On Track to be Canada’s Clean Energy Leader Investor Day December 6 th , 2017 1
Forward Looking Statements 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 those specific to becoming Canada’s leading clean energy company; our expectation of transitioning to 100% clean energy by 2025; anticipated government actions, including a regulatory environment that will incent clean and renewable power, carbon pricing, green credit and coal to gas life extension; expected provincial credits for existing wind and hydro in Alberta; expected federal regulations supporting coal to gas conversions; initial carbon tax of $30/tCO2 effective January 1, 2018, potentially climbing to $50/tCO2 by 2022; expected $30 million to $50 million to be received annually in credits for TransAlta’s existing renewable generation; the structure of the Alberta capacity market, including the expectation that the first auction will occur in 2021; TransAlta’s position to compete in the Alberta capacity market; the forecasted capacity price and medium term price forecast; the extension of plant life following coal to gas conversion and the impact on free cash flow (“FCF”) ; expected capacity requirements in Alberta; forecasted Alberta prices for both capacity and energy; ability to realize Gas and Renewables’ strategic objectives, including realizing more than $150 million annually in potential upside from the Hydro assets starting in 2021 and gaining capacity payments for wind and hydro in the capacity market; average free cash flow (“FCF”) for the remainder of 2017 and the period from 2018 to 2020; industry trends, including the continued reduction in the cost of renewables, the abundant supply of low cost natural gas and value of hydro-based power storage; ability to realize life extension and growth opportunities, including the Brazeau Pumped Storage Facility and the Bighorn Facility expansion and the timing and costs associated therewith; increase in cash flows and EBITDA from the Alberta hydro assets following the expiry of the applicable Alberta power purchase arrangement; increase in wind revenue going forward; Ontario’s long-term energy needs, including the anticipated supply gap in the mid-2020s; the mothballing of Sundance Units 3, 4 and 5; the conversion to gas-fired generation of Sundance Units 3 to 6 and Keephills Units 1 to 2, including the associated timing and expected benefits to be realized; the expected gas supply required for converted units; the construction by Tidewater of a pipeline to TransAlta’s Sundance and Keephills facilities with a capacity of 130 million cubic feet of gas per day by 2020 and expansion capability to 340 million cubic feet of gas per day; the terms of any definitive agreement with Tidewater in regard to the pipeline expected to be constructed from the Brazeau River Complex to TransAlta’s Sundance and Keephills facilities; the anticipated benefits of converting units to gas; the incremental FCF from the extended fleet life; ability to reduce operating and maintenance costs; improving operating flexibility; potential 70% reduction in carbon costs; construction of two or more pipelines to minimize risk of supply disruptions at the converted units; cumulative life extension and incremental cash flow associated therewith; expected portfolio benefit to be realized from price volatility attributable to active portfolio management; expected $50 million to $60 million of EBITDA from energy marketing; he anticipated benefits from Project Greenlight; key aspects of TransAlta growth strategy, including potentially partnering with financial players; system benefits attributable to the Brazeau Pumped Storage Facility; the continued relationship with TransAlta Renewables, including the potential drop down of assets to TransAlta Renewables; capital allocation from 2018 to 2020; 2018 outlook, including Comparable EBITDA, FCF and dividend payout ratio; increase in FCF through lower sustaining capital, reduction in interest expense and stable EBITDA; and steady improvement of credit metrics by 2020. Factors that may adversely impact our forward-looking statements include risks relating to: legislative or regulatory developments, including as it pertains to the Alberta capacity market; the Federal and/or Provincial governments not implementing legislation or regulations facilitating the conversion from coal generation to gas generation; the Federal and/or Provincial governments adopting different carbon prices rules; changes in economic and competitive conditions; inability to secure natural gas supply and the construction of a natural gas pipeline on terms satisfactory to the Company; the introduction of disruptive sources of energy or capacity; changes in the price for natural gas; decreased demand for energy or capacity; availability of financing; fluctuations in market prices, including deviations of Alberta spot and Mid- C spot prices relative to stated assumptions; the availability of fuel supplies required to generate electricity, including the costs of natural gas within Alberta; wind and hydro resources being less than long term average; reduction to the Canadian coal capacity factor; our ability to contract our generation for prices that will provide expected returns; risks associated with development projects and acquisitions, including permitting, labour and engineering risk associated with the coal to gas conversions; increased costs or delays in the construction or commissioning of pipelines to the converted units. 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 presentation. 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. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. 2
TransAlta Investor Day Agenda 9:30 am Dawn Farrell, President and Chief Executive Officer Introduction and Strategic Overview John Kousinioris, Chief Legal & Compliance Officer Regulatory & Market Overview Aron Willis, Senior Vice President, Gas & Renewables Gas & Renewables Wayne Collins, Executive Vice President, Coal & Mining Transitioning our Coal Fleet Jennifer Pierce, Senior Vice President, Trading and Marketing Trading & Marketing 15 minutes Break Nipa Chakravarti, Chief Transformation Officer Corporate Transformation Brett Gellner, Chief Investment Officer Growth & Reinvestment in the Future Donald Tremblay, Chief Financial Officer Financial Summary Dawn Farrell, President and Chief Executive Officer Closing Remarks Q&A Ending at 1:30 pm Lunch 3
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