TransAlta Corporation

Good morning. My name is Jenny, and I will be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation's third 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 the star, followed by the number two. Thank you. Ms. Valentini, you may begin your conference.

Thank you, Jenny. Good morning, everyone, and welcome to TransAlta's third quarter 2023 conference. With me today are John Kouzaniaris, President and Chief Executive Officer, Todd Stack, EVP Finance and Chief Financial Officer, and Kerry O'Reilly Books, EVP Commercial, Legal 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 the information provided during this conference call is subject to the forward-looking statement qualification set out here on slide two. 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 Todd will provide an overview of the quarter's results. After these remarks, we can 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 third 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, including the Bearspaw, Chenique, and Goodstonie First Nations, as well as the home of Métis Nation of Alberta Region 3. TransAlta delivered another strong performance in the third quarter, with $453 million of adjusted EBITDA and free cash flow of $228 million, or $0.87 per share. Both metrics were in line with our expectations for the quarter. Our performance was led by our Alberta Gas Delays in supply returning to service along with the reduction of power imports into Alberta and the lower water and wind resources enabled our merchant gas fleet in Alberta to perform exceptionally well. Our asset optimization program for the Alberta gas fleet also delivered higher contributions than the third quarter of 2022 due to higher hedged volumes at overall higher hedge prices than the previous year. This, coupled with lower realized gas prices in 2023, significantly expanded gross margin from our Alberta gas portfolio compared to Q3 of 2022. Our Alberta hydro fleet also performed well, although more normalized as compared to last year's exceptional quarter due to the impact of lower prices and lower water resource availability, which impacted production. Overall, our fleet availability was excellent at 91.9%. During the quarter and more recently, we have delivered on a number of key priorities and strategic initiatives. First, we announced that TransAlta had entered into a definitive agreement with an affiliate of Energy Capital Partners, the parent of Heartland Generation, pursuant to which TransAlta will acquire Heartland and its entire business operations in Alberta and British Columbia for $390 million, subject to working capital and other adjustments, as well as the assumption of $268 million of low-cost debt. This opportunity will enable us to expand and enhance our competitiveness and generation capabilities with 1.8 gigawatts of additional capacity to meet the changing demands of energy transition. Second, we close the acquisition of TransAlta Renewables, which represents a key milestone for the company. The simplified corporate structure and unified asset ownership, capital resources, and capabilities will enhance cash flow predictability and enable us to better realize future growth. Third, we fully commissioned the Garden Plain Wind Facility, adding 130 megawatts to our installed capacity. The facility is fully contracted with Pembina and PepsiCo and has a weighted average contract life of 17 years. Fourth, we significantly advanced the rehabilitation of Kent Hills, with all 50 turbines now fully reassembled and being returned to service as commissioning activities are completed. To date, 36 turbines have been fully placed back in operation and are now earning revenues from New Brunswick Power. Full commercial operations is expected to be reached before the end of the year. Fifth, we were proud to have ranked first on Newsweek's inaugural World's Most Trustworthy Companies 2023 list for the energy and utilities category, following an extensive global survey and evaluations of companies that people trust as a customer, as an investor, and as an employee. And finally, with another quarter of strong cash flow, our balance sheet position is strong with excellent liquidity to fund our recently announced transaction with Heartland Generation, as well as our growth projects. We made significant progress on our growth initiatives during the quarter and are on track to complete all our contracted renewables projects under construction, either during the fourth quarter of 2023 or early in 2024. We currently have 548 megawatts of products in the construction phase, representing an investment of $1.3 billion, with approximately $1.2 billion spent to date and $100 million left to go. Our Northern Goldfield solar project in Australia is nearing completion. Energization and testing processes are now fully in progress, with the facility expected to achieve commercial operations by the end of the year. This project will deliver approximately 9 million of adjusted EBITDA annually. Construction at the Horizon Hill wind project in Oklahoma is also well advanced with all 34 wind turbines fully assembled. Construction of the transmission interconnection is now underway and expected to soon be complete with the facility reaching commercial operations during the first quarter of 2024. At our White Rock East and West projects, equipment deliveries are now complete and wind turbine assembly is progressing well, with 34 out of 51 turbines fully assembled. The transmission interconnection is advancing and commercial operations are also expected in early 2024. Together, our Horizon Hill and White Rock Oklahoma wind projects will contribute over $100 million of EBITDA annually. Finally, our Mount Keith 132KV expansion project is also making excellent progress, with the transmission line and transformer installation now complete. The project will achieve commercial operations by the end of the year and contribute approximately $7 million of adjusted EBITDA annually. We're pleased that the finish line is in sight for all of these projects and look forward to adding all four to our operations in the near term. Within our development pipeline, we have 418 megawatts of advanced stage generation and transmission projects that we are progressing towards final investment decisions, representing additional growth capital of approximately $750 million. They range from wind generation at Tempest to battery storage at Waterchurch. We have been patient and disciplined in advancing these projects, focused on ensuring that they're appropriately de-risked and construction-ready with appropriate risk-adjusted returns to enhance shareholder value given the inflationary environment in which we found ourselves. Finally, we're pleased with the advancement in our growth pipeline, having almost reached our five gigawatt target two years early. During the quarter, we added an additional 186 megawatts of future development opportunities to the pipeline and have added over 800 megawatts of projects in the year today. I'll now pass it over to Todd to go through our segment results.