TransAlta Renewables Inc.
TSX : RNW

TransAlta Renewables Inc.

February 11, 2016 18:09 ET

TransAlta Renewables Reports Fourth Quarter and Full Year 2015 Results and Provides Outlook for 2016

CALGARY, ALBERTA--(Marketwired - Feb. 11, 2016) - TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX: RNW) today reported its financial results for the three months and year ended December 31, 2015. Comparable EBITDA(1) and comparable cash available for distribution(1) ("Comparable CAFD") for the fourth quarter was $94.6 million and $79.1 million respectively. Comparable EBITDA for the year was $260.8 million, significantly higher than the same period in 2014 due to the Company's acquisition of an economic interest in TransAlta Corporation's ("TransAlta") Australian assets which contributed $79.6 million in comparable EBITDA since May, including $31 million during the quarter. Comparable CAFD for the year was $177.5 million ($1.08 per share) with dividends paid during the period representing a payout ratio of 75 per cent, compared to $92.5 million ($0.81 per share) during the same period last year. Comparable net earnings per share(1) for the fourth quarter were $0.45 per share and $0.91 per share for the full year. Today, the Company also declared monthly dividends of $0.07333 per share for holders of record on March 1, 2016, April 1, 2016 and May 2, 2016 payable on each of March 31, 2016, April 29, 2016 and May 31, 2016, respectively.

"TransAlta Renewables delivered strong performance in the fourth quarter this year. Our 2015 results reflect the successful execution of our strategy to grow our diversified portfolio of high quality assets with stable cash flows and create value for our shareholders," said Brett Gellner, President of the Company. "Our investment in TransAlta's Australian and Canadian gas and renewable assets allowed us to increase our annual dividend by $0.11 per share over the past year, representing an increase of 14%. With the additional dividend increase anticipated once South Hedland comes on-stream in 2017, the Company will have increased the dividend by 25% since its initial public offering in August 2013. We continue to expect strong performance from the business in 2016 and will explore additional growth opportunities but remain disciplined in terms of returns and risk profile."

2016 Outlook(2)

TransAlta Renewables expects its comparable EBITDA for 2016 to be in the range of $365 million and $390 million. Adjusted funds from operations(1) is anticipated to be in the range of $245 million and $270 million, including sustaining capital expenditures and distributions to non-controlling interests. Comparable CAFD is expected to be in the range of $210 million and $235 million.

(1) Comparable EBITDA refers to earnings before interest, taxes, depreciation and amortization including finance lease income and adjusted for certain other items. Adjusted funds from operations (AFFO) includes sustaining capital 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. Comparable CAFD refers to AFFO less principal repayments of amortizing debt. These items are not defined under International Financial Reporting Standards ("IFRS") and the way they are calculated changed during 2015. 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 Management's Discussion and Analysis ("MD&A") for further discussion of these items, including, where applicable, reconciliations to measures calculated in accordance with IFRS.

(2) The 2016 outlook is based on expected revenues from the PPAs and sale of green attributes. We expect renewable energy production from our wind and hydro assets to be in the range of 3,500 to 3,850 GWh which includes the impact of economic interests acquired on January 6, 2016. Gas-fired generation primarily provides compensation for capacity, and accordingly, production is not a significant indicator of that business.

Fourth Quarter Highlights

On October 1, 2015, the Company completed a $442 million bond offering for its indirect wholly-owned subsidiary, Melancthon Wolfe Wind LP. The bonds are amortizing and bear interest at a rate of 3.834 per cent, payable semi-annually, and mature on December 31, 2028. Net proceeds were used to repay the amortizing term loan of $155.8 million and Wyoming wind acquisition loan of $116.7 million (US$87 million) to TransAlta in full, with the balance paying down amounts due on the $350 million credit facility with TransAlta.

On November 23, 2015, TransAlta Renewables announced the $540 million investment in the cash flows from TransAlta's Sarnia cogeneration plant, Le Nordais wind farm and Ragged Chute hydro facility, totaling approximately 611 MW of highly contracted power generation assets located in Ontario and Quebec. The transaction was subsequently approved by the shareholders, excluding TransAlta, on January 6, 2016 and closed on that date. The cash portion of the transaction was funded through the issuance of an aggregate of 17,692,750 subscription receipts for gross proceeds of approximately $172.5 million.

During the fourth quarter 2015, the power purchase agreement ("PPA") to supply power to the Kalgoorlie Consolidated Gold Mine Western Australia from the Parkeston Power Station was extended to October 2026 with options for early termination available to either party beginning in 2021. The contract extension will continue to provide stable cash flow for the business.

South Hedland Construction

In the fourth quarter, the Company invested AUD$66 million to advance the construction of the South Hedland Power Station, bringing the total investment for 2015 to AUD$181 million. As of December 31, 2015, major equipment was received on site in-line with the project schedule, including all three gas turbines and generators, the new step-up transformer and the air-cooled condenser. Electrical installation and mechanical erection work continues to proceed as planned. The power station is fully contracted and is expected to be commissioned in mid-2017.

The remaining project costs associated with South Hedland are estimated at approximately $316 million (AUD$326 million) as of December 31, 2015 and will be funded by TransAlta Renewables through a combination of cash flow from operations and borrowings under a credit facility.

Summary of Results

Q4 2015 compared to Q4 2014

  • Comparable EBITDA of $94.6 million compared to $58.5 million for the same period last year primarily due to the $31 million contribution from the Australian portfolio during the quarter
  • The increase in comparable EBITDA drove adjusted funds from operations of $79.1 million compared to $44.5 million for the same period last year
  • Renewable energy production of 983 GWh, compared to 1,015 GWh for the same period last year due to lower wind resources at Wyoming Wind and lower hydro volumes in Western Canada, partially offset by higher wind volumes in Eastern Canada

Full year 2015 compared to full year 2014

  • Comparable EBITDA of $260.8 million compared to $181.2 million for the same period last year, mostly due to the $79.6 million contribution from the Australian portfolio since May 2015
  • Higher EBITDA generated adjusted funds from operations of $200.0 million compared to $130.7 million for the same period last year
  • Comparable CAFD of $177.5 million compared to $92.5 million for the same period last year
  • Renewable energy production of 3,262 GWh compared to 3,351 GWh for the same period last year due to a return to normal wind volumes in Eastern Canada and lower than normal wind volumes at Wyoming after strong generation in 2014
The following table depicts key financial results and statistical operating data:
Fourth Quarter and Year Ended Dec. 31 2015 Highlights
In $CAD thousands, unless otherwise stated 3 months ended
Dec. 31, 2015
3 months ended
Dec. 31, 2014
Year Ended
Dec. 31, 2015
Year Ended
Dec. 31, 2014
Renewable energy production (GWh)(1) 983 1,015 3,262 3,351
Revenue 75,003 72,870 235,690 233,444
Net earnings attributable to common shareholders 107,420 21,665 194,892 48,658
Comparable net earnings attributable to common shareholders(2) 86,037 21,917 149,331 48,910
Comparable EBITDA(2) 94,633 58,452 260,824 181,236
Adjusted funds from operations(2) 79,135 44,526 200,031 130,704
Comparable CAFD(2) 79,135 44,526 177,456 92,472
Net earnings per share attributable to common shareholders, basic and diluted 0.56 0.19 1.18 0.42
Comparable net earnings per share(2) 0.45 0.19 0.91 0.43
Adjusted funds from operations per share(2) 0.41 0.39 1.22 1.14
Comparable CAFD per share(2) 0.41 0.39 1.08 0.81
Dividends paid per common share 0.21 0.19 0.81 0.77
Dividends declared per common share 0.21 0.19 0.82 0.64
(1) Includes production from the Wyoming wind farm and excludes Australian gas-fired generation
(2) These items are not defined under IFRS and the way they are calculated changed during 2015. 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.

TransAlta Renewables is in the process of filing its Annual Information Form, Audited Consolidated Financial Statements and accompanying notes, as well as the MD&A. These documents will be available today through TransAlta Renewables' website at www.transaltarenewables.com or through SEDAR at www.sedar.com.

About TransAlta Renewables Inc.

TransAlta Renewables is among the largest of any publicly traded renewable independent power producer ("IPP") in Canada. Our asset platform is diversified in terms of geography, generation and counterparties and consists of interests in 18 wind facilities, 13 hydroelectric facilities, eight natural gas generation facilities (including one currently under construction) and one natural gas pipeline, representing an ownership interest of 2,441 MW of net generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the State of Wyoming and the State of Western Australia. Our objectives are to (i) create 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 may contain 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, including certain financial outlooks, pertaining to, without limitation, the following: expected comparable EBITDA for 2016, adjusted funds from operations for 2016, comparable cash available for distribution for 2016; expected future dividend increases, including any dividend increases following the completion of South Hedland Power Station; the benefits associated with the extension of the PPA to supply power to the Kalgoorlie Consolidated Gold Mine from the Parkeston Power Station; the commissioning of the South Hedland Power Station; the remaining project costs for the South Hedland Power Station and the source of funding in respect of such costs and the effect, results and perceived benefits of the Australian and Canadian investments. These forward-looking statements are not historical facts but reflect the Company's current expectations concerning future plans, actions and results. 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: changes in tax, environmental, and other laws and regulations; competitive factors in the renewable power industry; operational breakdowns, failures, or other disruptions; changes in economic and market conditions; and other risks and uncertainties discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company's MD&A and 2016 Annual Information Form for the year ended December 31, 2015. 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. This news release and the financial outlooks contained herein were approved as of the date of this news release. The purpose of the financial outlooks contained herein 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. 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.

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