Ladies and gentlemen, thank you for standing by and welcome to the TransAlta Corporation Fourth Quarter and Full Year 2020. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chiara Valentini, Managing Director, Investor Relations. Please go ahead.

Thank you, Michele. Good morning, everyone, and welcome to TransAlta’s fourth quarter and year end 2020 conference call. With me today are Dawn Farrell, President and Chief Executive Officer; Todd Stack, Executive Vice President of Finance and Chief Financial Officer; John Kousinioris, Chief Operating Officer; and Kerry O'Reilly Wilks, Executive Vice President, Legal, Commercial and External Affairs. Today’s call is webcast, and I invite those listening on the phones to view the supporting slides that are posted on our website. A replay of the call will be available later today and the transcript will be posted to our website shortly thereafter. All the information provided during this conference call is subject to the forward-looking statement qualifications set out here on Slide 2 further details as well in our MD&A and incorporated in full for the purposes of today’s call. All amounts referenced during the call are in Canadian currency unless otherwise stated. The non-IFRS terminology used including comparable EBITDA, funds from operations, and free cash flow are also reconciled in the MD&A for your reference. On today’s call, Dawn and Todd will provide an overview of the quarter’s results along with expectations for 2021 after these prepared remarks, we will open the call for questions. With that, let me turn the call over to Dawn.

Thanks, Chiara and good morning everyone and thanks for joining our call today. This will be my last official conference call with all of you. So let me use my time to brag about the great successes of the team in 2020. And then I'll turn the reins over to Todd and John who - are more than ready to take the company ahead starting in April. So, let me start by saying that 2020 was quite a remarkable year for TransAlta whether it was how we handled the COVID-19 pandemic or how we positioned the company for 2021 and beyond. The team was absolutely focused on execution. Finished 2020 with strong financial and operational performance and we significantly advanced the strategies of TransAlta. The year was marked by the resilience of our people, the performance of our diversified portfolio of investments and progressed on our E-squared SG goals which are economic, environment, social and governance. Growing our investments in TransAlta renewables and continuing with our investments in the transition to natural gas here in Alberta have strengthened our overall E-squared SG framework. Our strategic renewables investments, our ownership of our hydro assets here in the Alberta market and our positioning in competitive gas fired generation have set us up well for any of the portfolios of ESG and E-squared SG shareholders. We set out in 2020 to continue to execute on our clean energy investment plan. And that's what we did. So first, we promised to advance our strategy of converting to gas here in the Alberta thermal fleet and there were several accomplishments. We achieved a major milestone when Sundance Unit 6 conversion to gas was completed and was fully commissioned to the grid in early 2021. We cut our CO2 emissions in half at that unit and…

Thanks, Dawn, and good morning, everyone. This morning I wanted to cover three key areas. First, I want to close off on our 2020 financial performance. Second, I'm going to discuss our 2021 outlook and some of the key factors driving year-over-year EBITDA growth. And third, I want to highlight on the strong financial foundation that we have in place for 2021. So looking at our financial performance on slide 7, overall I'm very pleased with how the portfolio performed throughout the year and 2020 again demonstrated that a broad diversity of regions, contracts and technologies can deliver stable and predictable cash flow. In the year we generated CAD 927 million of EBITDA and free cash flow of CAD 358 million both EBITDA and free cash flow performance were in line with 2019 results and within our original guidance range. I'll just touch on a few of the key drivers of 2020 performance in the year our wind and solar segment benefited from higher production from strong wind resource across all regions. And we also realized the benefits of three new assets in 2020, Big Level and Antrim were brought in line in late 2019 and are delivering cash flows as expected - late in 2020 we also added the Skookumchuck Wind Project which will provide a full year contribution to EBITDA in 2021. Although power prices in the Pacific Northwest were weak throughout 2020 a strong operational performance combined with our hedging practices resulted in our Centralia segment significantly exceeding 2019 financial performance. The energy marketing segment once again exceeded our expectations for a second year in a row generating CAD 114 million of cash flow. The investments we've made in this business over the past 20 years has positioned us well to capture opportunities and volatility across all…

Thanks Todd and good morning everyone. I'm very excited for the opportunity to lead TransAlta into the next phase of our growth and clean electricity transition. I'd like to thank Dawn for her focused leadership and stewardship over the last decade and her vision to put us on the path of renewables and lower intensity thermal generation while strengthening the financial capacity of our company. She has spent 30 years shaping and directing TransAlta’s path and we were extremely fortunate to have had her as a leader, mentor, colleague and friend and I wish her all the best as she soon embarks on the next chapter of her journey. Our strategic priorities for 2021 will build further on the path which we began to layout in 2019. We will successfully complete our conversion to gas strategy in 2021 with three boiler conversions to round out the two conversions completed last year. We also plan to advance our Sundance 5 repowering during the year which we currently expect to be fully operational by late 2023. We will continue to actively participate in policy development with a focus on economic environment and social and governance issues and with a particular emphasis on ensuring that the needs of our customers are met and that consumers have access to clean low-cost and reliable power - all of which remains top of mind. We are at an interesting and exciting time in the evolution of our industry and want to ensure that our voice is heard. With the expiry of the PPAs in Alberta and the evolution of our generating fleet in the province we are now highly focused on optimizing our Alberta business and have set up a separate team with objectives to ensure that this market is served both at a wholesale and…

Thank you John, Todd and Dawn. Michelle, would you please open the call up for questions from the analysts and then from media.

[Operator Instructions] Your first question comes from Rob Hope from Scotiabank. Your line is open.

And to start off I guess, congratulations and all the best in the next phases for Dawn and Brett.

Thanks.

And first question, if we can go back to Slide 9 on the hydro EBITDA generated in 2020 and the puts and takes as we look into 2021. I don't know if you're prepared to give an indicative range, but it seems like we could take that [2.11] [ph] and then adjust up 30% or adjust up based on the increased power prices that we're seeing so far in 2021? And then when we're taking a look at the carbon offsets, is there a chance that they could get certified in 2021? Will you utilize them in another area of the business or is that kind of just more of a 2022 issue? And I guess, finally were the - are there any offsets included in that [2.11] [ph] rate there?

Yes, there's a lot of questions in there Rob. So why don't I start and if I miss anything I'm sure Todd will jump in so…

Yes.

Look, we're not prepared at this time to give a lot more granularity on how the hydro will actually perform. I don't think there's just a simple rule of thumb that you can kind of allocate to what it’ll be. It depends on volatility in the marketplace in the moment and what we're seeing day-over-day, week-over-week in terms of what the performance is and the competitive response is. So it's really intended to sort of be an indicative representation of what people can expect there. With respect to the offsets, I don't think that the slide that Todd showed you had any value for offsets. I also think it's extremely unlikely that we'll see value for those offsets get pulled into 2021. I think the way the certification works we're really into a lagging year kind of cycle with respect to those offsets. And in terms of the value of the offsets, look - we continually look internally in terms of what we need for our own generation. What makes sense in terms of monetizing them in the market in the moment, and we take a longer term view in terms of where we think our own needs will be versus carbon obligations. So, it's really a mixed bag although for sure we end up using a good chunk of the offsets that we get for our own generation internally.

All right and Robert, Robert the only thing I would add is that we did include some disclosure in our financials on inventory levels for global energy credits.

Yes.

So, I can get Chiara to point to that, it’s back in the inventory note in our financial statements. And we did anticipate a rising carbon price and we were proactive in prior years to acquire and inventory a pretty significant renewable energy credit inventory portfolio.

At the time when the COVID - that was lower than it is…

Correct. And so to John's point we don't see a need to go out and source additional recs from outside of our hydro assets and outside of our wind assets.

Okay. A follow-up question, taking a look at the sustaining capital in 2021, it looks a little bit higher than in the market were expecting. But acknowledging that you do have a lot of conversions there? If we try to normalize it what does 2022 look like? Could we see, plan major maintenance significantly down versus where we are in 2021?

Yes, so I would expect that for 2022 on a normalized basis Rob, that you’d see a pretty significant reduction in sustaining capital expenditures. And I’ll just give you a sense of that. I think when you look at sort of the numbers that we’re outlining for 2021, rough range of numbers, I think of like CAD90 million to CAD100 million of that being largely on coal to gas and a lot of that is over the conversions that we're doing now. That will fall to a fraction of that on a normalized basis as we go forward. And then, there'll be various puts and takes among our gas fleet, our hydro facilities and wind. Wind is highly predictable, relatively modest capital expenditures. With hydro we have maintenance work. It comes in periods and we have some dam safety work that we have, but overall a significant reduction year-over-year.

And your next question will come from Ben Pham from BMO. Your line is open.

I wanted to follow up on the hydro assets. And two, I'm more curious as you look at the potential carbon price increase and the pricing trends in Alberta power in more the middle part of this decade, does that change any sort of macroeconomics [for you with appropriate] [ph] investments in terms of the ability the buybacks, the converts or change ownership somewhat is, if anything changed there that's notable to share?

Yes, the way that that transaction works in terms of the potential sort of conversion of Brookfield's kind of financing the company into an interest in the company has a bit of a longer term sort of range in the way that the calculation is done, Ben. So it might have an impact, if we see continued higher pricing and credits. And that would have the effect essentially of reducing the amount that Brookfield would be converting to in terms of its interest into the hydro fleet. You know from a directional perspective, but we'll see. It's still a ways away.

Okay. Do you think though - because I think you've maybe locked down the buyback option - based on what you're seeing? But do you think versus your initial analysis that the post 2025 outlook is now a bit more better - and it could accrue more to you, just given the carbon tax [direction] [ph] potentially?

Yes it's - hard to say - look I would say that directionally - if you look at some of the forecasting there is a general sense of prices over time would increase, certainly we're seeing carbon price expected to increase over time. The trick will be - in seeing what the impact will be on the new generation that comes into the province and the amount of credits that are there as people in the province continue to decarbonize. So you know - at least I can tell you from a working assumption internally we tend to think of that as being a static to a slightly positive for us in terms of what - you know a lower amount of potential interest going over to Brookfield on conversions.

Okay, it makes a lot of sense. And it’s good to see that - the carbon reduction target to be amplified here and think about 2050 and also 2030 in Alberta - look with the [indiscernible] turnover. Maybe you - do you envision TA in the next couple of decades to be mostly renewables if gets to that - that reduction target or do you think 2030 you got to basically build new gas in the province?

Yes, look we continue to think as a company that gas will play a pretty critical role in sort of backstopping generation in the province I mean, we saw, and I’m not even going to get into what happened in Texas, but I’m just going to look at what just happened in Alberta, our experience over the course of the last three or four weeks really a month ago when we get a cold snap in this province, the wind isn't blowing. Certainly, we don't have much in the way of solar generation here and the province is highly dependent on there being natural gas generation. It will be interesting to see how the technology evolves in the coming decade in the sense of CCS and what people can do to sort of reduce those CO2 emissions. But we do see at least in our company a [role] [ph] right now for natural gas generation for the foreseeable future. And we see it not just in Canada or really in Alberta, but in the United States and Australia. In terms of our company, we continue to look at natural gas opportunities. But we look at them in the context of our overall E2SG goals, our commitments on carbon reduction and think that there'll be a glide path over time to there being a reduction. The wildcard being, what we can do with technology to reduce emissions or capture those emissions.

And your next question will come from Mark Jarvi from CIBC Capital Markets. Your line is open.

I want to go back to the hydro assets in Alberta. I think in prior years, there was some commentary around potentially seeing an uplift in ancillary revenues and maybe some scarcity pricing. As you've seen the market evolve in the first couple of months I appreciate it’s still early days, but just any thoughts in terms of ancillary how you’ve seen. Could those prices come in relative to the market prices and that thesis around maybe some of more pressure on ancillary revenues?

Yes, I mean so far I think what we’re seeing on the ancillary services aside is pretty much Mark what we were expecting. We are seeing the ancillary prices kind of track. Broadly speaking the prices that we've seen in the market it's been an interesting sort of year in the province there's been a couple of instances where the inner tie for example has caused some issues in the province. I think on three separate occasions now. So it's answering just the importance of ancillary services and the importance of having that back-up and making sure that, that frequency is managed properly in the province. So I think it's as expected. I think Todd the relationships that we see are broadly what they have been in the past and I think the market is healthy. I think we're seeing probably a bit more in the way of [ASL] [ph] than we probably saw in the back half of last year in terms of volume as well.

Yes, and Mark just as a reminder we've kind of indicated to hit the historical relationship is that ancillary revenue price is roughly half let the energy price realize…

Up to 60% yes.

But similarly the volumes that we can we offer into the market out of the hydro business is effectively double the volume that we have on the energy sales.

Right so that's those are kind of the relationships that we've seen still.

Right. If you look this year on the full year number our 2020 it was about 45% of the market price, which was a bit lower and now it’s just because there wasn't much volatility. Whereas you think you'll see that's are not a snap, but I'm not for that's back towards more 50% of market pricing.

That's not a bad at least that's kind of the rule of thumb I have Mark. So that's not a bad way to look at it. So last year I agree with you it was sort of a pricing issue. And remember we had not just little pricing some pretty mild weather right. As we ended up the year in the fourth quarter here it was - it was a pretty sort of benign kind of start to the winter and volumes were down a little bit year-over-year on the ASI. I think we've seen more - what I would call normal kind of activity at least in the start of this year.

And then the energy marketing - soft of the guide you gave for 2021 implies a pretty healthy number especially relative to the past couple of years - and I guess is there going in your net 2021 number - like has there been aiming in the first couple of months of the year in terms of volatility in other markets that allowed you to - to guide a higher number - and I guess just the question then would be does that a number you think - you can see follow through and years beyond 2021.

Yes. Mark what I say is that the strong performance over the last couple of years and the ways in which they make their margins being largely real-time opportunistic taking advantage of markets flowing power to customers dealing with customers to supply in eastern markets as well as Western markets in the U.S. - you know that - that was part of the foundation that gave us confidence to start raising the expected range for them. It didn't feel right putting in the lower range knowing that we're coming off of two very, very strong years here. We continue to see market volatility that - that is what the marketing guys need to help broker those deals and move the power around and realize the profit. So I think it's just been a healthy - a healthy energy market in the east and west markets in the U.S. that gave us confidence to raise that - that outlook.

Yes, and some of that is just sort of Mark - if I could just chime in. Some of that is just sort of backed by some of the long-term trends that we're seeing for example in California - and the desert southwest and even in pockets of the eastern United States where you know we have seen with some of the weather events such as increasing volatility as the generation mix is changing over time. So, we’re factoring that in to our thinking.

And then in the TransAlta renewable press release, there was a comment about some of the growth of TransAlta, anything you flagged that in your presentation this morning. But there's also a mention of M&A opportunities. Can you provide little more color in terms of what that could mean whether or not that would be directly into TransAlta renewables or to have been mediated by TransAlta itself?

Yes, I would see the development group still sits inside TransAlta Corporation. The history has been even on M&A activities is to acquire it through TransAlta Corp and then make sure that it's fully de-risk and then drop it into TransAlta renewables. But there is no reason why in certain transactions, we can directly acquire into TransAlta renewables. But effectively, it is the TransAlta development team that's looking at opportunities and then deciding where it makes sense given the stage it’s at and given where renewables incorporate.

And any sort of color around what targets are these sort of renewables in North America. Is there stuff in Australia that you're seeing? Any other kind of background around what you'd consider for an M&A opportunity right now?

We - I mean - look, we have an internal process in the company that we go through and we look at opportunities and I can tell you Mark that we're looking at opportunities like in all three jurisdictions that ran in Canada, the U.S. and Australia in terms of potential opportunities frankly for both companies, not just for our NW. And - But I think it's probably fair to say Todd it's been more U.S. and Australia that we've been looking at in our investment committee. It's just - it’s a natural part of what we do year in year out.

Yes. I would say the opportunity set in the U.S. is larger…

Yes. But it is surprising how even opportunities in Canada tend to show up once in a while.

And your next question will come from Patrick Kenney from National Bank. Your line is open.

Just on repowering Sun 5 and I guess dovetailing in with your net zero pledge. Could you just remind us the planning to implement the flexibility to burn hydrogen as well? And yes, if not what technical challenges you might need to overcome to convert to hydrogen over time?

Yes. Patrick, so right now the work that we're doing on the repowering just contemplates that we can - that we'll just be burning natural gas frankly at the facility. I know I've spoken with our engineers there and the team that is heading it out. We do have the potential. There's more work to be done to burn hydrogen with it. It can be as high as I think it's around 30% of the total fuel, but there's more work to do. And candidly the same team is even considered the possibility of burning hydrogen even our coal to gas units to be honest at a lower percentage threshold, but we have more work to do. And frankly we don't have the supply right now anyway to be able to do it. So there's more to come on.

Yes. And Patrick just a couple of things to think about as people are talking about that. Remember hydrogen gets made with electricity either surplus, we know with electricity that still have capital that has to be invested in order to make the surplus number one. And number two, where it's made with nuclear or it's made with by taking the carbon molecules out of natural gas. All three of those have hydrogen prices in that CAD 10 to CAD 13 range and hydrogen itself in its production especially the blue hydrogen creates greenhouse gases that you have to actually take, you have to use CCS to get rid of the greenhouse gases there. So you have to always compare that burning of hydrogen against carbon capture and storage or other carbon neutral opportunities. So as TransAlta goes forward on its carbon neutral goal and potentially builds a lot of renewables that's probably a better place for it to invest its money. Now, it'll all depend on carbon pricing and other things like that. But as we do work - as John takes over the work for me of working with the provincial and federal government of good policy are the number one thing for Alberta to do is to put its money in the lowest cost. Kinds of options for the best outcomes and hydrogen may be part of that. But it is something where you use electricity to make your fuel to make electricity since not potentially the highest value. And I am pretty sure John will have some sort of technology session when he has his Investor Day in June.

And then just on the marketing gross margin guidance there 90 to 110. Could you confirm for us that net of OMNA that comes out to be call it 60 to 80 to the EBITDA guidance range. And then looking further out, I was just curious about the opportunities to maybe participate in the development of the market for carbon more on a global basis I guess as pricing policies become more clear. So both in regions where you operate, but also regions where you might not have a physical presence today although there might be an opportunity to play a role as a market maker?

So, first on the energy market guidance, I think your math is very much correct, it’s in that CAD25 million to CAD30 million OM&A costs that come off of the gross margin amount. So, we don't see any real difference from what you would see in the results for 2020 on the OM&A side. So 60 to 80 is about the right number.

And maybe just on the carbon side of the equation, Patrick. All I can say is that, we're very much focused on kind of carbon policy and kind of managing our, I’ll call environmental attributes primarily, just in the jurisdictions in which we're operating. There is a lot of themes issues in terms of sort of global carbon pricing. It'll be interesting to see where sort of government dialogue moves that over the course of the coming years as at least a number of the trading blocs try to maybe get alignment. But our focus tends to be much more focused on the regions in which we have a big portfolio and making sure that we look at it holistically in terms of the economics of our generation and the environmental attributes that that our fleet provides as well.

Got it, thanks John. Last one if I could just with the CAD1.2 billion senior debt target now being met, perhaps just an update on what the target that EBITDA ratio looks like over time on a consolidated basis. And John curious to get your thoughts on just developing a path back towards investment grade credit rating just in order to support the robust pipeline of growth opportunities that you have?

Yes, yes maybe I'll start and then John can add in. So we've kind of signaled that on a consolidated basis we’re looking at a long-term metric of call it 3 - 3.5 on debt to EBITDA and that's the one metric that I focus on probably be more than others. The over the - I think we are currently just around the four mark on that particular metric. And really what we see over the next couple of years is that as we finish up the Sun 5 project, our metric will probably be in around that range for the next two years until the Sun 5 project is completed and brought online. And then, we will see a solid improvement after that.

And I can - and Patrick happy to just kind of give some perspectives on our credit rating, I'd say that we're pretty comfortable with where we are from a credit rating perspective right now. I don't think that our treasury team and Todd can try me if he - sees any sort of challenges or issues in terms of us financing what we need to do to get things done from a growth perspective. A lot of times we tend to think of project financing - in terms of our growth - and that's really more reflective of the quality of the offtake and the cash flows that we have there. We are spending time. There was a focus considering you know what other ways could we finance things, are there other alternative pools of capital that we could source to kind of accelerate our growth. And that's certainly a focus for the team in 2021 and beyond. Todd, I don’t know if you want to add anything to that, but I think - that's really where we are.

And your next question will come from John Mould from TD Securities. Your line is open.

Maybe just starting with U.S. growth, in the context of what we saw in Texas. Any lessons there in terms of how you're going to think about contracting assets in the U.S. development portfolio. How you might consider M&A transactions or an appetite to go farther on winterization on U.S. assets than you might have had otherwise?

Yes, you know John I'll be honest, we're still trying to - we were talking about it just before the call. I was - actually doing a bunch of reading on what was going on or what happened in Texas. And I think it's going to take some time to actually break that down and really understand what happened from a - causal perspective. I think when it comes to the opportunity set that we have there and when we think of the 500 megawatts that we have in Oklahoma - kind of at an advanced stage. We do look at a - it’s kind of the standard deviations of the environment in which they're running into to make sure that - when we look at pricing out the technology that we're using it's appropriate and fit for purpose. But overall from a trend perspective and what we really are focused on is what the Biden administration is looking to do from a renewables perspective and that includes putting pressure - I think on large economic players to disclose where they are at from an environmental footprint perspective. And I think all that bodes well directionally for their being increased appetite frankly for people to try to decarbonize and come up - with just better ways of reducing their carbon footprint. So I think it’s positive - and look, we're focused on contracting those assets - those wouldn't be merchant assets from our perspective. So they'd be backstopped by PPA. So that sort of exposure to some of those kinds of issues that - that you would have seen more in the wholesale market - if I can put it that - would be insulated from.

Okay great. And then maybe just moving to your Alberta wind developments, just can you - you talk about how the offtake environment the opportunity for offtake is evolving. Are you getting any added comfort in potentially proceeding with some of those projects on a merchant basis especially in the context of a rising carbon price? Or would you need to secure a buyer for at least part of their output before deciding to move ahead?

Yes, I can tell you that we're very much focused on contracting those assets. We’re not as a company inclined to be building - you know merchant wind generation in the province and really all of the discussions that we have with a number of the other companies here which are very much on a path to being focused on their carbon footprint. I think is creating an opportunity set for us so, merchants not really where we’re at on that.

Okay great. And then maybe just one last one on Sun 6, just in terms of heat rate ramping is that all going as expected. Have there been any surprises? One way or another since the conversion that was completed that might be relevant to K2 and K3?

Yes, so no surprises in terms of the output of the plants both conversion - in fact I think that when you look at the performance testing that we did. We were actually a bit ahead from a heat rate and just from an overall performance perspective. So not a ton of lessons learned on that, as we go into our K2 and K3 just given the different nature of the setups of the two of them, but we feel pretty good about it. So we got what we expected to get maybe a little bit better.

[Operator Instructions] The next question comes from Maurice Choy, RBC Capital Markets. Your line is open.

My first question is on carbon taxes. That the prospect of higher carbon prices in Alberta especially, if indeed the CAD170 per tonne is introduced by 2030. Do you think that more - need to be done in relation to the units where you have a boiler conversion schedule?

Yes, it's a - look it's a great question Maurice. So I can tell you that when we were looking at, so it's a multi - it's a multipronged answer it’s tough. So if you just be patient for a second, I’ll try to give just some thoughts. So when we looked at all of the economics of doing the coal to gas conversions we always tested the economics of those facilities with various expectations of arising carbon prices we went through. We never sort of contemplated there would be a static price that we would have from a carbon perspective. So I think we're pretty comfortable with the - at least the foreseeable future as we go in. And so that would be one. The second thing that I would say is, that we're fortunate to have kind of the diversity of fleet that we have in Alberta. So when you think of our wind generation here in the province and our hydro generation in the province it creates a healthy bank of credits. Plus as Todd mentioned earlier on the call we banked a healthy group of credits that we can actually use to defray some of those costs that are associated with the rising carbon price going forward. The third thing I'd say is look, we're very much focused in the discussions and the dialogue that we have with government on just enforcing the notion that the capital that we put in all of the commitments that we made were under a particular regime with an expectation that the units would run for a transitional period. And, I'm talking about our coal to gas units from now into the mid to late 20s, 30s. And that's something that we just think was the bargain effectively that was struck for the capital that we put in. We continue to focus on that as being a key part of where we're at. And look Dawn talked a little bit about technology and what you - can potentially do whether it's CCS or something else that we can do from a carbon emissions perspective. We'll continue to look at that. It is pricey right now. But I don't want to prejudge or preclude us doing something in the future including potentially with the assistance of government in the event that that things become tighter in terms of the exposure there. I don't know Dawn, Todd if you want to add color on that….

I would just add one thing. One of the things we looked at really closely when we thought about a portfolio which included the coal to gas simple cycle and the bind cycle was expected volatility. And as more people invest in more green the green is intermittent and it creates more priced hours. And of course in order to run a grid at minus 30 we had a peak this year which probably nobody expected because the universities were back online, the office buildings are half empty. But we still hit a peak over last year. You need that. You need the thermal to turn on. And what's really unique about our portfolio position is our coal to gas investments are able to run at full load and they provide the peaking capability and sort of some of the pricing for that. If you look in the fine details of the regulations on gas in Alberta in Canada, our new peakers cannot dispatch to 100%. I think they're limited to 30%.

Yes, they’re limited, yes.

So these are really competitive assets for what will likely be a much more volatile market going forward.

And I guess this is follow-up to that, of indeed you have a more volatile market if indeed carbon prices are escalating to 100 if not beyond 100, how do you and I look at slide 14 in the pipeline the Alberta opportunity for us in new technologies have not changed. Do you see a prospect that you might introduce more new technologies in the space as well as perhaps an update to Project Pioneer around this year?

Yes what I would say is - look - let me try to answer the question in two ways - I mean - so when we look at the opportunity set in Alberta right now one of the things that we would consider is K1 and a repowering of K1 for the latter part - for the mid to the latter part of the decade depending on the needs of that the province has. I mean one of the interesting things is - there's going to be some pretty considerable turnover in just the amount of generation that exists in the province like pretty dramatically. So that is something that we've got - that we continue to look at - and we'll look at that in the context of the technology of the day. So that's one thing. Secondly a lot of the growth opportunity that - that we see in the province tends to be around cogen sort of contracted onsite generation Cogen. So that would be kind of the other - lim sort if you had a two-armed approach to looking at it - that would be the other place that we would be looking at doing that - and then the final thing that - that I think is important for us is our Brazeau pump storage you know - as carbon prices increase that just makes a lot more sense and there's more renewables that come in. It is the perfect battery for what the province needs to go forward and maybe just one more thing - you know it's interesting everybody talks about a CAD 170 you know carbon price. And you know I can - just at least my own thinking around it - there are and we expect will be a lot of credits in the marketplace with the onset of renewables. The pricing of that will likely be at prices likely below what you're seeing the price of carbon - in fact I think that's been experiencing pretty much every jurisdiction. If you look in the world and secondly - you know just some of the math that we do would show that if you start getting to a carbon price that is much higher than about CAD 100 a tonne and that - and this number probably will decrease over time - technology kicks in and actually becomes economic far before you get to a CAD 170 sort of carbon price in terms of coming and dealing with emissions that perspective. So for me the game is not at the CAD 170 level, it’s kind of what you do in the past kind of to the mid-point effectively you could see what I’m saying there.

And your next question will come from Naji Baydoun from IA Capital Markets. Your line is open.

I guess just following up on that last comment can you just maybe talk about what initiatives you see coming down the pipeline for this year. Is - for example Garden Plain the only sort of advanced project that you would clear rough idea on and maybe just a bit more details one we can expect a final decision on K1?

So in terms of the wind farms we've got two in Alberta and Canada we're also looking at expansions with existing wind farms. But we've got Garden Plain and Tempest's, which are the two most advanced stage new wind farms that we have. So we are definitely focused on trying to progressive lease one of those this year. And then we've got three wind farms in Oklahoma, which we're also really focused on trying to get one of those landed this year. When we think of K1 honestly my view on this timeframe taking a decision on that is more 2022. I think I'd like to get the coal to gas conversions done. I'd like to get us well on the way of having our Sundance five repowering done. And then we'll see how the market develops and what the needs are and then we'll make a decision in the fullness of time. But it's not a at least from in the fullness of time, but it's not at least from our perspective, I think Todd it's not a 2021 decision.

No. I agree.

That makes a lot of sense for Q1. I guess just another follow-up on an earlier comment, you mentioned that looking at the alternative put the capital to maybe accelerate growth. And I guess the obvious one is the R&W shares have performed very well last year. Can you just give us your latest thoughts on maybe a potentially reducing TransAlta stake in R&W selling down that stake and reinvesting in other opportunities, be it organic or M&A based?

Yes. Our view right now is we're very, very comfortable with the ownership level that we have with TransAlta renewables. It's at least from my own perspective a pillar of the company. I tend to think of three pillars of the company. I think of our hydro fleet. I tend to think of our gas fleet as being one and the third one is TransAlta renewable. So no discussion or thoughts on reducing our position in R&W at this point.

Your next question comes from Chris Varcoe from Calgary Herald. Your line is open.

Hi, this is a question for Dawn and I'm sorry if you've already answered this, but I just want to talk to you about the goal for net zero at 2050. Is this an aspirational goal for the company or from where you're sitting right now, do you actually have a pathway to net zero and if so how?

Chris, it's John. I'm happy to at least begin answering that and then maybe Dawn can chime in. So look it - like all of these kinds of goals it is an aspirational goal for the company in terms of getting to carbon neutrality by 2050. But what I would say about that is I look at where we have gone from an emissions profile perspective. We were over 40 megatons of CO2 emissions not that long ago frankly. And we’re now into the low tends and very much can see a pathway by kind of 2026 where we would be sub-10. So, it’s a pretty dramatic reduction from the company. We have a real sense of our coal to gas units coming to the end of their lives and kind of 20 - the mid-2030, the latter part of the 2030 and we just look at the life expectancy of a bunch of the other gas generating fleet that we have. So, we do see a pretty clear sort of trajectory in terms of our existing fleet where we would get very close to a place where we would be approximating carbon neutrality. And when we look at the environment attributes that come from our wind and our hydro facilities, we're pretty confident that we talk about it as an aspirational goal. But we don't need - how can I put it, out of the box sort of technical solutions that are just a twinkle in someone's eye to be able to get there. I think we see pathways to getting there.

Yes. I would take sec - as you know, I've worked on carbon policy since 1987, so it’s been a long journey. And I was really proud of the work that John and the team did, Kerry and the board did in setting that carbon neutrality goal for 2050. Remember net zero is the Canadian goal and that was kind of a global goal.

Yes.

And net zero means all carbon that's being put in the air has to be taken out. You got to either sink it or pull it out of the air. What John and the team have done is set TransAlta top for carbon neutrality. And what that does is that we'll use our investment dollars at TransAlta going forward to significantly help others green their portfolios because remember, we serve we are the enabler to customers. And they need us to supply them with safe reliable green and frankly and everybody has heard this gee - this from me a low cost electricity - because you know effectively our kids and your kids and our grandkids and they can't afford a CAD1,000 electricity bills they need to have low cost electricity. So by focusing TransAlta’s investment dollars on carbon neutrality - we can really make a huge difference to the province here. We can make a huge difference to customers and - and then of course that contributes overall to the Canadian goal. And you see, the Canadian government investing in tree planting - I mean that's the other side of the carbon - to net zero. But you know as - if we invest in technology and wind solar, our natural gas peaking, the stuff that really makes electricity low cost and reliable. I think it's a really important journey for TransAlta that the team is going to lead here. So, I think they've done a great job of taking this.

Just a follow-up and this is for either one of you - what do you need to see from both the federal and provincial governments right now, in order for companies like yours to be able to reach that and attain those goals?

Well, let me start with that. I think the - if you look at Canada reducing its carbon emissions by about 200 megatons over the next 10 years, because we really truly as a Canadian economy have not reduced any emissions since 2005. So, all of TransAlta’s heavy lifting has been taken up by other emissions. And so, if you look at that just simply multiply that by a 1,000 it's about CAD220 billion - CAD200 billion to CAD220 billion that's a lot of cash. It's about CAD20 billion a year that needs to be invested. And it has to be invested in true carbon reducing technologies. We have done a - we have been - I have been working with the provincial government here who has been really looking heavily at what the cost of life for carbon capture and storage. And we are - I am very, very helpful that there will be some sort of agreement here even as early as the current federal budget that will start to put some money into Alberta. So that we can start to make those carbon capture and storage investments in our economy and really green both the oil sands and continue to green the power sector here in Alberta. Now, the power sector in Alberta has done all the heavy lifting. But again you know it's always a journey. So, I would say Chris the thing to really watch for especially for Alberta is can we attract some - some funding, federally into the province for carbon capture and storage, carbon capture utilization and storage. For advancing hydrogen, we need three hubs here in Alberta, transportation hubs to really promote the use of hydrogen and the movement of hydrogen, and the movement of carbon as well. So, there is quite a transformation that can take place in Alberta over the next 10 years. And frankly, we're nine years now, not 10. We've actually - we're in the.

2021.

We’re in 2021. So, glad to give you more on that at a future time. But I think that's an important piece of work that John will be doing as he takes over the reins here.

And your next question will come from [Matt Lisco from Carbon Pulse]. Your line is open.

I had a bit more of a, I guess granular question regarding your offsite strategy for the 2020, your compliance here. I guess with the carbon price under tier being CAD40 for this year, CAD50 next year, potentially CAD15 incremental up from there? I was wondering if that trajectory has shifted your approach to turning in credits for the upcoming 2020 deadline in June taking note of for instance capital power and their earnings in February saying that they’re going to just pay the carbon price of CAD30 for their [Genesis 3] unit in order to bank credits into future years? I’m just wondering, if maybe you could speak to whether or not you're doing anything similar for that as you're trying to trying to match kind of bank for later years, or if your strategy hasn't changed much in that regard?

Yes Matt, it's interesting. I am kind of - I've got a smile on my face only because the question that you're asking really is one of the key topics that we're focusing on for the last two-hour meeting that we have of the day. So I - your timing is perfect. Look, we’re right now feeling like in long credits in terms of what we need. We're very much focused on reducing what the dollars are that we need to pay from a carbon perspective in a year. So that's something that is something that ends up driving kind of our approach to doing things. And we have in our team, we've got a team that actually trades these credits and is focused on optimizing them. They've got their own views on what the pricing are going to be kind of in the near term, the medium term and the longer term. And a bunch of that to be honest is pretty sensitive sort of information from a competitive perspective. So, I can't really give you sort of a level of granularity that you need. It's a bit of a science and an art that we have internally in the company. And for us, it's really taking a bunch of judgments in terms of what we think our needs are going to be, where we think carbon pricing is and where we think the value of the credits will be to kind of do that algorithm to figure out what makes sense for the company. So it's a - it's something we look at honestly, monthly in terms of determining it. So it's not a - not an easy thing to answer.

Yes, no worries at all. Just I guess a second follow-up, but still related to carbon pricing. You mentioned in the report released today. The federal government's launch of their output based pricing system review for 2022 and in that that review Ottawa says that they're going to look into an annual tightening of the output based standards starting in 2023. So currently, tier has a good bet gas electricity benchmark at 370 and it’s fixed at that rate? But in order to attain equivalency with the federal regime perhaps Alberta will have to follow similar to what the federal government does in future years. So I guess my question here is that should Ottawa decide to institute a declining electricity benchmark. I guess how would that affect your future procurement of generation plans for gas or renewables or your utilization strategy for offsets or ETCs under tier?

Yes I mean. look the, I think there's a lot - look I'll make a couple of comments on it. There's a lot of discussion I think from our perspective that needs to go on. And you know in terms of the performance standard we were actively involved with government at a time when we made the decisions to invest the way we're investing in all the coal to gas fleet that we are in the convergence to really accelerate carbon reductions in exchange for kind of a regime that made economic sense for us to actually do it. So, we'll be actively participating in the review of the performance standard and making our thoughts known in terms of what we think makes sense going forward. So that's one. Two with coal to gas conversions that we're doing the carbon price that we're exposed to is significantly reduced in terms of the output of CO2 that we have because we're effectively halfing the emissions that we have and although they're above the performance standard of 0.37 they're not - you know one. They're significantly below and when those plants are running in an appropriately, they're not on top of the 0.37, but they're not a lot over the 0.37 in terms of - you know where they actually are. And for sure as we look forward in terms of other investments that we need to make, we'll be looking at the impact of carbon pricing on those kinds of investments. I mean in most of the kind of transactions that we're focused on. We're very much focused on contracted generation typically under those regime carbon pricing as a flow through to the customer and our concern is really around that just competitiveness of industry making sure that power is low cost and fit for - purpose as we go forward. So it's a multifaceted sort of answer to your question. But it's - honest one in terms of kind of laying it out.

Yes, and I think - I'll just close with this - remember that, the federal rules are much - the standard or the intensity standard is much higher than what Alberta…

Correct.

Put in place. And so Alberta is already way more stringent…

Than the federal.

And so you know - I think there'll be quite a discussion, because I - the feds set a higher level for the other provinces.

At this time I have no further questions in queue. I turn the call back over for closing remarks.

Great thank you, thank you everyone. That concludes our call for today. If you have any further questions - please don't hesitate to reach out to the investor relations team here at TransAlta. Thank you and have a great day.

Thank you everyone. This will conclude today's conference call. You may now disconnect.