TransAlta Corporation

Good morning. My name is Joanna and I will be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation's second quarter 2022 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 the number one on your telephone keypad. If you would like to withdraw your question, please press star, then two. Thank you. Ms. Valentini, you may begin your conference.

Thank you, Joanna. Good morning, everyone, and welcome to TransAlta's second quarter 2022 conference call. With me today are John Cusignoris, President and Chief Executive Officer, Todd Stack, EVP Finance and Chief Financial Officer, and Kerry 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 we have posted on our website. As well, 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 call is subject to the forward-looking statement qualifications set out here on slide 2, also detailed further in our MD&A and incorporated in full for the purpose 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 also reconciled in the MD&A for your reference. On today's call, John and Todd will provide an overview of the quarter's results. After these remarks, we will open the call for questions. And with that, let me turn the call over to John.

Thank you, Ciara. Good morning, everyone, and thank you for joining our second 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 Pikani, the Kainai, the Tsutsina, and the Stony Nakota First Nations, as well as the home of Métis Nation Region 3. TransAlta had a solid second quarter. I'm proud of the progress we've made in advancing our priorities and the performance of our company and our employees. In Q2, we delivered $279 million of adjusted EBITDA, leading to free cash flow of $145 million or $0.54 per share. And on a year-to-date basis, we have generated $538 million of adjusted EBITDA, resulting in free cash flow of $253 million or $0.93 per share. Our Alberta electricity portfolio performed as we had anticipated, despite higher natural gas prices, compressed market heat rates, and a highly hedged position. Overall, our portfolio demonstrated the value of our strategically diversified fleet in Alberta and its ability to generate cash flow under dynamic market conditions. Our Alberta wind and hydro fleet led our results with excellent performance, benefiting from the higher pricing environment in the province and stronger production. whereas our Alberta gas segment had limited opportunity to benefit from the higher power prices that were realized in the market as it was highly hedged during the quarter. Contributions from our new contracted assets at Windrise and North Carolina Solar and the exceptional results from our energy marketing segment further supported our financial results for the quarter as we continue to track towards the midpoint of our 2022 guidance. During the quarter, we delivered on a number of key priorities. On the growth side, our development team secured another 200 megawatts of renewables growth with the announcement of the Horizon Hill wind project with Meta, formerly known as Facebook. In Western Australia, we're moving ahead with the Mount Keith Transmission Expansion Project with BHB. We also made a commitment to invest $25 million in Energy Impact Partners' new Deep Decarbonization Fund, which is focused on making investments in companies with transformative technologies critical to deep decarbonization, including long-term storage, novel generation, and industrial decarbonization. We're aiming to use this platform to take a targeted approach to diversification and to find the next generation of electricity solutions for our company. And so far in 2022, we've grown our renewables development pipeline by more than 300 megawatts across several prospective wind development sites in Canada and the United States. This is great progress towards our goal of adding over a gigawatt of opportunities in our pipeline this year. 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. I remain confident in our ability to deliver on the remainder of our two gigawatt clean electricity growth plan. Switching to our recontracting activities at Sarnia, we have now secured capacity commitment extensions with all three remaining industrial customers at the facility, with one customer going out to 2031 and the remaining two customers going to 2032. And we expect to hear from the ISO on their RFP process later this quarter. We announced the 10-year contract extension with New Brunswick Power, along with the receipt of a waiver from bondholders in relation to the Kent Hills wind facilities and we've commenced our rehabilitation efforts there. We also continue to make progress on advancing our EBITDA contribution from renewables assets with the addition of Windrise and North Carolina Solar last year. Our EBITDA contribution from renewables and storage assets reached 58% in the quarter, another step towards our target contribution level of 70% by the end of 2025. And finally, in June, we debuted our new brand and visual identity along with our energizing the future campaign. This new identity encapsulates the TransAlta of today while reinforcing the company's focus as a leader in creating a carbon neutral future for our customers. We continue to see considerable opportunities for TransAlta as the race to decarbonize continues to unfold. As you know, we plan to deliver two gigawatts of new renewables capacity by 2025 by deploying approximately $3 billion of growth capital with the target of achieving cumulative annual EBITDA from the growth projects of $250 million by 2025. We currently have approximately $1.3 billion of construction projects ongoing. We're about a year and a half into the execution of the plan, and we're proud of the progress that we've made. We have secured 800 megawatts of growth projects across Canada, the U.S., and Australia, representing 40% of our 2-gigawatt target by 2025. Combined, these projects will contribute approximately $136 million in EBITDA, once fully operational, providing 54% of our five-year incremental annual EBITDA target of $250 million. On the construction front, turbine deliveries commenced in July at Garden Plain. Racking and panels have been delivered at Northern Goldfield Solar, and the battery is in transit to the site. All major equipment supply and EPC agreements have been executed at both White Rock and Horizon Hill, and the EPC agreement has been executed for the Mount Keith Transmission Expansion Project. We're on track to deliver our current construction program across all three of our geographies. The demand for renewables remains strong in the U.S., and we see plenty of opportunity to capture growth in that market. We're also actively looking at a number of additional opportunities to grow our development pipeline there. These include acquisitions of individual early stage development sites and small development portfolios, as well as the prospecting of new sites, which will continue to add through the balance of 2022. We're also working to grow here in Canada, primarily in Alberta. While we have started to see inflationary pressures on capital for new projects, demand for corporate PPAs continues to be strong, and we're seeing PPA pricing respond to the inflationary pressures. we have confidence in our ability to deliver appropriate risk-adjusted returns for our shareholders. Our team is actively seeking opportunities to contract our sites and advance our projects into the construction phase. We expect our 100-megawatt Tempest wind project to be our next growth project here in Canada, targeting a final investment decision later this year. It's currently moving through the ASO interconnection process, and we see strong interest with multiple customers for this opportunity. We're also seeing growing opportunities in Western Australia in support of our remote mining customers. We're advancing several opportunities there and we expect to reach final investment decision on additional projects with BHP before the end of the year. I'll now turn it over to Todd to take us through our financial results for the quarter.