11
TransAlta Corporation
First Quarter Results
Monday, May 8, 2017
22
This presentation includes forward-looking statements or information (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities
legislation. All forward-looking statements are based on our beliefs as well as assumptions based on available information and on management’s experience and perception of
historical trends, current conditions, and expected future developments, as well as other factors deemed appropriate in the circumstances. Forward-looking statements are not facts,
but only predictions and generally can be identified by the use of statements that include phrases such as “may”, “will”, “can”, “believe”, “expect”, “anticipate”, “intend”, “plan”,
“project”, “forecast”, “foresee”, “potential”, “enable”, “continue”, or other comparable terminology. These statements are not guarantees of our future performance and are subject to
risks, uncertainties, and other important factors that could cause actual results or outcomes to be materially different from those set forth in the forward-looking statements. In
particular, this presentation contains forward-looking statements pertaining to: our business strategy and goals, including our decision to shut-down Sundance Unit 1 and mothball
Sundance Unit 2, to convert Sundance Unit 3 to 6 and Keephills Units 1 and 2 to gas and the cost and timing thereof; the useful life of the converted coal-to-gas units; the benefits
expected to be realized from such strategy, including minimizing capital requirements, reducing risk and accelerating returns on and of capital; our 2017 outlook, including
Comparable EBITDA, Funds from Operations ("FFO"), Free Cash Flow ("FCF") and Availability and revised guidance for Energy Marketing; the amount and timing for the full dispute
settlement with the Ontario Energy Financial Corporation; the development of pit areas at the Highvale mine and the associated benefits; the payment by the Alberta government
pursuant to the Off-Coal Agreement; the commissioning of South Hedland and the impact on FCF, FFO to Adjusted Net Debt and Adjusted Net Debt to EBITDA; our plans to raise
approximately $700 million to $900 million through project level financing to improve our debt coverage to 20% to 25% FFO to Net Debt by 2020; interest savings to be realized
through debt reductions; expectations relating to electricity prices and impact on FCF; cost savings to be realized from Project Greenlight; the cost of carbon; the growth in
renewable generation and our ability to participate in such growth; the in-service dates for Garden Plains, Cowley Ridge and Antelope Coulee; development costs for our wind and
solar projects and the availability of project financing to fund such development;
Factors that may adversely impact our forward-looking statements include risks relating to: fluctuations in market prices and the availability of fuel supplies required to generate
electricity; our ability to contract our generation for prices that will provide expected returns; the regulatory and political environments in the jurisdictions in which we operate;
environmental requirements and changes in, or liabilities under, these requirements; changes in general economic conditions, including interest rates; operational risks involving our
facilities, including unplanned outages at such facilities; disruptions in the transmission and distribution of electricity; the effects of weather; disruptions in the source of fuels, water,
or wind required to operate our facilities; natural or man-made disasters; the threat of domestic terrorism and cyberattacks; lower than anticipated electricity prices; equipment failure
and our ability to carry out, or have completed, repairs, alterations or conversions in a cost-effective manner or timely manner; commodity risk management; industry risk and
competition; fluctuations in the value of foreign currencies and foreign political risks; the need for additional financing; counterparty credit risk; insurance coverage; our provision for
income taxes; legal, regulatory, and contractual proceedings involving the Corporation; outcomes of investigations and disputes; reliance on key personnel; labour relations matters;
risks associated with development projects and acquisitions; increased costs or delays in the construction or commissioning of the South Hedland power project; adverse regulatory
developments; and any market disruption or changes in market regulation, including changes relating to the implementation of a capacity market. The foregoing risk factors, among
others, are described in further detail in the Risk Management section of our Management Discussion and Analysis and under the heading “Risk Factors” in our Annual Information
Form. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking
statements. The forward-looking statements included in this document are made only as of the date hereof and we do not undertake to publicly update these forward-looking
statements to reflect new information, future events or otherwise, except as required by applicable laws. Readers are cautioned not to place undue reliance on forward-looking
statements, which reflect the Corporation's expectations only as of the date of this news release. The purpose of the financial outlooks contained in this presentation is to give the
reader information about management's current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. In light of these
risks, uncertainties, and assumptions, the forward-looking events might occur to a different extent or at a different time than we have described, or might not occur at all. We cannot
assure that projected results or events will be achieved.
Certain financial information contained in this presentation, including Comparable EBITDA, FFO and FCF, may not be standard measures defined under International Financial
Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities. These measures should not be considered in isolation or as a substitute
for measures prepared in accordance with IFRS. For further information on non-IFRS financial measures we use, see the section entitled “Reconciliation of Non-IFRS Measures”
contained in our most recently filed Management's Discussion and Analysis, filed with Canadian securities regulators on www.sedar.com and the Securities and Exchange
Commission on www.edgar.com.
Forward Looking Statements
333
Agenda
Financial Performance
Strategic Announcement
Segment Performance
Finance Review and FCF Bridge
Coal to Gas Conversions
Greenlight
Growth Opportunities
Questions and Answers
44
Q1 2017 Financial & Operations Highlights
1 Adjusted for economic dispatching at U.S. Coal.
• Liquidity has doubled since March 2015
• $500 million in cash; positioned to pay off June 2017 debt maturity
• Financial ratios continue to improve
• Further improvement with commissioning of South Hedland
• Strong greenfield development pipeline
• Near-term focus on contracted Alberta and Saskatchewan renewables
3 mos. ended
Mar. 31 2017 Outlook(in $CAD millions) 2017 2016
Comparable EBITDA $274 $279 $1,025 - $1,135
FFO $203 $196 $765 - $855
FCF $98 $86 $300 - $365
Adjusted Coal Fleet Availability(1) 84.5% 90.1% 86% to 88%
55
Accelerating Coal-to-Gas
• Effective January 1, 2018: retirement of Sundance Unit 1; mothballing
of Sundance Unit 2
• Coal-to-gas conversions of Sundance Units 3 to 6, Keephills Unit 1 and
2 between 2021 to 2023.
• Align and execute our strategy to be consistent with Alberta’s
environmental and power policies.
• Minimizes capital required, reduces risk, accelerates return on (and of)
invested capital
Clearer view of expected cash flow duration from coal
66
Segmented EBITDA - Generation
Renewables and gas contributed 67% of Comparable Generation EBITDA in
Q1 2017
-$50
$0
$50
$100
$150
$200
$250
$300
$350
CanadianCoal
U.S. Coal CanadianGas
AustralianGas
Wind andSolar
Hydro TotalComparable
EBITDA
Renewablesand Gas
EB
ITD
A $
Mill
ion
s
Q1 2015 Q1 2016 Q1 2017
77
Alberta Power Price Overview
Performance not highly impacted by Alberta Power Price
$65$61
$29
$18$22
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$0
$50
$100
$150
$200
$250
$300
$350
Q1 2013 Q1 2014 Q1 2015 Q1 2016 Q1 2017
$ M
illio
ns
Quarterly Results and Alberta Power Price
Comparable EBITDA ($M) Comparable FFO ($M) AB Avg Power Price ($/MWh)
88
Finance & Treasury Overview
Area of Focus Execution
Liquidity • Liquidity of ~$2.0B at March 31, 2017 including cash of $504 million
(1) Reduction in committed credit facilities due to reduction in US bilateral credit facility from $300 million to $200 million.
(1)
$1.0 $1.0$0.9
$1.3$1.5 $1.5 $1.5
$1.4 $1.4
$0.0
$0.5
$1.0
$1.5
$2.0
Mar 31/15 Jun 30/15 Sep 30/15 Dec 31/15 Mar 31/16 Jun 30/16 Sep 30/16 Dec 31/16 Mar 31/17
Cash Available Liquidity Committed Credit Facilities
99
Financial Ratios and Debt Reduction
Ratios Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Target
Comparable FFO before Interest to Adjusted Interest 3.7 3.7 3.9 3.8 3.8 4 – 5x
Adjusted FFO to Adjusted Net Debt 16.2 16.5 17.6 17 18.2 20 – 25%
Adjusted Net Debt to Comparable EBITDA 4.6 4.3 4.1 3.8 3.6 3 – 3.5
• Metrics expected to improve with the commissioning of South Hedland in mid-2017 and
growth in Free Cash Flow.
• Decreased total net debt by $244 million in the quarter
• Further debt reduction will drive share price appreciation
Current Post 2020
Debt Reduction AccretesValue of Equity
Debt Equity
+ ~$3/share
1010
Tangible Factors Driving Cash Flow Growth
$250 mm(1)
$300 mm
$365 mm $400 mm
2016 2017
Guidance
2018 – 2020
Outlook
South Hedland
(Partial Year)
MSA Settlement
Off-Coal Payment
Lower Margin on
Alberta Coal
South Hedland
(Full Year)
Project Greenlight
Interest Expense
Mississauga and
Poplar Creek
Sundance 1&2
Higher Margin on
Alberta Renewables
Brazeau
Wind RFP in Alberta
and Saskatchewan
Solar Project in
Australia
$440 mm
Targeting in excess of $400 million of Free Cash Flow for 2018-2020
(1) Includes MSA settlement payment, productivity capital and Lakeswind tax equity.
1111
Factors Driving Early CTG Conversion
Early Conversion Benefits
Expected
Timing2021 – 2023 vs. 2026 – 2030
Expected Near-
Term Carbon
Costs
Political and social influence trending to less carbon, CTG reduces emissions by
~40%, CTG better positioned for potential increases in carbon pricing
~70% Savings Upon Conversion
Opex and
Sustaining
Capital
Significant savings upon conversion driven by lower fixed operating expenses
and sustaining capital expenditures (including avoidance of CASA compliance
capital expenditures)
Operating
FlexibilityFaster CTG ramp-up, ability to turn unneeded plants “off” and avoid unnecessary
operating expenses will drive improved capacity market competitiveness
ReliabilityCTG will have better reliability, important to meet performance obligations in a
capacity market
Gas Pricing Benefit from currently low natural gas pricing environment
Early conversion decision supported by detailed risk assessment and NPV
analysis
1212
Transforming the way we do business
• Drives ambitious improvements in all parts of TransAlta
• Engaging all employees – bottom-up approach
• Rigorous structure reinforcing accountability
• Creates a highly competitive low cost organization
1313
Positioned to Seize Opportunities in Targeted Markets
1Total estimated project spend is AUD$570 million. Total estimated project spend is stated in CAD$ and includes estimated capital interest costs and may change due to fluctuation in foreign exchange rates.
USA
CANADA1,500MW
1,000MW
500MW
AUSTRALIA
5,000MW
5,000MW
UNITED STATES
Renewables expansion at existing facilities
Targeted gas and renewables acquisition
AUSTRALIA
Wind and solar focus with sites in active
development
Offtake agreements
Targeted gas and renewables acquisitions
SASKATCHEWAN
Wind and Solar sites being
developed
EASTERN CANADA
Ontario RFPs greenfield solar /
small hydro uprates
Targeted gas and renewables
acquisitions
ALBERTA
Long history of developing renewables
in Alberta
3,000MW of CTG conversions
Brownfield wind farms shovel-ready
Brownfield solar and battery at
existing facilities
South Hedland $585 mm (1) Mid-2017150MW
Mid-2018$160 mm80MWGoonumbla Solar
Farm
Alberta Wind
ProjectsDecember 2019$300 mm150MW
Saskatchewan Wind $400 mm December 2019200MW
Brazeau Pump
Storage$1.8 - $2.5 B 2025600 – 900MW
OpportunityExpected
Capital
Expected Online
DateCapacity
Potential for
$3B to $4Bof contracted growth
opportunities over the
next 5 – 10 years
• Contracted projects can be funded
with 60-80% leverage
• Target 8-12% return on equity
depending on locations, contract
profile, and technologies
• $0.8 to $1.0 billion of equity
investment
1414
Garden Plains and Cowley Ridge Repower to be submitted in up-coming Alberta
procurement; Antelope Coulee submitted to Saskatchewan’s
Canadian Wind Projects
Edmonton
Calgary
Saskatoon
Regina
Hanna
Pincher Creek
Swift Current
Garden Plains Wind
Location30 km north of Hanna, Alberta
Capacity 130MW
Proposed
In-Service DateDecember 2019
Capital Costs $260 mm
Other Details Wind resource data dating back
to 2009
Partnerships with landowners
since 2011
Antelope Coulee Wind
Location 35 km southwest of Swift
Current, Sask
Capacity Up to 200MW
Proposed
In-Service DateDecember 2019
Capital Costs $400 mm
Other Details Wind resource data dating back
to 2008
Cowley Ridge Wind Repower
Location Northwest of Pincher Creek,
Alberta
Capacity 20MW
Proposed
In-Service DateDecember 2019
Capital Costs $40 mm
Other Details Site of original Cowley Ridge
Wind Farm which was built in
1993 and dismantled in 2016
Long-term understanding of
wind resource
1515
Australian Opportunities
1Total estimated project spend is AUD$570 million. Total estimated project spend is stated in CAD$ and includes estimated capital interest costs and may change due to
fluctuation in foreign exchange rates
TransAlta continues to build on already its significant Australian presence
Perth
South Hedland
Sydney
AUSTRALIA
Goonumbla
Gas
Solar
Goonumbla Solar Farm
Location 350km North-West of Sydney in New South Wales
Capacity 80MW
Proposed
In-Service Datemid-2018
Capital Costs $160 mm
Other Details
Site is permitted under the New South Wales Major
Project Planning Development process
Engaged Tier 1 EPC contractor to undertake
construction and operation and maintenance
Currently securing offtake agreements
South Hedland
Location South Hedland, Western Australia
Capacity 150MW
Expected
In-Service Datemid-2017
Capital Costs $585 mm(1)
Notes Expected to generate $80 mm of
EBITDA on an annualized basis
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Question and Answer