02 1.50 2.04
----------------------------------------------------------------------------
Cash flow from operations 78 123 261 291
----------------------------------------------------------------------------
(1) Gross margin and operating income are Additional IFRS
measures. Refer to the Additional IFRS measures section of the
MD&A.
(2) Comparable earnings, comparable earnings per share,
comparable EBITDA, funds from operations, and funds from operations
per share are not defined under IFRS. Refer to the Non-IFRS
financial measures section of the MD&A for an explanation and,
where applicable, reconciliations to net earnings(loss)
attributable to common shareholders, operating income (loss) and
cash flow from operating activities.
The complete second quarter report for 2012, including MD&A
and unaudited interim financial statements, as well as our second
quarter presentation is available on the Investors section of our
website: www.transalta.com.
Conference call
TransAlta will hold a conference call and web cast at 9 a.m. MT
(11 a.m. ET) today to discuss results. The call will begin with a
short address by Dawn Farrell, President and CEO, and Brett
Gellner, Chief Financial Officer, followed by a question and answer
period for investment analysts, investors, and other interested
parties. A question and answer period for the media will
immediately follow.
Please contact the conference operator five minutes prior to the
call, noting "TransAlta Corporation" as the company and "Jess
Nieukerk" as moderator.
Dial-in numbers:
Toll-free North American participants - 1-800-319-4610
Outside of Canada & USA call - 1-604-638-5340
A link to the live webcast will be available via TransAlta's
website, www.transalta.com, under Web Casts in the Investor
Relations section. If you are unable to participate in the call,
the instant replay is accessible at 1- 604-638-9010 with TransAlta
pass code 2231 followed by the # sign. A transcript of the
broadcast will be posted on TransAlta's website once it becomes
available.
Note: If using a hands-free phone, lift the handset and press
one to ask a question.
TransAlta is a power generation and wholesale marketing company
focused on creating long-term shareholder value. TransAlta
maintains a low-to-moderate risk profile by operating a highly
contracted portfolio of assets in Canada, the United States and
Australia. TransAlta's focus is to efficiently operate our biomass,
geothermal, wind, hydro, natural gas and coal facilities in order
to provide our customers with a reliable, low-cost source of power.
For 100 years, TransAlta has been a responsible operator and a
proud contributor to the communities where we work and live.
TransAlta is recognized for its leadership on sustainability by the
Dow Jones Sustainability North America Index, the FTSE4Good Index
and the Jantzi Social Index. TransAlta is Canada's largest
investor-owned renewable energy provider.
This news release may contain forward looking statements,
including statements regarding the business and anticipated
financial performance of TransAlta Corporation. These statements
are based on TransAlta Corporation's belief and assumptions based
on information available at the time the assumption was made. These
statements are subject to a number of risks and uncertainties that
may cause actual results to differ materially from those
contemplated by the forward-looking statements. Some of the factors
that could cause such differences include, pricing in the market
place, our inability to enter into long term contracts due to
prevailing market conditions, legislative or regulatory
developments, competition, global capital markets activity, changes
in interest rates, currency exchange rates, inflation levels and
general economic conditions in geographic areas where TransAlta
Corporation operates.
Note: All financial figures are in Canadian dollars unless noted
otherwise.
Contacts: TransAlta Corporation - Media & Investor
Inquiries: Jess Nieukerk Director, Investor Relations 1
800-387-3598investor_relations@transalta.com Website:
www.transalta.com
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