TransAlta Corporation

Good morning and welcome. My name is Carmen and I'll be your operator for today. At this time, I would like to welcome everyone to Transalta Corporation first quarter 2025 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 1 1 on your telephone keypad. If you would like to withdraw your question, please press star 11 again. Thank you. Ms. Paris, you may begin your conference.

Thank you, Carmen. Good morning, everyone. My name is Stephanie Paris, and I am the Vice President of Investor Relations and Corporate Strategy of TransAlta. Welcome to TransAlta's first quarter 2025 conference call. With me today are John Cousinouris, President and Chief Executive Officer, Joel Hunter, EVP Finance and Chief Financial Officer, and Blaine Van Mill, EVP Commercial and Customer Relations. 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 information provided during this conference call is subject to the forward-looking statement qualification 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 are in Canadian dollars unless otherwise noted. The non-IFRS terminology used, including adjusted EBITDA and free cash flow, are reconciled in the MD&A for your reference. On today's call, John and Joel will provide an overview of TransAlta's quarterly results. After these remarks, we will open the call for questions. With that, I will turn the call over to John.

Thank you, Stephanie. Good morning, everyone, and thank you for joining our first quarter conference call for 2025. As part of our commitment towards reconciliation, I want to begin by acknowledging that our company operates on the traditional territories of Indigenous peoples across Canada, Australia, and the United States. We recognize the rich and diverse histories, cultures, and contributions of the First Nations, Inuit, Métis, Aboriginal and Native American communities. And it is with gratitude and respect that we thank the peoples who have lived on these lands for generations for reminding us of the ongoing histories that precede us. Before diving into our quarterly results, I want to take a moment to reflect on our strategic direction. We're excited about the growing demand for electricity across our core markets, whether it is driven by population growth, economic expansion, electrification trends, increased use of electric vehicles, the rise of AI and data centers, or supportive policy environments, it's clear the future is very bright for our industry and our company. With opportunity, however, comes complexity. We face real challenges, political and regulatory uncertainty, long interconnection queues, tariffs, supply chain challenges, and rising costs, all of which serve to make near-term organic greenfield growth more difficult. In response, we are focused on diversifying our portfolio and increasing the stability and contractedness of our cash flows. This means our reliance on the Alberta market will evolve and likely decrease over time. It also means that we will remain technology agnostic, as we believe a mix of generation sources is essential to meet growing demand safely, reliably, and sustainably. Our deep operational experience across fuel types uniquely positions us to advance a balanced growth portfolio, including reliable thermal assets and clean, locally sourced power generation. We will continue to pursue growth with discipline and a sharp focus on shareholder value. In the near term, that includes maximizing the value of our legacy thermal assets, evaluating M&A opportunities, maintaining a strong balance sheet, and returning capital to our shareholders through dividends and share buybacks. At the same time, we're positioning our company to deliver sustained value through the rest of this decade and into the next. I'll now turn to the quarter. We delivered exceptional operational performance across our entire fleet during the first three months of the year. While our Alberta merchant portfolio was impacted by softer-than-expected prices, our hedging strategy and active asset optimization generated realized prices that were well above spot prices during the quarter. we delivered adjusted EBITDA of $270 million and pre-cash flow of $139 million or $0.47 per share. And we announced an 8% increase to our common share dividend to $0.26 per share on an annualized basis, which represents our sixth consecutive annual dividend increase. In the year to date, we have also returned $24 million or $0.08 per share to shareholders through share buybacks at an average price of $12.42 per share. Returning capital to shareholders remain a key part of our capital allocation strategy, which we adapt to market conditions and the timing and progress of our growth opportunities. We plan to renew our annual normal course issuer bid at the end of this month, and we retain the option to continue to make a creative share buybacks during the year of up to $100 million. We had a number of business highlights during the quarter. First, we achieved exceptional average fleet availability of 94.9%. Second, we mothballed Sundance Unit 6 on April 1 for a period of up to two years, depending on market conditions. This reflects our ongoing commitment to optimize our portfolio and minimize costs. We maintain the flexibility to return Sundance 6 to service when market fundamentals improve or opportunities to contract the facility are secured. Third, we completed the integration of Heartland Generation safely, on schedule, and have realized their targeted synergies across both the corporate and operational teams. And finally, we continue to engage with the government of Alberta and the ISO on the Restructured Energy Market Design, or REM. The government and the ISO recently announced that they had refined the scope of the REM most notably by removing the day-ahead energy and commitment products that had previously been proposed. The revised scope includes the day-ahead procurement of operating reserves and new ramping ancillary services, along with a higher offer and price cap. The proposed offer cap of up to $2,200 per megawatt hour, with the ability for pricing to administratively go up to $3,000 per megawatt hour is a significant and positive change to the current offer and price cap of $999 per megawatt hour, which has been in place unchanged for over 20 years. The ISO also intends to move forward with a locational marginal pricing framework and plans to allocate transmission system and ancillary services costs on the basis of cost causation, also a positive development from our perspective. We expect the government of Alberta and the ISO to provide more details on the REM later this month and are actively engaged with both parties on the redesign. We remain supportive of initiatives that provide long-term stability and reliability, as well as incentives for existing and new infrastructure investment. During the quarter, we also advanced our strategic priorities. First, we're pleased to announce our strategic partnership with Nova Clean Energy. NOVA is the US development arm of Bluestar Energy Capital, a platform founded in 2022 and led by Declan Flanagan, the former CEO of Orsted's onshore renewables business, and Neil O'Donovan, a former EVP at Orsted who served as CEO of its onshore business unit. NOVA's development team, under the leadership of Declan and Neil, has a successful track record of investing in and developing grid-scale wind, solar, and storage projects across the United States with over $10 billion of capital investment in global clean energy. Our relationship has a number of components. We have negotiated and structured a US $100 million revolving credit facility and a US $75 million term loan to NOVA with phase draws over the first two years, providing an annual return on capital, secured against project values, and strategically sized and balanced with our other capital allocation priorities. We have secured the exclusive option to purchase projects developed by NOVA in the WEC, one of our core growth markets, that are competitive on a risk-adjusted return basis. And the transaction provides TransAlta with potential upside through an equity conversion option, which could provide us up to a 23% ownership stake in NOVA. Our investment thesis in NOVA is as follows. First, it aligns us with a world-class developer, enhancing our ability to achieve strategic growth priorities in the latter part of the decade with technology agnostic customer solutions in the Western US. Second, it provides competitive differentiation to an advantage path to late stage development M&A with exclusive purchase rights from NOVA. And third, it allows us to monitor, govern, and influence project development by NOVA prior to any notice to proceed, resulting in attractive return profiles that can be augmented by our capabilities. The investment in NOVA complements our existing growth capabilities. We remain focused on executing our near-term brownfield projects, opportunistic M&A, and selective complementary projects. Opportunities will be evaluated and selected with a view to ensuring we're unlocking the most value for our shareholders. Moving to our legacy thermal sites, we continue to make significant steps forward in both the United States and Alberta. At our Centralia site, we're advancing discussions with our customer on a redevelopment opportunity to extend the operating life of Centralia through a contracted coal to gas conversion. Our team is forecasting significant near-term capacity and energy supply deficiencies in Washington State, and our Centralia facility can play an integral role in supporting ongoing reliability in the region. Over the past number of months, we've been progressing engineering and commercial negotiations, including term sheets and pricing, with the target of executing a definitive agreement in mid 2025. Aside from the coal to gas conversion, we also continue to evaluate other opportunities to build out the Centralia Energy Campus on our significant land holdings, including wind, solar, batteries, and next generation technologies. We expect to be able to share detailed development plans for Centralia in the coming months as we finalize negotiations. We're also advancing opportunities at our legacy thermal sites in Alberta, which we believe offer ideal conditions for data center opportunities, including speed to power, tier four reliability, and competitive power pricing. We're now actively in the commercialization phase of the project, with discussions around detailed and de-risked commercial offerings, which are being showcased to potential customers, including through access to our virtual data room. We continue to focus on securing exclusivity with key partners by mid-year, with detailed design and definitive agreements expected by year-end. A data center would be operational 18 to 24 months after signing definitive agreements. Finally, we continue to focus on our financial strength and capital disciplines. In March, we successfully closed the $450 million seven-year senior unsecured green note offering with a coupon of 5.65% maturing in 2032. This marked a return to the Canadian debt capital market by the company for the first time since 2013 and we're extremely pleased that the offering was well received. The majority of the net proceeds were used to repay our $400 million variable rate term loan facility in advance of its scheduled maturity later in the year. Following the offering, we exited the quarter with over $1.5 billion in available liquidity, including approximately $240 million of cash on hand, which positions us well to execute our strategic priorities. I'll now pass the call over to Joel.