TransAlta announces fourth quarter and year-end results
- 2006 comparable* earnings per share of $1.16 versus $0.82 in 2005
- High availability from Alberta thermal operations, improved spark spreads and strong performance from Alberta merchant assets, and Energy Trading among top drivers in 2006
- Fourth quarter 2006 comparable* earnings per share of $0.46 versus $0.24 in the same 2005 quarter driven by Alberta operations and a gain recorded on certain Centralia coal-fired asset contracts
- Dividend declared of $0.25 per common share payable April 1, 2007CALGARY, Alberta (Jan. 26, 2007) – TransAlta Corporation (TransAlta) (TSX: TA; NYSE: TAC) today reported 2006 comparable earnings of $233.8 million ($1.16 per share) versus $161.3 million ($0.82 per share) in 2005. Strong underlying operations from Alberta thermal and natural gas assets, positive spark spreads and merchant sales in Alberta, a mark-to-market gain recorded on certain Centralia coal-fired asset contracts, recontracting of the Sarnia natural gas-fired asset, and exceptional Energy Trading results drove year-over-year comparable earnings growth.
Net earnings, including one-time items, for the twelve months ended Dec. 31, 2006 were $44.9 million ($0.22 per share) versus $186.3 million ($0.94 per share) in the same period of 2005. Net earnings include the first quarter $6.2 million ($0.03 per share) after tax write down of a turbine held in inventory and the second quarter $55.3 million ($0.28 per share) benefit from changes in tax rates related to prior period earnings. In addition a $153.6 million ($0.76 per share) after tax charge related to the closure of TransAlta’s Centralia, Washington mine, and a $84.4 million ($0.42 per share) impairment of the Centralia Gas plant were made. The proceeding events were announced on Nov. 27, 2006. Net earnings for 2005 included a $12 million ($0.06 per share) after tax gain on discontinued operations and $13 million ($0.07 per share) from a tax settlement on a deferred receivable.
Cash flow from operations was $489.6 million and $619.8 million for the years ended Dec. 31, 2006 and Dec. 31, 2005, respectively. The reduction in cash flow from operations was due to timing of November collections primarily from Alberta customers in the fourth quarter. These balances were received on Jan. 2, 2007, resulting in cash inflow of $185 million. These inflows will appear in the first quarter 2007 statements. In 2005, November payments were received on Dec. 30, 2005.
“Our operations continued to perform well in the fourth quarter. However, our reported results were impacted by the difficult decision to stop our Centralia mine operations and move to Powder River Basin (PRB) coal. The long-term impact of this decision will be a definite improvement in the competitiveness of our Centralia coal-fired facility. We continue to work closely with our former mine employees, their representatives, and the local governments and communities to help employees find alternative employment,” said Steve Snyder, TransAlta President and CEO.
“For the year, our focus on cost savings and financial discipline, coupled with a consistent and dedicated effort by our employees, allowed us to achieve strong operational results despite a number of significant events. Our asset teams responded quickly and opportunistically to a very tough pricing environment in the Pacific Northwest in the second quarter. They also successfully responded to an unusual turbine blade failure at our Centralia coal-fired plant in the third quarter and of course, to all the issues related to our Centralia mine closure and PRB rail and coal supply procurement,” said Snyder.
In the fourth quarter 2006, TransAlta reported comparable earnings per share of $92.0 million ($0.46 per share) versus $47.9 million or $0.24 per share in the fourth quarter 2005. The increase in comparable earnings was driven by higher availability from Alberta coal assets, a settlement payment from Canadian National Railway related to the August 2005 train derailment at Lake Wabamun, Alberta, and an unrealized mark-to-market gain on certain Centralia coal-fired asset contracts. A net loss of $146.0 million ($0.72 per share) was reported in the fourth quarter 2006 compared to net earnings of $59.9 million ($0.30 per share) a year ago due to charges related to the Centralia mine closure and Centralia gas-fired asset impairment.
Cash flow from operations in the fourth quarter of 2006 decreased $134.2 million to $77.7 million versus the same quarter in 2005 due to the previously mentioned timing of the collection of receivables.
Availability averaged 89.0 per cent for 2006 compared to 89.4 per cent in 2005. Fourth quarter 2006 availability was 89.9 versus 90.4 per cent for the year-ago-period. Operations, maintenance, and administration costs were $14.7 million lower in 2006 and $6.4 million lower in the fourth quarter due to fewer planned outages and general cost savings.
“In 2007 and beyond, our goal is to deliver greater than 10 per cent total shareholder return and move toward a 10 percent return on capital employed over the long-term. This will be achieved through our continued focus on operations, productivity improvement, major maintenance and life-cycle planning, portfolio management and growth in the markets and technologies we know best,” said Snyder.
TransAlta also declared a dividend of $0.25 per share on common shares payable April 1, 2007 to shareholders of record at the close of business March 1, 2007. Dividends paid in 2006 are eligible dividends. Personal taxes on eligible dividends received after 2005 are reduced as a result of the new dividend tax regime announced in 2006.
*Presenting comparable earnings from period to period is provided to help management and shareholders evaluate earnings trends more readily in comparison with prior periods’ results. An explanation and reconciliation of this non-GAAP financial measure can be found beginning on page 22 of the News Release.
Dec. 31, 2006
Dec. 31, 2005
Dec. 31, 2006
Dec. 31, 2005
Availability (%) 89.9 90.4 89.0 89.4 Production (GWh) 13,298 13,408 48,213 51,810 Revenue ($MM) 779.8 810.1 2,796.5 2,838.5 Gross margin ($MM)1 404.4 375.3 1,491.4 1,442.0 Operating income before mine closure and impairment charges ($MM)1 150.6 118.7 478.5 456.8 Mine closure charges ($MM) (191.9) – (191.9) – Asset impairment ($MM) (130.0) (36.2) (130.0) (36.2) Operating income after mine closure and asset impairment charges ($MM) (171.3) 82.5 156.6 420.6 Earnings from continuing operations ($MM) (146.0) 47.9 44.9 174.3 Earnings from discontinued operations ($MM) – 12.0 – 12.0 Net (loss) earnings ($MM) (146.0) 59.9 44.9 186.3 Comparable earnings ($MM)1 92.0 47.9 233.8 161.3 Basic & diluted earnings per share ($) (0.72) 0.30 0.22 0.94 Comparable earnings per share ($) 0.46 0.24 1.16 0.82 Cash flow from operations ($MM) 77.7 211.9 489.6 619.8
1 Gross margin and operating income are not defined under Canadian GAAP. Refer to the non-GAAP financial measures section beginning on page 22 of the News Release for an explanation and reconciliation.
The complete 2006 year-end and fourth quarter release 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 fourth quarter 2006 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, investors, and other interested parties. 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 “Jennifer Pierce” as moderator.
- 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 replay will accessible at 1-877-653-0545 with TransAlta pass code 379035#. 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 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 and general economic conditions in geographic areas where TransAlta Corporation operates.
For more information:
Senior Advisor, Media Relations
Phone: (403) 267-7330
Director, Investor Relations
Phone: (403) 267-7622
Fax: (403) 267-2590