Strong underlying generation results fuel second quarter performance
- Comparable* earnings per share of $0.21 versus $0.16 in second quarter 2006
- Net earnings per share of $0.28 versus $0.43 in the year ago period
- Stronger results from Centralia Coal and Alberta facilities drive underlying gross margin increase
CALGARY, Alberta (July 27, 2007) – TransAlta Corporation (TransAlta) (TSX: TA; NYSE: TAC) today reported comparable earnings for the second quarter 2007 of $41.9 million ($0.21 per share) versus $31.1 million ($0.16 per share) for the same period in 2006. Net earnings for the second quarter 2007 were $57.2 million ($0.28) compared to $86.4 million ($0.43 per share) in the second quarter 2006.
Included in second quarter 2007 earnings is a $26.2 million ($0.08 per share) mark-to-market loss related to settlement of gains previously recorded in 2006 and mark-to-market movements on future period contracts related to the Centralia Coal facility. Net earnings included a gain of $7.6 million on the sale of Centralia mining equipment and $7.7 million related to the reduction of future income taxes as a result of the Canadian Federal government’s Tax Fairness Plan receiving Royal Assent during the quarter. Last year’s second quarter comparable and net earnings included, respectively, a $6.9 million ($0.03 per share) and $62.2 million ($0.31 per share) due to a reduction in tax expense related to lower tax rates which came into effect during the quarter.
Cash flow from operations was $227.6 million compared to $66.8 million for the second quarters of 2007 and 2006, respectively, due to higher cash earnings and reductions in working capital. Fleet availability was 83.6 per cent for the three months ended June 30, 2007 compared to 85.1 per cent in the same period last year due primarily to derating at Centralia Coal due to test burning Powder River Basin (PRB) coal.
“The second quarter was strong for TransAlta due to higher than expected production at our Centralia Coal facility resulting from favorable test burns of PRB coal blends and stronger pricing in the Pacific Northwest,” said Steve Snyder, president and CEO of TransAlta. “Our Alberta portfolio continues to deliver consistently strong returns as a result of excellent operational performance, execution of our life cycle management planning and favorable market conditions.
“The second half of 2007 is shaping up favorably for TransAlta. As we review our earnings potential over the next several years we are seeing higher pricing in our key markets of Alberta and the Pacific Northwest. As a result we expect low double digit annual growth in earnings per share over the same period,” said Snyder.
In the second quarter of 2007, the growth in comparable earnings was driven by a $52 million increase in Generation earnings related to increased production, higher prices and lower coal costs at the Centralia Coal facility. Increased production and higher prices at Alberta coal, natural gas and hydro assets also contributed favorably to the quarter. These results were offset by $9.2 million of lower Energy Trading earnings.
For the six months ended June 30, 2007, comparable earnings were $98.1 million ($0.48 per share) versus $106.5 million ($0.53 per share) in the first half of 2006. Net earnings were $113.4 million ($0.56 per share) versus $155.6 million ($0.78 per share) in the first half of 2006. In 2007, the underlying earnings increase is primarily related to favorable pricing in Alberta and Pacific Northwest combined with lower Centralia Coal fuel costs and increased production. These results were offset by higher unplanned outages in Alberta, increased Alber ta coal costs, lower margins at our Ottawa facility, and recording of a mark-to market loss of $40 million ($0.13 per share).
First quarter 2007 comparable and net earnings have been reduced by $13.8 million ($0.05 per share) to reflect the correction of an error in the amount of unrealized mark-to-market gains recorded on certain Centralia Coal contracts which no longer qualify for hedge accounting treatment. The resulting EPS for the first quarter of 2007 would be $0.28 per share versus the reported $0.33 per share. Earnings for the three and six months ended June 30, 2007 are not impacted by this.
For the six months ending June 30, 2007 cash flow from operations was $558.4 million compared to $267.1 million in the first six months of 2006. The increase is primarily due to the collection of $185 million of contractually scheduled payments related to 2006 and improvements in working capital. Availability was 85.9 per cent for the six months ended June 30, 2007 compared to 91.0 per cent in the same period last year due primarily to derating at Centralia due to test burning PRB coal.
Year to date TransAlta has announced a net 321 MW of new build. These projects include the $1.6 billion, 450 MW supercritical coal-fired Keephills 3 facility with EPCOR. The estimated capital cost includes $160 million of related mine capital. Keephills 3 is expected to be online in the first quarter of 2011. Additionally, TransAlta expanded its 25-year Power Purchase Agreement with New Brunswick Power Distribution and Customer Service Corporation to provide 96 MW of wind power. Under the agreement, TransAlta will construct, own and operate a wind power facility in New Brunswick. The capital cost is estimated to be $170 million. The expected commercial operations date is the fourth quarter of 2008.
*Presenting comparable earnings from period to period is provided to help management and shareholders evaluate earnings trends more readily in comparison with prior periods’ results. An explanation and reconciliation of this non-GAAP financial measure can be found beginning on page 26 of the MD&A.
Second Quarter and First Half 2007 Highlights:
All figures in millions unless otherwise stated.
June 30, 2007
June 30, 2006
June 30, 2007
June 30, 2006
|Gross margin ($MM)1||$355.7||$339.1||$733.6||$733.1|
|Operating income ($MM)1||$90.5||$75.7||$228.8||$229.7|
|Net earnings ($MM)||$57.2||$86.4||$113.4||$155.6|
|Comparable earnings ($MM)1||$41.9||$31.1||$98.1||$106.5|
|Basic & diluted earnings per share ($)||$0.28||$0.43||$0.56||$0.78|
|Comparable earnings per share ($)||$0.21||$0.16||$0.48||$0.53|
|Cash flow from operations ($MM)||$227.6||$66.8||$558.4||$267.1|
1 Gross margin and operating income are not defined under Canadian GAAP. Refer to the non-GAAP financial measures section beginning on page 26 of the MD&A for an explanation and reconciliation.
The complete second quarter report for 2007, including Management’s Discussion and Analysis and unaudited financial statements, is available on the Investors section of our website: transalta.com.
TransAlta will hold a conference call and webcast at 9 a.m. MST (11 a.m. EST) today to discuss second quarter 2007 results. The call will begin with a short address by Steve Snyder, president and CEO and Brian Burden, executive vice-president and CFO, followed by a question and answer period for investment analysts. A question and answer period for the media will immediately follow. Please contact the conference operator five minutes prior to the call, noting “TransAlta Corporation” as the company and moderator “Jennifer Pierce.”
- For local Calgary participants – (403) 232-6311
- For local Toronto participants – (416) 883-0139
- Toll-free North American participants – 1-888-458-1598
- Participant pass code – 26326#
If you are unable to participate in the call, the instant replay is accessible at 1-877-653-0545 with TransAlta pass code 506615#. A transcript will be posted on TransAlta’s website approximately one day after the conference call.
Note: If using a hands-free phone, lift the handset and press one to ask a question.
TransAlta is a power generation and wholesale marketing company focused on creating long-term shareholder value. We maintain a low-risk profile by operating a highly contracted portfolio of assets in Canada, the United States, Mexico and Australia. Our focus is to efficiently operate our coal-fired, gas-fired, hydro and renewable facilities in order to provide our customers with a reliable, low-cost source of power. For nearly 100 years, we’ve been a responsible operator and a proud contributor to the communities where we work and live.
This news release may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. These statements are based on TransAlta Corporation’s belief and assumptions based on information available at the time the assumption was made. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels, unanticipated accounting or audit issues with respect to our financial statements or our internal control over financial reporting, plant availability, and general economic conditions in geographic areas where TransAlta Corporation operates. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause TransAlta’s actual results and experience to differ materially from the anticipated results or other expectations expressed. Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date of this news release or as otherwise stated. TransAlta undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.
Note: All financial figures are in Canadian dollars unless noted otherwise.
For more information:
Senior Advisor, Media Relations
Phone: (403) 267-7330
Director, Investor Relations
Phone: (403) 267-7622
Fax: (403) 267-2590