TransAlta Renewables Inc.
December 2015
This presentation is for educational purposes only, and is not intended to serve as a buy or sell recommendation on any security,
investment product or other financial product or service. Any views or opinions presented are solely those of the authors and do not
necessarily represent those of the investment council.
Power and Utilities Team
Asem Mosmer
Portfolio Manager
Blake Klasios
Research Analyst
Alexandra Finstad
Research Analyst
Argjend Jakupi
Research Analyst
Moe Al-Nabhan
Research Analyst
Paige Ferneyhough
Research Analyst
Nick Cevallos
Research Analyst
Agenda
1. Industry Overview
2. Company Overview
3. Investment Theses
4. Valuation
5. Catalysts and Risks
6. Questions
1
Industry Overview
1. Notes & Key Industry Terms
Key Terms
Renewable Energy
• Energy coming from resources that are naturally replenished over time (e.g. wind, waves, sunlight, and
geothermal heat)
Non-renewable energy
•
Comes from sources that will not be replenished over time. Most are fossil fuels (e.g. coal, petroleum, and
natural gas)
Purchase Power Agreements (PPA)
• Contract between producer and consumer, where the power producer takes on risk of supplying power for
fixed price to buyer.
Drop-down transaction
•
A sale of assets by a parent company to its subsidiaries (TransAlta Corp.  TransAlta Renewables)
Generation Capacity
• Intended full –load sustained output of a facility
Device
Wattage
Hours Used
kWh
Light Bulb
100 Watts
700h (all month)
70 kWh
Megawatt Hour (MWh)
• The basic industrial unit for electricity (1 MWh = 1000 kWh = 1,000,000 Wh)
• An average household uses 0.8 -1.3 MWh/month
• The average annual residential energy use in the U.S. is about 3,000 kilowatt-hours for each person. So we
can figure out how many people our dam could serve by dividing the annual energy production by 3,000
1. Industry Overview – Canadian Renewables
Main Sources for Electricity Generation
Industry Snapshot
0.20%
Revenue
$26.5 bn
Annual Growth (2010-15)
Profit
1.50%
15.30%
Hydro
Convetional Steam
Nuclear
Internal Combustion
Tidal
Wind
1.7%
$4.1bn
15.00%
Exports
$2.1bn
Businesses
63.30%
46
Industry Supply Chain
•
•
•
•
•
Generation
Hydro Quebec
BC Hydro
Manitoba
Hydro
Ontario Power
Generation
Other
•
•
•
•
•
Generation
Transmission
Distribution
•
•
Distribution
Industrial
Markets
Residential
Markets
Commercial
Markets
Exports
Public
Administration
Agriculture
Transportation
1. Industry Overview (cont.)
Industry Drivers
Consumer, businesses and
manufacturers (overall
growth)
Electric
Power
Consumptio
n (Demand)
Highly
regulated
Price of
Electric
Power
Industrial
Capacity
Utilization
Macro
Trends
GDP Growth
Interest Rate Hikes
Consumer Demand
Decrease in price of
natural gas
World Price
of Natural
Gas
World Price
of NonRenewable
Power
High energyintensive
manufacturing
promotes industry
revenue growth
Low prices of coalgenerated electricity
increases
competition
2
Company Overview
2. Company Overview
Share Price History
Company Summary
TransAlta Renewables (RNW)
•
TransAlta Renewables Inc. is a Canada-based renewable
power company engaged in developing, owning and
operating renewable power generation facilities
•
TransAlta Renewables was incorporated in May 2013 as a
sponsored vehicle of TransAlta Corporation
•
Owns and operates around 17 wind farms, 12 hydro
facilities, and 7 gas facilities in Canada, the US, and most
recently acquired a Western Australian plant
14
13
12
11
10
9
8
Geographic Breakdown
Company Snapshot
Ticker
Stock Price
IPO Date
TSX: RNW
10.13
August 9, 2013
Market Cap
$1.93 billion
Revenue
$0.23 billion
Shares Outstanding
$190.8 million
2. Company Overview
Company Stock Performance
Nov 23, 2015:
Agreed to invest $540 million in 3 TransAlta wind and hydro
projects & entered into an agreement with AIMCo for the
sale of $200 million of their common shares
Dec 20th, 2013:
Acquired an economic interest
in a 144 MW wind farm in
Wyoming
14
2,500
2,000
12
1,500
11
1,000
10
500
Volume
Closing Price
9-Nov-15
9-Oct-15
9-Sep-15
9-Aug-15
9-Jul-15
9-Jun-15
9-May-15
9-Apr-15
9-Mar-15
9-Feb-15
9-Jan-15
9-Dec-14
9-Nov-14
9-Oct-14
9-Sep-14
9-Aug-14
9-Jul-14
9-Jun-14
9-May-14
9-Apr-14
9-Mar-14
9-Feb-14
9-Jan-14
9-Dec-13
9-Nov-13
9-Oct-13
0
9-Sep-13
9
9-Aug-13
Closing Price ($)
13
Jul 27th, 2015:
Announcement of classaction law-suit against
TransAlta – timed
power outages to driveup prices
May 7th, 2015:
Invested in an economic
interest in TransAlta’s
Western Australia Portfolio
Volume (Thousands)
Aug 9th, 2013:
Acquired 28 hydroelectric and wind facilities from
TransAlta & completed an IPO of 22.1 million common
shares @ $9.98/share
2. Company Overview
Supply Chain Breakdown
Resources
Counterparties
High Quality
Counterparties
AAA
BB
BBB
AA
A
•
TransAlta Renewables uses production facilities and natural resource to create renewable energy, which is then
sold through PPAs with 6 high quality counterparties
•
These counterparties are all primarily owned by the provincial government of their respective regions
•
TransAlta Renewabes is fully contracted through PPA agreements, having a weighted average term of 17 years
2. Company Overview (cont.)
Management Overview
Brett M. Gellner
CEO
Donald Tremblay
CFO
Cynthia Johnston
COO
Brett is also the current
Chief Investment Officer
at TransAlta Corp. and
was previously the cohead of CIBC World
Market’s Power &
Utilities group.
Donald is the current
CFO of TransAlta Corp.
and was previously
Brookfield Renewable
Power’s Executive VP
and CFO
Cynthia is also the
Executive VP of
TransAlta. Previously, she
was TransAlta’s VP of
Renewable Operations
John Kousinioris
Corporate Secretary
John is also the corporate
secretary at TransAlta
Corp. He was co-head of
the corporate commercial
department at Bennett
Jones LLP.
3
Investment Theses
3. Investment Thesis 1: Climate Change
Increasing focus on reducing emissions
•
Scientific research has proven that the world continues to warm YoY
• The Earth has warmed every year since 1880 with 2015 being the hottest year on record
•
According to National Oceanic and Atmospheric Administration (NOAA), the globe’s temperature in October had
increased 0.98 degrees Celsius higher than average – it is the highest recorded global temperature in recent
historical records
•
30,000 delegates globally are currently meeting in Paris to discuss climate change
• Canada will be playing a big part due to the Liberal Party’s “green” agenda
Trends in Land & Ocean Temperatures
Global Temperature Increase
Investment Thesis 1: Climate Change
Renewable Energy Growth Story
2012 WORLD POWER MIX
Coal
Natural Gas
Oil
Nuclear
Renewable
2040 WORLD POWER MIX
Coal
Natural Gas
Oil
Nuclear
Renewable
21%
Coal
41%
Renewable
Coal
31%
Renewable
32%
Nuclear
11%
Oil
5%
Nuclear
12%
Natural Gas
22%
Oil
1%
Natural
Gas
24%
The International Energy Agency predicts that renewable energy will grow by 11% over 28 years
Investment Thesis 1: Climate Change
•
Canada has invested $24 billion in renewable energy since 2009
• The Liberal government has pledged $300 million more in funding for the space
Canada is the 6th largest consumer of electricity on the planet
63% of TransAlta Renewables energy portfolio is in wind turbines – this is the most heavily invested and funded
space in Canada as well as the fastest growing
TransAtla’s acquisition of Wyoming Wind will allow for renewable energy push into the Republican stronghold of
the Midwestern United States
The Street has underestimated the severity of climate change and has no longer priced it into renewable stocks due
to the current drop in oil and natural gas prices
•
•
•
•
Clean Energy Canada Snapshot
Canada Renewable Energy
Growth (%)
Canadian Five Year National
Investment (in $Billions)
10
25
8
20
6
15
4
10
2
5
0
0
2009
2010
Wind
2011
Solar
2012
Hydro
2013
2009
2010
Wind
2011
Solar
2012
Hydro
2013
3. Investment Thesis 2: Upside to association with TA
Market over-reaction due to association with TransAlta Corp.
Headwinds Affecting Stock Price
1. August legal trouble with Alberta
Market Surveillance Administrator
• Alleged price manipulation by
taking outages at coal-fired
generating facilities
• Settlement on September 30
2015 to pay $56 million
2. Alberta economy
• Low demand for power from oil
companies due to oil price
• NDP phase out of coal (2030)
RNW vs TA
Share Price ($)
$18
$17
$16
$15
$14
$13
$12
$11
$10
$9
RNW
TA
Date
“Dial Down” Coal, “Dial Up” Renewables
•
TA Focus on Growing RNW
100000
90000
80000
70000
60000
50000
40000
30000
20000
10000
0
Coal
•
•
TA Generation by Fuel Type
TA strengthening balance sheet thorough asset dropdowns to
RNW
TA focusing “dialing up” renewable energy and recent
dropdowns show commitment:
Gas
Cogen
Renewables
2030
2029
2028
2027
2026
2025
2024
2023
2022
2021
2020
2019
2018
2017
Sarnia Cogen. Plant
2016
Annual Generation (GWh)
TA has set mandatory renewables targets: 15% of total load
in 2020, 20% of total load in 2025, 25% of total load in 2030
Ragged Chute Hydro Plant
Le Nordais
Wind Farm
3. Investment Thesis 3: Strong and Sustainable Growth
Generation Capacity (MW) – Proven Track Record for Growth
3000
2500
South
Hedland
Ontario/Quebec
Acquisition
(recently announced)
2000
Australia
Portfolio
1500
1000
500
0
2012
2013
2014
Wind
2015
Hydro
2016
2017
3. Investment Thesis 3: Strong and Sustainable Growth
Increasing CAFD & DPS
•
Substantial production increase through dropdowns from parent company
• Estimated CAFD from 2014 to 2018 is ~140%
• Taking advantage of low borrowing fees to position themselves for long-term benefits
•
Acquiring assets with lower P/CAFD
• Most recent acquisition of Ontario/Quebec Hydro and wind plants
have an overall P/CAFD of 10x, while the company as a whole trades at 12x
•
Increasing diversity of asset base
• Gas in Australia, different wind patterns in Eastern Canada vs West (+Australia)
Estimated CAFD ($ million)
Estimated Dividend/Share ($)
250
1
0.9
200
South Hedland
0.7
Operating
Ontario/Quebec
Assets
150
100
0.8
0.6
~9%
Australian
Acquisition
2.7%
Wyoming
Acquisition
0.5
~6%
South
Hedland
~5%
Ontario
/Quebec
Acquisition
0.4
Operating
Australian
Portfolio
50
0.3
0.2
0.1
0
2014 (Actual)
2015
2016
2017
0
IPO
2014
2015
2016
2017
4
Valuation
4. Valuation – Relative Valuation
Canadian Renewable Power Industry – Target Peer Group
Canadian Power Industry – Broader Industry
4. Valuation – DCF Analysis
Drop in Sales as result of resigning PPAs
with TA at a slight discount
Australian
Portfolio ~428 MW
Recent Acquisition
of Ontario/Quebec ~611 MW
South
Hedland ~150 MW
Transalta Renewables
Discounted Cash Flow Analysis
Mid-Year Convention
Y
Market Price
Model Price
Historical
Net Installed Capacity (MW)
Output (GWh)
$
2014
2015
2016
2017
2018
2019
('15 - '19)
1255
1255
1683
`
2294
2444
2444
2444
14.3%
2995
4016
5475
5832
5832
5832
14.3%
200,822
NA
22500
22019
245,341
(13709)
231,632
115.3%
(40,693.0)
$
EBITDA
% margin
Depreciation & Amortization
$
190,939
77.8%
76,589
$
EBIT
% margin
Taxes
EBIAT
$
114,350
56.9%
28588
85763
$
$
$
$
$
Plus: Depreciation & Amortization
Less: Capital Expenditures
Less: Increase in Net Working Capital
Unlevered Free Cash Flow
WACC
8.5%
Discount Period
Discount Factor
Present Value of Free Cash Flow
($ in million
CAGR
Implied Return
2013
866
Sales
% growth
Lease Revenues
Government Incentives
Total Sales
Royaties
Gross Profit (Total Sales - Royalties)
% margin
Operating Expenses (exc. D&A)
$13.50
Projection Period
186,865 $
(6.9%)
25445
21134
233,444 $
(12951)
220,493 $
118.0%
(46,605.0)
173,888
74.5%
73,951
250,593 $
34.1%
25445
28341
304,379 $
(17368)
287,011 $
114.5%
(62,648.2)
341,568 $
374,820 $ 386,065 $
397,646 16.3%
36.3%
9.7%
3.0%
3.0%
26717
28053
29456
30929 4.0%
38631
41157
41157
41157 14.3%
406,916 $
444,030 $ 456,677 $
469,732
(23673)
(25221)
(25221)
(25221)
383,243 $
418,809 $ 431,456 $
444,511 15.1%
112.2%
111.7%
111.8%
111.8%
(85,392.1)
(93,705.0)
(96,516.1)
(99,411.6)
$
224,363 $
73.7%
81,443
297,851
73.2%
90,516
$
325,104 $
73.2%
95,579
334,940
73.3%
98,446
99,937 $
53.5%
24984
74953
142,921 $
57.0%
35730
107190
207,336 $
60.7%
51834
155502
229,525 $
61.2%
57381
172143
236,493 $
61.3%
59123
177370
73,951
(8000)
(2492)
81,443
(12000)
(10566)
90,516
(8000)
(5380)
95,579
(8000)
(2956)
$
98,446
(8000)
691
345,099
73.5%
101,400
14.7%
243,699 19.5%
61.3%
60925
182774 19.5%
101,400
(8000)
808
-
$
138,412
$
166,067 $
8.5%
0.9
0.93
232,637 $
8.5%
1.9
0.86
256,766 $
8.5%
2.9
0.79
268,507 $
8.5%
3.9
0.73
276,982
8.5%
4.9
0.67
14.9%
$
138,412 $
154,185 $
199,071 $
202,506 $
195,176 $
185,563
6.0%
3.6%
4. Valuation – DCF Analysis
WACC Calculation
Target Capital Structure
Debt-to-Total Capitalization
Equity-to-Total Capitalization
Cost of Debt
Cost of Debt
Tax Rate
After-tax Cost of Debt
Cost of debt
27.3%
72.7%
5.1%
25.0%
3.8%
Value of Debt (mn)
$346,698.0
$35,000.0
$178,364.0
$100,912.0
Effective Yield Weighted Yield
5.91%
3.1%
5.28%
0.3%
4.00%
1.1%
4.00%
0.6%
5.07%
WACC Sensitivity Analysis
Debt-to-Total
Capitalization
Pre-tax Cost of Debt
Cost of Equity
Risk-free Rate(1)
Market Risk Premium(2)
Levered Beta
2.5%
7.1%
0.15
Cost of Equity
3.6%
WACC
3.6%
0.0
7.3%
17.3%
27.3%
37.3%
47.3%
4.1%
3.4%
3.3%
3.3%
3.4%
3.4%
4.6%
3.4%
3.3%
3.3%
3.4%
3.5%
5.1%
3.4%
3.3%
3.3%
3.4%
3.6%
5.6%
3.4%
3.3%
3.3%
3.4%
3.7%
6.1%
3.5%
3.3%
3.3%
3.5%
3.8%
Despite the actual WACC that was calulctaed, a WACC of 8.5% was used for the DCF
(1) Interpolated yield on 20-year U.S. Treasury
(2) Obtained from Ibbotson SBBI Valuation Yearbook
Implied Equity Value and Share Price
Terminal Value
$936,500.9 Enterprise Value
Less: Total Debt
Less: Preferred Securities
Terminal Year EBITDA (2019E)
$345,099.1 Less: Noncontrolling Interest
Exit Multiple
Terminal Value
Discount Factor
10.0x
Plus: Cash and Cash Equivalents
$3,450,990.6 Shares outstanding
0.67
Present Value of Terminal Value
% of Enterprise Value
$2,311,978.3
71.2%
Enterprise Value
$3,248,479.2
Implied Share Price
$3,248,479.2
(658,455.0)
-
Share Price
(37,847)
####
23,726
190,800.0
$13.50
WACC
Enterprise Value
Cumulative Present Value of FCF
6.5%
7.5%
8.5%
9.5%
10.5%
Exit Multiple
10.0x
11.0x
8.0x
9.0x
$12.29
$11.67
$11.08
$10.52
$9.99
$13.61
$12.93
$12.29
$11.68
$11.10
$14.94
$14.20
$13.50
$12.84
$12.20
$16.27
$15.47
$14.71
$13.99
$13.31
12.0x
$17.60
$16.74
$15.92
$15.15
$14.42
4. Valuation – LBO Analysis
•
•
Another tool used to value RNW was a quick and dirty LBO model
Using a linear regression tool and hardcoding an IRR of 20%, a share price of $12.56 was
calculated as an appropriate bid price for RNW.
SOURCES AND USES OF FUNDS
Uses of Funds
Acquisition Equity
Existing Net Debt Refinanced
Total Transaction Costs
Total Uses of Funds
$ 2,949,221
(672,576)
(44,238)
$ 3,666,035
New Equity
New Debt
Total Sources of Funds
$ 916,509
2,749,526
$ 3,666,035
ASSUMPTIONS
28/11/2015
$ 12.37
25.0%
$ 15.46
190,800.000
Current Stock Price
Transaction Premium
Acquisition Stock Price
Shares Outstanding
25%
75%
TEV as a Multiple of Year 0
Revenue
EBITDA
10.6x
10.0x
INCOME STATEMENT
Year 0
$ 233,444
Net Revenue
Expenses
Royalties + Other Exp.
RE
& Other
SG&A
$
(12,951) $
(46,605)
Year 1
$ 304,379
(17,368) $
(62,648)
Pro Forma
Year 2
Year 3
$ 406,916
$ 444,030
(23,673) $
(85,392)
(25,221) $
(93,705)
Year 4
$ 456,677
(25,221) $
(96,516)
Year 5
$ 469,732
(25,221)
(99,412)
Total Expenses
$ (59,556)
$ (80,016)
$ (109,065)
$ (118,926)
$ (121,737)
$ (124,633)
Operating Income
Interest Income
Interest Expense
Pre-Tax Income
$ 173,888
949
(192,467)
$ (17,630)
$ 224,363
949
(192,467)
$ 32,845
$ 297,851
949
(186,621)
$ 112,179
$ 325,104
949
(175,332)
$ 150,721
$ 334,940
949
(161,496)
$ 174,393
$ 345,099
949
(145,961)
$ 200,088
Taxes
Net Income
(4,407)
$ (13,222)
8,211
$ 24,634
28,045
$ 84,134
37,680
$ 113,040
43,598
$ 130,795
50,022
$ 150,066
4. Valuation – LBO Analysis
LBO CAPITAL STRUCTURE - 5 YR OVERVIEW
Year 1
Year 2
Pro Forma
Year 3
Year 4
Year 5
Exit EBITDA Multiple 10.0x
Implied Enterprise Value
Less: Net Debt
Implied Equity Value
$ 3,058,058
(2,826,468)
$ 231,590
$ 3,883,668
(2,674,867)
$ 1,208,800
$ 4,206,828
(2,487,381)
$ 1,719,447
$ 4,333,863
(2,276,160)
$ 2,057,702
$ 4,464,989
(2,039,277)
$ 2,425,712
Implied Multiple of Capital
IRR Return
0.2x
-76%
1.2x
11%
1.8x
21%
2.1x
21%
2.5x
20%
Billions
IRR ANALYSIS
$3.0
5 year investment horizon
$2.5
$2.0
CREDIT & LEVERAGE STATISTICS
Total Debt / EBITDA
Net Debt / EBITDA
EBITDA / Interest
EBIT / Interest
Total Debt / Equity
Total Debt / Capital
Year 0
11.8x
11.8x
1.2x
0.8x
2.9x
74.1%
Year 1
9.6x
9.1x
1.5x
1.1x
2.7x
73.3%
Pro Forma
Year 2
Year 3
7.5x
7.0x
6.6x
5.5x
1.9x
2.2x
1.5x
1.7x
2.4x
2.1x
70.8%
67.4%
Year 4
6.7x
4.8x
2.5x
1.9x
1.7x
63.3%
$1.0
Year 5
6.5x
4.1x
2.8x
2.1x
1.4x
58.3%
25%
Equity
$0.0
At Purchase Year 0
At Exit Year 5
Debt
Valuation Sensitivity to Purchase Premium and Exit Multiple
Exit
Multiple
Exit
Multiple
IRR
Purchase Price (per share, before 25% premium)
### $ 11.33 $
12.33 $
13.33 $
14.33 $
15.33
8x
19%
14%
9%
5%
-1%
9x
23%
19%
15%
11%
7%
10x
28%
24%
20%
16%
12%
11x
31%
28%
24%
21%
17%
12x
35%
31%
28%
24%
21%
45%
Equity
$0.5
Equity
IRR Sensitivity to Purchase Price and Exit Multiple
55%
Debt
75%
Debt
$1.5
$ 9x
10x
11x
12x
13x
$
$
$
$
$
15.0%
10.88
12.58
14.26
14.56
16.54
Share PriceShare Price
Purchase Premium
Purchase Premium
20.0%
25.0%
30.0%
35.0%
$ 10.58 $ 10.28 $ 10.24 $ 9.84
$ 12.18 $ 11.78 $ 11.38 $ 11.08
$ 13.76 $ 13.33 $ 12.90 $ 12.60
$ 13.96 $ 13.36 $ 12.76 $ 12.46
$ 15.74 $ 14.94 $ 14.14 $ 13.34
4. Valuation – LBO Analysis
•
•
Another tool used to value RNW was a quick and dirty LBO model
Using a linear regression tool and hardcoding an IRR of 20%, a share price of $13.33 was calculated
as an appropriate bid price for RNW.
• This comes with assuming a 25% acquisition premium, 75% leverage, a 10x terminal EBITDA multiple
and conservative operating scenarios
SOURCES AND USES OF FUNDS
Uses of Funds
Acquisition Equity
Existing Net Debt Refinanced
Total Transaction Costs
Total Uses of Funds
Sources of Funds
New Equity
New Debt
Total Sources of Funds
$ 2,996,244
(672,576)
(44,944)
$ 3,713,764
Current Stock Price
Transaction Premium
Acquisition Stock Price
Shares Outstanding (a)
Transaction Enterprise Value
TEV as a Multiple of Year 0
Revenue
EBITDA
$ 928,441
2,785,323
$ 3,713,764
IRR ANALYSIS
Year 1
Exit EBITDA Multiple 11.0x
Implied Enterprise Value
Less: Net Debt
Implied Equity Value
Implied IRR
Implied Multiple of Capital
IRR Return
11/28/2015
$ 12.56
25.0%
$ 15.70
190,800.000
$ 2,323,668
$ 2,959,413
(2,687,311)
$ 272,101
(70.7)%
0.3x
-71%
Year 2
$ 3,755,072
(2,547,243)
$ 1,207,829
14.1%
1.3x
14%
Pro Forma
Year 3
$ 4,057,386
(2,376,618)
$ 1,680,768
21.9%
1.8x
22%
10.6x
10.0x
Year 4
$ 4,170,711
(2,186,962)
$ 1,983,749
20.9%
2.1x
21%
Year 5
$ 4,287,435
(1,977,177)
$ 2,310,258
20.0%
2.5x
20%
4. Valuation - Summary
Current Price: $10.09
Our Valuation
Valuation
Methodology
Min
25th Percentile
Median
75th percentile
Max
52 Week Low/High
LBO (2)
DCF (1)
2016 EV/EBITDA
2016 P/E
5
10
15
20
25
30
Other Analysts’ Target
Share Price ($ CAD)
Current Price: $10.09
9
10
11
12
Share Price ($ CAD)
13
14
15
5
Catalysts And Risks
4. Risks
Power Purchase Agreements Risk
Highly Regulated Industry
• TransAlta Renewables sells majority of its energy to
third parties through a PPAs and there is possibility
that the third party could be unable or unwilling to
fulfill their obligations of the PPA
• The energy industry is heavily influenced by federal,
provincial, and local government regulations that
relate to renewable energy development and
electricity pricing, especially with regards to coal
power generation
• Mitigation: RNW enters in the majority of PPAs
with their parent company, and other reputable
companies with strong credit history and strong
historical performance.
Risk of Inconsistent Income
• The strength and consistency of the wind resources at
the Company's wind facilities may vary from what
the Company anticipates due to a number of factors
• Mitigation: The company builds wind farms in areas
that have consistent wind data, and have access to
wind without any interference from any natural
barriers or man made buildings. Also, TransAlta
Renewables diversifies its energy mix, limiting
season-to-season variability in energy production
• Mitigation: Transalta is effectively on track to phase
out coal production in line with the recent
announcement by the Alberta Government to phase
out coal generation by 2030
Risk of Foreign Investments
• Foreign laws or regulations may not provide for the
same type of legal certainty and rights, which may
adversely affect the Company's ability to receive
revenues or enforce its rights in connection with its
foreign operations.
• Mitigation: TransAlta Renewables limits its overseas
business, and primarily operates in North America.
4. Catalysts
Additional Drop-downs from TA
•
Potential Portfolio dropdown of ~$300M in the near-term from TA
•
These short-term drop downs are to assist TA in reaching its goal of reducing debt
•
Other good fits for drop downs from TA come from recent M&A moves TA has been involved in:
• E.g. through the restructuring of TA’s Poplar Creek gas facility, TA gained interests in 2 wind facilities and
71 MW of renewable generating capacity in the US
•
These assets look to be potential good fits for RNW
New Liberal Government Support of Renewable Gnergy Generation
•
•
•
•
Current and future wind and hydro facilities are eligible to receive incentives under the Wind Power Production
Incentive (ecoENERGY for Renewable Power) sponsored by the federal government
Environmental regulations that do not force compliance costs/shutdowns in excess of the federal carbon framework
are extremely advantageous
The Alberta Government announced increases to provincial Specified Gas Emitters Regulations:
• Jan 1, 2016  increase in the Greenhouse Gas (“GHG”) reduction obligation for large emitters from 12% to
15% of emissions (i.e. reduce emission intensity by 15%) along with the compliance price of the technology
fund (carbon levy) rising from $15/tonne to $20/tonne
• Jan 1, 2017  further increase to a 20% reduction requirement and a $30/tonne levy
Under management guidance, the GHG offsets created by RNW’s current Alberta wind facilities are expected to
increase in value through 2017, as GHG emitters can use them as compliance instruments in place of contributing
to the carbon levy
4. Catalysts
Additional Drop-downs from TA
Facility
Location
Like ly ne ar te rm drop-downs:
Ragged Chute
Ontario
Kent Breeze
Ontario
Wintering Hills
Alberta
Lakeswind
Minnesota
Mass Solar
Massachusetts
Total
Gas fire d asse ts:
Fort Saskatchewan
Poplar Creek
Mississauga
Ottawa
Sarnia
Windsor
Total
Alberta
Alberta
Ontario
Ontario
Ontario
Ontario
Albe rta Hydro
Barrier
Bearspaw
Big Horn
Brazeau
Cascade
Ghost
Horseshoe
Interlakes
Kananaskis
Pocaterra
Rundle
Spray
Three Sisters
Total
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Alberta
Ne t
MWs
7
20
44
50
21
142
35
244
54
37
506
31
907
13
17
120
355
36
51
14
5
19
15
50
103
3
801
Fue l
Re ve nue
Source
Hydro
Wind
Wind
Wind
Solar
LTC
LTC
Merchant
LTC
LTC
Est.
Contract
Expiry Counte rparty Value ($M)
2029
2031
2034
2030+
OPA
IESO
Municipalities
Owne r
TA
TA
TA
TA
TA
TA
~$300M
Nat
Nat
Nat
Nat
Nat
Nat
gas
gas
gas
gas
gas
gas
LTC
2019
Dow Chemical
LTC
2030
Suncor
LTC
2018
OEFC
LTC
2017-2033
OPA
LTC
2022-2025
OPA
LTC/Merchant
2016
OEFC
TA
TA
TA
TA
TA
TA
$1.75B+
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Hydro
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Alberta PPA
Merchant
Alberta PPA
Alberta PPA
Alberta PPA
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
TA
TA
TA
TA
TA
TA
TA
TA
TA
TA
TA
TA
TA
$850M+
Questions?
THANK YOU.
Appendix
Income Statement
Balance Sheet
Statement of Cash Flows