TransAlta Corp (TAC) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the TransAlta third quarter 2008 results conference call. I would like to introduce Jennifer Pierce, Vice President of Investor Relations. Please go ahead, Jennifer.

Thank you, Ashley. Good morning, everyone. Welcome to TransAlta's third quarter 2008 conference call. With me this morning are Steve Snyder, our President and CEO; Brian Burden, Executive Vice President and Chief Financial Officer; Ken Stickland, the Executive Vice President Legal Sustainable Development and EH&S; Frank Hawkins, Vice President and Treasurer; and Michael Lawrence, our Manager of External Relations.

Third quarter results were released earlier this morning, and I hope you've had a chance to review them. Additional operating information will be posted on our website after the call. All information provided during this conference call is subject to the forward-looking statement qualification which is detailed in today's news release and incorporated in full for the purposes of our call.

The amounts referenced in this review are in Canadian currency unless otherwise stated. I also remind the audience that Canadian and US GAAP require us to deconsolidate our Mexican operations and report the business as variable interest entity. We, therefore, report the results of our Mexican operations as equity income or loss. The Mexican operations were sold on October 8th, 2008, and, as a result, we will report them in the fourth quarter for the last time.

In addition, the non-GAAP terminology used in this call, including comparable earnings, operating income and gross margin, is reconciled starting on page 24 of the MD&A. Per-share figures for the second quarter of 2008 are based on an average of 198 million shares outstanding, compared to 203 million shares in the second quarter of 2007. Also, please note financial information has been rounded to the nearest whole number.

On this morning's call, Steve will provide an overview of operating results for the quarter and year-to-date; Brian will provide details on our cash flow, capital spending, and balance sheet items; and to conclude, Steve will provide commentary on what investors can expect for the remainder of '08, and the future outlook and highlights for TransAlta as we move into '09.

Let me turn the call over to Steve.

Good morning and welcome, everyone. I am pleased to report that TransAlta's third quarter results keep us on track to deliver on our goal of delivering low, double-digit earnings-per-share growth this year. Third quarter comparable earnings were CAD 0.32 per share, consistent with the CAD 0.32 achieved for the same period last year. Year-to-date, we have achieved CAD 1.06 of comparable earnings per share, an increase of more than 30%, compared to the same nine-month period last year.

Net earnings year-to-date are CAD 0.71 per share compared to CAD 0.88. Our net earnings are lower year-to-date as a result of the CAD 65 million after-tax equity loss from the write-down of our Mexico business.

We had a strong quarter across the fleet, with the exception of higher, unplanned outages at our Alberta Thermal units. That performance drove a CAD 17 million increase in comparable generations gross margins. We had stronger contractual pricing in our core regions and increased merchant production from our Sundance facility as a result of our Sundance 4 upgrade. Partially offsetting these gains were the unplanned outages at our Alberta Thermal units and the related increase in OM&A costs, as well as the repair costs on the Keephill's ash lagoon dyke.

As we discussed in detail at Investor Day, we understand the issues at Alberta Thermal. We are implementing solutions and expect to see improved reliability next year. Despite this situation, overall fleet availability for the quarter was 86%, up from 85% in quarter three 2007. Production for the quarter was down 400 gigawatt hours as a result of unfavorable market conditions for our Sarnia facility and the higher, unplanned outages at Alberta Thermal.

In the third quarter, we achieved a CAD 6 million increase in energy trading gross margins. The increase in energy trading gross margins comes from the continued and consistent success of our disciplined trading strategies. OM&A expenses in our energy trading segment were higher due primarily to increase compensation award accruals based on performance year-to-date.

I'd now like to discuss two events that occurred subsequent to the third quarter. The first is the successful closure of a sale of our Mexican business. We were very pleased, given the volatile state of credit markets to close the sale of our Mexican business to InterGen on October the 8th. The sale generated proceeds of 303.5 million US dollars. Our plan during the year was to utilize up to CAD 200 million of the proceeds for share buyback under our current, normal course issue or bid program which runs until May 5th, 2009.

Given the current, unprecedented level of volatility in the financial markets, especially in the last few weeks, and the uncertainty as to when markets may settle, we have decided to suspend purchases under the MCIB at this time in order to maintain maximum financial flexibility. We will reevaluate financial market conditions in January to determine the best use of cash resources going forward. These unusual times call for patience, a strong short-term buy as to prudence, and conservation of cash and balance sheet capacity.

The second event is the current, unplanned outage at Genesee 3, our joint venture with EPCOR. On October 10th, the unit experienced a turbine blade failure. EPCOR is the plant operator and is doing everything possible to return the unit to service. We are working closely with them and will assist in any way we can. The root cause of the incident is being investigated.

As a result of the lost production, estimated at approximately 280 gigawatt hours, TransAlta's fourth quarter net income is expected to decline by CAD 13 million to CAD 16 million or between CAD 0.07 and CAD 0.08 per share. We are currently forecasting a return to service by the end of November.

While the Genesee 3 outage is an unfortunate event, as I said earlier, our overall fleet is performing strongly and costs are being tightly controlled. We still expect to meet our goal of low, double-digit, earnings-per-share growth for the year.

Let me turn the call over to Brian to provide more detail on our cash flow expectations, capital plans, and balance sheet strength.

Thank you, Steve. Cash flow from operations in the third quarter increased CAD 46 million to CAD 202 million. Cash flow was favorable compared to quarter three 2007, as a result of higher cash earnings in the quarter and an additional Alberta PPA payment offset by higher inventories at our thermal plants. Year to date, cash flow from operations is CAD 610 million and we remain on track to deliver on our objective of CAD 850 to CAD 950 million for the full year.

Looking at our capital spending, for 2008, we estimate our total sustaining capital spend will be in the range of CAD 440 to CAD 480 million. And this estimate can be broken down as follows: CAD 110 to CAD 120 million for planned major maintenance; CAD 70 to CAD 75 million for the Centralia transition plant; CAD 100 to CAD 110 million for our Alberta mines; and CAD 160 to CAD 175 million for routine capital and productivity investments. And in quarter three 2008, we spent a total of CAD 97 million in sustaining CapEx.

In terms of our growth CapEx, our annual spending has not changed and is expected to be CAD 510 to CAD 550 million. And this estimate includes CAD 320 to CAD 330 million for Keephills 3, CAD 135 to CAD 145 million for Kent Hills wind farm, CAD 20 to CAD 25 million for the Blue Trail wind farm, CAD 15 to CAD 20 million for the Sundance 5 efficiency upgrade, and CAD 20 to CAD 30 million for the Summerview wind farm expansion. And in quarter three 2008, we spent a total of CAD 209 million on growth CapEx.

We remain on time and on budget with all of these projects. And our 96 megawatt Kent Hills wind facility is set to come online late in the fourth quarter of this year.

Finally, I'd like to touch on our balance sheet strength, financial ratios, and our liquidity. In markets like we see today, financial strength is paramount to being able to achieve objectives and deliver long-term shareholder value. And as we stated at Investor Day, our balance sheet and financial ratios remain strong. Given the strength of our earnings, our cash flow, our portfolio of long, medium, and short-term contracts, and our disciplined capital allocation, we have flexibility within the minimum and maximum ratios that we have established. And as I also stated, we maintain regular dialogue with the credit rating agencies. On October the 22nd, Standard and Poor's reaffirmed our BBB credit rating with a stable outlook.

Looking at our liquidity, overall we maintain CAD 2.2 billion in committed and uncommitted credit facilities. And as of the end of the quarter, we have CAD one billion available to us. We have sufficient cash flow and credit facilities available to meet our debt maturities, capital expenditures, and collateral obligations while sustaining our dividend. And while our total outstanding long-term debt is currently around CAD 2.5 billion. Other than some small amortization debt, TA has only CAD 205 million due in 2009, zero in 2010, and CAD 225 million in 2011, of maturing long-term debentures.

With all the recent market volatility, we understand the need to carefully monitor and track our liquidity, and our treasurer team continues to do an excellent job of that.

And with that, I'll turn the call back over to Steve.

Thank you, Brian. As I said recently at our Investor Day, TransAlta's value proposition is as valid today as it was a year ago and as it was five years ago. We believe in financial strength and largely contracted revenues, as well as maintenance of our solid financial ratios, all of which support our strong balance sheet.

We also believe in a very disciplined approach to capital allocation. We are committed to paying shareowners a dividend. Affirming this principle is the Board dividend payout policy which targets a 60% to 70% payout of comparable earnings. In addition, we carefully assess the economic value of investing in our fleet and in growth to ensure we are achieving returns of at least 10% while staying within our financial ratios. We have and will maintain a low-to-moderate risk profile. We do that through diversified geographies, diversified fuels, diversified contracts, and, of course, an ongoing emphasis on operational excellence and cost control.

We are now well positioned in western Canada and western US markets. The fundamentals of these markets remain strong. In Alberta, reserved margins are low, currently below 10%. Even if there's no new demand growth, new capacity is needed to improve the reliability of the current system. This provides an excellent opportunity for wind development. We control the sites and the resources. And we also have competitive advantages that come from being in the business more than a decade and having strong supplier relationships.

Looking at our other key market, the western US, renewable portfolio standards require renewables to be built. They're getting largely independent of demand growth. A particular opportunity for us is geothermal expansion for the California market. We have accessed reserves through our CE generation partnership with MidAmerican. They are an experienced operator and developer of geothermal assets and know the markets well.

At Investor Day, we discussed these growth opportunities in detail. This remains an excellent time to grow our renewable portfolio profitably. It provides at the same time a great deal of flexibility with respect to timing of that growth. This focus on renewable also continues our environmental leadership. We continue to look across our fleet at how we can reduce our environmental footprint, and this includes greening coal. As we have said be fore, we believe that carbon capture and storage has very high potential to reduce carbon emissions. We continue to progress with Project Pioneer, our carbon capture pilot project with Alstom, Canada. We continue to talk with potential industry partners and with the government for funding. Ultimately, carbon capture technology is expected to provide a benefit not only to TransAlta and to our shareowners, but across North America as well.

To summarize, even with the volatility that we see in today's capital and commodity markets, TransAlta's value proposition and our outlook for the next several years remain strong. I believe we have a compelling story for investors. And we are well positioned to navigate through the current turmoil and to continue delivery in shareowner value.

I will now turn the call over to Jennifer for our question-and-answer period.

Thanks, Steve and Brian. So that we may rotate through callers, we shall take one question and one follow-up from each caller before moving down the queue. We will answer questions from the investment community first and then open the call to the media. We will then respond to individual investors. So please identify yourself when asking a question.

I remind you that we do not provide guidance and that we will answer your model-related questions offline after the call.

Ashley, we'll now take questions, please.

Thank you. (OPERATOR INSTRUCTIONS) Our first question goes to Sam Kanes. Sam, go ahead, please.

Thank you. With respect to Q4, the -- I guess the earnings correction you're going to have, I'm just wondering if you can give us a little broader color? Because the minute that Genesee 3 went down, November, December forward, prices spiked to 122 and 105, or something like that, I guess. Is it just simply the loss of production against prices prior to? Because you are also going to make something back, Steve, with respect to the stock market at the moment, right, because of the tightness courtesy of that plant being down? I'm just wondering how far you went down the pike in terms of assessing your CAD 0.07 to CAD 0.08, whether or not it was just strictly at that plant or the net of all things that you see next few months.

Yes. No, it's our assessment of -- it's a mixture of, you know, obviously (inaudible) we've already got and things that we've had to buy back in the market. So it's a mixture of those prices. So we've taken that into our calculation of what we think the overall cost will be.

So, therefore, some of Genesee 3 was contracted? It wasn't 100% merchant going in, I guess?

Yes, some of it was contracted and some of it we've had to buy back then.

I see. Shifting to price stability now, for change, in construction and maybe price erosion in the case of steel, we've heard from other folks. I'm just wondering if you might have some flex here and actually coming in under budget on some of your major projects going forward. Is that simply tied in too much or are you down -- too far down the pike now?

I mean, I think, I mean, yes, we've all seen the volatility in the markets and the volatility of cost and things. Dependent on where that settles, you're right that we could have some reduction in the increases that we see and we could have some reductions over time. And we'll see how that -- we'll see how that plays out. I think it's a bit too uncertain to put any numbers against that, Sam, but you're right. We may see that if costs start to come off.

Thank you.

Thank you for your question. The next question goes to Robert Kwan. Robert, go a head, please.

All right. Thank you. Just on the suspension of the NCIB, is that just a timing issue or is it something when January rolls around, you'll assess the market and decide whether there's a better use for that cash, whether it's growth or an increased dividend?

Steve here. It's definitely the latter. I think really we're just seeing this accumulation over the last few weeks of all of the uncertainty around liquidity in the market, around what are market conditions going to be like as we go forward, and where are all these various costs of capital going to settle out. Just given all that, sort of that accumulation over the last three to four weeks, we just felt it was prudent to sit back for a couple of weeks, let market settle down a bit, and then we'll just reassess in January. All I can say is that we've indicated that in terms of capital allocation that share buyback can play a roll in that and we'll reassess what to do about that and the amount in January.

Okay. So if -- you're saying it's the latter, and you --

Yes. We have no -- we really have no internal concerns at all about liquidity or bench strength. But I mean, the reality is the market out there, as I talk to other people and bankers and other CEOs, you'll hear some pretty extreme words being used to describe the market. I think in that market condition, it's just prudent we just step back, take a few weeks, we'll let it settle down a bit, and then we'll reassess in January.

Okay. So because it doesn't sound like you're slowing down, say project construction to conserve capital and then you're suspending the NCIB --

No.

-- does that really mean that share buybacks have moved even further down the list in terms of your preference in capital allocation?

I would not draw that conclusion. Our development plans have not changed at this point, and -- though they're ongoing as you know we laid out at our Investor Day. We have a five-year plan. I'm sure with a five-year plan, some will be moved up, some will be moved back, and some will be added, some will be taken out. But overall, I don't see any major disruption to that development plan at this time.

Okay. Thanks, Steve.

Thank you for your question. The next question goes to Matthew Akman. Matthew, go ahead, please.

Thanks. My question, Steve, is for you, and it relates to plant operations. When you look at the company, I guess at the risk of over-simplifying, for the next few years, all you guys really have to do is run the plants well to generate really strong earnings growth, and -- because prices have escalated so much relative to where they were contracted. And yet, when I look at the quarter, higher unplanned outages in Alberta, at Centralia, the turbine blade failure, operations is not going as well as I think anyone would like it to.

So given it's such a major issue in hitting your numbers and a lot of other things are in place, what are you going to do about the operations and is there something special you need to do to ensure that it's done better?

Well, first, I mean, my take on the quarter -- I mean, every CEO in the world wants every quarter to be better than the last one or the one last year. So in that sense, that's when you just do the same, that's a bit of a disappointment. Where I step back from that and what it really tells me, Matthew, is -- confirms to me the underlying strength of our core assets. We went into the third quarter and the Keephills dyke lagoon was an extra cost we didn't anticipate. The markets did fall off in October -- or September a bit. And, of course, we did have this issue in Alberta Thermal. Despite that, we still equaled last year results.

So to your first part of your comment, the -- if we just run this company smartly, we will have increase in earnings go forward just because of market conditions and our fundamental cost base. I don't see anything in the operations that overly concerns me. We have to alter a bit our maintenance profile for Alberta Thermal. That's been shown to us the last year. We're on top of that. There's a plan to do that, but it's not a particularly costly issue at all, just a matter of doing things slightly differently. And I suspect as we sit here today, that you'll see steady improvement in availability as we go through 2009. Meanwhile, the rest of the fleet is operating at very strong levels.

And I would say, by the way, Centralia has been running extremely well since the major maintenance programs early in the year, and we -- we're on some very strong production levels right now. I don't see that changing.

I guess just as a follow-up then. You don't see the need to do something more structural in the organization to really put more focus on operations and to mitigate the risks of these things going forward?

No. We have a very strong focus on operations. The one -- we did make one change. We combined all of the maintenance work, which was the two organizations, into one organization. And that should help a bit on efficiency and a bit on communications. But I wouldn't call that major. I'd call that a fine tuning.

No, the -- our team are on top of this. They know the issue really is to make sure that we put the right amount of steel in at the right times. Judgment is used on that. And I think going forward we've got a good sense of what exactly we have to do to ensure we hit all of our availability targets.

Okay, Steve. Thanks very much for that.

Thank you for your question. The next question goes to Michael McGowan. Michael, go ahead, please.

Hello. Good morning.

Good morning, Michael.

I have a question also on the maintenance. Some of the unplanned outages during this quarter, is that an extension of the theme you discussed during your Investor Day, where you were having some problems with your boiler tubes at the Alberta Thermal facilities?

Yes, every -- exactly. These are all related to boiler leaks at Albert Thermal. Boiler leaks are probably the most common cause of unplanned shutdowns for a coal-based facility. And we're -- we have been -- are addressing them and are confident that we know what the issues are. We have a plan to fix that. And I see rising availabilities as we go through the second half of 2009.

So you expect the issues with the boiler tubes to extend through the first half of 2009, then, as well?

Well, we, you know what? Trying to predict broiler leaks is impossible. I think we've got plans. Our normal maintenance plans will take care of almost all of these issues through the first half, because you know we do a lot of our maintenance in the second and third quarters. We've accelerated some of that. So I suspect that we'll see steady improvements starting in the first quarter and increase through the second half of the year.

Okay.

And, plus, as we talked about at Investor Days -- this is Jennifer -- during the second half of 2008, we staged some pit stops for work on some of the immediate issues we had at Alberta Thermal boilers. And then for the balance of the project, as Steve said, we have our normal major maintenance schedule in place. And due to our cost benefit analysis of the opportunities before us, we've decided that it makes the most sense to do the remaining work around the boilers during our normal major maintenance outages that are planned in the first half of the year.

Okay. And just as a follow-up. Your operating and maintenance expense, one of the issues there for the increase which was sited were the -- what happened with the Keephills lagoon. Have you isolated the incremental costs associated with those repairs?

It's going to e probably CAD 2 to CAD 3 million dollars in terms of expense, and we'll have some related capital that will be spent as we go through next year.

Okay. Thank you very much.

Thank you for your question. The next question goes to Andrew Kuske. Andrew, go ahead, please.

Thank you. Good morning. Just a question as it relates to your view on this cycle that we're seeing right now with all the credit distress, and then those -- the valuations collapsing and how you look at that relative to your experience in 2001, 2002, when we saw the last really distressed cycle among the IPPs.

Oh, boy. Andrew, I guess the simple, just thinking about it here -- I haven't really put a lot of time to that. The one back in 2001 and '2, really was, I think, driven by excess supply and huge, really a huge over supply all at once, at the same time that prices collapsed. So you had a combination of over supply, poor prices, and high debt loads, and that combination was pretty toxic.

Today, I think the industry, generally speaking, particularly the core players, are stronger financially. Supply is still on the short side, not the long side. And so I think the issues here are quite different, really driven by this liquidity issue and by the, you know, waiting -- readjustment of, I guess working capital costs, which are going to take awhile to still sort through the system. I think it is fundamentally different and I think again why we will come through much stronger than even back in 2001.

So I guess in that context, when you look at the severe difference in the environment from then to now, and TransAlta's relative positioning at that point to now, how do you think about the IRRs on things like the share buyback program and just capital investment at this stage?

Well, I think that we'll have somewhat similar issues in that the number of opportunities for growth are -- remain quite strong today. The industry needs new supply. And, in addition, obviously, there are some assets out there that because of the liquidity issues and financial market problems, may have to be put up for sale and we'd have to look at that. So on that side they're strong results. The challenge are on the share buyback, and we're still a believer in that overall, still is what our valuation's going to settle down to. And that's, I don't know, [a 64 thousand, million dollar] question on the table today. And we'll see how that settles out. But that's really the driver behind us just holding back for a few weeks and seeing how that settles out before we make any final calls.

Okay. Great. Thank you.

Thank you for your question. (OPERATOR INSTRUCTIONS) The next question goes to Linda Ezergailis. Linda, go ahead, please.

Thank you. I have a question with respect to your Powder River Basin coal contracts in your outlook section. It was very helpful just to indicate that you expect a slight increase compared to those seen to date. Looking out over the longer term, can you help us maybe understand what those contract escalations are largely a function of? Is that diesel pricing for the rail cars? Or how might be think of that in terms of sensitivities going forward?

Yes, I think a lot of it relates to diesel, et cetera. But I think what we've broadly said, as we see in terms of the prices, we've said -- we've given you this quotation of the CAD 20 to CAD 25 range that we see, which is what we want to stick to. And I think we talked about seeing around about a 10% increase this year and probably slightly less next year, but within that single-digit range.

Great. Thank you. And just as a follow-up question, I guess historically for the past two years, TransAlta had provided quarterly maintenance activity guidance within a year to help us anticipate when the planned activity was. And I think it was discontinued earlier this year, just because there was a view that all of those larger maintenance initiatives were largely behind you.

In light of some of the recent boiler tube challenges, would it be possible maybe to get some sense of that guidance again going forward for 2009?

Yes, Linda. This is Jennifer. We'll do that in Q4, where -- we provided the major maintenance spend expectation at Investor Day. And as far as the quarterly breakdown, what we give at the beginning of the year is a percentage, and we'll do that in Q4.

Okay. And just to help us out for this year, I guess the major plan, was well unplanned, now planned maintenance was related to the G3? Or is there anything else, just remind me, that should be going on in Q4?

Well, G3 is unplanned, Linda.

I realize that, but now you're --

Linda, what I was saying is we've got the sustaining CapEx budget in the MD&A. We can certainly follow up with you after the call.

Okay.

What I would do is subtract what we've spent year-to-date from our expectations for the balance of the year, and that'll give you what we plan to --

Yes.

-- spend in Q4.

Okay. I was just hoping to get some words around that, but.

Yes, we --

We'll follow up offline. Thank you.

Yes, we'll follow up.

Yes. I think excluding Genesee 3, we're pretty well tracking to our plan.

Yes.

The expectation on G3 from a capital perspective is --

Steve Snyder -- CAD 3 to CAD 4 million.

-- CAD 2 -- CAD 3 to CAD 4 million.

Thank you.

Thank you for your question. The last question in our question queue is Robert Kwan. Robert, go ahead, please.

Thank you. If I can just go back to the capital allocation issue. If suspending the share buyback and potentially reallocating to either growth or just other items isn't a liquidity issue for you, and then, Steve, some of your comments earlier that the value proposition hasn't changed over time, can you provide some color as to why a share buyback wouldn't be highly attractive at the current price, particularly as you were buying back shares in the mid-30s?

I don't think we've said -- sorry. Brian here. I don't think we've said we're reallocating the share buyback that we've just suspended to growth. I think we said we're taking a pause for these next two months because we believe in preserving our liquidity and giving a strength to our liquidity. And that's basically what we're doing. I think we've said that we'll review that in January, as we do all the time, in terms of looking at our capital allocation going forward as to what's the best use of funds. And we're always looking at comparing the IRRs and looking at what that might be. And that's how we've made the decisions over the last two years and we'll continue to do so.

Sure, Brian --

We're just -- if I could just make one --

Yes.

We are going to continue with the balanced capital allocation, the loss we've had for a while, and we're going to maintain that. And, honestly, I would just, I think view the current discussion around the NCIB as a temporary, prudent thing to do under today's market conditions. And it's no more or less than exactly that. And I wouldn't, honestly, would not read any change in direction or anything into that particular comment. It's just simply a prudent thing to do, we think, with the financial markets in the condition they're in, and that's it.

Okay. I guess, Steve, maybe I misunderstood your comments earlier then. The CAD 200 million was earmarked for share buyback. And earlier you had mentioned that when you said it was the latter point, being that you potentially will review the use of those proceeds and that that could be used for future growth projects or the dividend rather than necessarily using that full amount to buy back shares.

Well, we still intend to pursue growth opportunities. We will look at the capital allocation relative to a share buyback and make those decisions at the time. As I would say, nothing at all has really changed since we discussed all this in a fair amount of detail at our Investor Day. And the only change, really, is a bit of prudence on timing under today's market conditions. So --

Okay. So --

-- that's the only thing that's changed.

So is it purely a timing issue on the CAD 200 million that was earmarked coming out of Mexico?

At this -- yes, that's correct.

Okay. Thanks, Steve.

Thank you for your question. We currently have no more questions in the queue.

Thank you, Ashley. Why don't we give the opportunity for any media that are on the call to ask questions at this time, please.

(OPERATOR INSTRUCTIONS) We have a question from [Scott Hagget]. Scott, please go ahead.

Hi. Just one question. Have you been in the market at all before the decision to buy back your shares, before making the decision to halt that program?

We've not been in the market at all in the third quarter. So we haven't been in the market at all over the last three to four months.

All right. Thank you.

Thank you. There are currently no questions in our question queue.

Okay. Operator, we'll just give it a minute and we'll see if there are any final questions before we conclude our call. And then Jeff and I are always available to do follow-up after the conference call.

And we do have a question from Sam Kanes. Sam, go ahead, please.

I'm going to chime in on this. I know we've talked about it before. You have an outstanding cost-per-megawatt profile for all of your wind farms. And it comes into a question I occasionally get from clients. In -- is it because, besides your outstanding relationship long-term at the business, do you have some form of predetermined price-per-megawatt order that just kind of stands out there with Vestas or -- and/or others, that you're benefiting from as time goes on here? And, if so, how much is left on it?

I think the simple answer, Sam, is no. I think it's just a historical long-term relationship. And as a result of which we're able to really negotiate very good pricing, part of a long-going relationship. So there's nothing specific.

Would it be volumetric then?

I think, Sam, as well, I think it's that we've got our own teams that are very good at actually constructing the wind farms, do it very quickly, can put them up very easily. And it's the expertise that we've built over this last 10 years that helps us. As well as, you know, Steve said the strategic supply relationship. So it's a mixture of two or three of those things where we think we've got the expertise, whether it's around wind factors, et cetera, that give us that competitive edge and that cost edge.

I think also, Sam, there's a factor on their part relative to our ability to execute, our ability to develop at low cost, acquire good sites at low cost, and, as Brian mentioned, the strong team. So when they look at a sale, our sale has a high probability of success. As you look at other sales, they may not have the same probability. And there's a price that we can extract for that, that comfort, and that's what we do.

Okay. Appreciate that. Last one. This International Accounting Standard, a lot of time to plan for it, of course; I presume where the issue's going to come into the value of your Ontario Sarnia plant and your Centralia gas-fired plant, and how that will work different under International Accounting Standards. Do you have some preliminary observation for that, other than what you've written in your press release?

No, we don't. Obviously, as you say, it is quite early and some of the standards are still changing. We have a full time involved in that. And, obviously, as soon as we have anything material that we can disclose, we will do. But at this time it would be too early to add any conjecture on that, Sam.

Fine. Thank you.

Thank you for your question. The next question goes to Bob Hastings. Bob, go ahead, please.

Yes. Just a small, technical thing. The guidance on the tax rate was 25%. Is that still standing for the year?

Well, the guidance on the tax rate was 23% to 28%.

Oh, okay.

And so that still stands. And as you can probably see with our tax rate year-to-date, we'll be at the lower end of that.

Okay. That's what I was wondering. Thank you very much.

Ashley, I believe there's one final question from [Allen Marquis].

Yes. Allen, please go ahead.

Okay. Well, earlier it was said that CAD 70 to CAD 75 million was spent on the Centralia transition plant. I was wondering how that CAD 70 to CAD 75 million was used for at that plant.

The transition plan, Allen, includes the work on the rail loading and unloading facility, as well as work around the conversion of our equipment inside the plant so that we can effectively burn Powder River Basin coal.

Yes.

All right. Thank you.

Thank you for your question. We currently have no more questions in the question queue.

Great. Well, Ashley, thank you for your assistance. And to our listeners, thank you for your attendance. If you have any further questions, please don't hesitate to give Jeff or me a call this afternoon.

Thank you. This concludes --

Thank you.

This concludes the TransAlta third quarter 2008 results conference call with Jennifer Pierce. On behalf of our teleconferencing team, have a good day.