TransAlta Corporation achieved its 2016 financial guidance with solid operational performance, despite some challenges to certain business segments
The following table summarises 2016 results:
| $m | FY16 | FY15 | Var $ | % |
| Adjusted availability* | 89.2% | 89.0% | 0.2% |
|
| Production (GWh) | 31,157 | 40,673 | (2,516) | (6.2%) |
| Revenue | 2,397 | 2,267 | 130 | 5.7% |
| Comparable EBITDA** | 1,065 | 1,004 | 61 | 6.1% |
| Comparable funds from operations (FFO) | 763 | 740 | 23 | 3.1% |
| Comparable free cashflow | 299 | 315 | (16) | (5.1%) |
| Net debt | 4,056 | 4,441 | (385) | (8.7%) |
| Net debt/EBITDA | 3.8 | 5.0 | (1.2) |
|
| Adjusted FFO/Adjusted net debt | 17.0% | 15.2% | 1.8% |
|
* adjusted for economic dispatching at US Coal
** excludes adjustments related to Keephills 1 force majeure provisions
Source: TransAlta, FIIG Securities
Key points:
- Revenue for FY16 rose 5.7% to CAD2.4bn from CAD2.3bn per corresponding period (pcp), primarily due to full year contributions from renewable assets acquired in the second half of 2015, strong performance from the gas and renewable segments, reduced costs and the reversal of the Keephills 1 force majeure provision in 2013
- Comparable EBITDA for FY16 was up slightly by 6.1% pcp at CAD1.1bn. EBITDA remained relatively stable notwithstanding lower power prices in Alberta (as shown in Figure 1), and unfavourable market conditions from the US coal segment, which was offset by the company’s highly contracted profile and hedging strategy
Figure 1
(1) Excludes adjustments related to the Keephills 1 force majeure provisions
Source: TransAlta
- All business segments reported stronger comparable EBITDA for FY16 except the US Coal business. The US Coal business’ EBITDA dropped by 35% due to reduced margins from lower prices and unfavourable impact of mark to market on certain forward financial contracts that do not qualify for head accounting, which was partly offset by lower coal transportation costs and a reduction in coal impairment charges
- Net debt reduced to CAD4.1bn at 31 December 2016 compared to CAD4.4bn at 31 December 2015, primarily due to the repayment of debt using proceeds from the sale of its Canadian Assets, free cashflow from operations and the strengthened Canadian dollar. As a result, net debt/EBITDA fell to 3.8x at 31 December 2016, compared to 5.0x at 31 December 2015. TransAlta’s financial leverage also improved to 17% at 31 December 2016 from 15.2% pcp when measured on an adjusted FFO to adjusted net debt basis
- The group maintained its strong liquidity profile, with around CAD1.7bn of available liquidity including cash of CAD305m at 31 December 2016. The company also restructured its capital structure by issuing two non-recourse bonds (CAD362m in total) to align debt maturities with the contracted cashflows of its underlying assets. TransAlta plans to raise CAD700-900m over the next eighteen months to refinance some of its upcoming debt maturities
- During FY16, TransAlta signed an agreement with the Government of Alberta to stop coal fired emissions at the company’s Alberta coal facilities in exchange for payments in total of CAD524m from 2017 to 2030. Other achievements during the year included but were not limited to entering into a memorandum of understanding with the Alberta government to develop a policy framework to facility coal to gas conversions, and renewable electricity development
Outlook
TransAlta provided its financial outlook for 2017, shown in Figure 2:
Figure 2
Source: TransAlta
The company has provided other non-financial goals it is working on for 2017, which includes the following:
- Work with the Alberta government on establishing terms and conditions to convert coal plants to gas
- Contribute to the design of a new capacity market
- Advance the company’s investment in the Brazeau Pumped Storage by securing long term contracts