Advertisement
Operating
-- Coal: Comparable gross margins from TransAlta's coal fleet increased $20 million year-over-year despite higher planned outages-- Gas: Comparable gross margins from TransAlta's gas fleet increased $21 million year-over-year as a result of strong availability and reduced gas input costs-- Renewables: Comparable gross margins increased $4 million year-over-year primarily due to strong hydro generation outpacing lower prices in Alberta and lower wind volumes in Western and Eastern Canada-- Energy Trading: Gross margins decreased $134 million year-over-year due to unfavorable market conditions relative to trading positions held
Major maintenance
-- TransAlta completed its three-year intensive major maintenance program for its coal fleet. Completion of this capital investment program sets up these coal units to operate to end of life
Growth
-- Acquisition of the 125 megawatt ("MW") dual-fuel Solomon power station for U.S. $318 million, which is fully contracted with Fortescue Metals Group Ltd-- TransAlta and MidAmerican Energy Holdings Company entered into a new strategic partnership through which the two companies will work together to develop, build, and operate new natural gas-fired electricity generation projects in Canada-- Construction of the 68 MW contracted New Richmond wind farm in Quebec is on track to be commissioned in the first quarter of 2013-- Realignment of resources as part of an ongoing strategy to continuously improve operational excellence and accelerate growth, resulting in $25 - $30 million cost savings per year by the end of 2013Significant Events
Sundance Unit 3
On November 23, 2012, TransAlta reported that the independent arbitration panel granted TransAlta force majeure relief for derates and outages in 2012 and 2011 related to the mechanical failure of critical generator components on Sundance Unit 3. This decision validates that the mechanical failure was beyond TransAlta's reasonable control.
Federal Greenhouse gas regulations
As a result of amendments to Canadian federal regulations requiring coal-fired plants be shut down after a maximum of 50 years of operation, TransAlta has reviewed the useful lives of the Alberta coal generating facilities and related coal mining assets, and where permitted under the regulations, extended the useful lives to a maximum of 50 years.
Sundance Units 1 and 2
On July 23, 2012, TransAlta reported the independent arbitration panel considering TransAlta's decision in December 2010 to shut down two units at its Sundance generating station had allowed the company's claim of force majeure. This decision validates TransAlta's belief the units failed due to issues beyond its control.
TransAlta also sought to have the PPA terminated for economic reasons, as provided for under the legislation. The panel did not agree with this claim. The cost to repair the units is estimated at approximately $190 million. This investment is expected to start generating cash flow in the fourth quarter of 2013.
Net penalties of $189 million from the arbitration panel's decision were recorded in the second quarter of 2012. Additionally, TransAlta wrote down its Sundance Units 1 and 2 by $43 million in the second quarter. This impairment was reversed by $41 million in the third quarter as a result of additional years of merchant operations expected to be realized due to the amendments to Canadian federal regulations.
