First Quarter 2023 Financial Highlights
- Adjusted EBITDA(1) of
$128 million - Free cash flow ("FCF")(1) of
$93 million - Cash available for distribution ("CAFD")(1)(2) of
$71 million or$0.27 per share - Earnings before income taxes of
$53 million - Cash flow from operating activities of
$67 million
Other Business Highlights & Updates
Kent Hills rehabilitation program on track with 13 towers fully reassembled and commissioning commenced in late April, with full return to service of the facility in the second half of 2023- Northern Goldfields construction nearing completion with commercial operations to commence in the second quarter of 2023
Mount Keith 132kV expansion project construction activities have commenced and on track to be completed in the second half of 2023
"Overall, this quarter's performance was impacted by lower than normal wind conditions that prevailed across
"I am pleased that our growth construction program is advancing well despite the macro challenges with supply chain and labour availability. The Northern Goldfields Solar and
"As we move forward, we continue to focus on identifying opportunities to extend our cash tax horizon that we currently expect to impact results in 2024. Absent any growth, our cash available for distribution is expected to decline after the next three quarters due to the expected increase in cash taxes payable and the step down in revenue at our Southern Cross facilities," added
First Quarter 2023 Highlights
$ millions, unless otherwise stated | Three Months Ended | |
Renewable energy production (GWh)(3) | 1,219 | 1,310 |
Revenues | 119 | 143 |
Adjusted EBITDA(1) | 128 | 139 |
Free cash flow(1) | 93 | 108 |
Cash available for distribution(1) | 71 | 90 |
Earnings before income taxes | 53 | 49 |
Net earnings attributable to common shareholders | 45 | 41 |
Cash flow from operating activities | 67 | 103 |
Net earnings (loss) per share attributable to common shareholders, basic | 0.17 | 0.15 |
Free cash flow per share(1),(2) | 0.35 | 0.40 |
Cash available for distribution per share(1),(2) | 0.27 | 0.34 |
Dividends declared and paid per common share | 0.23 | 0.23 |
First Quarter 2023 Results Summary
The Company's renewable power production decreased by 91 GWh for the three months ended
Adjusted EBITDA decreased
FCF and CAFD for the three months ended
Net earnings attributable to common shareholders increased by
Cash flow from operating activities for the three months ended
Significant Events and Other Updates
Kent Hills Wind Facilities Update
Rehabilitation of the
During the first quarter of 2023, the Company filed and served a statement of claim in the
Notes | |
(1) | These items are not defined and have no standardized meaning under IFRS. Please refer to the Discussion of Operating Results, 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) | Free cash flow per share and cash available for distribution per share are calculated as free cash flow and cash available for distribution, respectively, divided by the weighted average number of common shares outstanding during the period of 267 million shares for |
(3) | 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. |
Non-IFRS Measures
We evaluate our performance using a variety of measures to provide management and investors with an understanding of our financial position and results. Certain of the measures discussed in this earnings release are not defined under IFRS and therefore should not be considered in isolation, as a substitute for, as an alternative to, or more meaningful than measures as determined in accordance with IFRS when assessing our financial performance or liquidity. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers.
The Company's key non-IFRS measures are adjusted EBITDA, FCF and CAFD.
Adjusted EBITDA
Adjusted EBITDA is an important metric for management since it represents our core business profitability. Interest, taxes, depreciation and amortization are not included, as differences in accounting treatments may distort our core business results. We present adjusted EBITDA along with operational information of the assets in which we own an economic interest so that readers can better understand and evaluate the drivers of those assets in which we have an economic interest. Since the economic interests are designed to provide the Company with returns as if we owned the assets themselves, presenting the operational information and adjusted EBITDA provides a more complete picture for readers to understand the underlying nature of the investments and the resultant cash flows that would otherwise only be presented as finance income from the investments.
Adjusted EBITDA is composed of our reported EBITDA adjusted to exclude the impact of unrealized mark-to-market gains and losses, asset impairments and reversals and certain insurance recoveries, plus the adjusted EBITDA of the facilities in which we hold an economic interest, which is the facilities' reported EBITDA adjusted for: 1) finance lease income and the change in the finance lease receivable amount; 2) contractually fixed management costs; 3) interest earned on the prepayment of certain transmission costs; 4) the impact of unrealized mark-to-market gains and losses; 5) certain insurance recoveries; and 6) asset impairments and reversals.
Free Cash Flow
FCF represents the amount of cash that is available from operations and investments in subsidiaries of TransAlta in which we have an economic interest, to invest in growth initiatives, to make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or repurchase common shares. Changes in working capital are excluded so that FCF is not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and the timing of receipts and payments.
FCF is calculated as the cash flow from operating activities before changes in working capital, less sustaining capital expenditures, distributions paid to subsidiaries' non-controlling interest, finance income from economic interests and principal repayments on lease obligations, plus FCF of the assets owned through economic interests, which is calculated as adjusted EBITDA from the economic interests less interest expense, sustaining capital expenditures, current income tax expense, principal repayments on lease obligations and working capital and other timing. FCF per share is calculated using the weighted average number of common shares outstanding during the period.
Cash Available for Distribution
CAFD can be used as a proxy for the cash that will be available to common shareholders of the Company. CAFD is calculated as FCF less tax equity distributions and scheduled principal repayments of amortizing debt.
Presenting FCF and CAFD helps readers assess our cash flows in comparison to prior periods. See the Reconciliation of Non-IFRS Measures section's of the MD&A for additional information.
Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below.
Reconciliation of Non-IFRS Measures
Since the economic interests are designed to provide the Company with returns as if we owned the assets ourselves, presenting the operating information and adjusted EBITDA provides a more complete picture to understand the underlying nature of the investments and the resultant cash flows that would otherwise only be presented as finance income from investments.
The following tables reflect adjusted EBITDA and provides reconciliation to earnings before income taxes for the three months and year ended
Owned Assets | Economic Interests | |||||||||
Three months ended $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 63 | 3 | 53 | — | 33 | 6 | 44 | 202 | (83) | 119 |
Fuel, royalties and | 3 | 1 | 23 | — | 1 | 4 | 1 | 33 | (6) | 27 |
Gross margin | 60 | 2 | 30 | — | 32 | 2 | 43 | 169 | (77) | 92 |
Operations, | 11 | 2 | 8 | 6 | 4 | 1 | 8 | 40 | (13) | 27 |
Taxes, other than | 2 | 1 | — | — | 1 | — | — | 4 | (1) | 3 |
Net other operating | (3) | — | — | — | — | — | — | (3) | — | (3) |
Adjusted EBITDA(4) | 50 | (1) | 22 | (6) | 27 | 1 | 35 | 128 | ||
Depreciation and | (34) | |||||||||
Asset impairment | 10 | |||||||||
Finance income | 23 | |||||||||
Interest income | 1 | |||||||||
Interest expense | (12) | |||||||||
Earnings before income tax | 53 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. |
Owned Assets | Economic Interests | |||||||||
Three months ended $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 70 | 4 | 69 | — | 31 | 6 | 43 | 223 | (80) | 143 |
Fuel, royalties and | 4 | 1 | 40 | — | 1 | 3 | 2 | 51 | (6) | 45 |
Gross margin | 66 | 3 | 29 | — | 30 | 3 | 41 | 172 | (74) | 98 |
Operations, | 9 | 2 | 8 | 6 | 4 | 1 | 7 | 37 | (12) | 25 |
Taxes, other than | 1 | — | 1 | — | 1 | — | — | 3 | (1) | 2 |
Net other operating | (7) | — | — | — | — | — | — | (7) | — | (7) |
Adjusted EBITDA(4) | 63 | 1 | 20 | (6) | 25 | 2 | 34 | 139 | ||
Depreciation and | (37) | |||||||||
Finance income | 19 | |||||||||
Interest income | 1 | |||||||||
Interest expense | (13) | |||||||||
Foreign exchange loss | 1 | |||||||||
Earnings before | 49 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. |
Reconciliation of Reported Cash Flow from Operating Activities to FCF and CAFD
Three Months Ended | ||
$ millions | ||
Cash flow from operating activities | 67 | 103 |
Change in non-cash operating working capital balances | 2 | (17) |
Cash flow from operations before changes in working capital | 69 | 86 |
Adjustments: | ||
Sustaining capital expenditures – owned assets | (3) | (4) |
Finance income – economic interests(1) | (23) | (19) |
FCF - economic interests(1) | 50 | 45 |
FCF(2) | 93 | 108 |
Deduct: | ||
Tax equity distributions | (11) | (10) |
Principal repayments of amortizing debt(3) | (11) | (8) |
CAFD(2) | 71 | 90 |
Weighted average number of common shares outstanding in the period (millions) | 267 | 267 |
FCF per share(2) | 0.35 | 0.40 |
CAFD per share(2) | 0.27 | 0.34 |
(1) | Refer to the Reconciliation of FCF to Finance Income Related to Subsidiaries of TransAlta below in this earnings release. |
(2) | These items are non-IFRS measures and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures sections for further details. |
(3) | Includes owned assets and economic interests. |
Reconciliation of FCF to Finance Income Related to Subsidiaries of TransAlta
The following table is a reconciliation of the finance income recognized on those assets we hold an economic interest in.
Three Months Ended | ||
$ millions | ||
Finance income related to subsidiaries of TransAlta | 23 | 19 |
Tax equity distributions | 11 | 10 |
Principal repayments of amortizing debt | 5 | 5 |
Return of capital and redemptions | 15 | 18 |
Effects of changes in working capital and other timing | (4) | (7) |
FCF - economic interests(1) | 50 | 45 |
(1) | This item is a non-IFRS measure and has no standardized meaning under IFRS. Refer to the Non-IFRS Measures section of this earnings release for further details. |
Reconciliation of Adjusted EBITDA to FCF and CAFD
The table below bridges our adjusted EBITDA to our FCF and CAFD for the three months ended
Owned Assets | Economic Interests | |||||||
Three months ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | |
Adjusted EBITDA(1) | 50 | (1) | 22 | (6) | 27 | 1 | 35 | 128 |
Provisions and contract liabilities | (1) | — | — | — | — | — | — | (1) |
Interest expense | — | — | — | (9) | (1) | — | (7) | (17) |
Current income tax expense | (8) | (2) | — | — | — | — | (6) | (16) |
Sustaining capital expenditures | (2) | — | (1) | — | — | — | (2) | (5) |
Interest income | — | — | — | 1 | — | — | 3 | 4 |
Other | — | — | — | — | — | — | — | — |
FCF(2) | 39 | (3) | 21 | (14) | 26 | 1 | 23 | 93 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (11) | — | — | (11) |
Principal repayments of | (6) | — | — | — | — | — | (5) | (11) |
CAFD(2) | 33 | (3) | 21 | (14) | 15 | 1 | 18 | 71 |
(1) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to earnings before income taxes above. |
(2) | FCF and CAFD are defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to cash flow from operating activities above. |
Owned Assets | Economic Interests | |||||||
Three months ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | |
Adjusted EBITDA(1) | 63 | 1 | 20 | (6) | 25 | 2 | 34 | 139 |
Provisions and contract liabilities | (1) | — | — | — | — | — | — | (1) |
Interest expense | — | — | — | (11) | — | — | (6) | (17) |
Current income tax expense | — | — | — | — | (1) | — | (5) | (6) |
Sustaining capital expenditures | (3) | — | (1) | — | (1) | — | (3) | (8) |
Interest income | — | — | — | 1 | — | — | — | 1 |
FCF(2) | 59 | 1 | 19 | (16) | 23 | 2 | 20 | 108 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (10) | — | — | (10) |
Principal repayments of | (3) | — | — | — | — | — | (5) | (8) |
CAFD(2) | 56 | 1 | 19 | (16) | 13 | 2 | 15 | 90 |
(1) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to earnings before income taxes above. |
(2) | FCF and CAFD are defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to cash flow from operating activities above. |
About
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 remediation of the
The forward-looking statements contained in this news release are based on current expectations, estimates, projections and assumptions, having regard to the Company's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: sufficiency of our budgeted capital expenditures in carrying out our business plan; applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; and the satisfaction by third parties of their obligations, including under power purchase agreements. These statements are subject to a number of risks and uncertainties that could cause actual plans, actions and results to differ materially from current expectations including, but not limited to: our potential inability to identify accretive growth opportunities or to fund any such growth opportunities; our potential inability to acquire operating or development assets from TransAlta; competitive factors in the renewable power industry; operational breakdowns, failures, or other disruptions; failure to meet financial expectations; inability to achieve our ESG targets; general domestic and international economic and political developments, including armed hostilities, the threat of terrorism, cyberattacks, diplomatic developments or other similar events; equipment failure and our ability to carry out or have completed the repairs in a cost-effective or timely manner, or at all, including if the remediation at the
Note: All financial figures are in Canadian dollars unless noted otherwise.
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