TransAlta Corporation

Ladies and gentlemen, thank you for standing by and welcome to TransAlta Corporation fourth quarter and full year 2020. At this time, all participants are in a listen-only mode. After the speaker's presentations, there will be a question and answer session. To ask a question during this time, simply press star, then the number one on your telephone keypad. If you require any further assistance at all, please press star zero. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kira Valentini, Managing Director, Investor Relations. Please go ahead.

Thank you, Michelle. Good morning, everyone, and welcome to TransAlta's fourth quarter and year-end 2020 conference call. With me today are Don Farrell, President and Chief Executive Officer, Todd Stack, Executive Vice President, Finance and Chief Financial Officer, John Cusignoris, Chief Operating Officer, and Kerry O'Reilly Wilkes, Executive Vice President, Legal, Commercial and External Affairs. Today's call is webcast and I invite those listening on the phone lines to view the supporting slides that are posted on our website. A replay of the call will be available later today and a transcript will be posted to our website shortly thereafter. All information provided during this conference call is subject to the forward-looking statement qualifications set out here on slide two further details as well in our MD&A and incorporated for the purposes of today's call. All amounts referenced during the call are in meeting currency unless otherwise stated. The non-IFRS terminology used, including comparable EBITDA, funds from operations, and free cash flow, are reconciled in the MD&A for your reference. On today's call, Don and Todd will provide an overview of the quarter's results, along with expectations for 2021. After these prepared remarks, we will open the call for questions. With that, let me turn the call over to Dawn.

Thanks, Kira, and good morning, everyone, and thanks for joining our call today. This will be my last official Congress call with all of you, so let me use my time to brag about the great successes of the team in 2020, and then I'll turn the reins over to Todd and John, who are more than ready to take the company ahead starting in April. So let me start by saying that 2020 was quite a remarkable year for TransAlta. Whether it was how we handled the COVID-19 pandemic or how we positioned the company for 2021 and beyond, the team was absolutely focused on execution. We finished 2020 with strong financial and operational performance, and we significantly advanced the strategies of TransAlta. The year was marked by the resilience of our people, the performance of our diversified portfolio of investments, and progress on our E2SG goals, which are economic, environment, social, and governance. Growing our investments in TransAlta renewables and continuing with our investments in the transition to natural gas here in Alberta have strengthened our overall E2SG framework. Our strategic renewables investments, our ownership of our hydro assets here in the Alberta market, and our positioning in competitive gas-fired generation have set us up well for any of the portfolios of ESG and E2SG shareholders. We set out in 2020 to continue to execute on our clean energy investment plan, and that's what we did. So first, we promised to advance our strategy of converting to gas here in the Alberta thermal fleet, and there were several accomplishments. We achieved a major milestone when Sundance Unit 6 conversion to gas was completed and was fully commissioned to the grid in early 2021. We cut our CO2 emissions in half at that unit, and we're ready to start K2 in March and K3 in the fall. The announcement of a rise in carbon prices to $170 a ton by 2030 here in Canada made the decision to close the Highvale mine effective December 31st, 2021, the end of this year, the right one. This decision advanced our goal of being off thermal coal in Canada by four years, originally 2025, but now by the end of 2021. All our Alberta thermal facilities will now run only on natural gas starting January 1st, 2022. During the fourth quarter of 2020, we also executed an equipment supply agreement for the Sundance Unit 5 repowering, 730 megawatt project, is estimated to cost between $800 and $825 million, and is scheduled to be online late in 2023. Finally, we retired our first coal unit at Centralia on December 31, 2020. We're now operating only one unit at Centralia until the end of its life in 2025, which is supported by a strong PPA with our customer, Puget. Now, secondly, on the renewable side of our clean energy investment plan, we completed Our investment in a 49% interest in the Skookumchuck Wind Facility in Washington, and this added net capacity of 67 megawatts. We advanced construction on our 207 megawatt wind rise facility here in Alberta, despite the COVID pressures. We're about 80% complete as of the end of 2020. We completed our first battery storage project at Summerview with some good financial and operational performance already in 2021. We advanced discussions on our US wind projects and have a number of serious discussions with customers here in Alberta on additional renewables investments. And finally, we worked with BHP in Australia to bring lower intensity and power solutions to their operations so they can grow their business on a less carbon intensive basis. Our newly extended contract to 2038 provides us with unique opportunity in Western Australia to grow our on-site generation and renewable business. Now, thirdly, on our E-squared SG track record, we advanced the ball considerably there as well. Greenhouse gas emissions for 2020 were down another 4.2 million tons, representing another 20% reduction in greenhouse gas emissions year over year. We are now down over 60% in greenhouse gas emissions compared to 2005 levels. Our goal is to be under 12 million tons by the end of 2022, down almost 70% from 2005. Our performance is exceeding targets set under the Paris Agreement. To date, TransAlta has delivered 25 million tons of greenhouse gas reductions globally and approximately 19 million tons of greenhouse gas reductions in Canada since 2005. Greenhouse gas reductions in Canada represent close to 10% of Canada's goal of a 220 million ton reduction for Canadians by 2030. We approved an Equity, Diversity and Inclusion Pledge which was recommended by our employees and approved and committed to by our Board of Directors. and a really special accomplishment, we achieved a score of A- from CDP, which put us in the leadership category for sustainability. We are among a very exclusive and elite group of companies with this designation. The average CDP score for our peers is a B, and the average score for reporting companies in North America is a D. We did all this while improving the financial condition of the company. In 2020, free cash flow was $358 million and $1.30 per share, an excellent result considering that our thermal business was down over $100 million due to the downturn here in Alberta and the impacts of COVID-19 on the Alberta economy. We ended the year with over $2 billion of liquidity and with up $700 million of cash in the bank. And many congratulations to our finance and treasury team, who did an outstanding piece of work on the project financing for South Headland in Western Australia. At the end of the year, we announced a 303 megawatt asset drop down to R&W, and we declared a 6% increase for our dividend holders for TransAlta shareholders based on our continued confidence in our strategy and its financial strength. And then finally, we achieved our net recourse debt target after a multi-year effort of deleveraging. I'd like to end my comments today by talking about our people. In 2020, our people safely ran our fleet and advanced our strategy and our financial performance. Whether they were at their remote home offices or at the plants or in our corporate offices, they kept their spirits high and our COVID-19 cases low. Our Sundance Unit 6 outage had at one time over 700 people on site with no spread. Absolutely remarkable. More importantly, our people achieved first quartile performance on our organizational health KPI. A five-year journey from fourth quartile to first quartile as measured by our people. In a year where a worldwide pandemic was trying to create nothing but havoc and upset, We improve the way people work with one another to execute our strategy. With all the great work in 2020 by our employees, it is clear that TransAlta is a leader in clean electricity and a sought-after investment by those who are interested in companies that deliver on E-squared SG objectives. And of course, as I leave after 35 years, I know it will be the people that I miss the most. Finally, on February 4th this year, we announced my retirement from TransAlta and the appointment of John Kouzanouris as our new CEO. The board and I worked together over the past several years to oversee a serious succession process that led to the anonymous appointment of John as our new CEO. John is the best choice for taking TransAlta into the future, and I supported his appointment wholeheartedly. John and I have worked together for over eight years. He is a fine leader who will definitely navigate the ship over the next decade. He and Todd are excellent partners who have already announced a top team who are ready to take the company into what will be a very exciting time as clean electricity becomes even more central to many of our energy needs. Congratulations to both John and Todd. What an exciting time ahead for both of you, for the team and for the industry. So folks, From me, that's a wrap. And Todd, I'll turn it over to you so that you can take everyone through the numbers.