Financial Performance & Outlook - TransAlta achieved an Adjusted EBITDA of $1634 million in 2022 [31], and projects an Adjusted EBITDA of $1200 to $1320 million for 2023 [3, 20] - The company aims to deliver Free Cash Flow (FCF) between $560 to $660 million in 2023 [51] - 54% of TransAlta's generation EBITDA came from renewable sources [27] - TransAlta Renewables projects an Adjusted EBITDA of $230 to $270 million and CAFD of $495 to $535 million for 2023 [38] Development & Growth - TransAlta plans to expand its development pipeline by adding 1,500 MW of development sites [3] - The company has projects under construction totaling approximately $14 billion [18] - TransAlta is targeting 40% female employees by 2030 [3, 43] - The company is targeting $315 million EBITDA from projects under construction [48] Emissions Reduction - TransAlta aims to accelerate CO2 emissions reduction to 75% from 2015 levels by 2026 [10, 51] and achieve net-zero emissions by 2045 [10]

TransAlta Corporation (NYSE:TAC) Q4 2022 Earnings Conference Call February 23, 2023 11:00 AM ET Company Participants Chiara Valentini - Vice President, Strategic Finance and IR John Kousinioris - President and CEO Todd Stack - Executive Vice President, Finance and CFO Kerry O'Reilly Wilks - Executive Vice President, Legal, Commercial and External Affairs Conference Call Participants Mark Darby - CIBC Capital Markets Maurice Choy - RBC Capital Markets Rob Hope - Scotiabank Patrick Kenny - National Bank John ...

[Introductory Messages](index=4&type=section&id=Introductory%20Messages) The introductory messages highlight the company's exceptional 2022 performance, strategic transition to renewables, and commitment to long-term value creation [President's Message](index=4&type=section&id=President%27s%20Message) President and CEO John Kousinioris highlights 2022 as a year of exceptional performance, driven by the successful execution of the Clean Electricity Growth Plan - The company's strategy focuses on capitalizing on cash flow from its legacy fleet to fund the expansion and diversification of its contracted renewables fleet[7](index=7&type=chunk) - TransAlta has accelerated its decarbonization goal, adopting a net-zero by 2045 target, having already reduced GHG emissions by **68%** since 2015, contributing to approximately **10%** of Canada's Paris Agreement target[9](index=9&type=chunk) - The Clean Electricity Growth Plan's capital target was increased from **$3 billion** to **$3.6 billion** due to inflation, with the corresponding EBITDA target also raised from **$250 million** to **$315 million**, reflecting higher PPA prices[17](index=17&type=chunk) - The company increased its annual dividend by **10%** to **$0.22 per share**, starting in January 2023, and returned **$54 million** to shareholders through share buybacks in 2022[14](index=14&type=chunk) 2022 Key Performance Highlights | Metric | 2022 Value | Change vs 2021 | | :--- | :--- | :--- | | Free Cash Flow per Share | $3.55 | 64% Increase | | Fleet-wide Availability | 90.0% | 3.4 percentage points increase | | Total Recordable Injury Frequency (TRIF) | 0.39 | Best ever result | [Message from the Chair](index=7&type=section&id=Message%20from%20the%20Chair) Chair of the Board John P Dielwart commends the management team for delivering the best year in the company's operating history in 2022 - 2022 was reported as the best year in the company's operating history, with unprecedented performance and exceptional free cash flow[30](index=30&type=chunk) - The company has materially reduced corporate-level debt, expanded its renewable portfolio, and retired or converted all Canadian coal assets to natural gas, eight years ahead of the government mandate[30](index=30&type=chunk) - The capital allocation strategy involves deploying cash flows from the legacy merchant thermal and hydro fleet toward contracted renewables to pivot the company and create long-term value[31](index=31&type=chunk) [Company Profile](index=8&type=section&id=Company%20Profile) This section details TransAlta's identity as a major power generator, its strategic direction for renewable growth, and its execution approach [Who We Are](index=8&type=section&id=Who%20We%20Are) TransAlta is a major Canadian power generator with a diversified portfolio of hydro, wind, solar, and natural gas assets across Canada, the United States, and Australia TransAlta at a Glance (2022) | Metric | Value | | :--- | :--- | | Enterprise Value | $8.9 billion | | Market Capitalization | $3.3 billion | | Diversified Portfolio | ~6,600 MW | | Generating Facilities | 72 | | Generation Experience | 111 years | | Employees | Over 1,200 | | Growth Pipeline | ~4+ GW | Financial Highlights (2018-2022) | Metric ($ millions) | 2022 | 2021 | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | 1,634 | 1,286 | 917 | 1,123 | 984 | | Free Cash Flow | 961 | 585 | 348 | 524 | 435 | | Earnings (Loss) Before Income Taxes | 353 | (380) | (303) | 193 | (96) | | Cash Flow from Operating Activities | 877 | 1,001 | 702 | 849 | 820 | 2022 Adjusted EBITDA from Generation by Fuel Type | Fuel Type | Adjusted EBITDA ($ millions) | Percentage of Total | | :--- | :--- | :--- | | Gas | 629 | 39% | | Hydro | 527 | 32% | | Wind and Solar | 311 | 19% | | Energy Marketing | 183 | 11% | | Energy Transition | 86 | 5% | [Where We Are Going](index=16&type=section&id=Where%20We%20Are%20Going) TransAlta is executing its Clean Electricity Growth Plan with clear targets for 2025, including adding **2 GW** of renewable capacity through a **$3.6 billion** investment Clean Electricity Growth Plan Targets (2021-2025) | Metric | 2025 Goal | | :--- | :--- | | Renewables Growth | 2 GW | | Growth Capital | $3.6 Billion | | Incremental Adjusted EBITDA | $315 Million | | Development Pipeline | 5 GW | [How We Are Doing It](index=18&type=section&id=How%20We%20Are%20Doing%20It) The company's strategy is centered on renewable electricity growth and a strong commitment to sustainability, underscored by specific ESG targets - The company has adopted a net-zero by 2045 target and is on track to achieve a **75%** reduction in CO2 emissions by 2026 from 2015 levels[79](index=79&type=chunk) - TransAlta plans to deploy **$3.6 billion** of growth capital by the end of 2025 to add **2 GW** of new renewables capacity[79](index=79&type=chunk) Progress on Key ESG Targets (as of 2022) | Area | Metric | 2030 Goal | 2022 Status | | :--- | :--- | :--- | :--- | | Environment | GHG Emissions Reduction (vs 2015) | 75% (by 2026) | 68% | | Social | Women in Workforce | 40% | 26% | | Governance | Women on Board | 50% | 36% | [Management's Discussion and Analysis (MD&A)](index=20&type=section&id=Management%27s%20Discussion%20and%20Analysis) This section provides a comprehensive analysis of the company's financial performance, strategic initiatives, and future outlook for 2022 [Highlights](index=24&type=section&id=Highlights) In 2022, TransAlta exceeded its financial guidance, driven by exceptional performance across all generation segments and the Energy Marketing segment - Adjusted EBITDA increased by **$348 million** year-over-year, driven by strong performance from the Alberta portfolio, incremental production from new facilities, higher ancillary service revenues, and lower carbon compliance costs[113](index=113&type=chunk) - Free Cash Flow (FCF) increased by **$376 million** to **$961 million**, primarily due to higher adjusted EBITDA and a decrease in sustaining capital spending[117](index=117&type=chunk) Consolidated Financial Highlights | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Adjusted EBITDA ($M) | 1,634 | 1,286 | | Free cash flow ($M) | 961 | 585 | | Net earnings (loss) attributable to common shareholders ($M) | 4 | (576) | | Cash flow from operating activities ($M) | 877 | 1,001 | | Adjusted availability (%) | 90.0 | 86.6 | [Significant and Subsequent Events](index=27&type=section&id=Significant%20and%20Subsequent%20Events) Key strategic developments included the acquisition of a **50%** interest in the Tent Mountain pumped hydro project, the issuance of **US$400 million** in Senior Green Bonds, and a **10%** increase in the common share dividend - The company acquired a **50%** interest in the Tent Mountain Renewable Energy Complex, an early-stage **320 MW** pumped hydro energy storage project in Alberta[123](index=123&type=chunk) - Issued **US$400 million** in Senior Green Bonds with a **7.75%** coupon, maturing in 2029, with proceeds allocated to eligible green projects[127](index=127&type=chunk)[129](index=129&type=chunk) - The Board of Directors approved a **10%** increase in the common share dividend, raising the annualized dividend to **$0.22 per share** effective January 1, 2023[130](index=130&type=chunk) - The rehabilitation plan for the Kent Hills 1 and 2 wind facilities was announced, with PPAs extended to December 2045, and the project targeted for completion in the second half of 2023[142](index=142&type=chunk)[173](index=173&type=chunk) [Segmented Financial Performance and Operating Results](index=30&type=section&id=Segmented%20Financial%20Performance%20and%20Operating%20Results) In 2022, all generation segments demonstrated strong performance, with Hydro, Gas, and Wind and Solar segments showing significant adjusted EBITDA increases [Hydro](index=30&type=section&id=Hydro) The Hydro segment's adjusted EBITDA surged by **$205 million** due to higher merchant pricing in Alberta, higher production, and increased ancillary service prices - Adjusted EBITDA for 2022 increased by **$205 million** compared to 2021, primarily due to higher merchant prices, higher production, and higher ancillary service prices and volumes in the Alberta market following the expiration of the Alberta PPA[156](index=156&type=chunk)[159](index=159&type=chunk) Hydro Segment Performance | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Production (GWh) | 1,988 | 1,936 | | Revenues ($M) | 607 | 383 | | Adjusted EBITDA ($M) | 527 | 322 | [Wind and Solar](index=31&type=section&id=Wind%20and%20Solar) The Wind and Solar segment saw a **$49 million** increase in adjusted EBITDA from new assets and favorable pricing, despite an extended outage at Kent Hills - Adjusted EBITDA increased by **$49 million** in 2022, driven by higher production from new facilities (Windrise and North Carolina Solar), higher merchant pricing in Alberta, and liquidated damages from the Windrise facility, partially offset by the extended outage at the Kent Hills facilities[166](index=166&type=chunk) - The rehabilitation of the Kent Hills 1 and 2 wind facilities is underway, with an estimated capital cost of **$120 million** and a target completion in the second half of 2023, with the outage resulting in approximately **$3 million** per month of foregone revenue[172](index=172&type=chunk)[173](index=173&type=chunk) Wind and Solar Segment Performance | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Production (GWh) | 4,248 | 3,898 | | Revenues ($M) | 407 | 348 | | Adjusted EBITDA ($M) | 311 | 262 | [Gas](index=33&type=section&id=Gas) The Gas segment's adjusted EBITDA grew by **$141 million**, benefiting from strong Alberta prices and lower carbon costs, partially offset by higher natural gas prices - Adjusted EBITDA increased by **$141 million** in 2022, mainly due to capturing higher realized energy prices in Alberta, higher Ontario merchant pricing, and lower carbon compliance costs, partially offset by higher natural gas prices and consumption[179](index=179&type=chunk) Gas Segment Performance | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Production (GWh) | 11,448 | 10,565 | | Revenues ($M) | 1,521 | 1,126 | | Adjusted EBITDA ($M) | 629 | 488 | [Energy Transition](index=34&type=section&id=Energy%20Transition) The Energy Transition segment's EBITDA declined by **$47 million** due to coal asset retirements, partially offset by higher prices and production at the Centralia facility - Adjusted EBITDA decreased by **$47 million** in 2022, primarily due to the retirement of the Alberta coal assets (Keephills Unit 1 and Sundance Unit 4), partially offset by higher prices and production at the Centralia facility and lower carbon costs in Alberta[191](index=191&type=chunk) Energy Transition Segment Performance | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Production (GWh) | 3,574 | 5,706 | | Revenues ($M) | 724 | 728 | | Adjusted EBITDA ($M) | 86 | 133 | [Energy Marketing](index=35&type=section&id=Energy%20Marketing) The Energy Marketing segment exceeded expectations with a **$17 million** increase in adjusted EBITDA due to successful short-term trading across volatile North American markets - Adjusted EBITDA increased by **$17 million** in 2022, exceeding expectations due to successful short-term trading of physical and financial power and gas products across volatile North American markets[197](index=197&type=chunk) Energy Marketing Segment Performance | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Adjusted EBITDA ($M) | 183 | 166 | [Alberta Electricity Portfolio](index=37&type=section&id=Alberta%20Electricity%20Portfolio) The Alberta portfolio, constituting **52%** of the company's gross installed capacity, significantly benefited from strong market conditions in 2022 - The average Alberta power pool price increased from **$102/MWh** in 2021 to **$162/MWh** in 2022, driven by higher demand, and higher natural gas and carbon prices[216](index=216&type=chunk)[218](index=218&type=chunk) - Gross margin for the Alberta Electricity Portfolio increased by **$319 million** to **$1,177 million** in 2022, as higher realized power prices offset higher fuel costs[222](index=222&type=chunk) Alberta Portfolio Key Metrics | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Realized merchant power price per MWh | $126 | $91 | | Hedged volume (GWh) | 7,228 | 6,992 | | Hedged power price average per MWh | $86 | $72 | | Fuel and purchased power per MWh | $60 | $38 | | Carbon compliance cost per MWh | $9 | $16 | [Financial Position](index=45&type=section&id=Financial%20Position) As of December 31, 2022, TransAlta's total assets increased by **$1.5 billion** to **$10.7 billion**, while total liabilities rose by **$2.1 billion** to **$8.8 billion** - Working capital increased year-over-year mainly due to the reclassification of the Kent Hills Bonds from current to long-term liabilities and the repayment of **US$400 million** of senior notes due in 2022[265](index=265&type=chunk) Consolidated Statement of Financial Position Summary | ($ millions) | Dec. 31, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Total current assets | 3,714 | 2,197 | | Total non-current assets | 7,027 | 7,029 | | **Total assets** | **10,741** | **9,226** | | Total current liabilities | 2,888 | 1,931 | | Total non-current liabilities | 5,864 | 4,702 | | **Total liabilities** | **8,752** | **6,633** | | **Total equity** | **1,989** | **2,593** | [Financial Capital](index=47&type=section&id=Financial%20Capital) The company maintained a strong financial position in 2022, with credit ratings reaffirmed by major agencies, and total consolidated net debt at **$2.85 billion** - Credit ratings were reaffirmed in 2022: Moody's (Ba1, stable), DBRS Morningstar (BBB low, stable), and S&P Global Ratings (BB+, stable)[271](index=271&type=chunk) - The company has **$2.1 billion** in liquidity, including **$1.1 billion** in cash and **$1.2 billion** available under committed credit facilities[429](index=429&type=chunk)[281](index=281&type=chunk) Capital Structure Summary | As at Dec. 31 ($ millions) | 2022 | 2021 | | :--- | :--- | :--- | | Total consolidated net debt | 2,854 | 2,636 | | Equity attributable to shareholders | 1,110 | 1,582 | | Non-controlling interests | 879 | 1,011 | | **Total capital** | **5,243** | **5,629** | [2023 Outlook](index=72&type=section&id=2023%20Outlook) For 2023, TransAlta anticipates strong but moderated financial performance compared to the exceptional results of 2022 - The outlook reflects lower expected pricing in Alberta due to normalized weather and new supply additions, partially offset by contributions from new projects like Garden Plain wind and the full return of the Kent Hills facilities in H2 2023[409](index=409&type=chunk)[416](index=416&type=chunk) 2023 Financial Outlook vs. 2022 Actuals | Measure | 2023 Target | 2022 Actuals | | :--- | :--- | :--- | | Adjusted EBITDA | $1,200M - $1,320M | $1,634M | | Free Cash Flow (FCF) | $560M - $660M | $961M | | Dividend | $0.22/share annualized | $0.20/share annualized | Key 2023 Market Assumptions | Market | 2023 Price Assumption | | :--- | :--- | | Alberta Spot Price | $105 - $135 / MWh | | Mid-C Spot Price | US$75 - US$85 / MWh | | AECO Gas Price | $4.60 / GJ | [Strategy and Capability to Deliver Results](index=76&type=section&id=Strategy%20and%20Capability%20to%20Deliver%20Results) TransAlta's strategy is centered on its Clean Electricity Growth Plan, aiming to add **2 GW** of renewable capacity by 2025 with a **$3.6 billion** investment - Projects currently under construction total **678 MW** and include Garden Plain (Wind, AB), White Rock (Wind, OK), Horizon Hill (Wind, OK), Northern Goldfields (Solar, WA), and Mount Keith (Transmission, WA)[16](index=16&type=chunk)[445](index=445&type=chunk) - The company has **374 MW** of advanced-stage development projects, including wind, gas, and battery storage, and an early-stage pipeline of **3.9 GW** to **5.0 GW**[442](index=442&type=chunk)[450](index=450&type=chunk)[451](index=451&type=chunk) Clean Electricity Growth Plan (2021-2025) | Target | Goal | % Achieved (as of Feb 2023) | | :--- | :--- | :--- | | Renewable Energy Capacity | 2 GW | 40% | | Capital Investment | $3.6 Billion | 41% | | Incremental Average Annual EBITDA | $315 Million | 47% | [Environment, Social and Governance (ESG)](index=89&type=section&id=Environment%2C%20Social%20and%20Governance%20%28ESG%29) TransAlta has formalized its commitment to sustainability by adopting a net-zero by 2045 target and developing a comprehensive Climate Transition Plan - The company has adopted a new, more ambitious target to achieve net-zero for **100%** of its scope 1 and 2 GHG emissions by 2045[537](index=537&type=chunk)[545](index=545&type=chunk) - A formal Climate Transition Plan has been developed, outlining actions to reduce operational and value chain emissions, supported by sustainable finance and an inclusive transition framework[571](index=571&type=chunk) - In 2022, the company achieved its 2026 targets for reducing air emissions (SO2 and NOx) and fleet-wide water consumption, four years ahead of schedule[547](index=547&type=chunk)[551](index=551&type=chunk) Climate-Related Financial Metrics ($ millions) | Year ended Dec. 31 | 2022 | 2021 | | :--- | :--- | :--- | | Capital expenditures for renewable energy generation | 666 | 326 | | Renewable energy adjusted EBITDA | 838 | 584 | | Environmental attribute sales revenue | 53 | 40 | | Renewable energy adjusted revenue | 1,014 | 731 | [Consolidated Financial Statements](index=151&type=section&id=Consolidated%20Financial%20Statements) This section presents the company's audited financial statements, including the auditor's report, core statements, and detailed notes [Auditor's Report and Management's Report](index=151&type=section&id=Auditor%27s%20Report%20and%20Management%27s%20Report) This section includes management's assertion of responsibility for the financial statements and internal controls, followed by the independent auditor's report from Ernst & Young LLP - The independent auditor, Ernst & Young LLP, issued an unqualified opinion on the consolidated financial statements and the company's internal control over financial reporting[968](index=968&type=chunk)[978](index=978&type=chunk) - Critical Audit Matters identified by the auditor include the valuation of long-lived assets and goodwill for certain renewable energy CGUs, and the valuation of Level III derivative instruments due to significant estimation uncertainty and judgment[984](index=984&type=chunk)[986](index=986&type=chunk) [Core Financial Statements](index=158&type=section&id=Core%20Financial%20Statements) The core financial statements present the company's performance for the years 2020-2022, showing revenues of **$2.98 billion** and net earnings of **$161 million** in 2022 Consolidated Statement of Earnings (Loss) Summary | ($ millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | 2,976 | 2,721 | 2,101 | | Gross margin | 1,635 | 1,489 | 1,133 | | Operating income (loss) | 531 | (239) | (88) | | Net earnings (loss) | 161 | (425) | (253) | | Net earnings (loss) attributable to common shareholders | 4 | (576) | (336) | Consolidated Statement of Financial Position Summary | As at Dec. 31 ($ millions) | 2022 | 2021 | | :--- | :--- | :--- | | Total assets | 10,741 | 9,226 | | Total liabilities | 8,752 | 6,633 | | Total equity | 1,989 | 2,593 | Consolidated Statement of Cash Flows Summary | ($ millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Cash flow from operating activities | 877 | 1,001 | 702 | | Cash flow used in investing activities | (741) | (472) | (687) | | Cash flow from (used in) financing activities | 45 | (282) | 272 | [Notes to Consolidated Financial Statements](index=163&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed disclosures that support the primary financial statements, covering accounting policies, segment performance, and financial instruments - Asset impairment charges were significantly lower in 2022 at **$9 million**, compared to **$648 million** in 2021, which was impacted by decisions to suspend the Sundance Unit 5 repowering and retire other coal units[1162](index=1162&type=chunk)[1169](index=1169&type=chunk) - The company adjusted the useful lives of certain Gas segment assets in 2022, resulting in a **$132 million** increase in depreciation expense for the year[1354](index=1354&type=chunk) - As of Dec 31, 2022, the company had total contractual commitments of approximately **$8.3 billion**, including long-term debt, interest, operating leases, and purchase obligations[1515](index=1515&type=chunk)[1318](index=1318&type=chunk) [Supplementary Information and Appendices](index=252&type=section&id=Supplementary%20Information%20and%20Appendices) This section provides additional financial and operational data, sustainability performance indicators, and corporate information for stakeholders [Eleven-Year Financial and Statistical Summary](index=252&type=section&id=Eleven-Year%20Financial%20and%20Statistical%20Summary) This section provides a high-level summary of key financial and operational data spanning from 2012 to 2022, highlighting major trends in revenues, earnings, and assets Key Metrics (2020-2022) | ($ millions, except where noted) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Revenues | 2,976 | 2,721 | 2,101 | | Net earnings (loss) attributable to common shareholders | 4 | (576) | (336) | | Total assets | 10,741 | 9,226 | 9,747 | | Cash flow from operating activities | 877 | 1,001 | 702 | | Adjusted EBITDA | 1,634 | 1,286 | 917 | | Total generating capacity (MW) | 6,650 | 7,387 | 8,265 | [Plant Summary](index=255&type=section&id=Plant%20Summary) This provides a detailed inventory of TransAlta's generating assets as of December 31, 2022, listing each facility by type, location, capacity, and ownership Gross Installed Capacity by Fuel Type (MW) | Fuel Type | Gross Installed Capacity (MW) | | :--- | :--- | | Gas | 3,084 | | Wind & Battery Storage | 1,906 | | Hydro | 922 | | Energy Transition (Coal) | 671 | | Solar | 143 | | **Total** | **6,726** | [Sustainability Performance Indicators](index=257&type=section&id=Sustainability%20Performance%20Indicators) This section presents a detailed breakdown of the company's ESG performance data for 2020-2022, covering environmental, social, and governance metrics Key Sustainability Metrics | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Total GHG emissions (tonnes CO2e) | 10,248,000 | 12,505,000 | 16,361,000 | | Water consumption (million m³) | 20 | 30 | 40 | | Total Recordable Injury Frequency (TRIF) | 0.39 | 0.82 | 0.81 | | Women in workforce (%) | 26 | 24 | 21 | | Women on Board of Directors (%) | 36 | 42 | 45 | [Shareholder and Corporate Information](index=269&type=section&id=Shareholder%20and%20Corporate%20Information) This section provides essential information for shareholders, including details on dividend declarations, stock performance charts, and contact information - Common share dividends were declared at **$0.050 per share** for the first three quarters of 2022 and increased to **$0.055 per share** for the dividend payable January 1, 2023[1610](index=1610&type=chunk) - A chart comparing a **$100** investment in TransAlta versus the S&P/TSX Composite Index over ten years shows TransAlta's value at **$120** and the index at **$186** at the end of 2022, assuming dividend reinvestment[1621](index=1621&type=chunk)

Financial Data and Key Metrics Changes - TransAlta Corporation reported adjusted EBITDA of CAD 555 million for Q3 2022, a 38% increase compared to the prior period, driven by strong performance in the Alberta Electricity portfolio [7] - Free cash flow for the quarter was CAD 393 million, or CAD 1.45 per share, representing an 87% increase quarter-over-quarter [8] - Year-to-date adjusted EBITDA reached CAD 1.1 billion, a 5% increase over 2021, with free cash flow per share of CAD 2.38, a 28% increase year-over-year [8][27] - The company revised its 2022 financial guidance upwards, increasing adjusted EBITDA and free cash flow guidance by CAD 295 million and CAD 245 million respectively [8][30] Business Line Data and Key Metrics Changes - The hydro segment delivered adjusted EBITDA of CAD 245 million in Q3 2022, nearly tripling from CAD 82 million in Q3 2021, driven by stronger realized pricing and higher volumes [23] - Adjusted EBITDA from the gas segment increased by 26% due to high availability and stronger merchant pricing in Alberta [24] - The Energy Transition segment saw a decrease in adjusted EBITDA by CAD 4 million year-over-year, attributed to the retirement of certain units, partially offset by improved performance from the Centralia facility [24] Market Data and Key Metrics Changes - The average pool price for electricity in Alberta for Q3 2022 was CAD 221 per megawatt hour, compared to CAD 100 per megawatt hour in Q3 2021, influenced by high electricity demand and natural gas prices [19] - The hydro fleet realized merchant prices of CAD 246 per megawatt hour, an 11% premium over the average spot price [21] - The gas fleet generated CAD 290 million in revenue, with a blended realized price of CAD 146 per megawatt hour [20] Company Strategy and Development Direction - The company aims to continue delivering clean electricity solutions and is focused on securing 400 megawatts of clean electricity projects across Canada, the U.S., and Australia [36] - TransAlta is actively expanding its development pipeline, with a focus on renewables and storage, and is progressing on various projects including the rehabilitation of Kent Hills wind facilities [37] - The company is committed to achieving a 75% reduction in CO2 emissions by 2026 from 2015 levels and is focused on equity, diversity, and inclusion initiatives [39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2023, expecting a constructive year with average prices in the Alberta power market projected around CAD 119, with Q1 showing particularly strong pricing [48] - The company is not overly concerned about political interference in the market, emphasizing the importance of a long-term view on pricing [49] - Management highlighted the need for a balanced approach to decarbonization, including carbon capture and storage (CCS) as part of the long-term strategy [66] Other Important Information - The Board of Directors approved a common share dividend increase of 10%, marking the fourth consecutive annual increase [9] - The company returned CAD 16 million to shareholders through share buybacks during the quarter, with a total of CAD 34 million in buybacks for 2022 [12] - TransAlta Renewables delivered CAD 88 million of adjusted EBITDA, below expectations due to low wind resources and extended outages [32] Q&A Session Summary Question: Capital Allocation Strategy - Management indicated that higher cash flow will be allocated towards dividends, share buybacks, and ongoing growth projects, with a focus on maintaining a strong balance sheet [44][45] Question: 2023 Pricing Outlook - Management expressed optimism for 2023, with expected strong pricing in Q1 and a constructive overall market outlook [48] Question: Growth Pipeline and M&A - The internal development pipeline is expected to meet growth targets, with M&A considered to supplement growth rather than as a primary strategy [56] Question: Carbon Capture and Storage Opportunities - Management acknowledged the importance of CCS in achieving decarbonization goals and is monitoring developments in government policy [66] Question: Kent Hills Rehabilitation Update - The priority is to rehabilitate Kent Hills wind facilities, with expectations for turbines to return to service by mid-2023 [69] Question: Hydro Plant Ownership and Performance - Management provided details on the Brookfield deal, indicating that the hydro fleet's performance this year may affect ownership stakes [92][94]

Financial Data and Key Metrics Changes - In Q2 2022, the company reported adjusted EBITDA of CAD 279 million, leading to free cash flow of CAD 145 million or CAD 0.54 per share. Year-to-date, adjusted EBITDA reached CAD 538 million, resulting in free cash flow of CAD 253 million or CAD 0.93 per share [10][11][37] - The average pool price for electricity in Alberta for Q2 settled at CAD 122 per megawatt hour, compared to CAD 106 per megawatt hour in 2021, driven by higher natural gas prices [28] - Natural gas prices averaged approximately CAD 7 per gigajoule in Q2 2022, compared to CAD 3 per gigajoule in the previous year [29] Business Line Data and Key Metrics Changes - The Alberta Wind and Hydro fleet led the results with a 60% increase in adjusted EBITDA, from CAD 55 million in Q2 2021 to CAD 88 million in Q2 2022, driven by strong production and higher realized pricing [34] - The Energy Marketing segment generated CAD 50 million in adjusted EBITDA, with expectations to generate between CAD 110 million and CAD 130 million in gross margin for the year [36] - The EBITDA contribution from renewables and storage assets reached 58% in the quarter, moving towards a target of 70% by the end of 2025 [19] Market Data and Key Metrics Changes - The company noted strong demand for renewables in the U.S. and is actively seeking to grow its development pipeline in that market [24] - In Alberta, the company is experiencing inflationary pressures on capital for new projects, but demand for corporate Power Purchase Agreements (PPAs) remains strong [25] Company Strategy and Development Direction - The company aims to deliver 2 gigawatts of new renewables capacity by 2025, deploying approximately CAD 3 billion in growth capital, targeting cumulative annual EBITDA from growth projects of CAD 250 million by 2025 [21] - The company is focused on expanding its renewable development pipeline, with over 300 megawatts added so far in 2022, and is on track to secure another 200 megawatts [16][46] - The company is advancing its Mount Keith Transmission Expansion project in Western Australia and has committed CAD 25 million to Energy Impact Partners' Deep Decarbonization Fund [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to deliver on its growth plans despite recent volatility in energy market pricing, maintaining a strong balance sheet with approximately CAD 1.9 billion in liquidity [39] - The company anticipates that forward prices will remain strong, with expectations for the balance of the year carrying a lower hedge level compared to Q2 [33] - Management highlighted the importance of meeting guidance and expressed optimism about the company's performance in the second half of the year [90] Other Important Information - The company debuted a new brand and visual identity in June, emphasizing its commitment to a carbon-neutral future [20] - The company is actively working on ESG objectives, including reclamation work and increasing female representation in the workforce [49] Q&A Session Summary Question: Dynamics in the Ancillary Market - Management noted increased competition in the ancillary services market due to high gas prices, which has led to more participation from the gas fleet in the AES market [60][61] Question: Clean Electricity Standard Impact - Management indicated that regulatory initiatives are not significantly impacting supply in Alberta, with renewables growth driven by ESG requirements from customers [64][65] Question: Long-term Contracts in Alberta - Management discussed the interest in contracting existing generation, particularly in wind and hydro, while noting the challenges associated with hydro as a premium product [75] Question: Energy Marketing Guidance - Management explained that the increase in energy marketing guidance was modest, with overall guidance remaining unchanged due to uncertainties in performance and gas prices [86][90] Question: Alberta Thermal Redevelopment Opportunities - Management confirmed ongoing discussions regarding redevelopment opportunities in Centralia and Alberta, focusing on solar and storage potential [100][101] Question: Sarnia Re-contracting Outlook - Management does not expect recent transmission project delays to impact the re-contracting process with the Ontario off-taker [106][107]

transalta® Q2 2022 Results August 5, 2022 2 Disclaimer and Forward-Looking Statements This presentation includes "forward-looking information" within the meaning of applicable Canadian securities laws, and "forward-looking statements" within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). All forward-looking statements are based on the beliefs as well as as ...

TRANSALTA CORPORATION Management's Discussion and Analysis Second Quarter Report for 2022 Management's Discussion and Analysis This Management's Discussion and Analysis ("MD&A") contains forward-looking statements. These statements are based on certain estimates and assumptions and involve risks and uncertainties. Actual results may differ materially. See the Forward-Looking Statements section of this MD&A for additional information. Table of Contents This MD&A should be read in conjunction with the unaudit ...

TransAlta Corporation (NYSE:TAC) Q1 2022 Earnings Conference Call May 6, 2022 11:00 AM ET Company Participants Chiara Valentini - VP, Strategic Finance & IR John Kousinioris - President and CEO Todd Stack - EVP, Finance and CFO Kerry O'Reilly Wilks - EVP, Legal Commercial and External Affairs Conference Call Participants Dariusz Lozny - Bank of America Rob Hope - Scotiabank Mark Jarvi - CIBC John Mould - TD Securities Andrew Kuske - Credit Suisse Maurice Choy - RBC Naji Baydoun - iA Capital Markets Operator ...

TransAlta Q1 2022 Results MAY 6, 2022 TransAlta 1 Forward-Looking Statements This presentation includes "forward-looking information" within the meaning of applicable Canadian securities laws, and "forward-looking statements" within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). All forward-looking statements are based on the beliefs as well as assumptions ...

[Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section details the company's forward-looking statements, associated assumptions, and material risk factors - This section outlines the forward-looking statements within the MD&A, which are based on management's current estimates and assumptions, and cautions that actual results may differ materially[3](index=3&type=chunk) - Key forward-looking topics include the Clean Electricity Growth Plan, projects under construction, remediation of Kent Hills facilities, carbon compliance costs, and the **2022 financial outlook**[4](index=4&type=chunk) - The statements are based on assumptions such as Alberta spot prices of **$90-$100/MWh** and Mid-Columbia spot prices of **US$55-$65/MWh** for 2022[5](index=5&type=chunk) - Significant risks include the COVID-19 pandemic, market price fluctuations, operational risks like unplanned outages, and equipment failure, such as the issues at the **Kent Hills wind facilities**[6](index=6&type=chunk) [Description of the Business](index=4&type=section&id=Description%20of%20the%20Business) The company operates a diversified power generation portfolio across multiple regions and fuel types - TransAlta is a major Canadian power generator with a diversified portfolio of assets using **water, wind, solar, and natural gas**[9](index=9&type=chunk) Consolidated Facility Ownership as of March 31, 2022 | Region | Fuel Type | Gross Installed Capacity (MW) | Number of Facilities | Weighted Average Contract Life (Years) | | :--- | :--- | :--- | :--- | :--- | | **Alberta** | Hydro, Wind, Solar | 1,470 | 30 | 2 (primarily merchant) | | | Gas & Energy Transition | 2,073 | 8 | | | **Canada (Excl. Alberta)** | Hydro, Wind, Solar, Gas | 1,487 | 21 | 7 | | **US** | Wind, Solar, Gas, Energy Transition | 1,219 | 10 | 7 | | **Australia** | Gas | 450 | 6 | 17 | | **Total** | **All** | **6,699** | **75** | **5** | [Highlights](index=5&type=section&id=Highlights) The company's Q1 2022 performance shows a significant increase in net earnings despite lower adjusted EBITDA and FCF Q1 2022 vs Q1 2021 Financial Highlights | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenues | $735M | $642M | | Adjusted EBITDA | $266M | $310M | | Net earnings attributable to common shareholders | $186M | ($30M) | | Cash flow from operating activities | $451M | $257M | | Free cash flow (FCF) | $115M | $129M | | Net earnings per share, basic and diluted | $0.69 | ($0.11) | - **Adjusted EBITDA decreased by $44 million** to $266 million, largely due to lower performance in the Gas, Energy Transition, Hydro, and Energy Marketing segments[26](index=26&type=chunk) - **Net earnings attributable to common shareholders increased significantly to $186 million** from a loss of $30 million, driven by higher revenues and lower carbon compliance costs[27](index=27&type=chunk) - **Free Cash Flow (FCF) decreased by $14 million** to $115 million, primarily due to lower adjusted EBITDA and higher distributions to non-controlling interests[29](index=29&type=chunk) [Significant and Subsequent Events](index=7&type=section&id=Significant%20and%20Subsequent%20Events) Key strategic developments include new project PPAs, contract extensions, and an ESG rating upgrade - Key developments include the **Mount Keith Transmission Expansion**, **Sarnia Contract Extensions**, a new **PPA for the Garden Plain Wind** project, a long-term **PPA with Meta for the Horizon Hill Wind Project**, an **MSCI ESG Rating Upgrade to 'A'**, and the repurchase of **1.4 million common shares**[31](index=31&type=chunk)[32](index=32&type=chunk)[37](index=37&type=chunk) [Performance by Segment](index=8&type=section&id=Performance%20by%20Segment%20with%20Supplemental%20Geographical%20Information) This section analyzes the financial and operational performance across the company's realigned business segments [Alberta Electricity Portfolio](index=9&type=section&id=Alberta%20Electricity%20Portfolio) The Alberta portfolio's gross margin declined due to weaker market conditions and higher natural gas costs Alberta Electricity Portfolio Performance (Q1 2022 vs Q1 2021) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Total Production (GWh) | 2,576 | 2,914 | | Revenues | $275M | $301M | | Gross Margin | $161M | $180M | Key Alberta Market Metrics (Q1 2022 vs Q1 2021) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Spot power price average ($/MWh) | $90 | $95 | | Natural gas price (AECO) ($/GJ) | $4.50 | $2.89 | | Realized merchant power price ($/MWh) | $107 | $103 | | Fuel and purchased power ($/MWh) | $56 | $35 | | Carbon compliance cost ($/MWh) | $9 | $19 | - **Carbon compliance costs per MWh decreased significantly from $19 to $9**, primarily due to the shift from coal to natural gas, despite an increase in the carbon tax price[55](index=55&type=chunk) [Segmented Financial Performance and Operating Results](index=11&type=section&id=Segmented%20Financial%20Performance%20and%20Operating%20Results) Overall adjusted EBITDA declined, driven by lower results in most segments except for Wind and Solar - The company realigned its operating segments in Q4 2021 to reflect its strategic focus on clean energy, creating new **'Gas' and 'Energy Transition' segments**[57](index=57&type=chunk)[58](index=58&type=chunk) Adjusted EBITDA by Segment (Q1 2022 vs Q1 2021) | Segment | Q1 2022 Adjusted EBITDA | Q1 2021 Adjusted EBITDA | | :--- | :--- | :--- | | Hydro | $61M | $77M | | Wind and Solar | $89M | $76M | | Gas | $102M | $106M | | Energy Transition | $5M | $16M | | Energy Marketing | $27M | $43M | | Corporate and Other | ($18M) | ($8M) | | **Total** | **$266M** | **$310M** | [Hydro](index=12&type=section&id=Hydro) Adjusted EBITDA for the Hydro segment decreased due to lower ancillary service pricing in Alberta - **Adjusted EBITDA decreased by $16 million to $61 million**, primarily due to lower ancillary service pricing in the Alberta market and higher OM&A costs[69](index=69&type=chunk) - **Availability increased to 96.7%** from 91.9% in Q1 2021 due to lower planned outages, and production rose slightly by 12 GWh[66](index=66&type=chunk)[67](index=67&type=chunk) [Wind and Solar](index=13&type=section&id=Wind%20and%20Solar) The Wind and Solar segment's adjusted EBITDA grew, driven by new assets and liquidated damages - **Adjusted EBITDA increased by $13 million to $89 million**, driven by incremental revenue from new facilities and liquidated damages from turbine performance[75](index=75&type=chunk) - **Availability decreased significantly to 78.7%** from 95.1% due to the unplanned outage at the Kent Hills facilities and operational issues at the new Windrise facility[73](index=73&type=chunk) [Gas](index=14&type=section&id=Gas) The Gas segment's adjusted EBITDA saw a slight decrease from higher fuel costs despite better merchant pricing - **Adjusted EBITDA decreased slightly by $4 million to $102 million**, mainly due to higher natural gas prices, partially offset by higher realized merchant pricing[83](index=83&type=chunk) - **Availability improved to 93.8%** from 85.0% due to fewer planned outages following the completion of coal-to-gas conversions[81](index=81&type=chunk) [Energy Transition](index=15&type=section&id=Energy%20Transition) The Energy Transition segment's EBITDA declined significantly following the retirement of coal units - **Adjusted EBITDA decreased by $11 million to $5 million**, primarily due to lower production from the retirement of Keephills Unit 1 and higher coal costs[90](index=90&type=chunk) - **Gross installed capacity decreased significantly** from 1,879 MW to 784 MW year-over-year due to the retirement of coal units[86](index=86&type=chunk) [Energy Marketing](index=16&type=section&id=Energy%20Marketing) Energy Marketing's adjusted EBITDA normalized after an exceptionally strong performance in the prior year - **Adjusted EBITDA decreased by $16 million to $27 million**, as Q1 2021 results benefited from exceptional short-term market volatility[94](index=94&type=chunk) [Corporate](index=16&type=section&id=Corporate) Corporate costs increased due to the absence of a prior-year wage subsidy and swap valuation changes - Corporate overhead costs, represented as a negative adjusted EBITDA, **increased by $10 million to ($18) million**, primarily due to the receipt of the Canada Emergency Wage Subsidy (CEWS) in 2021[95](index=95&type=chunk) [Strategy and Capability to Deliver Results](index=17&type=section&id=Strategy%20and%20Capability%20to%20Deliver%20Results) The company outlines its Clean Electricity Growth Plan and the robust project pipeline supporting its strategic goals [Clean Electricity Growth Plan](index=17&type=section&id=Clean%20Electricity%20Growth%20Plan) The company is executing its five-year growth plan to add 2 GW of renewables and is ahead of schedule - The company's goal is to be a leading customer-centered electricity company focused on growing its portfolio of **high-quality generation facilities with stable cash flows**[100](index=100&type=chunk) Progress on Strategic Targets | Goal | Target | Status | Progress Summary | | :--- | :--- | :--- | :--- | | **Accelerate Growth** | Deliver 2 GW of renewable capacity by 2025 | Ahead of Plan | 800 MW cumulative progress towards target | | | Deliver $250M incremental annual EBITDA | Ahead of Plan | ~$135M cumulative progress towards target | | **Expand Pipeline** | Expand development pipeline to 5 GW by 2025 | On track | Evaluating opportunities to add new development sites | | **Financial Strength** | Maintain strong cash flow and capital allocation | On track | Liquidity of $2.4B as of March 31, 2022; returned $18M via share buybacks in Q1 | [Growth Pipeline](index=19&type=section&id=Growth%20Pipeline) The growth pipeline includes over 678 MW under construction and a multi-gigawatt development portfolio Projects Under Construction | Project | Type | Region | MW | Target Completion | Average Annual EBITDA | | :--- | :--- | :--- | :--- | :--- | :--- | | Garden Plain | Wind | AB, Canada | 130 | H2 2022 | $14M - $18M | | White Rock Wind | Wind | OK, US | 300 | H2 2023 | US$42M - US$46M | | Horizon Hill | Wind | OK, US | 200 | H2 2023 | US$27M - US$30M | | Northern Goldfields Solar | Hybrid Solar | WA, Australia | 48 | H2 2022 | AU$9M - AU$10M | | Mount Keith 132kV Expansion | Transmission | WA, Australia | n/a | H2 2023 | AU$6M - AU$7M | - The company has **140 MW of projects in advanced-stage development**, including the Tempest Wind project in Alberta[113](index=113&type=chunk) - The early-stage development pipeline totals between **2,205 MW and 2,805 MW**, with projects spanning wind, solar, battery storage, and pumped hydro[114](index=114&type=chunk) [2022 Financial Outlook](index=21&type=section&id=2022%20Financial%20Outlook) The company reaffirms its 2022 financial targets, supported by strong merchant pricing and updated assumptions 2022 Financial Targets | Measure | 2022 Target | 2021 Actual | | :--- | :--- | :--- | | Adjusted EBITDA | $1,065M - $1,185M | $1,263M | | Free Cash Flow (FCF) | $455M - $555M | $562M | Updated 2022 Power and Gas Price Assumptions | Market | Original Expectations | Updated Expectations | | :--- | :--- | :--- | | Alberta Spot ($/MWh) | $80 - $90 | $90 - $100 | | Mid-C Spot (US$/MWh) | US$45 - US$55 | US$55 - US$65 | | AECO Gas Price ($/GJ) | $3.60 | $4.50 - $5.50 | - The company is tracking against its stated 2022 guidance, with **strong merchant pricing expected to continue** in Alberta and the Pacific Northwest[119](index=119&type=chunk)[121](index=121&type=chunk) - The estimated net capital expenditure for the **Kent Hills foundation rehabilitation has increased to approximately $120 million**, with a return to service expected in H2 2023[124](index=124&type=chunk) [Selected Quarterly Information](index=23&type=section&id=Selected%20Quarterly%20Information) This section presents historical quarterly financial data, highlighting seasonality and key operational impacts - The company's results are seasonal, with higher maintenance costs in the spring and fall, while **hydro generation is highest in the spring and wind resources are stronger in the winter**[130](index=130&type=chunk) Quarterly Financial Data (Q2 2021 - Q1 2022) | Metric | Q2 2021 | Q3 2021 | Q4 2021 | Q1 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenues | $619M | $850M | $610M | $735M | | Adjusted EBITDA | $302M | $381M | $270M | $266M | | Net earnings (loss) attributable to common shareholders | ($12M) | ($456M) | ($78M) | $186M | - Quarterly net earnings have been impacted by key events, including the **extended outage at Kent Hills**, the retirement of Keephills Unit 1, and lower carbon costs in Q1 2022[134](index=134&type=chunk) [Financial Position](index=25&type=section&id=Financial%20Position) The company's financial position strengthened with an increase in total assets and equity as of Q1 2022 Consolidated Statement of Financial Position (Changes) | Item | March 31, 2022 | Dec. 31, 2021 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $9,425M | $9,226M | $199M | | Total Liabilities | $6,785M | $6,633M | $152M | | Total Equity | $2,640M | $2,593M | $47M | - **Working capital increased to $311 million** from $266 million, mainly due to higher cash from operations and collateral received[137](index=137&type=chunk) - **Non-current liabilities decreased by $162 million**, primarily due to a $101 million decrease in decommissioning provisions resulting from higher discount rates[141](index=141&type=chunk) [Financial Capital](index=27&type=section&id=Financial%20Capital) This section details the company's capital structure, liquidity position, and returns to capital providers [Capital Structure and Liquidity](index=27&type=section&id=Capital%20Structure%20and%20Liquidity) The company maintains a strong liquidity position of $2.4 billion and a balanced capital structure Capital Structure as of March 31, 2022 | Component | Amount ($M) | % of Total Capital | | :--- | :--- | :--- | | Total consolidated net debt | 2,342 | 43% | | Non-controlling interests | 945 | 18% | | Exchangeable preferred securities | 400 | 7% | | Equity attributable to shareholders | 1,695 | 32% | | **Total Capital** | **5,382** | **100%** | - The company has **$1,067 million of debt maturing between 2022 and 2024** and expects to refinance the senior notes maturing in 2022[147](index=147&type=chunk) - Total available capacity under committed credit facilities was **$1,217 million** as of March 31, 2022[148](index=148&type=chunk) [Returns to Providers of Capital and Non-Controlling Interests](index=29&type=section&id=Returns%20to%20Providers%20of%20Capital%20and%20Non-Controlling%20Interests) Net interest expense remained stable while earnings attributable to non-controlling interests increased - **Net interest expense was $67 million** for Q1 2022, compared to $63 million for Q1 2021[153](index=153&type=chunk) - As of March 31, 2022, the company owns **60.1% of TransAlta Renewables** and **50.01% of TA Cogen**, both of which are consolidated[155](index=155&type=chunk)[156](index=156&type=chunk) - Reported earnings attributable to non-controlling interests **increased by $11 million to $20 million** in Q1 2022 compared to the same period in 2021[158](index=158&type=chunk) [Other Consolidated Analysis](index=30&type=section&id=Other%20Consolidated%20Analysis) This section provides an analysis of the company's consolidated cash flows [Cash Flows](index=30&type=section&id=Cash%20Flows) Operating cash flow increased significantly due to favorable working capital changes Consolidated Statement of Cash Flows (Q1 2022 vs Q1 2021) | Cash Flow Activity | Q1 2022 ($M) | Q1 2021 ($M) | | :--- | :--- | :--- | | Operating activities | 451 | 257 | | Investing activities | (72) | (111) | | Financing activities | (106) | (200) | | **Cash and cash equivalents, end of period** | **1,221** | **648** | - **Cash used in financing activities decreased by $94 million**, mainly due to lower drawings under the company's credit facilities, partially offset by higher share repurchases[165](index=165&type=chunk)[172](index=172&type=chunk) [Additional IFRS Measures and Non-IFRS Measures](index=31&type=section&id=Additional%20IFRS%20Measures%20and%20Non-IFRS%20Measures) This section defines and reconciles non-IFRS measures used to evaluate core business performance and leverage [Reconciliation of Non-IFRS Measures](index=31&type=section&id=Reconciliation%20of%20Non-IFRS%20Measures) This section reconciles key non-IFRS measures like Adjusted EBITDA and FCF to their IFRS counterparts - Key non-IFRS financial measures used by the company include **Adjusted EBITDA, Funds from Operations (FFO), and Free Cash Flow (FCF)** to evaluate performance[171](index=171&type=chunk) Reconciliation of Cash Flow from Operating Activities to FFO and FCF (Q1 2022) | Metric | Amount ($M) | | :--- | :--- | | Cash flow from operating activities | 451 | | Change in non-cash operating working capital | (284) | | Adjustments | 19 | | **Funds from Operations (FFO)** | **186** | | Deduct: Sustaining capital, dividends, etc | (71) | | **Free Cash Flow (FCF)** | **115** | Reconciliation of Adjusted EBITDA to FFO and FCF (Q1 2022) | Metric | Amount ($M) | | :--- | :--- | | Adjusted EBITDA | 266 | | Provisions, Interest, Taxes, Other | (80) | | **Funds from Operations (FFO)** | **186** | | Deduct: Sustaining capital, dividends, etc | (71) | | **Free Cash Flow (FCF)** | **115** | [Key Financial Non-IFRS Ratios](index=38&type=section&id=Key%20Financial%20Non-IFRS%20Ratios) The company's leverage ratios, including Adjusted Net Debt to Adjusted EBITDA, improved during the quarter Adjusted Net Debt to Adjusted EBITDA Ratio | Metric | March 31, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Adjusted net debt | $3,013M | $3,307M | | Adjusted EBITDA (LTM) | $1,219M | $1,263M | | **Ratio (times)** | **2.5x** | **2.6x** | Deconsolidated Net Debt to Deconsolidated Adjusted EBITDA Ratio | Metric | March 31, 2022 | Dec. 31, 2021 | | :--- | :--- | :--- | | Deconsolidated net debt | $1,619M | $1,870M | | Deconsolidated adjusted EBITDA (LTM) | $848M | $852M | | **Ratio (times)** | **1.9x** | **2.2x** | - The **deconsolidated net debt to adjusted EBITDA ratio decreased** compared to year-end 2021, due to lower deconsolidated net debt from debt repayments and higher cash balances[211](index=211&type=chunk) [Critical Accounting Policies and Estimates](index=41&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting estimates were impacted by macroeconomic factors, particularly changes in discount rates - Material changes in estimates during Q1 2022 were influenced by global economic recovery, geopolitical events, and resulting **energy price volatility**[212](index=212&type=chunk) - The provision for **decommissioning and restoration obligations decreased** during the quarter as a result of higher discount rates[213](index=213&type=chunk) - The **defined benefit pension obligation decreased from $228 million to $205 million**, also due to increases in discount rates[214](index=214&type=chunk) [Regulatory Updates](index=42&type=section&id=Regulatory%20Updates) This section covers key regulatory developments related to clean energy and carbon pricing across major markets - **Canada:** The federal government released a discussion paper on a new **Clean Electricity Standard (CES)** aiming for a net-zero electricity sector by 2035[221](index=221&type=chunk)[223](index=223&type=chunk) - **Ontario:** The IESO is conducting a medium-term RFP to procure capacity, and policy development is underway for the province's **carbon pricing system**[225](index=225&type=chunk)[227](index=227&type=chunk) - **United States:** The SEC has proposed rules to **standardize climate-related disclosures** for investors, and Congress continues to consider support for renewable energy[228](index=228&type=chunk)[229](index=229&type=chunk) - **Australia:** A national election is scheduled for May 21, 2022, but no policy proposals are expected to present **significant adverse risks** to TransAlta's performance[230](index=230&type=chunk) [Disclosure Controls and Procedures](index=43&type=section&id=Disclosure%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal controls over financial reporting were effective - Management, including the CEO and CFO, evaluated the effectiveness of the company's **Internal Control over Financial Reporting (ICFR)** and **Disclosure Controls and Procedures (DC&P)**[237](index=237&type=chunk) - Based on their evaluation, the CEO and CFO concluded that as of March 31, 2022, the company's **ICFR and DC&P were effective**[237](index=237&type=chunk) - The evaluation scope **excluded the recently acquired North Carolina Solar facility**, consistent with regulatory guidance for recent acquisitions[235](index=235&type=chunk)[236](index=236&type=chunk)