TransAlta Corporation

Ladies and gentlemen, thank you for standing by and welcome to the TransAlta Corporation third quarter 2020 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Chiara Valentini, Managing Director, Investor Relations. Thank you. Please go ahead.

Thank you, Mariama. And good morning, everyone, and welcome to TransAlta's third quarter 2020 conference call. With me today are Don Farrell, President and Chief Executive Officer, Todd Stack, Chief Financial Officer, John Kousinioris, Chief Operating Officer, Brett Gellner, Chief Development Officer, and Kerry O'Reilly Wilkes, Chief Legal Regulatory and External Affairs Officer. Today's call is webcast and I invite those listening on the phones to view the supporting slides that are posted on our website. A replay of the call will be available later today and the transcript will be posted to our website shortly thereafter. All the information provided during this conference call is subject to the forward-looking statement qualifications set out here on slide two. further detailed in our MD&A and incorporated in full for the purposes of today's call. All amounts referenced during the call are in Canadian currency unless otherwise stated. The non-IFRS terminology used including comparable EBITDA, funds from operations and free cash flow are also reconciled in the MD&A for your reference. On today's call, Don and Todd will provide an overview of the course results along with expectations for balance of the year and after these prepared remarks, we will open the call for questions. With that, let me turn the call over to Dawn.

Good morning everyone and thanks for joining us on our third quarter call here in 2020. We have some great third quarter and year-to-date results to report and as well we have a number of very key and important updates and accomplishments on our strategy of becoming Canada's leading clean electricity provider. I'm going to start with our strategic updates and then I'm going to turn it over to Todd for the numbers. During the quarter, the Board and Management of TransAlta made several key decisions that we announced this morning. They've included that we've determined we can now close the Alberta Highvale Mine effective December 31st, 2021. This decision advances our goal of being off thermal coal in Canada by four years, originally 2025, but now by the end of 2021. All Alberta power plants will now run only on natural gas starting January 1, 2022. Our only coal plant after the end of next year will be Centralia, which has a long-term contract supporting its cash flows, and we have a transition agreement on greenhouse gases in Washington State until the end of its life in 2025. In Q3, we also made the final investment decision on Sundance Unit 5 repowering. This 730 megawatt project is estimated to cost between $800 and $825 million and will come online in Alberta in the fourth quarter of 2023. The team has advanced the project substantially throughout the year and we've received board approval to build the project and I'm pleased to tell you today that we're on track. Our gas conversions are also on track with Sun 6 in its final stages of testing. Everything is proceeding extremely well. We'll complete the full commissioning by mid-November in just a couple of weeks. The K2 and K3 conversions are on deck to be completed next year. On our ESG front, our greenhouse gas emissions will be under 11.5 million tons by the end of 2022, down almost 70% from 2005. I want to be very clear, TransAlta has more than met its fair share of the Paris Agreement. To date, we alone have delivered 10% of Canada's goal of a 220 million ton reduction for Canadians by 2030. We'll begin the conversation today about our plans for additional reductions as we work with customers to help them achieve their ambitions to reduce their own greenhouse gases. And due to the outstanding work by our finance team to raise project debt at South Headland, We have created even more strength in our liquidity, which has never been stronger. All this at a time when there's great uncertainty due to COVID. This sets us apart as a company in which to invest. We are positioned with the cash we need to continue to grow R&W and to fund our growth at TransAlta. We have positioned several assets as potential drop downs to R&W and hope to make an announcement in the coming months. We also We'll also provide further updates to you on our project pipeline and what's next on the growth side. On gas supply, two important milestones were met. We and Tidewater entered into agreement with ACCO to sell the Pioneer pipeline for $255 million. The transaction is expected to close in the second quarter of 2021. The TC team also received regulatory approval for the NGTL 2021 expansion project. which expands our supply options and helps us manage future pricing volatility. TransAlta Corporation has been a leader in the deployment of innovative renewable technologies for decades. We were a pioneer in Canada in the deployment of wind power generation and we're now growing our renewable fleet with a new addition of a commercial operation of our wind charger battery storage system. This is Alberta's first utility scale battery storage project and it's a truly renewable system as it's powered by the Summerview Wind Farm. The board also approved a diversity and inclusion pledge which was developed by our frontline diversity and inclusion council. Great work by that team to get us clearly pointed at the future and set the foundation for our goal to have 40% of our workforce female by 2030. Finally, but just as importantly, We delivered excellent financial results that demonstrate our continued drive to generate free cash flow for our investors. I think this is the third quarter in a row which we've been over $100 million of free cash flow, so congratulations to the hardworking TransAlta team that made that so. By the end of the call, it will be very clear TransAlta is a leader in clean electricity and should be a sought-after investment by those who are interested in companies that deliver on economics, and ESG. We call it E-ESG or E squared SG and we're very proud of the work we've all done to get us here today. Our work to convert our Alberta fleet to gas, our ownership in hydro, our ownership in R&W, our innovative work with customers and the clear advantages we have with our marketing and trading team have created a strong and diversified portfolio of investments that have held up through a pretty interesting 2020. Frankly, the team at TransAlta hasn't missed a beat. Now, I know the investment community is familiar with most of the projects that we're investing in, so I won't go through them line by line, but I want to provide you with a couple of updates. Our Skookumchuck wind project is close to completion, and we expect commercial operation to be imminent. Our 49% ownership option will be executed shortly thereafter. Construction on Windrise, our contracted wind facility here in Alberta, is 45% complete. And we began receiving wind turbine generators on site in mid-October. We're advanced on the KBOB Cogen project. And as I said earlier, for Sun 5, we've received approval to proceed and are targeting commercial operation by fourth quarter 2023. Now, we're typically pretty conservative in terms of what we tell you about what's in the development pipeline. and we often only tell you about projects once they're signed, sealed and delivered. But we thought today that because we have a lot of development potential at TransAlta behind the scenes that we'd highlight some of that. We have over 2,500 megawatts of growth projects that are in various stages of development. This is a great amount of growth potential and our business development efforts set us up well to generate growing returns for the considerable future. This is the first time we've provided details on many of these projects. We have a dedicated development staff that continues to advance all of our prospects from PPAs, wind studies, permitting to transmission access. And our goal continues to be to target 200 to 400 megawatts of development projects per year. And we have the cash and the financial capability to achieve this goal. Now, as I summarized earlier today, we announced that we will be entirely running on natural gas in Canada by the end of 2021. This is a tremendous milestone for us and a major step forward in delivering on our clean energy investment plan. This decision is the concluding chapter of our thermal coal legacy here in Alberta and further demonstrates our commitment to our Alberta customers that their electricity is moving towards carbon neutral. Recent and upcoming milestones on this journey include retiring Sundance Unit 3 on July 31, 2020, Completing the boiling conversion of Sun 6 with full gas firing, which is currently in testing and commissioning mode. Boiler conversions next year for Keep Hills Units 2 and 3. Gas firing Sundance Unit 4 and Keep Hills Unit 1 in 2022. Although these units will be due rate to run fully on gas, we have sufficient ability in our portfolio to flex all of our capacity to ensure that we can fully optimize the fleet and serve the market here in Alberta. And finally, of course, the repowering of Sundance Unit 5. Now, as you can see from this slide, TransAlta has made tremendous progress as an organization in reducing our greenhouse gas emissions, especially in comparison to international agreements compared to our peers here in Canada and to the rest of Canada. to our peers here in Alberta and to the peers in the rest of Canada. By the end of 2022, we'll have achieved a 32 million ton reduction in greenhouse gas emissions from the 2005 levels across our worldwide fleet. Of that, 21 million tons have been reduced in our Canadian operations. As I said earlier, overall, we've contributed 10% to the Paris target set by the Canadian government. We are among a very few companies in Canada to achieve such significant reductions, and in doing so, we are a clear leader in supporting Canada's commitment to the Paris Agreement. We are outpacing the rest of the province and the country by significant margins. And we're not done yet. The pace of change in renewable energy technology is accelerating at an unprecedented level. We know that we can be long-term partners with our customers to provide green electricity and help integrate these new and leading technologies into their power supply. This roadmap describes how we're conceptualizing the delivery of these technologies and implementing them with our customers. We are working with customers like BHP in Western Australia where a recent contract replacement and extension at Southern Cross Energy recognizes the value and the need for integrating renewables to supplement base load requirements that industrial customers need for their operations. As we look at the mid-2020s, we're dusting off our prior work on carbon capture and storage that we'll be using to understand its potential value in supporting a future renewables build-out here in Alberta. We're also re-looking at the economics of Brazzo pump storage. It's a potential 900 megawatt battery that has the potential to store wind and solar here in Alberta and provide firm green electricity. We are currently working with customers who may be interested in buying firm green electricity from Brazzo in the future. and we have a team that works directly with flow battery companies and we expect to make investments there in the coming years. There are many technologies in various states of commercial readiness and we stand ready to make necessary investments as they become more commercial for our customers. On hydrogen, many players are going to invest substantial dollars in creating hydrogen. We'd like to be one of the first power companies to blend hydrogen into our facilities and we're working with potential partners today to see what opportunities may now be available. Before I turn over the call to Todd, I want to take a moment to summarize the key takeaways from this call. We are moving our corporate transition forward on an E squared SG principle. E for economics, E for environment, S for socially responsible and G for governance. Trans Delta's track record on greenhouse gas reductions is indisputable. ESG investors should be looking carefully at TransAlta for their portfolios. We are moving into an ESG-focused investment space and are set to continue to deliver impressive emissions reductions in the country. We are one of Canada's largest suppliers of renewable electricity and our new goal is to focus on firm green electricity supply, which will take us a decade to achieve, a great long-term goal for the team. We have a proven track record of commercializing new and innovative technology and will continue to be a trusted partner for our customers. And finally, we're committed to building a strong and modern organization free from discrimination and systemic barriers. So now let me turn it over to Todd who will give you more color on the numbers.