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 first quarter 2022 results conference call. Note that 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. And 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, please press star then number two. Thank you. Ms. Valentini, you may begin your conference.

Thank you, Sylvie. Good morning, everyone, and welcome to TransAlta's first quarter 2022 conference call. With me today are John Cusignoris, President and Chief Executive Officer, Rod Stack, EVP Finance and Chief Financial Officer, and Kerry O'Reilly-Wilt, 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 also posted on the website. A replay of the call will be available later today, and the transcript will be posted to our site shortly thereafter. All of the information provided during this conference call is subject to the forward-looking statement qualifications set out here on slide 2, detailed 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 noted. The non-IFRS terminology used, including adjusted EBITDA, funds from operations, and free cash flow are reconciled in the MD&A for your reference. On today's call, John and Todd will provide an overview of the quarter's results. And 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 first quarter results call for 2022. As part of our commitment towards reconciliation, I want to begin by acknowledging that TransAlta's head office, where we are 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 Pekani, the Kainai, the Tsitsina, and the Stony Nakoda First Nations, as well as the home of Métis Nation Region 3. TransAlta had a solid first quarter and I'm proud of the progress we have made in advancing our priorities and in the performance of our company and our employees. We delivered $266 million of adjusted EBITDA and free cash flow of $115 million, or $0.42 per share, both broadly in line with our expectations for the quarter. We focused on optimizing and economically dispatching our fleet and delivered operational performance, which enabled us to run during periods of peak pricing in Alberta. The prices realized by both our Alberta hydro and Alberta gas fleets were in excess of average spot prices in the quarter, and are reflective of the value and peaking nature of our diversified fleet. During the quarter, we also delivered on a number of key priorities. On the growth side, our development team secured 200 megawatts of renewables growth with the announcement of the Horizon Hill wind project with Meta, formerly known as Facebook, as well as the Mount Keith transmission expansion project in Western Australia with BHB. We executed a PPA for the remaining 30 megawatts of capacity at our 130 megawatt Garden Plain wind facility with an investment-grade counterparty. Garden Plain is now 100% contracted with two great counterparties. And we are now able to share with you that Amazon is our corporate customer at the White Rock Wind Projects. I remain confident in our ability to deliver on the remainder of our 2 gigawatt clean electricity growth plan. We're targeting to reach investment decisions on another 200 megawatts of renewables growth later this year and are on track to deliver on our annual target of 400 megawatts for 2022. Switching to our recontracting activities at Sarnia, I can now confirm that we have entered into additional contract extensions with all three remaining industrial customers at the facility. This is a significant achievement. With PPA renewals now in place with all of our industrial customers at the site, setting the facility up well for contracted life extension into the 2030s. On the coal transition side, we have fully retired both Key Pills Unit 1 and Sundance Unit 4, and now no longer have operating coal units in Canada. Our coal transition is among the most meaningful carbon emission reduction achievements in the country, representing 9 to 10% of Canada's 2030 emissions reductions target. Overall, we have reduced our annual CO2 emissions by 29 million tons as compared to 2005, including 3.9 million tons of annual reductions in 2021, a 24% reduction year over year. The recently announced policy directions from the federal government support our decisions and validate our strategic shift. Government policy announcements, particularly the federal discussion paper on the Clean Electricity Standard and the 2030 Emissions Reductions Plan, confirmed that new natural gas generation faces growing policy and economic risks. Our principal focus is now on developing renewable projects that meet the growing demand for electricity in a manner that is aligned with global carbon goals, as we outlined at our Investor Day last year. Identifying alternative pathways to deliver reliability while pursuing a path to net zero is critical for our company, and we have established an internal energy innovation team with a mandate to do just that. In addition to the recent investment we made in Econa to help advance our hydrogen technology platform, we have made a $25 million commitment to Energy Impact Partners Frontier Fund. This fund is focused on making investments in companies with transformative technologies critical to deep decarbonization, including long-term storage, novel generation, and industrial decarbonization. All of this is directed at taking a targeted approach to diversification, and defining the next generation of power solutions for our company. We continue to make considerable progress on advancing our EBITDA contribution from renewables assets. With the addition of the wind rise in North Carolina solar facilities last year, our EBITDA contribution from renewables and storage assets reached 53% in the quarter, another step toward our target contribution level of 70% by the end of 2025. As a result of the progress we've made in advancing our clean electricity growth plan, our ESG rating with Morgan Stanley Capital International was upgraded from BBB to A. And finally, in March, we were active with our normal course issuer bid and returned $18 million to our shareholders through the buyback of 1.4 million common shares. In April, we entered into a long-term PPA with Meta for the full output from the 200-megawatt Horizon Hill wind project in Oklahoma. The delivery of low-cost, reliable, and clean electricity from Horizon Hill supports META's sustainability goals and will bring our wind fleet in the United States to almost 875 megawatts. Commercial operation of the wind farm is expected to be achieved in the second half of 2023, and annual EBITDA from the project is expected to be between $27 and $30 million. Similar to our White Rock project, over 90% of the project capital costs have been fixed, under a turbine supply agreement with Vestas and an EPC agreement for the construction of the project with infrastructure and energy alternatives. Horizon Hill will be our eighth wind facility in the US. We're also excited to announce the expansion of the Mount Keith transmission system in Western Australia to support the Northern Goldfields based operations of BHP. The project will facilitate the connection of additional generating capacity to our network to support BHP's operation and increase their competitiveness as a supplier of low-carbon nickel. The project is being developed under the existing PPA with BHP, which has a 15-year term. Construction capital is estimated to be between 50 to 53 million Australian dollars, and the project is expected to be completed in the second half of 2023 and generate annual EBITDA in the range of 6 to 7 million Australian dollars. We see considerable opportunities for TransAlta as the race to decarbonize unfolds over the next decade. We plan to deliver 2 gigawatts of new renewables capacity by 2025 by deploying 3 billion of capital with the target of achieving cumulative annual EBITDA from the projects of 250 million by 2025. We're just over a year into the execution of the plan, and we're proud of the progress that we have made. We've secured 800 megawatts of growth projects across Canada, the U.S., and Australia, representing 40% of our 2 gigawatt target by 2025, and combined, these projects will contribute approximately $137 million in EBITDA once fully operational, providing 55% of our five-year incremental annual EBITDA target of $250 million. As I turn now to our U.S. development pipeline, we've highlighted that the Horizon Hill project has moved from the advanced development category into the under-construction category. We still have over 750 megawatts of potential development sites in the US across a number of projects in several key markets. The demand for renewables remains strong in the US, and we see plenty of opportunity for growth in that market. And we're actively looking at a number of opportunities to grow our development pipeline there. We recently added a new wind development site to the pipeline and expect to continue to add projects to our pipeline over the course of 2022. We remain disciplined on growth in Canada, primarily here in Alberta. Our Tempest wind project has moved up to an advanced stage of development, and we continue to see demand for renewable PPAs in the market from corporate customers. Our team is actively seeking opportunities to contract our sites and advance our projects into the construction phase. And in Australia, we've moved the Mount Keith transmission expansion projects to the under-construction phase. We're definitely seeing growing opportunities in Western Australia in support of our remote mining customers, and we're advancing several opportunities there and expect to reach final investment decision on additional projects with BHP and others in coming months. I'll now turn it over to Todd to take us through our financial results for the quarter.