TransAlta (US:TAC)2022-02-24 21:34Financial Data and Key Metrics Changes - TransAlta reported a record adjusted EBITDA of CAD 1.26 billion for 2021, a 36% increase from 2020 [5][21] - Free cash flow reached CAD 562 million or CAD 2.07 per share, marking a 59% increase on a per share basis compared to 2020 [5][21] - The company ended the year with CAD 2.2 billion in liquidity, including CAD 947 million in cash [22] Business Line Data and Key Metrics Changes - The Alberta hydro fleet delivered a threefold increase in adjusted EBITDA from CAD 105 million in 2020 to CAD 322 million in 2021 [20] - Adjusted EBITDA from the new gas segment increased by 35% year-over-year from CAD 367 million in 2020 to CAD 494 million in 2021 [20] - Energy marketing delivered CAD 137 million in adjusted EBITDA, a 21% increase from 2020 [20] Market Data and Key Metrics Changes - The average pool price for Q4 2021 settled at CAD 107 per megawatt hour, significantly higher than the average price of CAD 47 [17] - The hydro fleet captured peak pricing with average realized prices of CAD 122 per megawatt hour, representing a 19% premium over the average spot price [18] Company Strategy and Development Direction - The company aims to achieve a 75% reduction in CO2 emissions by 2026 from 2015 levels, having already reduced annual CO2 emissions by 3.9 million tons in 2021 [8][27] - TransAlta secured 600 megawatts of renewable growth in 2021, representing 30% of its five-year growth target [9][10] - The company is focusing on maximizing the value of its hydro and wind fleets while exploring battery storage opportunities [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2 gigawatts clean electricity growth plan by 2025, with a target to reach investment decisions on another 400 megawatts in 2022 [9][26] - The company noted strong demand for renewables in the US and plans to expand its development pipeline [12][26] - Management highlighted the importance of securing long-term contracts to support the Alberta merchant fleet [39] Other Important Information - TransAlta completed its transition from coal to gas in Canada, achieving this milestone nine years ahead of the government target [8] - The company is committed to equity, diversity, and inclusion, aiming for at least 40% female employees by 2030 [27][29] Q&A Session Summary Question: Discussion on US development pipeline changes - Management clarified that changes in the US development pipeline were driven by continuous evaluation of project potential rather than supply chain or inflationary pressures [32][33] Question: Confirmation of the 2 gigawatts target by 2025 - The target remains unchanged, with ongoing development efforts to meet this goal [34] Question: Factors affecting the clean energy growth plan - Management emphasized the importance of matching development projects with power purchase agreements (PPAs) and noted robust demand for renewable energy [36][38] Question: Relationship between TransAlta and TransAlta Renewables - TransAlta Renewables remains a key vehicle for funding growth, with ongoing evaluations of strategic positioning [42] Question: Impact of FMG settlements on EBITDA - Specific terms of the FMG settlement were confidential, but management expressed satisfaction with the resolution [44] Question: Long-term outlook for the Pacific Northwest market - Management is exploring renewable opportunities and alternative technologies for future projects in the region [46][48] Question: Cost pressures on projects - Management acknowledged inflationary pressures but emphasized that PPAs help maintain project economics [58][59] Question: Clarity on contracting for industrial customers - Management expects to finalize contracts with major industrial customers in the first half of the year [62] Question: Strategy for refinancing capital commitments - The company plans to refinance capital commitments for new facilities, leveraging its strong cash position [66]