TransAlta Corporation

Good morning, my name is Sylvie and I will be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation's second quarter 2021 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad. And if you would like to withdraw your question, simply press star then number two. Thank you. And I would like to turn the conference over to Kier Valentini, Managing Director of Strategic Finance and Investor Relations. Please go ahead.

Great. Thank you, Sylvie. Good morning, everyone, and welcome to TransAlto's second quarter conference call. With me today are John Kouzanouris, President and Chief Executive Officer, Todd Stack, EVP Finance and Chief Financial Officer, and Carrie O'Reilly-Wilkes, EVP Legal, Commercial, and External Affairs. Today's call is being 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 the transcript will be posted to our website shortly thereafter. All of the information provided during this conference call is subject to the forward-looking statement qualification set out here on slide two. Details further 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 pre-cash flow are also reconciled in the NDA for your reference. On today's call, John and Todd will provide an overview of the quarter's results, along with our expectations for the balance of year. After these remarks, we will open the call for questions. With that, let me turn the call over to John.

Thank you, Kiara. Good morning, everyone, and thank you for joining our second quarter call. As part of our commitment towards reconciliation, I want to begin by acknowledging that TransAlta's head office, where I am today, is located in the traditional territories of the Nitsitapi, the people of the Treaty 7 region in southern Alberta, which includes the Siksika, the Pagani, the Kainai, the Tsutsina, and the Stony Nakoda First Nations, as well as the home of Métis Nation Region 3. We've had another outstanding quarter. I'm extremely pleased with the performance of our company, and the progress that we have made in advancing our priorities. In Q2, we delivered a 39% increase in comparable EBITDA, which has resulted in a 55% increase in free cash flow per share quarter over quarter. And year to date, we have generated a 40% increase in comparable EBITDA, which has resulted in a 38% increase in free cash flow per share year over year. Based on our strong year to date performance, along with our expectations for the balance of the year, we're pleased to increase our EBITDA and pre-cash flow guidance for 2021 by 13% and 22%, respectively, at the midpoints compared to the original guidance we provided for 2021. Todd will provide more details on our revised guidance later in the call. Our access to liquidity remains strong, and we're able to fully fund our remaining conversion to gas at Key Pills 3, as well as our growth pipeline, and we continue to achieve improved safety performance year over year. Our performance this quarter was driven by operational and optimization excellence across the fleet, which enabled us to capture the higher prices experienced in Alberta. The Alberta team has developed key operating strategies that ensure our fleet has high availability during periods of increased demand so that we're able to provide reliable power when it is most needed. For the second quarter in a row, our Alberta hydro and thermal segments have demonstrated the underlying value of our diversified Alberta fleet. Energy marketing also had an excellent quarter with strong trading results across our US power and natural gas desks. During the quarter, we also progressed a number of our key priorities. In late July, we announced that we had reached an agreement to provide BHP Nickel West with a 48 megawatt hybrid solar and battery energy storage solution. The project will reduce BHP's greenhouse gas emissions at Leinster and Mount Keith in Western Australia by 540,000 tons of CO2 over the first 10 years of operation. This project is a concrete example of TransAlta supporting our customers' drive to achieve their ESG goals. In early May, we announced our 130 megawatt garden plane wind project, which is contracted to Pembina Pipeline, and is another example of how we're focused on enabling our customers to achieve their ESG goals. We advanced construction of our 207 megawatt windrise project, As of June 30th, the facility was 88% complete and we expect to achieve COD during the fall of 2021. In Q2, we completed a contract extension at Sarnia with an anchor and longstanding customer. We continue to advance recontracting discussions with our other industrial customers with whom we expect to execute contracts later in the year. In July, the ISO released draft details for the procurement of capacity in Ontario for 2026 and beyond. were participating in the consultation process with the ISO, seeking to secure a contract renewal for the facility. At the end of June, we closed the previously announced sale of the Pioneer Pipeline to ADCO, which provided $128 million of proceeds to TransAlta. These funds will be redeployed to our renewables growth program. Our coal-to-gas conversion of Keep Hills 2 began during the quarter and was successfully completed in July. The conversion of Keep Hills 2 reduces our carbon emissions by more than half at that unit. And this is another significant milestone for TransAlta if we transition off coal. Sheerness 1 and 2 are now fully off coal and have been registered as gas-fired steam generation assets with the ISO. We advanced our preparations for our Keep Hill 3 coal-to-gas conversion, which will start in September. With the completion of this conversion and the closure of the Highvale mine effective December 31, all our Alberta facilities will be generating on lower carbon natural gas at year end. We continue our evaluation of the Sundance 5 repowering in light of the higher costs, the changing supply and demand dynamics of the Alberta market, as well as the evolving regulatory environment. In Q2, we completed an additional competitive tendering process for the engineering, procurement, and construction contract, and we are now reviewing those bid results as well as the overall Sundance 5 repowering project costs. To date, we've delivered over 26 million tonnes of annual greenhouse gas reductions, representing approximately 8% of Canada's goal of reducing between 292 and 329 million tons of CO2 from 2005 levels by 2030. On the renewables front, we progressed our 300 megawatt White Rock East and West and 200 megawatt Horizon Hill wind projects to an advanced stage and are actively seeking and discussing contracting opportunities to move them into construction. We also added 500 megawatts of renewables to our growth pipeline, which is a continuing focus for our company. And finally, TransAlta Renewables was named to the best 50 corporate citizens list, a proud achievement for our team. We're pleased to be able to announce our new Northern Goldfield solar and storage project with BHP. The project is the first renewable energy project to be developed under the power purchase agreement we extended with BHP back in October 2020. and initiates the growth of our renewables fleet in Australia. The project comprises two solar farms, totaling 38 megawatts, and a 10 megawatt battery energy storage system. Total construction capital is estimated between $64 and $68 million. This is another concrete example of our customer-centric solution strategy at work. Our goal is to be the supplier of choice for customers who are focused on sustainable growth and decarbonization. The project will be integrated into our southern cross-remote network in Western Australia. It is our first hybrid solar battery project that integrates our customers' desire for lower carbon intensity alongside the need for reliable power to ensure effective and more sustainable mining operations. Once completed, the project will be one of the world's largest off-grid hybrid networks supporting mining operations and further improves BHP's position as one of the lowest carbon nickel miners in the world. The project is expected to be completed during the second half of 2022 and will generate incremental EBITDA between $8 and $9 million annually. On May 3, we launched the Garden Plain project and are extremely excited to have Pembina Pipeline as a new customer. Working with customers like Pembina to develop low-cost, reliable energy solutions in support of their sustainability goals is a cornerstone of our strategy. As we've announced, The project will have 130 megawatts of capacity and is supported by an 18-year agreement with Pemina for 100 megawatts of the capacity and the associated environmental attributes. We expect the project to deliver between 14 and 18 million in comparable EBITDA on a full year basis. We have executed the turbine supply agreement for the project and are scheduled to commence construction later this year. We expect the wind facility to reach commercial operation during the latter part of 2022. We remain customer-centered on growth, focused on delivering customized clean power solutions to meet our customers' ESG objectives in the most cost-effective manner. A key element of this goal is expanding our renewables business with the objective of advancing a wind project out of our U.S. wind development portfolio this year. We currently have 500 megawatts of advanced-stage wind project in our growth pipeline, which have the potential to become commercial in the 2023 to 2024 timeframes. We're progressing development activities on Horizon Hill and White Rock East and West, which are located in Oklahoma, and are engaged in exclusive discussions and processes regarding opportunities to contract the output from the facilities. We now have over 2.5 gigawatts of earlier stage opportunities in various geographies with a focus on renewables. Our development team is keeping busy in Canada, Australia, and the United States. I'll now turn it over to Todd to take us through our financial results for the quarter.