TransAlta Corp. released its initial financial outlook for 2017, predicting it will produce better results than 2016 despite expectations that the Alberta power market will remain oversupplied.
The Calgary-based power generator said Dec. 19 that it expects to generate comparable free cash flow of $300 million to $365 million in 2017, which is expected to be roughly $50 million to $65 million better than its 2016 guidance.
TransAlta said its 2017 results are expected to top 2016 thanks to revenue from its new natural gas-fired power plant in western Australia, which is expected to become operational by mid-2017, and the receipt of the first coal transition payment from the Alberta government.
For 2017, the company is targeting comparable EBITDA in the range of C$1.03 billion to C$1.14 billion and comparable funds from operations of C$765 million to C$855 million.
"The 2017 outlook follows a successful year for TransAlta in 2016. While there are varying views on the outlook for power prices in 2017, we have chosen to take a conservative view for purposes of our budgeting and forecasting," TransAlta President and CEO Dawn Farrell said in a news release. Additionally, TransAlta CFO Donald Tremblay said the company is well positioned to meet its nearing debt maturity in May 2017 and is not focusing on its 2018 debt maturities.
In addition to releasing its 2017 financial outlook, TransAlta confirmed its 2016 outlook. The company continues to expect 2016 comparable free cash flow in the range of C$250 million to C$300 million. Due to lower power prices, the corporation also expects that it will reach the lower end of the C$990 million and C$1.1 billion range for its comparable EBITDA, and the lower end of the C$755 million and C$835 million range for its comparable funds from operations. The company will release its fourth-quarter and year-end 2016 results on March 3, 2017.
In other news, TransAlta separately announced that its board of directors approved an agreement to swap all of its outstanding first preferred shares with new cumulative redeemable minimum rate reset first preferred shares. The series 1 preferred shares will have a reset spread of 5.29%, a minimum reset coupon rate of 6.5% and a reset date of Dec. 31, 2021.
Under the transaction, series A shareholders will get 0.503 of a new preferred share, series B shareholders will receive 0.550 of a new preferred share, series C shareholders will receive 0.705 of a new preferred share, series E shareholders will receive 0.790 of a new preferred share and series G shareholders will receive 0.820 of a new preferred share. A fixed cumulative dividend of C$1.625 per new preferred share per annum will be payable on the last business day of March, June, September and December yearly, as well as when declared by the TransAlta board.
The board of directors of the corporation also declared a quarterly dividend of 4 Canadian cents per common share payable on April 1, 2017, to shareholders of record March 1, 2017.