TransAlta Renewables Reports Third Quarter 2019 Results and Declares Dividends
Third Quarter 2019 Financial Highlights
-- Comparable EBITDA of $86 million, a decrease of 2% over Q3 2018; -- Adjusted funds from operations of $69 million, an increase of $2 million or 3% compared to Q3 2018; and -- Cash available for distribution increased by $2 million compared to Q3 2018.
TransAlta Renewables Inc. ("TransAlta Renewables" or the "Company") (TSX:RNW.TO) today reported financial results for the three and nine months ended Sept. 30, 2019. Comparable EBITDA((1,2)) for the quarter and nine months ended September 30, 2019 was $86 million and $313 million, respectively, representing a 2% decrease for the quarter and a 6% increase year-to-date, as compared to the equivalent periods in the previous year. Comparable EBITDA for the three months ended Sept. 30, 2019 decreased by $2 million, mainly due to lower Comparable EBITDA at Australian Gas and US Wind and Solar, partially offset by higher Comparable EBITDA from Canadian Wind. Comparable EBITDA for the nine months ended Sept. 30, 2019 increased by $17 million, mainly due to an increase in US Wind & Solar EBITDA from the Lakeswind wind and Mass Solar solar economic interests acquired in May 2018, an increase in Canadian Wind Comparable EBITDA due to insurance proceeds related to a 2018 tower fire at Summerview and higher green attribute revenues and higher Comparable EBITDA at Canadian Gas due to decreased fuel consumption stemming from a customer planned outage, partially offset by lower Comparable EBITDA at Australia Gas due to the impact of the weakening Australian dollar.
"Third quarter results were in line with our overall expectations," said John Kousinioris, President. "We remain very focused on successfully commissioning our two US wind projects prior to the end of the year. In addition, we are continuing work to add further accretive projects to our portfolio, including potential additional drop-down opportunities from TransAlta Corporation."
CAFD for the three months ended Sept. 30, 2019 increased by $2 million due to higher AFFO. CAFD for the nine months ended Sept. 30, 2019 increased by $6 million mainly due to higher AFFO partially offset by higher principal repayments of amortizing debt and finance lease obligations.
Reported net earnings attributable to common shareholders for the three months ended Sept. 30, 2019 increased by $12 million primarily due to an increase in the change in fair value of financial assets of $29 million, lower foreign exchange losses of $5 million and a reduction in fuel, royalties and other costs of $5 million, partially offset by an increase in depreciation expense of $11 million, a reduction of finance income of $10 million and interest income of $10 million from subsidiaries of TransAlta, both related to our investment in Australian Gas. Reported net earnings attributable to common shareholders for the nine months ended Sept. 30, 2019 decreased by $12 million. The decrease was attributable to higher foreign exchange losses of $33 million due to the weakening Australian dollar, a reduction of finance income and interest income from subsidiaries of TransAlta of $74 million, partially offset by an increase in the change in fair value of investments in subsidiaries of TransAlta of $66 million, a decrease in interest expense of $7 million, and an increase in income tax recovery of $21 million mainly due to the reduction in Alberta corporate tax rates in the third quarter of 2019.
The Company also declared a monthly dividend of $0.07833 per common share for holders of record on January 15, 2020, February 14, 2020 and March 13, 2020 payable on each of January 31, 2020, February 28, 2020 and March 31, 2020.
-- On March 28, 2019, a subsidiary of TransAlta Corporation ("TransAlta") closed the acquisition of the Antrim wind project which was previously announced on February 20, 2018. The Company has an economic interest in the 29 MW project, located in New Hampshire, which has two 20-year PPAs with counterparties having a Standard & Poor's credit rating of A+ or better. The project is mechanically complete with all nine turbines fully assembled and commercial operation is expected by the end of the year. -- Construction continues on Big Level, the 90 MW wind project in Pennsylvania which has a 15-year PPA with Microsoft Corporation. Foundations are complete and turbine erection is progressing. We expect to commission this project by the end of the year. -- On August 1, 2019, Mr. David Drinkwater was appointed Chair of the Board of Directors. Mr. Allen Hagerman's term as Chair expired pursuant to the terms of the Chair Terms of Reference. Mr. Hagerman continues to serve as an independent director on the Board of Directors.
The following table depicts key financial results and statistical operating data:
Third Quarter 2019 Highlights
In $CAD millions, unless otherwise stated 3 Months ended 9 Months ended Sept. 30, 2019 Sept. 30, 2018 Sept. 30, 2019 Sept. 30, 2018 --- Renewable energy production (GWh)(3) 706 665 2,574 2,545 Revenues 89 90 327 322 Comparable EBITDA(1,2) 86 88 313 296 Cash flow from operating activities 75 78 258 282 Adjusted funds from operations(1) 69 67 243 235 Cash available for distribution(1) 67 65 216 210 Net earnings attributable to common shareholders 24 12 131 143 Net earnings per share attributable to common shareholders, basic and diluted 0.09 0.05 0.50 0.56 Adjusted funds from operations per share(1) 0.26 0.25 0.92 0.92 Cash available for distribution per share(1) 0.25 0.25 0.82 0.82 Dividends paid per common share 0.23 0.23 0.70 0.70 Dividends declared per common share(4) 0.23 0.23 0.70 0.70 ---
The following tables provide further detail on the allocation of the Comparable EBITDA between owned assets and assets in which TransAlta Renewables holds an economic interest; as well as a reconciliation to adjusted funds from operations.
3 Months Ended Sept. 30 2019 2018 ($CAD millions) Owned Economic Total Owned Economic Total Assets Interest Assets Interest --- Comparable EBITDA 50 36 86 43 45 88 Interest expense (10) (10) (11) (11) Sustaining capital expenditures (5) (2) (7) (8) (8) Current income tax expense (2) (2) (1) 1 Tax equity distributions (1) (1) (2) (2) Distributions paid to subsidiaries' non-controlling interest (1) (1) Realized foreign exchange loss (2) (2) 1 1 Insurance recovery (6) (6) Interest income and other 2 3 5 1 (4) (3) Change in long term receivable 9 9 Adjusted funds from operations 35 34 69 24 43 67 ---
9 Months Ended Sept. 30 2019 2018 ($CAD millions) Owned Economic Total Owned Economic Total Assets Interest Assets Interest Comparable EBITDA 195 118 313 179 117 296 Interest expense (30) (30) (38) (38) Sustaining capital expenditures (22) (5) (27) (20) (1) (21) Current income tax expense (1) (6) (7) (4) 1 (3) Tax equity distributions (4) (4) (2) (2) Distributions paid to subsidiaries' non-controlling interest (4) (4) (3) (3) Realized foreign exchange loss (4) (4) Provisions 2 2 Insurance recovery (4) (4) (6) (6) Interest income and other 6 4 10 3 (2) 1 Change in long term receivable 9 9 Adjusted funds from operations 136 107 243 119 116 235 ---
A complete copy of TransAlta Renewables' third 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. Adjusted funds from operations (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. Cash available for distribution (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) During the first quarter of 2019, we revised our approach to reporting adjustments to arrive at Comparable EBITDA, mainly to be more comparable with other companies in the industry. Comparable EBITDA is now adjusted to exclude the impact of unrealized mark-to-market gains and losses. Both the current and prior period amounts have been adjusted to reflect this change. (3) Includes production from US Wind and Solar and excludes Canadian and Australian gas-fired generation. Production is not a key revenue driver for our gas-fired facilities as most of their revenues are capacity based. (4) Includes DRIP non-cash 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 21 wind facilities, 13 hydroelectric facilities, seven natural gas generation facilities, one solar facility and one natural gas pipeline, representing an ownership interest of 2,414 megawatts of owned generating capacity, located in the provinces of British Columbia, Alberta, Ontario, Québec, New Brunswick, the States of 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, including as it pertains to: the Company's growth plan; adding new accretive projects to the fleet including additional drop-downs from TransAlta Corporation; and the commissioning and commercial operation of the Antrim and Big Level wind projects during the fourth quarter of 2019. 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: competitive factors in the renewable power industry; delays in the construction or commissioning of the US wind projects, including any weather, construction or regulatory impacts; operational breakdowns, failures, or other disruptions; changes in economic and market conditions; continued access to debt, tax equity, and capital markets; changes in tax, environmental, and other laws and regulations; 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 for the year ended December 31, 2018 and 2019 Annual Information Form. 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 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.
SOURCE TransAlta Renewables Inc.
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SOURCE: TransAlta Renewables Inc.
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