TAC

TransAlta Corporation Form 6-K Summary

Business Context and Reporting Period

This Form 6-K, filed on April 24, 2003, reports the unaudited financial results for TransAlta Corporation for the three-month period ended March 31, 2003. TransAlta is Canada's largest non-regulated power generation and wholesale marketing company, operating assets in Canada, the U.S., Mexico, and Australia. The report includes a press release and the full Quarterly Report with Management's Discussion and Analysis (MD&A).

Key Financial Metrics

Debt and Liquidity: Total debt increased due to acquisitions. Non-recourse long-term debt acquired with CE Generation was approximately $693.1 million. Cash and cash equivalents decreased by $25.5 million to $117.8 million at March 31, 2003, primarily due to investing activities.

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased by $196.5 million (47%) driven by the acquisition of CE Generation, higher electricity spot prices, increased production, and improved plant availability.
• Production: Production rose 7% to 13,004 GWh, aided by new plants and better availability at the Centralia plant, partially offset by the shutdown of Wabamun unit three.
• Cash Flow: Operating cash flow improved by $41.1 million. This was largely due to a significant $109.0 million income tax payment made in Q1 2002 that did not recur in 2003, offset by an increase in accounts receivable.
• Discontinued Operations: Q1 2002 included $11.2 million in earnings from the Transmission operation, which was sold in April 2002. Q1 2003 had no discontinued operations.

Guidance, Outlook, and Risks

Management Commentary: CEO Steve Snyder highlighted improved asset productivity and cost management. The company successfully issued $276 million in gross equity proceeds to strengthen its financial position.

Outlook:

• Capacity: Capacity is expected to increase in 2003 with the completion of the Campeche and Chihuahua plants in Mexico and the McBride Lake project.
• Prices: Electricity spot prices are expected to be lower in the remainder of 2003 due to lower natural gas prices and seasonal hydro production.
• Costs: Fuel costs per MWh are expected to decrease. Maintenance costs are expected to fluctuate based on the timing of planned outages.
• Capital Expenditures: Forecasted at $830 million for the year (excluding the CE Gen acquisition).

Risks and Contingencies:

• Regulatory Investigations: TransAlta is subject to ongoing investigations by the Federal Energy Regulatory Commission (FERC) regarding trading activities in California and the Pacific Northwest during 2000-2001. While cleared of wrongdoing in one ruling, the company faces potential refunds for price overcharges and class-action lawsuits in Oregon and Washington. No provision has been made for these as outcomes are uncertain.
• Market Volatility: Results are subject to fluctuations in commodity prices, interest rates, and currency exchange rates.

Investor Verification Checklist

• Acquisition Integration: Verify the financial impact and integration progress of the 50% interest in CE Generation LLC (816 MW capacity) acquired in January 2003.
• Regulatory Exposure: Monitor the status of FERC investigations and California state court appeals regarding 2000-2001 trading practices and potential refund liabilities.
• Debt Structure: Review the terms of the $693.1 million in non-recourse debt assumed with the CE Gen acquisition and its impact on leverage ratios.
• Asset Retirement Obligations: Note the adoption of new accounting standards (CICA/FASB) for asset retirement obligations effective Jan 1, 2003, which resulted in a cumulative effect adjustment to net earnings.
• Equity Dilution: Confirm the impact of the $276 million equity offering on earnings per share and shareholder ownership.