TransAlta Renewables Reports First Quarter 2020 Results

First Quarter 2020  Highlights

• Comparable EBITDA⁽¹⁾ of $118 million, a $2 million increase over the same period last year;
• Adjusted funds from operations ("AFFO")⁽¹⁾ of $94 million, in line with 2019;
• Cash available for distribution ("CAFD")⁽¹⁾ of $91 million or $0.34 per share in the quarter; and
• First full quarter of operations at the Big Level and Antrim wind projects.

CALGARY, May 12, 2020 /CNW/ - TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) announced today solid financial results which were in line with expectations for the three months ended March 31, 2020.

Comparable EBITDA for the three months ended March 31, 2020 increased by $2 million, mainly due to higher Comparable EBITDA from US Wind and Solar, partially offset by lower Comparable EBITDA from Canadian Wind. Comparable EBITDA from US Wind and Solar increased due to higher production at Wyoming and Lakeswind and a full quarter of operations at Big Level and Antrim. Comparable EBITDA at Canadian Wind decreased mainly due to lower wind resources in Eastern Canada, lower carbon offset revenues and lower government incentives driven by the planned expiry of the Wind Power Production Incentives  in 2019, partially offset by higher wind resources in Western Canada and the timing of recognition of green attribute revenues.

AFFO and CAFD for the three months ended March 31, 2020 were impacted by higher tax equity distributions and realized foreign exchange losses which were offset by higher Comparable EBITDA, lower sustaining capital expenditures on owned assets, and lower current income tax expense. Additionally, CAFD was impacted by higher principal repayments on the amortizing debt.

"Results for the quarter were strong and we are proud to now be generating renewable power for our customers at Big Level and Antrim," said John Kousinioris, President. "With respect to growth, we continue to advance conversations with TransAlta Corporation regarding the drop-down of renewable and gas assets into the Company. Finally, I want to thank all TransAlta employees and contractors, especially the front-line employees of TransAlta that operate and maintain the TransAlta Renewables facilities in Canada, the United States and Australia. They have quickly adapted to the new norm we are experiencing and have embraced the challenges and new health and safety practices that this global pandemic has created. Through their hard work and dedication, we continue to deliver the essential power that our customers and communities need to ensure our economies and governments can carry-on throughout this unprecedented time."

Net earnings attributable to common shareholders for the three months ended March 31, 2020 decreased by $73 million. The decrease was attributable to: (i) a reduction in finance income of $18 million primarily related to higher returns of capital on the US Wind and Solar tracking preferred shares and a reduction of dividends on the Preferred Shares Tracking Australia Cash Flows; (ii) higher foreign exchange losses of $13 million due to the weakening of the Australian dollar; (iii) unfavourable changes in the fair value of the Preferred Shares Tracking the Amortizing Term Loan of $36 million; (iv) lower operating income of $10 million due mainly to lower revenues in Canadian Wind; and (v) an increase in depreciation expense of $3 million.

Subsequent Events
The Company held its first virtual Annual General Meeting of Shareholders on April 28, 2020 at which all Board nominees were elected and all resolutions passed.

COVID-19 Response
TransAlta Corporation, as the manager and operator of the Corporation's business and assets, formally implemented its business continuity plan on March 9, 2020, which is focused on: (i) ensuring that employees that can work remotely do so; and (ii) ensuring that employees operating and maintaining our facilities, who are not able to work remotely, are able to work safely and in a manner that ensures they remain healthy.  This plan includes health screening, enhanced cleaning arrangements, travel bans, revised schedules, contingent work teams and the reorganization of processes and procedures to limit contact with other employees and contractors on-site.  Although these are unprecedented times, the Company remains highly diversified with facilities that are highly contracted and located in various geographies. Our cash flows have been relatively unaffected in the quarter due to the high contractedness of our asset portfolio and financial strength of our customers.  We continue to have a strong balance sheet with ample liquidity to provide added flexibility during this time.

Currently, all of our facilities including those which we have economic interests through TransAlta Corporation,  remain fully operational and capable of meeting our customers' needs.  We have modified our operating procedures and implemented restrictions to non-essential access to our facilities to support continued operations through the pandemic. The Corporation continues to work and serve all of our customers and counterparties under the terms of their contracts. We have not experienced interruptions to service requirements. Electricity and steam supply continue to remain a critical service requirement to all of our customers and have been deemed an essential service in our jurisdictions.

First Quarter Ended March 31, 2020 Highlights

In $CAD millions, unless otherwise stated	3 Months Ended
	March 31, 2020	March 31, 2019
Renewable energy production (GWh)^(2)	1,173	1,001
Revenues	110	127
Net earnings attributable to common shareholders	3	76
Comparable EBITDA	118	116
Adjusted funds from operations	94	94
Cash flow from operating activities	82	131
Cash available for distribution	91	92
Net earnings per share attributable to common
shareholders, basic and diluted	0.01	0.29
Adjusted funds from operations per share^(1)	0.35	0.36
Cash available for distribution per share^(1)	0.34	0.35
Dividends declared per common share	0.23	0.23
Dividends paid per common share^(3)	0.23	0.23

The following tables provide further detail on the allocation of the Comparable EBITDA between owned assets and assets in which TransAlta Renewables holds an economic interest; as well as a reconciliation to AFFO.

3 Months Ended March 31 ($CAD millions)	2020			2019
	Owned Assets	Economic Interest	Total	Owned Assets	Economic Interest	Total
Comparable EBITDA	67	51	118	74	42	116
Interest expense	(10)	—	(10)	(10)	—	(10)
Sustaining capital expenditures	(2)	(3)	(5)	(7)	(1)	(8)
Current income tax expense	—	(1)	(1)	(1)	(2)	(3)
Tax equity distributions	—	(6)	(6)	—	(1)	(1)
Realized foreign exchange loss	(3)	—	(3)	—	—	—
Currency adjustment, reserves,	2	(1)	1	1	(1)	—
interest income, and other
AFFO	54	40	94	57	37	94

A complete copy of TransAlta Renewables' first quarter report, including MD&A and unaudited financial statements, is available through TransAlta Renewables' website at www.transaltarenewables.com or at SEDAR at www.sedar.com.

Notes

(1) Comparable EBITDA refers to earnings before interest, taxes, depreciation and amortization including finance lease income and adjusted for certain other items. AFFO includes the deduction of sustaining capital expenditures and distributions to non-controlling interests and excludes the effects of timing and working capital on distributions from subsidiaries of TransAlta in which the Company holds an economic interest. CAFD refers to adjusted funds from operations less principal repayments of amortizing debt. These items are not defined under International Financial Reporting Standards ("IFRS"). Presenting these items from period to period provides management and investors with the ability to evaluate earnings and cash flow trends more readily in comparison with prior periods' results. Refer to the Non-IFRS Measures section of the MD&A for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.

(2) Includes production from Canadian Wind, Canadian Hydro and US Wind and Solar and excludes Canadian and Australian gas-fired generation. Production is not a key revenue driver for gas-fired facilities as most of their revenues are capacity-based.

(3) Includes DRIP payments.

About TransAlta Renewables Inc.
TransAlta Renewables is among the largest of any publicly traded renewable independent power producers ("IPP") in Canada. Our asset platform and economic interests are diversified in terms of geography, generation and counterparties and consist of interests in 23 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities, one solar facility and one natural gas pipeline, representing an ownership interest of 2,527 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of Pennsylvania, New Hampshire, Wyoming, Massachusetts, Minnesota and the State of Western Australia. Our objectives are to (i) provide stable, consistent returns for investors through the ownership of, and investment in, highly contracted renewable and natural gas power generation and other infrastructure assets that provide stable cash flow primarily through long-term contracts with strong counterparties; (ii) pursue and capitalize on strategic growth opportunities in the renewable and natural gas power generation and other infrastructure sectors; (iii) maintain diversity in terms of geography, generation and counterparties; and (iv) pay out 80 to 85 per cent of cash available for distribution to the shareholders of the Company on an annual basis.

Cautionary Statement Regarding Forward Looking Information
This news release contains forward looking statements, including statements regarding the business and anticipated financial performance of the Company that are based on the Company's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "plans", "expects", "proposed", "will", "anticipates", "develop", "continue", and similar expressions suggesting future events or future performance. In particular, this news release contains forward-looking statements, pertaining to, without limitation, the following:  the potential impact of COVID-19 on the Company and the actions to be undertaken by the Company or TransAlta in response to the COVID-19 pandemic;  the drop-down of  renewable and gas assets into the Company and the timing thereof; and the Company's access to financing through unencumbered assets, the Company having ample liquidity to provide added flexibility, and the company sufficient funding opportunities to pursue its growth objectives. The forward-looking statements contained in this news release are based on many assumptions including, but not limited to, the following: the impacts arising from COVID-19 not becoming significantly more onerous on the Company, which includes the Company being able to continue to operate as an essential service, and being able to fund growth through project level debt and to access credit on reasonable terms. Forward-looking statements are subject to a number of significant risks, uncertainties and assumptions that could cause actual plans, performance, results or outcomes to differ materially from current expectations. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this news release include risks relating to the impact of COVID-19 and the associated general economic downturn, the impact of which will largely depend on the overall severity and duration of COVID-19 and the general economic downturn, which cannot currently be predicted, and which present risks including, but not limited to: more restrictive directives of government and public health authorities; reduced labour availability impacting our ability to continue to staff the Company's operations and facilities; impacts on the Company's ability to realize its growth goals, including acquiring assets from TransAlta; decreases in short-term and/or long-term electricity demand; increased costs resulting from the Company's efforts to mitigate the impact of COVID-19; deterioration of worldwide credit and financial markets that could limit the Company's ability to obtain external financing to fund its operations and growth expenditures; a higher rate of losses on accounts receivables due to credit defaults; further disruptions to the Company's supply chain; impairments and/or write-downs of assets; and adverse impacts on the Company's information technology systems and the Company's internal control systems as a result of the need to increase remote work arrangements, including increased cybersecurity threats.  Other factors that may adversely impact the Company's forward-looking statements include, but are not limited to, risks relating to:  operational risks involving the Company's facilities, including unplanned outages at such facilities; disruptions in the transmission and distribution of electricity; the effects of weather and other climate-related risks; disruptions in the source of water, wind, solar or gas resources required to operate our facilities; natural disasters; equipment failure and our ability to carry out repairs in a cost-effective or timely manner; and industry risks and competition. The foregoing risk factors, among others, are described in further detail in the Company's Management's Discussion and Analysis and Annual Information Form for the year ended December 31, 2019, which are available on SEDAR at www.sedar.com.  Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company's expectations only as of the date of this news release. The Company disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Note: All financial figures are in Canadian dollars unless noted otherwise.

SOURCE TransAlta Renewables Inc

Investor Inquiries: Phone: [phone] in Canada and U.S., Email: [email protected]; Media Inquiries: Phone: Toll-free media number: 1-855-255-9184, Email: [email protected]

Related Links

http://www.transaltarenewables.ca