TransAlta Reports Strong 2024 Results, Announces Dividend Increase and 2025 Annual Guidance

CALGARY, Alberta, Feb. 20, 2025 (GLOBE NEWSWIRE) -- TransAlta Corporation (TransAlta or the Company) (TSX: TA) (NYSE: TAC) today reported its financial results for the fourth quarter and year ended Dec. 31, 2024.

"Our business delivered solid results within the upper range of our guidance, driven by high availability across our generation portfolio, along with the enduring performance of our optimization and hedging strategies. During the year, we added 2.2 GW of generation to our fleet, with three contracted wind facilities achieving commercial operation in addition to the acquisition of Heartland Generation. We also returned $214 million, or $0.71 per share, of value to shareholders through dividends and share repurchases at an average price of $10.59 per share,” said John Kousinioris, President and Chief Executive Officer of TransAlta.

"Given our confidence in the future, we are pleased to announce that our Board of Directors has approved an eight per cent increase to our common share dividend, now equivalent to $0.26 per share on an annualized basis. This represents our sixth consecutive annual dividend increase, affirming our Company's commitment to returning value to shareholders,” added Mr. Kousinioris.

"Our portfolio of generating facilities continues to perform well. In 2025, we expect to generate between $450 and $550 million of free cash flow. We maintain a balanced, prudent and disciplined approach to capital allocation and balance sheet strength. We remain focused on advancing development opportunities at our legacy thermal energy campuses, along with pursuing longer term growth options with a commitment to maximizing shareholder value. Looking to 2025 and beyond, I am optimistic about our Company's momentum and opportunities."

Fourth Quarter 2024 Financial Highlights

• Adjusted EBITDA⁽¹⁾ of $285 million, compared to $289 million for the same period in 2023
• Free Cash Flow (FCF)⁽¹⁾ of $48 million, or $0.16 per share, compared to $121 million, or $0.39 per share, for the same period in 2023
• Cash flow from operating activities of $215 million, compared to $310 million from the same period in 2023
• Net loss attributable to common shareholders of $65 million, or $0.22 per share, compared to $84 million, or $0.27 per share, for the same period in 2023

• Achieved the upper range of both 2024 adjusted EBITDA and FCF guidance
• Returned $143 million of capital to common shareholders through the buyback of 13.5 million common shares at an average price of $10.59 per share
• Adjusted EBITDA of $1,253 million, compared to $1,632 million from the same period in 2023
• FCF of $569 million, or $1.88 per share, compared to $890 million, or $3.22 per share, from the same period in 2023
• Net earnings attributable to common shareholders of $177 million, or $0.59 per share, compared to $644 million, or $2.33 per share, from the same period in 2023
• Exited 2024 with a strong financial position, with adjusted net debt to adjusted EBITDA of 3.6 times and available liquidity of $1.6 billion

• Announced an annual dividend increase of eight per cent, now equivalent to $0.26 per share on an annualized basis, which represents the sixth year of consecutive dividend growth
• Provided 2025 guidance including adjusted EBITDA of $1.15 to $1.25 billion and FCF of $450 to $550 million, or $1.51 to $1.85 per share
• Completed the acquisition of Heartland Generation at a purchase price of $542 million in December 2024, which added 1.7 GW to gross installed capacity
• Achieved strong operational availability of 91.2 per cent in 2024, compared to 88.8 per cent in 2023
• 2024 Total Recordable Injury Frequency of 0.56 compared to 0.30 in 2023
• Reduced scope 1 and 2 GHG emissions intensity in 2024 to 0.35 tCO₂e/MWh from 2023 levels of 0.41 tCO₂e/MWh
• Achieved commercial operation at the White Rock West and East wind facilities in January and April 2024, respectively
• Achieved commercial operation at the Horizon Hill facility in May 2024
• Completed the Mount Keith 132kV expansion project during the first quarter of 2024

Declared Increase in Common Share Dividend

The Company's Board of Directors has approved a $0.02 annualized increase to the common share dividend, or 8 per cent increase, and declared a dividend of $0.065 per common share to be payable on July 1, 2025 to shareholders of record at the close of business on June 1, 2025. The quarterly dividend of $0.065 per common share represents an annualized dividend of $0.26 per common share.

TransAlta Acquired Heartland Generation from Energy Capital Partners

On Dec. 4, 2024, the Company closed the acquisition of Heartland Generation Ltd. and certain affiliates (collectively, Heartland) for a purchase price of $542 million from an affiliate of Energy Capital Partners (ECP), the parent of Heartland (the Transaction). To meet the requirements of the federal Competition Bureau, the Company entered into a consent agreement with the Commissioner of Competition pursuant to which TransAlta agreed to divest Heartland's Poplar Hill and Rainbow Lake assets (the Planned Divestitures) following closing of the Transaction. In consideration of the Planned Divestitures, TransAlta and ECP agreed to a reduction of $80 million from the original purchase price for the Transaction. ECP will be entitled to receive the proceeds from the sale of Poplar Hill and Rainbow Lake, net of certain adjustments following completion of the Planned Divestitures. TransAlta also received a further $95 million at closing of the Transaction to reflect the economic benefit of the Heartland business arising from Oct. 31, 2023 to the closing date of the Transaction, pursuant to the terms of the share purchase agreement. The net cash payment for the Transaction, before working capital adjustments, totalled $215 million, and was funded through a combination of cash on hand and draws on TransAlta's credit facilities.

Excluding the Planned Divestitures, the Transaction adds 1.7 GW (net interest) of complementary capacity from nine facilities, including contracted cogeneration and peaking generation, legacy gas-fired thermal generation, and transmission capacity, all of which will be critical to support reliability in the Alberta electricity market.

Mothballing of Sundance Unit 6

On Nov. 4, 2024, the Company provided notice to the Alberta Electric System Operator (AESO) that Sundance Unit 6 will be mothballed on April 1, 2025, for a period of up to two years depending on market conditions. TransAlta maintains the flexibility to return the mothballed unit to service when market fundamentals improve or opportunities to contract are secured. The unit remains available and fully operational for the first quarter of 2025.

Production Tax Credit (PTC) Sale Agreements

On Feb. 22, 2024, the Company entered into 10-year transfer agreements with an AA- rated customer for the sale of approximately 80 per cent of the expected PTCs to be generated from the White Rock and the Horizon Hill wind facilities.

On June 21, 2024, the Company entered into an additional 10-year transfer agreement with an A+ rated customer for the sale of the remaining 20 per cent of the expected PTCs.

The expected average annual EBITDA⁽¹⁾ from the two agreements is approximately $78 million (US$57 million).

Normal Course Issuer Bid (NCIB)

TransAlta remains committed to enhancing shareholder returns through appropriate capital allocation such as share buybacks and its quarterly dividend. In the first quarter of 2024, the Company announced an enhanced common share repurchase program for 2024, allocating up to $150 million, and targeting up to 42 per cent of 2024 FCF guidance, to be returned to shareholders in the form of share repurchases and dividends.

On May 27, 2024, the Company announced that it had received approval from the Toronto Stock Exchange to purchase up to 14 million common shares pursuant to an NCIB during the 12-month period that commenced May 31, 2024, and terminates May 31, 2025. Any common shares purchased under the NCIB will be cancelled.

For the year ended Dec. 31, 2024, the Company purchased and cancelled a total of 13,467,400 common shares at an average price of $10.59 per common share, for a total cost of $143 million, including taxes.

Horizon Hill Wind Facility Achieves Commercial Operation

On May 21, 2024, the 202 MW Horizon Hill wind facility achieved commercial operation. The facility is located in Logan County, Oklahoma and is fully contracted to Meta Platforms Inc. for the offtake of 100 per cent of the generation.

White Rock Wind Facilities Achieve Commercial Operation

On Jan. 1, 2024, the 100 MW White Rock West wind facility achieved commercial operation. On April 22, 2024, the 202 MW White Rock East wind facility also completed commissioning. The facilities are located in Caddo County, Oklahoma and are contracted under two long-term power purchase agreements (PPAs) with Amazon Energy LLC for the offtake of 100 per cent of the generation.

Mount Keith 132kV Expansion Complete

The Mount Keith 132kV expansion project, located in Western Australia, was completed during the first quarter of 2024. The expansion was developed under the existing PPA with BHP Nickel West (BHP), which extends until Dec. 31, 2038. The expansion will facilitate the connection of additional generating capacity to the transmission network which supports BHP's operations.

Year Ended and Fourth Quarter 2024 Highlights

Segmented Financial Performance

Full Year 2024 Financial Results Summary

For the year ended Dec. 31, 2024, the Company demonstrated strong financial and operational performance. The results were within the upper range of management's expectations due to active management of the Company's merchant portfolio and hedging strategies. During 2024, the Company settled a higher volume of hedges at prices that were significantly above the spot market in Alberta and achieved commercial operation at the White Rock and Horizon Hill wind facilities. On Dec. 4, 2024, the Company completed the acquisition of Heartland Generation, which added 1.7 GW to gross installed capacity. Refer to the Significant and Subsequent Events section of our MD&A dated Dec. 31, 2024, for details on the Heartland acquisition and the Planned Divestitures.

Availability for the year ended Dec. 31, 2024, was 91.2 per cent, compared to 88.8 per cent in 2023, an increase of 2.4 percentage points, primarily due to:

• The addition of the White Rock and Horizon Hill wind facilities; and
• The return to service of the Kent Hills wind facilities.

• Production from new facilities, including the White Rock West and East wind facilities commissioned in January and April 2024, respectively, the Horizon Hill wind facility commissioned in May 2024, and the Northern Goldfields solar facilities commissioned in November 2023;
• Production from the facilities acquired with Heartland;
• Favourable market conditions in the Ontario wholesale power market that enabled higher dispatch at the Sarnia facility in the Gas segment that resulted in higher merchant production to the Ontario grid;
• The return to service of the Kent Hills wind facilities in the first quarter of 2024; and
• Full-year production from the Garden Plain wind facility; partially offset by
• Increased economic dispatch at the Centralia facility due to lower market prices compared to the prior year in the Energy Transition segment; and
• Higher dispatch optimization in Alberta.

• Gas adjusted EBITDA decreased by $266 million, or 33 per cent, compared to 2023, primarily due to lower power prices in the Alberta market and resulting increase in economic dispatch, an increase in the price of carbon, higher carbon costs and fuel usage related to production and lower capacity payments, partially offset by a higher volume of favourable hedging positions settled, the utilization of emission credits to settle a portion of our 2023 GHG obligation and lower natural gas prices;
• Hydro adjusted EBITDA decreased by $143 million, or 31 per cent, compared to 2023, primarily due to lower spot power prices and ancillary services prices in the Alberta market, partially offset by realized premiums above the spot power prices, higher environmental and tax attributes revenues due to higher sales of emission credits to third parties and intercompany sales to the Gas segment and higher ancillary service volumes due to increased demand by the AESO;
• Energy Transition adjusted EBITDA decreased by $31 million, or 25 per cent, compared to 2023, primarily due to increased economic dispatch driven by lower market prices which negatively impacted merchant production, partially offset by lower fuel and purchased power costs; and
• Corporate adjusted EBITDA decreased by $20 million, or 17 per cent, compared to 2023, primarily due to higher spending to support strategic and growth initiatives; partially offset by
• Wind and Solar adjusted EBITDA increasing by $59 million, or 23 per cent, compared to 2023, primarily due to new sales of production tax credits, the return to service of the Kent Hills wind facilities, the commercial operation of the White Rock and Horizon Hill wind facilities, partially offset by lower realized power pricing in the Alberta market and higher OM&A due to the addition of new wind facilities; and
• Energy Marketing adjusted EBITDA increasing by $22 million, or 20 per cent, compared to 2023, primarily due to favourable market volatility and timing of realized settled trades during the current year in comparison to the prior year and lower OM&A.

• Lower gross margin due to lower revenues, excluding the effect of unrealized losses from risk management activities, partially offset by lower fuel and purchased power;
• Higher OM&A due to increased spending on planning and design of an ERP system upgrade, higher spending on strategic and growth initiatives, penalties assessed by the Alberta Market Surveillance Administrator for self-reported contraventions and Heartland acquisition-related transaction and restructuring costs;
• Higher current income tax expense due to the full utilization of Canadian non-capital loss carryforwards in 2023, which was partially offset by lower earnings before income tax in 2024;
• Unfavourable change in non-cash operating working capital balances due to lower accounts payables and accrued liabilities, partially offset by lower collateral provided as a result of market price volatility;
• Higher interest expense on debt primarily due to lower capitalized interest resulting from lower construction activity in 2024 compared to 2023; and
• Lower interest income due to lower cash balances and lower interest rates.

• The adjusted EBITDA items noted above;
• Higher current income tax expense due to the full utilization of Canadian non-capital loss carryforwards in 2023, partially offset by lower earnings before income taxes in 2024; and
• Higher net interest expense due to lower capitalized interest resulting from lower construction activity in 2024 compared to 2023, and lower interest income due to lower cash balances and interest rates in 2024 compared to prior year; partially offset by
• Lower distributions paid to subsidiaries' non-controlling interests relating to lower TA Cogen net earnings resulting from lower merchant pricing in the Alberta market and the cessation of distributions to TransAlta Renewables non-controlling interest;
• Lower sustaining capital expenditures due to the receipt of a lease incentive related to the Company's head office and lower planned major maintenance at our Alberta and Western Australian gas facilities, partially offset by higher major maintenance at our Alberta Hydro assets; and
• Higher provisions accrued in the current year compared to the prior year resulting in higher FCF.

Net earnings attributable to common shareholders totalled $177 million for the year ended Dec. 31, 2024, compared to $644 million in the same period in 2023, a decrease of $467 million, or 73 per cent, primarily due to:

• The adjusted EBITDA items discussed above;
• Higher asset impairment charges due to an increase in decommissioning and restoration provisions on retired assets, driven by a decrease in discount rates and revisions in estimated decommissioning costs and higher impairment charges related to development projects that are no longer proceeding;
• Lower unrealized mark-to-market gains and lower realized gains on closed exchange positions in the Energy Marketing segment mainly driven by market volatility across North American power and natural gas markets;
• Higher unrealized mark-to-market losses recorded in the Wind and Solar segment primarily related to the long-term wind energy sales at the Oklahoma facilities;
• Higher interest expense due to lower capitalized interest during 2024 resulting from lower construction activity in 2024 compared to 2023;
• Lower capacity payments in 2024 for Southern Cross Energy in Western Australia due to the scheduled conclusion on Dec. 31, 2023 of the demand capacity charge under the customer contract, partially offset by the commencement in March 2024 of capacity payments for the Mount Keith 132kV expansion;
• Heartland acquisition-related transaction and restructuring costs;
• Lower interest income due to lower cash balances and lower interest rates during 2024;
• Higher spending in connection with planning and design work on a planned upgrade to the ERP system;
• Lower income tax expense due to lower earnings; and
• Penalties assessed by the Alberta Market Surveillance Administrator for self-reported contraventions pertaining to Hydro ancillary services provided during 2021 and 2022; partially offset by
• Lower depreciation and amortization compared to 2023 related to revisions of useful lives of certain facilities in prior and current periods, partially offset by the commercial operation of new facilities during the year and the return to service of the Kent Hills wind facilities;
• Higher unrealized mark-to-market gains recorded in the Energy Transition segment primarily related to favourable changes in forward prices;
• A recovery related to the reversal of previously derecognized Canadian deferred tax assets; and
• Higher net other operating income mainly due to Sundance A decommissioning cost reimbursement.

Fourth quarter 2024 results were in-line with management's expectations due to active management of the Company's merchant portfolio and hedging strategies, despite lower power prices in the Alberta and mid-Columbia markets. The Company settled a higher volume of hedges that were significantly above average spot prices during the period. The acquisition of Heartland on Dec. 4, 2024 positively contributed to production in the Gas segment and further diversifies TransAlta's competitive portfolio in the highly dynamic and shifting electricity landscape in Alberta by adding 1.7 GW to gross installed capacity.

Availability for the three months ended Dec. 31, 2024, was 87.8 per cent, compared to 86.9 per cent for the same period in 2023, an increase of 0.9 percentage points, primarily due to:

• The addition of the White Rock and Horizon Hill wind facilities which operated with high availability;
• The return to service of the Kent Hills wind facilities;
• Higher availability in the Hydro segment due to lower planned outages;
• Higher availability in the Energy Transition segment due to lower unplanned outages; and
• Positive contribution from the addition of the gas facilities acquired with Heartland; partially offset by
• Lower availability for the Gas segment due to planned outages at Sarnia, Sheerness and Keephills.

• Higher production in the Wind and Solar segment due to the addition of the Horizon Hill and White Rock West and East wind facilities during 2024;
• Higher production in the Hydro segment compared to the same period in 2023 due to water conservation in the fourth quarter of 2023 that resulted in lower production volumes compared to the current period; partially offset by
• Lower production in the Energy Transition segment due to higher dispatch optimization, which negatively affected merchant production; and
• Lower production in the Gas segment driven by lower availability at the Sarnia facility due to planned outages, higher economic dispatch in Alberta and lower production from Western Australia due to lower demand, partially offset by positive contribution from the Heartland gas facilities.

• Gas adjusted EBITDA decreased by $25 million, or 18 per cent, due to lower realized power prices in Alberta, an increase in the carbon price in Canada and higher OM&A driven by higher maintenance costs at the South Hedland facility, partially offset by a higher volume of favourable hedging positions settled, positive contribution from the Heartland gas facilities and lower capacity payments;
• Corporate adjusted EBITDA decreased by $8 million, or 27 per cent, due to higher spending to support strategic and growth initiatives; partially offset by
• Wind and Solar adjusted EBITDA increasing by $13 million, or 16 per cent, due to environmental and tax attributes revenues from the sale of PTCs from the White Rock and Horizon Hill wind facilities to taxable US counterparties, higher revenues driven by increased production from the addition of the White Rock and Horizon Hill wind facilities and the return to service of the Kent Hills wind facilities, partially offset by unfavourable merchant power prices in Alberta;
• Energy Marketing adjusted EBITDA increasing by $13 million, or 93 per cent, due to favourable market volatility and the timing of realized settled trades during 2024 in comparison to the same period in 2023;
• Energy Transition adjusted EBITDA increasing by $2 million, or eight per cent, compared to 2023, primarily due to lower fuel and purchased power costs, partially offset by increased economic dispatch due to lower market prices; and
• Hydro adjusted EBITDA increasing by $1 million, or two per cent, due to higher merchant revenues driven by higher volumes, partially offset by lower spot power prices and lower environmental and tax attributes revenues.

• The adjusted EBITDA items noted above;
• Higher realized foreign exchange losses compared to realized foreign exchange gains in the comparative period;
• Higher current income tax expense due to the full utilization of Canadian non-capital loss carryforwards in 2023, partially offset by a higher loss before income taxes in the current period compared to the same period in 2023;
• Higher net interest expense due to lower capitalized interest as a result of capital projects being completed in the first half of 2024 and lower interest income due to lower cash balances in 2024; and
• Higher dividends paid on preferred shares; partially offset by
• Lower distributions paid to subsidiaries' non-controlling interests due to lower TA Cogen net earnings;
• Lower sustaining capital due to lower planned maintenance at the Alberta gas facilities, partially offset by higher planned maintenance at the Sarnia cogeneration facility and Alberta hydro facilities; and
• Higher provisions accrued in the current year compared to the prior year resulting in higher FCF.

• The adjusted EBITDA items discussed above;
• Higher interest expense due to lower capitalized interest in the fourth quarter of 2024 resulting from lower capital activity compared to the same period in 2023;
• Heartland acquisition-related transaction and restructuring costs in the fourth quarter of 2024;
• Higher ERP upgrade costs related to planning and design work;
• Penalties assessed by the Alberta Market Surveillance Administrator for self-reported contraventions pertaining to Hydro ancillary services provided during 2021 and 2022;
• Higher depreciation and amortization due to the commercial operation of the White Rock and Horizon Hill wind facilities during 2024; and
• Higher taxes other than income taxes, mainly consisting of property taxes due to the addition of new wind facilities during 2024; partially offset by
• Higher realized and unrealized foreign exchange gains;
• Lower realized gains on closed exchange positions in 2024 compared to the same period in 2023;
• An income tax recovery relative to the prior period expense as a result of a higher loss before income taxes due to the above noted items; in addition to lower non-deductible expenses;
• Lower net earnings attributable to non-controlling interest compared to the same period in 2023 due to lower merchant pricing in the Alberta market;
• Higher net other operating income mainly due to Sundance A decommissioning cost reimbursement; and
• Lower asset impairment charges related to the decommissioning and restoration provisions on retired assets driven by lower discount rates in the current period compared to the same period in 2023, partially offset by impairment charges related to development projects that are no longer proceeding.

Alberta Electricity Portfolio

For the three months and year ended Dec. 31, 2024, the Alberta electricity portfolio generated 3,150 GWh and 11,809 GWh, respectively, compared to 2,989 GWh and 11,759 GWh, respectively, in the same periods in 2023. The annual production increase of 50 GWh, or 0.4 per cent, was primarily due to:

• Higher production in the Gas segment due to the addition of gas facilities from the acquisition of Heartland; and
• A full-year of production from the addition of the Garden Plain wind facility, which was commissioned in August 2023; partially offset by
• Higher dispatch optimization in the Gas segment; and
• Lower production from the Alberta hydro facilities due to lower water resources compared to the prior year.

• Higher production from the Gas segment due to the Heartland acquisition; and
• Higher production from the Alberta hydro facilities due to significant water conservation during the fourth quarter of 2023; partially offset by
• Higher economic dispatch for the Alberta gas facilities; and
• Lower production in the Wind and Solar segment due to lower wind resource.

• The impact of lower Alberta spot power prices and lower hydro ancillary services prices;
• Increased dispatch optimization in the Gas segment driven by lower power prices; and
• An increase in the carbon price per tonne from $65 in 2023 to $80 in 2024; partially offset by
• Higher gains realized on financial hedges settled in the period;
• Higher environmental and tax attributes revenues due to the increased sales of emission credits to third parties and intercompany sales from the Hydro segment to the Gas segment;
• The utilization of emission credits in the Gas segment in 2024 to settle a portion of our 2023 GHG obligation;
• Higher hydro ancillary services volumes due to increased demand by the AESO; and
• Lower natural gas prices.

• Lower Alberta spot power prices;
• Higher carbon compliance costs due to increase in the carbon price from $65 per tonne in 2023 to $80 per tonne in 2024; and
• Higher purchased power due to the contractual requirement to fulfill physical power trades; partially offset by
• Higher gains realized on financial hedges settled in the period.

• Higher generation from the addition of increased supply of new renewables and combined-cycle gas facilities into the market compared to the prior period; and
• Lower natural gas prices.

Liquidity and Financial Position

We maintain adequate available liquidity under our committed credit facilities. As at Dec. 31, 2024, we had access to $1.6 billion in liquidity, including $336 million in cash, which exceeds the funds required for committed growth, sustaining capital and productivity projects.

2025 Outlook and Financial Guidance

For 2025, management expects adjusted EBITDA to be in the range of $1.15 to $1.25 billion and FCF to be in the range of $450 to $550 million, based on the following, relative to 2024:

• Higher contribution from the wind and solar portfolio due to a full-year impact of new asset additions of the White Rock and Horizon Hill wind facilities;
• Contribution from assets acquired with Heartland;
• Lower contributions from the legacy merchant hydro, wind and gas assets in Alberta which are expected to step down due to lower expected average power prices in Alberta given baseload gas and renewables supply additions in late 2024 and 2025;
• Lower current income tax expense in 2025 compared to 2024 actual; and
• Increased net interest expense in 2025 as a result of the Heartland acquisition and lower interest income earned on lower cash deposits and lower capitalized interest on growth projects.