TransAlta Announces 2002 Results and Declares Dividend, Part 2 of 2.Part 2 CALGARY Calgary (kăl`gərē), city (1991 pop. 710,677), S Alta., Canada, at the confluence of the Bow and Elbow rivers. The largest city in Alberta and the fastest-growing major city in Canada, Calgary is a corporate, transportation, and financial , Alberta--(BUSINESS WIRE)--Jan. 31, 2003 On Jan. 1, 2002, the corporation retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin adopted the new CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) standard for stock-based compensation. The new standard requires that stock-based payments to non-employees, direct awards of stock and awards that call for settlement in cash or other assets other assets Assets of relatively small value. For financial reporting purposes, firms frequently combine small assets into a single category rather than listing each item separately. be accounted for using the fair value method of accounting. The fair value method is encouraged for other stock-based compensation plans, but other methods of accounting, such as the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. method, are permitted. Under the fair value method, compensation expense is measured at the grant date and recognized over the service period. Under the intrinsic value method, compensation expense is determined as the difference between the market price of the underlying stock and the exercise price of the equity instrument granted. If the intrinsic value method is used, disclosure is made of earnings and per share amounts as if the fair value method had been used. The corporation has elected to use the intrinsic value method of accounting for its fixed stock option plans and its performance stock option plan. Accordingly, no compensation cost has been recognized for these plans. The following table provides pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma measures of net earnings (loss) and earnings (loss) per share had compensation expense been recognized based on the estimated fair value of the options on the grant date in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with the fair value method of accounting for stock-based compensation:
3 months ended Dec. 31 Year ended Dec. 31
2002 2001 2002 2001
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Reported net earnings
(loss) applicable to
common shareholders $ (54.3 ) $ 46.5 $ 189.9 $ 214.6
Compensation expense 1.0 0.5 3.7 2.0
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Pro forma net earnings
(loss) applicable to
common shareholders $ (55.3 ) $ 46.0 $ 186.2 $ 212.6
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Reported basic earnings
(loss) per share $ (0.32 ) $ 0.27 $ 1.12 $ 1.27
Compensation expense per
share 0.01 - 0.02 0.01
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Pro forma basic earnings
(loss) per share $ (0.33 ) $ 0.27 $ 1.10 $ 1.26
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Reported diluted earnings
(loss) per share $ (0.32 ) $ 0.27 $ 1.12 $ 1.25
Compensation expense per
share 0.01 - 0.02 0.01
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Pro forma diluted earnings
(loss) per share $ (0.33 ) $ 0.27 $ 1.10 $ 1.24
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Options were granted only in the first quarter of 2002. The estimated fair value of these stock options was determined using the binomial binomial (bī'nō`mēəl), polynomial expression (see polynomial) containing two terms, for example, x+y. The binomial theorem, or binomial formula, gives the expansion of the nth power of a binomial (x+ model using the following assumptions, resulting in a weighted-average fair value of $4.25 per option (2001 - $4.35):
2002 2001
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Risk-free interest rate 5.9% 5.4%
Expected hold period to exercise (years) 7.0 7.0
Volatility in the price of the corporation's shares 28.3% 28.2%
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The accounting treatment for the corporation's performance share ownership plan remains unchanged from the year ended Dec. 31, 2001. Under this plan, compensation expense recognized in the three and twelve months ended Dec. 31, 2002 was $1.0 million and $5.3 million, respectively (2001 - $1.2 million and $6.6 million, respectively). Compensation expense is included in operations, maintenance and administration (OM&A) in the statements of earnings. Effective Jan. 1, 2003, TransAlta TransAlta Corporation TSX: TA NYSE: TAC (formerly:Calgary Power) is a Canadian energy company based in Calgary, Alberta. It operates 51 power plants in Canada, the United States, Mexico, and Australia. has elected to account for stock-based compensation in accordance with the fair value method, and will expense stock-based compensation in respect of stock options on a prospective basis. The CICA amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. its standard on foreign currency translation effective Jan. 1, 2002. The changes require that translation gains and losses arising on long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. foreign currency denominated monetary items be included in income in the current period. Previously, these gains and losses were to be amortized over the life of the related item. As TransAlta designates long-term foreign currency denominated items as hedges of net investments in foreign operations, all gains and losses arising on the translation of these items are deferred and included in the cumulative translation adjustment account in shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. , therefore this amendment has no impact on TransAlta. The CICA has amended its standard on the recognition, measurement, and disclosure of the impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of long-lived long-lived adj. 1. Having a long life: a long-lived aunt. 2. Lasting a long time; persistent: a long-lived rumor. 3. assets. This standard is effective April 1, 2003 and requires that an impairment loss be recognized when the carrying amount of a long-lived asset exceeds the sum of the undiscounted cash flows expected from its use and eventual disposition. The impairment loss is measured as the amount that the long-lived asset's carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. exceeds its fair value. TransAlta early adopted this standard in the fourth quarter of 2002. In accordance with the standard, the impairment calculation for the Wabamun plant resulted in the recognition of an impairment loss of $110.0 million, which is included in asset impairment and equipment cancellation charges in the statements of earnings. In the third quarter of 2002, in response to changes in accounting standards in the U.S. with respect to energy trading activities, the corporation has adopted a policy that all gains and losses on energy trading contracts be shown in the statement of earnings. Consistent with these recommendations, the corporation has chosen to disclose the gross transaction volumes of those energy trading contracts that are physically settled. TransAlta's results are seasonal in nature due to the nature of the electricity market and related fuel costs. 2. ACQUISITIONS On Dec. 6, 2002, the corporation completed a step acquisition of Vision Quest vision quest supernatural experience in which an individual interacts with a guardian spirit to obtain advice or protection. Of particular importance to indigenous North and South American peoples, these rituals varied from tribe to tribe. Windelectric Inc. (Vision Quest). The initial steps resulted in 41 per cent ownership of Vision Quest for $13.5 million, accounted for using the equity method. Book values approximated fair values. The final step brought TransAlta's ownership to 100 per cent and TransAlta's total investment in Vision Quest to $68.8 million. The results of Vision Quest's operations have been included in the corporate segment of the consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge since the date of acquisition. Vision Quest owns and operates 67 wind power turbine turbine, rotary engine that uses a continuous stream of fluid (gas or liquid) to turn a shaft that can drive machinery. A water, or hydraulic, turbine is used to drive electric generators in hydroelectric power stations. power plants with a total capacity of 44 MW and a further 37.5 MW under construction. The aggregate purchase price includes the previous investments of $13.5 million, plus $21.3 million of cash and 745,791 common shares valued at $14.2 million. In addition, a loan of $19.8 million was previously advanced to Vision Quest. The value of the common shares issued was determined based on the average market price of TransAlta's common shares for the five days before and after the terms of the acquisition were agreed to and announced. 136,287 of the shares will be issued over the next three years. The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition. Due to the timing of the purchase, it was impractical im·prac·ti·cal adj. 1. Unwise to implement or maintain in practice: Refloating the sunken ship proved impractical because of the great expense. 2. to complete the allocations process satisfactory without causing undue delay in issuing the financial statements for the period in which the combination occurred. Therefore, the purchase price allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as was prepared based on the best allocations that could be made in the time available and, if necessary, the allocations in the purchase equation may be adjusted when the process is completed in the first quarter of 2003. Net assets acquired at assigned values: Working capital, including cash of $8.2 million $ 6.5 Property, plant and equipment 70.1 Goodwill 27.2 Power Purchase Arrangement 2.5 Short-term debt (32.2) Future income tax liability (4.7) Interest rate swaps (0.6) -------------------------------------------------------------------- Total $ 68.8 -------------------------------------------------------------------- -------------------------------------------------------------------- Consideration: Initial investment $ 13.5 Cash, including previous advances of $19.8 million 41.1 Common shares 14.2 -------------------------------------------------------------------- Total $ 68.8 -------------------------------------------------------------------- -------------------------------------------------------------------- On Dec. 6, 2002, the corporation purchased the remaining 15 per cent interest in the Southern Cross Energy Partnership, located in western Australia Western Australia, state (1991 pop. 1,409,965), 975,920 sq mi (2,527,633 sq km), Australia, comprising the entire western part of the continent. It is bounded on the N, W, and S by the Indian Ocean. Perth is the capital. , for AUD AUD In currencies, this is the abbreviation for the Australian Dollar. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. $8.5 million (Cdn$7.2 million). At the time of acquisition, book values approximated fair values. 3. DISCONTINUED OPERATIONS Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. On July 4, 2001, the corporation signed a purchase and sale agreement for the disposal of its Transmission operation. Regulatory approval was received on March 28, 2002. On April 29, 2002, the Transmission operation was sold for proceeds of $820.7 million, of which $818.0 million has been collected. The proceeds excluded accounts receivable accounts receivable n. the amounts of money due or owed to a business or professional by customers or clients. Generally, accounts receivable refers to the total amount due and is considered in calculating the value of a business or the business' problems in paying of $31.7 million, which were retained and collected by TransAlta, and accounts payable of $4.4 million. The disposal resulted in a final gain on sale of $120.0 million ($0.71 per common share), net of income taxes of $32.9 million. The previously reported gain included a number of estimates, therefore the gain was adjusted in the fourth quarter of 2002 to reflect agreed working capital adjustments and actual amounts paid and received. For reporting purposes, the results of the Transmission operation have been presented as discontinued operations in the statement of earnings.
2002 2001
3 months ended Dec. 31 Transmission Transmission
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Revenues $ - $ 42.8
Operating expenses - (19.1)
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Operating income - 23.7
Net interest expense - (0.6)
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Earnings before income taxes - 23.1
Income taxes - 9.8
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Earnings before gain on disposal - 13.3
Gain on disposal 10.0 -
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Earnings from discontinued operations $ 10.0 $ 13.3
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2002 2001
Edmonton
Year ended Dec. 31 Transmission Transmission Composter Total
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Revenues $ 55.8 $ 171.1 $ 6.6 $ 177.7
Operating expenses (30.8) (84.6) (5.4) (90.0)
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Operating income 25.0 86.5 1.2 87.7
Net interest expense (2.4) (9.7) - (9.7)
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Earnings before income
taxes 22.6 76.8 1.2 78.0
Income taxes 9.8 32.4 0.5 32.9
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Earnings before gain on
disposal 12.8 44.4 0.7 45.1
Gain on disposal 120.0 - - -
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Earnings from discontinued
operations $ 132.8 $ 44.4 $ 0.7 $ 45.1
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At Dec. 31, 2002, all of the corporation's discontinued operations had been sold. At Dec. 31, 2001, all of the corporation's discontinued operations had been sold with the exception of the Transmission operation. Balance sheet amounts are as follows:
Dec. 31, 2002 Dec. 31, 2001
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Current assets $ - $ 36.1
Capital assets - 637.5
Other assets - 3.3
Current liabilities - (15.5)
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Net assets $ - $ 661.4
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4. PRICE RISK MANAGEMENT ASSETS AND LIABILITIES The Energy Marketing group uses energy derivatives Also known as energy trade, oil trade, gas trade, power trade. Major players include: Mitsui & Co. Energy Risk Management, major trading houses, oil companies, utilities, financial institutions. , including physical and financial swaps, forwards and options to optimize optimize - optimisation returns from assets, earn trading revenues and gain market information. Energy contracts that meet the definition of a derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. in FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting 133, Accounting for Derivative Instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. and Hedging Activities, are accounted for at fair value in accordance with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. and U.S. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). Derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. are used to hedge the corporation's exposure to changes in electricity and natural gas prices. Under Canadian GAAP, settlement accounting is used for hedging activities if certain criteria are met. Under U.S. GAAP, hedging activities are accounted for in accordance with FASB Statement 133. Energy Marketing's price risk management assets and liabilities represent the fair value of unsettled (unrealized) trading transactions. With the exception of transmission contracts, the fair value of all energy trading activities is based on quoted market prices. The fair value of physical transmission contracts is based on quoted market prices and a spread option valuation model. The fair value of financial transmission contracts is based upon statistical analysis of historical data.
Dec. 31, 2002 Dec. 31, 2001
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Price risk management assets
- Current $ 157.8 $ 137.6
- Long-term 60.7 71.3
Price risk management liabilities
- Current (173.8) (114.1)
- Long-term (50.6) (69.0)
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$ (5.9) $ 25.8
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The following table illustrates movements in the fair value of the corporation's price risk assets and liabilities during the year ended Dec. 31, 2002: -------------------------------------------------------------------- Fair value of net price risk management assets outstanding at Dec. 31, 2001 $ 25.8 Fair value of new contracts entered into during the period (2.7) Changes in fair values attributable to market price and other market changes 7.6 Contracts realized or settled during the period (36.6) Changes in fair values attributable to changes in valuation techniques and assumptions - -------------------------------------------------------------------- Fair value of net price risk management liabilities outstanding at Dec. 31, 2002 $ (5.9) -------------------------------------------------------------------- -------------------------------------------------------------------- The source of the valuations of the above contracts and maturities over each of the next five calendar years and thereafter is as follows:
2008
and
2003 2004 2005 2006 2007 there- Total
after
Prices actively quoted $(17.6) $ 3.3 $ 3.2 $ 2.1 $ 1.5 $ - $(7.5)
Prices based on models 1.6 - - - - - 1.6
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Asset (liability) $(16.0) $ 3.3 $ 3.2 $ 2.1 $ 1.5 $ - $(5.9)
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5. INVESTMENTS In January 2002, an additional $2.9 million was invested in Vision Quest. In December 2002, the corporation purchased the remaining interest in Vision Quest as described in Note 2. In April 2002, an additional $2.5 million was invested in a distributed generation Distributed generation generates electricity from many small energy sources. It has also been called also called on-site generation, dispersed generation, embedded generation, decentralized generation, decentralized energy or company. This investment is accounted for using the equity method. In April 2002, an initial $0.2 million was invested in a biomass generation company. An additional $0.5 million was invested in September 2002. The investment is accounted for using the cost method. A foreign exchange revaluation Revaluation A calculated adjustment to a country's official exchange rate relative to a chosen baseline. The baseline can be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country's government (i.e. of $1.9 million occurred during the twelve months ended Dec. 31, 2002 on the investment in the Australian Australian pertaining to or originating in Australia. Australian bat lyssavirus disease see Australian bat lyssavirus disease. Australian cattle dog a medium-sized, compact working dog used for control of cattle. gas transmission pipeline. 6. ASSET IMPAIRMENT AND EQUIPMENT CANCELLATION CHARGES After a detailed engineering assessment, a review of environmental issues, and a review of short- and long-term market forecasts, the corporation decided to implement a phased decommissioning Decommissioning is a general term for a formal process to remove something from operational status. Some specific instances include:
In November 2002, the corporation cancelled orders for four natural gas turbines and as a result recorded a cancellation charge of $42.5 million for contract termination Defense procurement: the cessation or cancellation, in whole or in part, of work under a prime contract or a subcontract thereunder for the convenience of, or at the option of, the government, or due to failure of the contractor to perform in accordance with the terms of the contract (default). costs. The costs consist of progress payments made to date. In September 2001, the corporation monetized its investment in the 154 MW Pierce Pierce may refer to: Places
7. LONG-TERM RECEIVABLES Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed In August 2002, the remaining $180.3 million due from Aquila Networks Canada (formerly UtiliCorp Networks Canada) that arose from the August 2000 sale of the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: Alberta Distribution and Retail operation was collected in full. The net California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). accounts receivable of US$24.2 million has been reclassified to long-term receivables, as collection is no longer expected in 2003, although ultimate collection of the net receivable is expected. On Dec. 12, 2002, a U.S. Federal Energy Regulatory Commission The Federal Energy Regulatory Commission (FERC) is the United States federal agency with jurisdiction over electricity sales, wholesale electric rates, hydroelectric licensing, natural gas pricing, and oil pipeline rates. (FERC FERC Federal Energy Regulatory Commission FERC FEMA Emergency Response Capability ) Administrative Law Judge administrative law judge n. a professional hearing officer who works for the government to preside over hearings and appeals involving governmental agencies. They are generally experienced in the particular subject matter of the agency involved or of several agencies. issued proposed findings of fact findings of fact n. (See: finding) that TransAlta be entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: to receive approximately US$44.0 million for electricity sales to California. However, FERC has proposed further adjustments in respect of power and gas prices, which could result in further adjustments to the amount to be received by TransAlta. Until a final ruling is made with respect to these issues, TransAlta will maintain the provision for these receivables. 8. LONG-TERM DEBT Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. On June 20, 2002, the corporation issued debt of US$300.0 million under a US$1.0 billion shelf prospectus filed May 14, 2002. The notes are unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. and bear interest at 6.75 per cent, and mature on July 15, 2012. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). on the issuance were $456.9 million. 9. COMMON SHARES ISSUED AND OUTSTANDING TransAlta Corporation is authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: to issue an unlimited number of voting common shares without nominal or par value. At Dec. 31, 2002, the corporation had 169.8 million (Dec. 31, 2001 - 168.3 million) common shares issued and outstanding plus outstanding employee stock options to purchase an additional 3.2 million shares (Dec. 31, 2001 - 2.8 million). In February 2002, TransAlta announced a normal course issuer bid to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. up to 3.0 million common shares for cancellation. For the year ended Dec. 31, 2002, 2.0 million common shares had been repurchased under the normal course issuer bid. On Dec. 6, 2002, the corporation issued 609,504 common shares as a portion of the aggregate purchase price of Vision Quest (Note 2). 10. PRIOR PERIOD REGULATORY DECISIONS Financial results for 2002 were affected by Alberta Energy and Utilities Board (EUB EUB Energy and Utilities Board (Alberta, Canada) EUB EU–Büro (Bundesministerium für Bildung und Forschung; German ministry of Science) EUB Electric Upright Bass EUB European Union Bank EUB Essential User Bypass ) decisions related to other reporting periods. The impact of such regulatory decisions is recorded when the effect of such decisions is known, without adjustment to the financial statements of prior periods. On April 16, 2002, the EUB rendered a negative decision of $3.3 million (pre-tax) with respect to TransAlta's hydro hy·dro adj. Hydroelectric. n. pl. hy·dros 1. Hydroelectric power. 2. A hydroelectric power plant. bidding strategy in 2000. In December 2001, the EUB ruled that the Wabamun unit four outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. qualified for relief under the Temporary Suspension Regulation (TSR (Terminate and Stay Resident) Refers to a program that remains in memory when the user exits it in order that it be immediately available at the press of a hotkey. ) and ordered that TransAlta would receive $11.0 million ($7.0 million after-tax) to compensate the corporation for obligation payments incurred in 2000 as a result of the outage. 11. CONTINGENCIES Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. In August 2000, a single thermal generating unit at the Wabamun plant was shut down due to safety concerns related to possible corrosion fatigue Corrosion fatigue is fatigue in a corrosive environment. It is the mechanical degradation of a material under the joint action of corrosion and cyclic loading. Nearly all engineering structures experience some form of alternating stress and are exposed to harmful environments cracks within the waterwall tubing of its boiler boiler, device for generating steam. It consists of two principal parts: the furnace, which provides heat, usually by burning a fuel, and the boiler proper, a device in which the heat changes water into steam. . Repairs were completed late in the second quarter of 2001 and the unit returned to service in June 2001. Since Jan. 1, 2001, the unit has been subject to the terms of a power purchase arrangement (PPA PPA 1. Palpation, Percussion & Ausculation 2. Pittsburgh pneumonia agent 3. Postpartum amenorrhea 4. Price per accession 5. Pure pulmonary atresia ). Under the PPA's force majeure [French, A superior or irresistible power.] An event that is a result of the elements of nature, as opposed to one caused by human behavior. The term force majeure article, the corporation is not obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to supply electricity during the period of repair, subject to confirmation by the administrator of the PPAs. Had such confirmation not occurred, the corporation would have been obligated to pay a penalty equal to the cost of obtaining an alternative source of electricity to fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. its PPA supply obligations during the affected period. The force majeure decision went to arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the in July 2001. On May 23, 2002, the arbitrators confirmed in their ruling that the outage qualified as a force majeure event, but also ruled that the corporation should have returned the unit to service more quickly. As a result of the decision, the corporation was required to pay $38.9 million plus interest of $2.7 million, all pre-tax. The payment was recorded as an offset to revenues. On May 8, 2002, FERC requested that 150 sellers of wholesale electricity and ancillary Subordinate; aiding. A legal proceeding that is not the primary dispute but which aids the judgment rendered in or the outcome of the main action. A descriptive term that denotes a legal claim, the existence of which is dependent upon or reasonably linked to a main claim. services to the California electricity market, including TransAlta, respond to questions regarding their trading strategies In finance, a trading strategy (see also trading system) is a predefined set of rules to apply. Usually, this refers to a means used to replicate an option in order to give it an arbitrage free value in the sense that the cost of buying some financial assets to give the same in California during 2000 and 2001. TransAlta has responded to the FERC request and believes it operated in accordance with all applicable laws, rules, regulations and tariffs This is a list of tariffs and trade legislation:
On May 21 and 22, 2002, FERC issued two additional requests for information regarding 'round-trip' trading activities, to which TransAlta responded, stating that the corporation does not believe it participated in any round-trip trades Round-trip trade The purchase and sale of a security within a short period of time. during 2000 and 2001. In addition, Reliant Energy Reliant Energy, Inc., based in Houston, Texas, is a non-utility, retail and wholesale electricity provider. In Texas, it provides service to nearly 1.9 million retail electricity customers, including residential and small business customers and commercial, industrial, Inc. issued a statement that it engaged in round-trip trades in 1999 with Merchant Energy Group of the Americas, Inc. (MEGA (1) Million (10 to the 6th power). Abbreviated "M". In communications, mega typically refers to 1,000,000. In storage, mega typically refers to 1,048,576. See MB, binary values and space/time. (2) A prefix attached to words that means a very large size or quantity. ). TransAlta acquired an initial 50 per cent interest in MEGA in June 2000, and acquired the remaining 50 per cent in June 2001. TransAlta contends that no round-trip trading Round-Trip Trading An action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of a particular security, commodity or asset. occurred between Reliant Energy Inc. and MEGA during any period in which TransAlta had an ownership interest in MEGA. TransAlta will continue to cooperate with the regulators and supply all information requested. On May 30, 2002, the California Attorney General's Office (CAGO CAGO Colleague of the American Guild of Organists CAGO Contractor Acquired Government Owned CAGO Cargo Apparent Good Order ) filed civil complaints in the state court of California against eight additional wholesale power companies, including TransAlta. The complaint alleges violations of California's unfair business practices law in connection with rates charged for wholesale electricity sales. TransAlta believes that it has complied with applicable laws in regard to this complaint. In particular, the company is of the view that the basis of the complaint is a matter of federal rather than state jurisdiction. FERC has previously rejected allegations made by CAGO that TransAlta's subsidiaries violated vi·o·late tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. rate filing requirements. On June 26, 2002, TransAlta filed a Notice of Motion to dismiss the complaint. On Sept. 9, 2002, the Commodities Futures Trading Commission requested information on similar issues. TransAlta has provided the requested information. On Dec. 16 and 20, 2002, two class action lawsuits class action lawsuit A lawsuit in which one party or a limited number of parties sue on behalf of a larger group to which the parties belong. For example, investors may bring a class action lawsuit against a brokerage firm that has actively promoted a tax on behalf of all persons and businesses in the states of Oregon Oregon, city, United States Oregon, city (1990 pop. 18,334), Lucas co., NW Ohio, a suburb adjacent to Toledo, on Lake Erie; inc. 1958. It is a port with railroad-owned and -operated docks. The city has industries producing oil, chemicals, and metal products. and Washington were initiated in respect of alleged unlawful practices in the purchase and sale of wholesale energy. TransAlta believes these are without merit and will vigorously defend its actions. No amount has been accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. in these financial statements as neither the amount of the claim nor the outcome was determinable Liable to come to an end upon the happening of a certain contingency. Susceptible of being determined, found out, definitely decided upon, or settled. determinable adj. at the reporting date. On Dec. 16, 2002, the Canadian government ratified rat·i·fy tr.v. rat·i·fied, rat·i·fy·ing, rat·i·fies To approve and give formal sanction to; confirm. See Synonyms at approve. the Kyoto Protocol Kyoto Protocol: see global warming. . The Kyoto Protocol will have no impact on TransAlta's U.S., Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum or Australian operations as these countries have not ratified the Protocol. TransAlta is not able to estimate the full impact the Protocol will have on its Canadian operations, as the Canadian government has not yet established an implementation plan. However, the PPAs for TransAlta's coal-fired plants in Alberta contain 'Change in Law' provisions that provide an opportunity to recover compliance costs from the PPA customers. As a member of the Canadian Clean Power Coalition, TransAlta, along with its peers, is exploring other means to reduce greenhouse gas greenhouse gas n. Any of the atmospheric gases that contribute to the greenhouse effect. greenhouse gas emissions, including the purchase of offset credits. The acquisition of Vision Quest and its prospects for further development has resulted in additional amounts of zero-emissions facilities consistent with the strategy of the corporation. Since 1990, the corporation has reduced net emissions in Canada by 18 per cent and is on track to reach zero net emissions by 2024. 12. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the current period's presentation. 13. SEGMENTED DISCLOSURES Effective Jan. 1, 2002, the Generation and Independent Power Projects business segments were combined into one Generation segment to reflect changes in TransAlta's organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. . Prior period amounts have been reclassified.
I. Earnings information
Unaudited
3 months ended Energy
Dec. 31, 2002 Generation Marketing Corporate Total
--------------------------------------------------------------------
Revenues $ 498.7 $ 992.4 $ 1.0 $ 1,492.1
Trading purchases - (974.5) - (974.5)
--------------------------------------------------------------------
Net segment revenues 498.7 17.9 1.0 517.6
Fuel and purchased power (226.9) - - (226.9)
--------------------------------------------------------------------
Gross margin 271.8 17.9 1.0 290.7
Operations, maintenance and
administration 115.3 3.6 16.2 135.1
Depreciation and
amortization 57.4 0.5 4.6 62.5
Asset impairment and
equipment cancellation
charges (Note 6) 152.5 - - 152.5
Taxes, other than income
taxes 7.6 - - 7.6
--------------------------------------------------------------------
EBIT before corporate
allocations (61.0) 13.8 (19.8) (67.0)
Corporate allocations (18.1) (2.3) 20.4 -
--------------------------------------------------------------------
EBIT $ (79.1) $ 11.5 $ 0.6 (67.0)
----------------------------------------------------------
Other income 1.0
Foreign exchange gain 0.9
Net interest expense (24.0)
--------------------------------------------------------------------
Earnings from continuing
operations before income
taxes and non-controlling
interests $ (89.1)
--------------------------------------------------------------------
--------------------------------------------------------------------
Unaudited
3 months ended Energy
Dec. 31, 2001 Generation Marketing Corporate Total
--------------------------------------------------------------------
Revenues $ 431.8 $ 526.9 $ - $ 958.7
Trading purchases - (524.3) - (524.3)
--------------------------------------------------------------------
Net segment revenues 431.8 2.6 - 434.4
Fuel and purchased power (246.4) - - (246.4)
--------------------------------------------------------------------
Gross margin 185.4 2.6 - 188.0
Operations, maintenance and
administration 68.7 1.6 19.1 89.4
Depreciation and
amortization 41.4 4.0 6.4 51.8
Asset impairment and
equipment cancellation
charges (Note 6) 2.7 - - 2.7
Taxes, other than income
taxes 4.6 - - 4.6
Prior period regulatory
decisions (Note 10) (11.0) - - (11.0)
--------------------------------------------------------------------
EBIT before corporate
allocations 79.0 (3.0) (25.5) 50.5
Corporate allocations (23.6) (1.9) 25.5 -
--------------------------------------------------------------------
EBIT $ 55.4 $ (4.9) $ - 50.5
----------------------------------------------------------
Other income 1.2
Foreign exchange gain 2.9
Net interest expense (12.4)
--------------------------------------------------------------------
Earnings from continuing
operations before income
taxes and non-controlling
interests $ 42.2
--------------------------------------------------------------------
Unaudited
--------------------------------------------------------------------
Energy
Year ended Dec. 31, 2002 Generation Marketing Corporate Total
--------------------------------------------------------------------
Revenues $ 1,673.9 $ 3,703.8 $ 1.0 $ 5,378.7
Trading purchases - (3,654.8) - (3,654.8)
--------------------------------------------------------------------
Net segment revenues 1,673.9 49.0 1.0 1,723.9
Fuel and purchased power (703.6) - - (703.6)
--------------------------------------------------------------------
Gross margin 970.3 49.0 1.0 1,020.3
Operations, maintenance
and administration 346.3 15.1 59.1 420.5
Depreciation and
amortization 196.3 2.5 20.2 219.0
Asset impairment and
equipment cancellation
charges (Note 6) 152.5 - - 152.5
Taxes, other than income
taxes 27.3 0.1 - 27.4
Prior period regulatory
decisions (Note 10) 3.3 - - 3.3
--------------------------------------------------------------------
EBIT before corporate
allocations 244.6 31.3 (78.3) 197.6
Corporate allocations (70.6) (8.3) 78.9 -
--------------------------------------------------------------------
EBIT $ 174.0 $ 23.0 $ 0.6 197.6
---------------------------------------------------------
Other income 0.1
Foreign exchange gain 1.2
Net interest expense (82.7)
--------------------------------------------------------------------
Earnings from continuing
operations before income
taxes and non-controlling
interests $ 116.2
--------------------------------------------------------------------
--------------------------------------------------------------------
Audited
--------------------------------------------------------------------
Energy
Year ended Dec. 31, 2001 Generation Marketing Corporate Total
--------------------------------------------------------------------
Revenues $ 2,158.4 $ 2,694.7 $ - $ 4,853.1
Trading purchases - (2,533.7) - (2,533.7)
--------------------------------------------------------------------
Net segment revenues 2,158.4 161.0 - 2,319.4
Fuel and purchased power (1,230.6) - - (1,230.6)
--------------------------------------------------------------------
Gross margin 927.8 161.0 - 1,088.8
Operations, maintenance
and administration 290.6 36.2 65.4 392.2
Depreciation and amortization 156.5 11.0 23.7 191.2
Asset impairment and
equipment cancellation
charges (Note 6) 118.8 - - 118.8
Taxes, other than income
taxes 18.7 - - 18.7
Prior period regulatory
decisions (Note 10) (11.0) - - (11.0)
--------------------------------------------------------------------
EBIT before corporate
allocations 354.2 113.8 (89.1) 378.9
Corporate allocations (82.5) (6.6) 89.1 -
--------------------------------------------------------------------
EBIT $ 271.7 $ 107.2 $ - 378.9
--------------------------------------------------------
Other income 1.5
Foreign exchange gain 0.8
Net interest expense (88.1)
--------------------------------------------------------------------
Earnings from continuing
operations before income
taxes and non-controlling
interests $ 293.1
--------------------------------------------------------------------
--------------------------------------------------------------------
II. Selected balance sheet information
Dec. 31, 2002 Energy Discontinued
(unaudited) Generation Marketing Corporate Operations Total
--------------------------------------------------------------------
Goodwill $ - $ 29.3 $ 27.2 $ - $ 56.5
Other assets 6,353.4 315.3 694.4 - 7,363.1
--------------------------------------------------------------------
Total segment
assets $ 6,353.4 $ 344.6 $ 721.6 $ - $7,419.6
--------------------------------------------------------------------
--------------------------------------------------------------------
Dec. 31, 2001
(audited)
--------------------------------------------------------------------
Goodwill $ - $ 29.3 $ - $ - $ 29.3
Other assets 5,873.2 384.0 643.0 676.9 7,577.1
--------------------------------------------------------------------
Total segment
assets $ 5,873.2 $ 413.3 $ 643.0 $ 676.9 $7,606.4
--------------------------------------------------------------------
--------------------------------------------------------------------
III. Selected cash flow information
3 months ended Energy Discontinued
Dec. 31, 2002 Generation Marketing Corporate Operations Total
--------------------------------------------------------------------
Capital
expenditures $ 190.8 $ 2.1 $ 1.7 $ - $ 194.6
3 months ended
Dec. 31, 2001
--------------------------------------------------------------------
Capital
expenditures $ 415.5 $ 2.0 $ (6.3)$ 7.8 $ 419.0
Year ended
Dec. 31, 2002
--------------------------------------------------------------------
Capital
expenditures $ 909.1 $ 4.2 $ 10.7 $ 21.8 $ 945.8
Year ended
Dec. 31, 2001
--------------------------------------------------------------------
Capital
expenditures $ 1,147.6 $ 43.8 $ 15.1 $ 40.0 $1,246.5
IV. Reconciliation
Depreciation and amortization (D&A) expense per statement of cash
flows
3 months ended 12 months ended
Dec. 31 Dec. 31
2002 2001 2002 2001
--------------------------------------------------------------------
D&A expense for reportable
segments $ 62.5 $ 51.8 $ 219.0 $ 191.2
Discontinued operations - 12.9 15.6 46.5
Mining equipment depreciation,
included in fuel and purchased
power 9.3 7.0 37.1 31.8
Site restoration accrual,
included in fuel and purchased
power 7.7 9.1 38.9 37.3
Other 0.2 1.8 4.2 5.5
--------------------------------------------------------------------
$ 79.7 $ 82.6 $ 314.8 $ 312.3
--------------------------------------------------------------------
--------------------------------------------------------------------
14. UNITED STATES United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES These interim consolidated financial statements have been prepared in accordance with Canadian GAAP and follow the same accounting policies and methods of computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. as, and should be reading conjunction with, the most recent annual financial statements. In connection with the corporation's May 12, 2002 shelf debt prospectus, TransAlta is required to reconcile these interim consolidated financial statements to U.S. GAAP. This reconciliation will be included with the corporation's annual report, and it shall be deemed to be incorporated by reference into these interim consolidated financial statements. 15. SUBSEQUENT EVENTS On Jan. 13, 2003, TransAlta and EPCOR See Equal percentage contribution rule. Utilities Inc. (EPCOR) announced an agreement whereby TransAlta will acquire a 50 per cent interest in EPCOR's Genesee Phase 3 project for $395.0 million. On the same date, TransAlta made a $157.0 million payment to EPCOR for TransAlta's share of project costs incurred to date. A 450 MW addition to the existing Genesee Generating station is currently under construction and expected to commence commercial operations in early 2005. Included in the arrangement is an option for EPCOR to puchase a 50 per cent interest in TransAlta's Centennial one project, formerly referred to as Keephills three. The option expires Dec. 31, 2005. EPCOR also has the option to purchase a 50 per cent interest in TransAlta's Sarnia plant, which may be exercised between January 2003 and March 2004. On Jan. 24, 2003 the corporation announced the acquisition of 50% of the membership interests in CE Generation LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control (CE Gen) for US$205.0 million (approximately Cdn$312 million) plus approximately US$35.0 million (approximately Cdn$53 million) and the assumption of debt of approximately US$500.0 million (approximately Cdn$762 million). The acquisition will be accounted for using the purchase method of accounting. CE Gen is controlled jointly by TransAlta and MidAmerican Energy Holdings Company MidAmerican Energy Holdings Company is a holding company controlled by Berkshire Hathaway. MidAmerican holds the following companies:
adj. Being in due proportion; proportional. tr.v. pro·por·tion·at·ed, pro·por·tion·at·ing, pro·por·tion·ates To make proportionate. consolidated with those of TransAlta. The transaction closed on Jan. 29, 2003.
SUPPLEMENTAL INFORMATION
Annualized Dec 31,2002 Dec. 31, 2001
--------------------------------------------------------------------
Closing market price $ 17.11 $ 21.60
Price range (last 12 months)
High $ 23.95 $ 30.13
Low $ 16.69 $ 19.15
Debt/invested capital 50.8% 52.3%
Return on common shareholders' equity 3.5% 10.9%
Return on invested capital 4.0% 8.7%
Book value per share $ 12.05 $ 11.82
Cash dividends per share $ 1.00 $ 1.00
Price/earnings ratio (times) 41.7 17.0
Dividend payout ratio 241.8% 78.5%
Interest coverage (times) 1.4 3.2
Interest coverage including preferred
securities (times) 1.1 2.8
Dividend coverage (times) 2.4 4.1
GLOSSARY A term used by Microsoft Word and adopted by other word processors for the list of shorthand, keyboard macros created by a particular user. See glossaries in this publication and The Computer Glossary. OF KEY TERMS Availability - A measure of time, expressed as a percentage of continuous operation 24 hours a day, 365 days a year, that a generating unit is capable of generating electricity, whether or not it is actually generating electricity. Btu - A standard unit for measuring the quantity of heat energy required to heat one pound of water one degree Fahrenheit Fahr·en·heit adj. Abbr. F Of or relating to a temperature scale that registers the freezing point of water as 32°F and the boiling point as 212°F at one atmosphere of pressure. . Capacity - The rated continuous load-carrying ability, expressed in megawatts of generation equipment. Gigawatt gig·a·watt n. Abbr. GW One billion (109) watts. - A measure of electric energy equal to 1,000 megawatts. Gigawatt hour (GWh) - A measure of electricity consumption equivalent to the use of 1,000 megawatts of power over a period of one hour. Heat rate - A measure of conversion, expressed as Btu/MW, of the amount of thermal energy thermal energy Internal energy of a system in thermodynamic equilibrium (see thermodynamics) by virtue of its temperature. A hot body has more thermal energy than a similar cold body, but a large tub of cold water may have more thermal energy than a cup of boiling required to generate electrical energy. Megawatt meg·a·watt n. Abbr. MW One million watts. meg  a·watt - A measure of electric energy equal to 1,000,000 watts.Megawatt hour (MWh) - A measure of electricity consumption equivalent to the use of 1,000,000 watts of power over a period of one hour. Spark spread Spark Spread The difference between the market price of electricity and its cost of production. Notes: This measure is important because it helps utility companies determine their bottom line (profit). - A measure of gross margin per MW, sales price less cost of fuel. |
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