TransAlta Corporation

Good morning. At this time, I would like to welcome everyone to TransAlta Corporation's first quarter 2023 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 followed by the number two. Thank you. Ms. Bautini, you may begin your conference.

Great. Thank you, Sergio. Good morning, everyone, and welcome to TransAlta's first quarter 2023 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-Welks, EVP Legal, Commercial, and External Affairs. Today's call is being webcast, and I invite those listening in 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 qualifications set out here on slide 2, and 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 also reconciled in the MD&A for your reference. On today's call, John and Tal will provide an overview of the quarter's results, and after these remarks, we will open the call for questions. And 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 2023. 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 Nakoda First Nations, as well as the home of Métis Nation Region 3. TransAlta had an exceptional first quarter. We're proud of the overall performance of our company and our employees. We delivered $503 million of adjusted EBITDA, a 94% increase over our Q1 2022 results, and free cash flow of $263 million, or $0.98 per share, a 145% increase over Q1 2022 results on a per share basis. Both metrics beat our expectations for the quarter. Overall, our results benefited from continuing strong power prices in Alberta and Mid-Sea, complemented by strong operational performance from our fleet and the success of our asset optimization and hedging strategies. The Alberta market was impacted by stronger power prices in adjacent markets, which lowered net imports into Alberta, encouraged exports of power from Alberta to the Pacific Northwest, and together with increased outages in the province, allowed us to increase overall production from our Alberta gas fleet by 40% as compared to the same quarter last year. Our higher capacity factors in the gas fleet, coupled with lower realized gas prices, delivered higher gross margins for our portfolio compared to Q1 2022. Our Alberta hydro and gas merchant portfolio also benefited from our large and calculated power hedge positions in the quarter. Our overall availability was strong at 92%, despite our ongoing outage at Kent Hills, and was driven by the great performance of our Alberta gas fleet, which achieved 96% availability. Highly important for delivering on our peaking capacity strategy within the Alberta market. Apart from Kent Hills, our performance was partially offset by weaker availability in our wind fleet due to a lengthy outage at wind rise from a transformer failure due to a manufacturing defect, while snow storms and Hydro-1 transmission outages impacted our Ontario wind fleet. During the quarter, we delivered on a number of key priorities. On the growth side, our development team continues to expand our pipeline, adding another 286 megawatts of renewables growth project. The rehabilitation of Kent Hills is progressing well with 13 towers fully reassembled and two-thirds of the foundations poured and completed. And I'm pleased to be able to say that commissioning activities have now commenced with the first turbine energized and currently in its final stages of commissioning. During the quarter, we returned $36 million of capital back to shareholders through the buyback of 3.2 million shares. We continue to buy back shares in April, returning an additional $29 million of capital back to our shareholders. In late March, we entered into an automatic share purchase plan to facilitate additional purchases under our normal course issuer bid. This channel now allows us to take advantage of market opportunities, especially in period when the company is in blackout. Our current NCIB program is set to expire in May, and we intend to renew the program with the TSX before it matures. And finally, with another quarter of strong cash flow, our balance sheet position is strong with excellent liquidity and cash on hand to fund our growth projects. Turning to our clean electricity growth plan, to date we've secured 800 megawatts of growth projects across Canada, the US and Australia, representing 40% of our two gigawatt target by 2025. We currently have 678 megawatts of projects in the construction phase, all of which are expected to be online by the end of 2023. These projects will contribute approximately $149 million in contracted EBITDA, once fully operational, or approximately 47% of our five-year incremental annual EBITDA target of $315 million. Here in Alberta, our 130-megawatt garden plane wind farm is nearing completion. All 26 of the turbines have been assembled, and over half the units are in operation today. We expect to finalize commissioning of the last turbines and achieve COD later this month. We expect the wind farm to contribute 15 million of contracted EBITDA annually, and so far, we're pleased with the turbine performance. In collaboration with Siemens, we've applied many learnings from the startup of Windrise to the project to ensure that turbine availability meets our expectations right out of the gate. Our Northern Goldfields project is also reaching final completion. solar panel installation is complete, and interconnection of the facility into our remote network is underway. The team is now installing the battery system and setting up the control system and expects to move into the energization and commissioning phase over the next few weeks. We're aiming to reach commercial operation by the end of the second quarter. This project will deliver approximately 9 million of adjusted EBITDA. And our two Oklahoma wind projects also continue to progress well, and we expect them to reach final completion by the end of this year. All of the turbine components have been delivered for both projects, and at Horizon Hill, we have completed the collector system and foundation work and have started to assemble turbines. At White Rock, over half the foundations have been completed, and the collector system installation is well advanced. We've just started to erect turbines at this site as well. These projects will contribute adjusted EBITDA of over $100 million annually. Our Mount Keith 132 KV expansion project is also well underway. Construction activities have commenced and are on track to be completed in the latter half of 2023. This project will contribute approximately $6 million of adjusted EBITDA annually. As you know, we're targeting to reach investment decisions on 500 megawatts of growth this year through a combination of greenfield and potential M&A activities. Within our development pipeline, we currently have 374 megawatts of advanced stage generation and transmission projects that we're advancing towards final investment decisions as we progress through the year. They represent additional growth capital of approximately $600 million. Our 94-megawatt Southern Cross capacity and transmission expansion projects in Western Australia are advancing well, and we expect to make final decisions together with our customer, BHP Nickel West, later this year. Our 180 megawatt water charger battery storage project in Alberta also continues to advance. And with the recently announced federal budget, we see opportunities under various programs together with our indigenous partners to pursue new funding channels to support the project as we work towards making a final investment decision. And finally, our 100 megawatt Tempest wind project in Alberta is also making progress. We're actively marketing this opportunity with multiple corporate customers. We continue to advance our growth pipeline in 2023. As you recall, in 2022, we added almost 2 gigawatts to our renewable development pipeline across our regions, providing significant progress towards our longer-term goal of having 5 gigawatts of projects in the pipeline. For 2023, we have an in-year stated goal of adding another 1,500 megawatts of new sites to our pipeline to replenish our growth in the longer term. And so far, we've added 286 megawatts toward this goal. Notably, in the first quarter, we acquired a 50% interest in the 320-megawatt 10-mountain pumped hydro energy storage project. This project provides us with a unique opportunity to supply 15 hours of long duration and zero-emission energy storage capabilities for the Alberta market, which will help to address the increasing intermittency that we believe will be experienced with the growth of renewable generation in the province. Since our last update, we see continuing strength in power prices in Alberta and the Pacific Northwest. In Alberta, Ford power prices for the balance of the year are trading higher as a result of, among other things, the relatively strong price results in the year to date, transmission import restrictions into the province, and delays in new supply additions. With our strong results this quarter and improved market expectations for the rest of the year, we're pleased to increase our financial guidance for 2023's adjusted EBITDA by approximately $250 million. We're now expecting Alberta power prices to settle the year $15 per megawatt hour higher than our initial guidance, between $125 to $145 per megawatt hour. Higher pricing and production are expected to increase adjusted EBITDA to the range of $1.45 billion to $1.55 billion, representing an increase of 19% at the midpoint of our prior guidance. Free cash flow is expected to be in the range of $650 million to $750 million, an increase of 15% at the midpoint compared to our prior guidance. And energy marketing gross margin is expected to be in the range of $130 million to $150 million, an increase of 40% at the midpoint of prior guidance. I'll now turn it over to Todd for further discussion on the quarter's financial results.