TransAlta Renewables Reports Second Quarter 2021 Results
CALGARY, AB, Aug. 10, 2021 /CNW/ -
Second Quarter 2021 Highlights
- Comparable EBITDA(1) of $97 million, an $18 million decrease to the same period in 2020
- Adjusted funds from operations ("AFFO")(1) of $64 million, a $26 million decrease to the same period in 2020
- Cash available for distribution ("CAFD")(1) of $40 million or $0.15 per share in the second quarter, a $27 million decrease to the same period in 2020
Significant & Subsequent Events
- Completed the previously announced acquisition of a 100 per cent economic interest in the 29 MW Ada cogeneration facility and a 49 per cent economic interest in the 137 MW Skookumchuck wind facility. The economic benefit of each transaction was effective as at Jan. 1, 2021
- Executed a 10-year contract extension at Sarnia with one of its large industrial customers
- Announced that it will be providing BHP Billiton Nickel West Pty Ltd. ("BHP") with renewable electricity to its Goldfields-based operations through the construction of the 48 MW Northern Goldfields Solar Project
- Recognized as one of the Best 50 Corporate Citizens for 2021 by Corporate Knights
2021 Revised Outlook
With weaker than anticipated results to date, we have amended our guidance to reflect the following revised ranges:
- Comparable EBITDA range of $470 to $500 million
- AFFO range of $310 to $340 million
- CAFD range of $260 to $290 million
TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) announced today financial results for the three and six months ended June 30, 2021.
"Our strategy has been to diversify and enhance the contracted cash flow profile of our fleet. We are pleased to have made significant progress this quarter on this front with the addition of the recent Skookumchuck and Ada acquisitions that are now contributing to our results," said Todd Stack, President. "As well, our growth and construction pipelines continue to advance. We were pleased to announce the launch of our Northern Goldfields Solar Project which will commence construction in the fourth quarter of this year. Upon completion, this project is expected to be one of the world's largest remote solar and storage projects supporting mining operations. In addition, the construction of our Windrise acquisition is proceeding to completion and is on track to achieve commercial operations later this year. Together these two new projects will add approximately $30 million of comparable EBITDA annually and will extend and diversify our contracted cash flow profile even further."
"On the operational front, our results this quarter did see weaker EBITDA and CAFD results. This was driven by lower results from our Canadian Gas segment and the lower wind resource experienced through the natural variations in weather. Given the impact of these events, combined with the acceleration of sustaining capital spend at South Hedland, we have reduced our 2021 guidance ranges. These events are not expected to impact the long-term cash flow potential of our assets." said Todd Stack, President.
Comparable EBITDA for the three and six months ended June 30, 2021 decreased by $18 and $13 million, respectively, compared to the same periods in 2020 mainly due to lower wind resources and unplanned outages in the Canadian Gas segment, partially offset by production from the acquisition of the economic interests of Skookumchuck and Ada.
AFFO for the three and six months ended June 30, 2021, decreased by $26 million and $27 million respectively, compared to the same periods in 2020, mainly due to lower comparable EBITDA, higher interest expense, higher current income tax expense, higher sustaining capital expenditures from Australian Gas and higher tax equity distributions due to the addition of the Skookumchuck facility.
CAFD for the three and six months ended June 30, 2021, decreased by $27 million and $28 million, respectively, as a result of decreased AFFO.
Net earnings attributable to common shareholders for the three months ended June 30, 2021 decreased by $5 million compared to the same period in 2020, primarily due to unplanned outages in the Canadian Gas segment and lower foreign exchange gains, partially offset by higher finance income from investments in subsidiaries of TransAlta and no fair value losses recognized in the current period. Finance income from investments in subsidiaries was higher in the current period compared to the same period in 2020, due to higher distributions received from the Australian economic interest. No fair value losses were recognized in the period as the Preferred Shares Tracking the Amortizing Term Loan were redeemed on Oct. 23, 2020.
Net earnings attributable to common shareholders for the six months ended June 30, 2021, increased by $44 million compared to the same period in 2020, primarily due to higher finance income from investments in subsidiaries of TransAlta and no fair value losses recognized on financial assets as the Preferred Shares Tracking the Amortizing Term Loan were redeemed in the prior year. This was partially offset by unplanned outages in the Canadian Gas segment and lower foreign exchange gains recognized in the period.
Northern Goldfields Solar Project
The 48 MW Northern Goldfields Solar Project consists of the 27 MW Mount Keith Solar Farm, 11 MW Leinster Solar Farm, 10 MW/5 MWh Leinster battery energy storage system and interconnecting transmission infrastructure, all of which will be integrated into our 169 MW Southern Cross Energy North remote network in Western Australia. The Company owns an indirect economic interest in the project through the tracking preferred shares that are based in reference to the Australian cash flows. Construction activities are scheduled to start in the fourth quarter of 2021 with completion of the project expected in the second half of 2022. The project is expected to contribute between $8 and $9 million of annual EBITDA.
Windrise Wind Project
The Company acquired a 100 per cent direct interest in the 207 MW Windrise wind project on Feb. 26, 2021. Construction activities continue to advance with all the appropriate procedures in place for COVID-19 to protect the construction team The commercial operation date is expected to occur during the second half of 2021 and the project is expected to have an EBITDA contribution range of between $20 to $22 million. Turbine erection activities are ongoing and the transmission line was energized on June 10, 2021. As at June 30, 2021, the project was approximately 88 per cent complete.
Sarnia Cogeneration Facility Contract Extension
On May 12, 2021, the Company executed an Amended and Restated Energy Supply Agreement with one of its large industrial customers at the Sarnia cogeneration facility which provides for the supply of electricity and steam. This agreement will extend the term of the original agreement from Dec. 31, 2022 to Dec. 31, 2032. However, if the Company is unable to enter into a new contract with the Ontario Independent Electricity System Operator ("IESO") or enter into agreements with its other industrial customers at the Sarnia cogeneration facility that extend past Dec. 31, 2025, then this agreement will automatically terminate on Dec. 31, 2025. The current contract with the IESO in respect of the Sarnia cogeneration facility expires on Dec. 31, 2025. The Company is in active discussions with the three other existing industrial off-takers regarding agreement extensions to their supply of electricity and steam from the Sarnia cogeneration facility on comparable terms.
TransAlta Renewables Named to 50 Best Corporate Citizens List
During the second quarter, the Company was recognized by Corporate Knights as one of the Best 50 Corporate Citizens for 2021. The Best 50 Corporate Citizens list evaluates and ranks Canadian corporations against a set of 24 key performance indicators covering environmental, social and governance ("ESG") indicators relative to their industry peers and using publicly available information. The Company is committed to continuous improvement on key ESG issues and to ensuring its economic value creation is balanced with a value proposition for the environment and its communities.
Global Pandemic
TransAlta Corporation ("TransAlta"), as the manager and operator of the Company's business and assets, continues to operate under its business continuity plan, which focused on ensuring that: (i) TransAlta employees who can work remotely do so and (ii) TransAlta employees who operate and maintain our facilities, and who are not able to work remotely, were able to work safely and in a manner that ensures they remain healthy. TransAlta has adopted local public health authority and government guidelines in all jurisdictions in which we operate to promote the health and safety of all employees and contractors with our health and safety protocols. All of TransAlta's offices and sites follow strict health screening and social distancing protocols including requirements for personal protective equipment. Further, TransAlta maintains travel limitations that are aligned to local jurisdictional guidance, enhanced cleaning procedures, revised work schedules, contingent work teams and the reorganization of processes and procedures to minimize any workplace transmission of the virus.
Notwithstanding the challenges associated with the pandemic, all of our facilities, including those which we have economic interests through TransAlta, continue to remain fully operational and are capable of meeting our customers' needs. The Company 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 due to COVID-19. 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.
The Company remains highly diversified with facilities that are highly contracted and located in various geographies. Our cash flows from our underlying asset portfolio are also supported by the financial strength of our customers. The Company continues to maintain a strong financial position and currently has access to $0.8 billion in liquidity including $240 million of cash.
Updated 2021 Outlook
Comparable EBITDA for the quarter and full year expectations were impacted by a number of factors including, unplanned outages at Sarnia and lower wind production. While the unplanned outages at Sarnia did not have a material impact on electricity production, they did impact steam supply to our customers. Although steam supply disruptions of this nature are atypical and infrequent, these interruptions resulted in a provision for liquidated damages which we expect to resolve later this year. Wind resource is cyclical and production in the first half of the year was 92 per cent of long-term average production, with lower wind resource in all operating regions. In light of these events, the Company is revising its previously-issued guidance for the 2021 fiscal year. Comparable EBITDA for 2021 is now estimated to be between $470 and $500 million.
For 2021, AFFO and CAFD are now also revised to be between $310 million and $340 million, and between $260 and $290 million, respectively, due to the lower comparable EBITDA and the acceleration of the acquisition of a spare turbine for the South Hedland facility. These events are not expected to impact the long-term cash flow generating potential of our assets.
The following table provides additional details pertaining to our 2021 outlook:
Measure (C$ millions unless otherwise noted) |
Revised Outlook |
Previous Outlook |
Comparable EBITDA |
$470 to $500 |
$480 to $520 |
Adjusted funds from operations |
$310 to $340 |
$335 to $365 |
Cash available for distribution |
$260 to $290 |
$285 to $315 |
Second Quarter Ended June 30, 2021 Highlights
C$ millions, unless otherwise stated |
3 Months Ended |
6 Months Ended |
||
June 30, 2021 |
June 30, 2020 |
June 30, 2021 |
June 30, 2020 |
|
Renewable energy production (GWh)(2) |
1,051 |
1,098 |
2,160 |
2,271 |
Revenues |
92 |
103 |
218 |
213 |
Net earnings attributable to common shareholders |
25 |
30 |
77 |
33 |
Comparable EBITDA(1) |
97 |
115 |
220 |
233 |
Adjusted funds from operations(1) |
64 |
90 |
157 |
184 |
Cash flow from operating activities |
79 |
71 |
182 |
153 |
Cash available for distribution(1) |
40 |
67 |
130 |
158 |
Net earnings per share attributable to common |
0.09 |
0.11 |
0.29 |
0.12 |
Adjusted funds from operations per share(1) |
0.24 |
0.34 |
0.59 |
0.69 |
Cash available for distribution per share(1) |
0.15 |
0.25 |
0.49 |
0.59 |
Dividends declared per common share |
0.23 |
0.23 |
0.47 |
0.47 |
Dividends paid per common share(3) |
0.23 |
0.23 |
0.47 |
0.47 |
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.
Owned Assets |
Economic Interests |
|||||||||||||||
3 months ended June 30, |
Canadian Wind |
Canadian Hydro |
Canadian Gas |
Corporate |
US |
US |
Australian |
Total |
||||||||
Comparable EBITDA(1) |
35 |
7 |
3 |
(5) |
22 |
4 |
31 |
97 |
||||||||
Provisions and contract liabilities |
— |
— |
12 |
— |
— |
— |
— |
12 |
||||||||
Interest expense |
(5) |
(1) |
— |
(2) |
(1) |
— |
(6) |
(15) |
||||||||
Current income tax expense |
(7) |
— |
— |
— |
(1) |
— |
(5) |
(13) |
||||||||
Realized foreign exchange |
— |
— |
— |
1 |
— |
— |
— |
1 |
||||||||
Tax equity distributions |
— |
— |
— |
— |
(8) |
— |
— |
(8) |
||||||||
Sustaining capital |
(2) |
(1) |
(1) |
— |
(1) |
(1) |
(4) |
(10) |
||||||||
Distributions paid to |
(2) |
— |
— |
— |
— |
— |
— |
(2) |
||||||||
Interest income |
1 |
— |
— |
1 |
— |
— |
— |
2 |
||||||||
AFFO(1) |
20 |
5 |
14 |
(5) |
11 |
3 |
16 |
64 |
||||||||
Owned Assets |
Economic Interests |
|||||||||||||||
3 months ended June 30, |
Canadian Wind |
Canadian Hydro |
Canadian |
Corporate |
US |
US |
Australian |
Total |
||||||||
Comparable EBITDA(1) |
42 |
8 |
19 |
(5) |
20 |
— |
31 |
115 |
||||||||
Interest expense |
(8) |
— |
— |
(2) |
— |
— |
— |
(10) |
||||||||
Current income tax expense |
— |
(1) |
— |
— |
(1) |
— |
(5) |
(7) |
||||||||
Tax equity distributions |
— |
— |
— |
— |
(6) |
— |
— |
(6) |
||||||||
Sustaining capital expenditures |
(2) |
(1) |
(1) |
— |
— |
— |
— |
(4) |
||||||||
Distributions paid to |
(3) |
— |
— |
— |
— |
— |
— |
(3) |
||||||||
Currency adjustment and |
1 |
— |
— |
1 |
— |
— |
3 |
5 |
||||||||
AFFO(1) |
30 |
6 |
18 |
(6) |
13 |
— |
29 |
90 |
||||||||
Owned Assets |
Economic Interests |
|||||||||||||||
6 months ended June 30, |
Canadian Wind |
Canadian Hydro |
Canadian |
Corporate |
US |
US |
Australian |
Total |
||||||||
Comparable EBITDA(1) |
92 |
8 |
24 |
(11) |
40 |
4 |
63 |
220 |
||||||||
Provisions and contract liabilities |
(6) |
— |
12 |
— |
— |
— |
— |
6 |
||||||||
Interest expense |
(10) |
(1) |
(1) |
(5) |
(1) |
— |
(12) |
(30) |
||||||||
Current income tax expense |
(8) |
— |
— |
— |
(1) |
— |
(9) |
(18) |
||||||||
Realized foreign exchange |
— |
— |
— |
1 |
— |
— |
— |
1 |
||||||||
Tax equity distributions |
— |
— |
— |
— |
(14) |
— |
— |
(14) |
||||||||
Sustaining capital |
(3) |
(1) |
(1) |
— |
(1) |
(1) |
(4) |
(11) |
||||||||
Distributions paid to subsidiaries' non-controlling |
(2) |
— |
— |
— |
— |
— |
— |
(2) |
||||||||
Interest income |
2 |
— |
— |
2 |
— |
— |
1 |
5 |
||||||||
AFFO(1) |
65 |
6 |
34 |
(13) |
23 |
3 |
39 |
157 |
||||||||
Owned Assets |
Economic Interests |
|||||||||||||||
6 months ended June 30, |
Canadian Wind |
Canadian Hydro |
Canadian |
Corporate |
US |
US |
Australian |
Total |
||||||||
Comparable EBITDA(1) |
95 |
8 |
38 |
(10) |
41 |
— |
61 |
233 |
||||||||
Interest expense |
(15) |
(1) |
— |
(4) |
— |
— |
— |
(20) |
||||||||
Current income tax expense |
— |
(1) |
— |
— |
(1) |
— |
(6) |
(8) |
||||||||
Realized foreign exchange |
— |
— |
— |
(3) |
— |
— |
— |
(3) |
||||||||
Tax equity distributions |
— |
— |
— |
— |
(12) |
— |
— |
(12) |
||||||||
Sustaining capital |
(4) |
(1) |
(1) |
— |
(1) |
— |
(2) |
(9) |
||||||||
Distributions paid to |
(3) |
— |
— |
— |
— |
— |
— |
(3) |
||||||||
Currency adjustment and |
1 |
— |
— |
3 |
— |
— |
2 |
6 |
||||||||
AFFO(1) |
74 |
5 |
37 |
(14) |
27 |
— |
55 |
184 |
||||||||
A complete copy of TransAlta Renewables' second quarter MD&A and unaudited financial statements are 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 and may not be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Refer to the Non-IFRS Measures and Reconciliation of Non-IFRS Measures sections 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, US 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 in 2020. The DRIP was suspended in the fourth quarter of 2020.
(4) US Wind and Solar includes the Skookumchuck wind facility and US Gas comprises the Ada cogeneration facility which were acquired through investment in tracking preferred shares on Apr. 1, 2021. The economic benefit of the transaction was effective as at Jan. 1, 2021. Results of the Skookumchuck wind facility and Ada cogeneration facility include Jan. 1 through June 30, 2021.
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 24 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities, one solar facility, one natural gas pipeline, and one battery storage project, representing an ownership interest of 2,633 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, Michigan, Minnesota, Washington 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 revised financial outlook, including in respect of comparable EBITDA, adjusted funds from operations and cash available for distribution; the events giving rise to the revised financial outlooks not impacting the long-term cash flow generating potential of the Company's assets; the expiry of the current contract with the IESO in respect of the Sarnia cogeneration facility and the contract extensions with the three other existing industrial off-takers; the steam supply interruptions at Canadian Gas, including the potential payment for liquidated damages; the Northern Goldfields Solar Project and Windrise wind project, including the timing and cost thereof and their expected contributions to EBITDA. 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, including assumptions that the electricity and steam that is being provided by the Company will continue to be an essential service in the jurisdictions in which we operate. 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, such as more restrictive directives of government and public health authorities, reduced labour availability, inability to staff the Company's construction and operating activities, or disruptions to the Company's supply chain; impairments and/or write-downs of assets; adverse impacts on the Company's information technology systems and the Company's internal control systems; 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, 2020, 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: 1-800-387-3598 in Canada and U.S., Email: [email protected]; Media Inquiries: Phone: Toll-free media number: 1-855-255-9184, Email: [email protected]
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