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Capital (Tables) | 12 Months Ended
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Dec. 31, 2019
Disclosure of notes and other explanatory information [Abstract] |
Disclosure of share capital, reserves and other equity interest | Common Shares A. Issued and Outstanding TransAlta is authorized to issue an unlimited number of voting common shares without nominal or par value.
As at Dec. 31 | 2019 |  | 2018 |
| Common shares (millions) | Amount | Common shares (millions) | Amount
Issued and outstanding, beginning of year | 284.6 |  | 3,059 |  | 287.9 |  | 3,094 |
Purchased and cancelled under the NCIB | (7.7) |  | (83) |  | (3.3) |  | (35) |
Stock options exercised | 0.1 |  | 2 |  | — |  | — |
Issued and outstanding, end of year | 277.0 |  | 2,978 |  | 284.6 |  | 3,059 |
B. NCIB Program Shares purchased by the Corporation under the NCIB are recognized as a reduction to share capital equal to the average carrying value of the common shares. Any difference between the aggregate purchase price and the average carrying value of the common shares is recorded in deficit. The following are the effects of the Corporation's purchase and cancellation of the common shares during the year:
For the year ended Dec. 31 | 2019 | 2018
Total shares purchased(1) | 7,716,300 |  | 3,264,500 |
Average purchase price per share | $ | 8.80 |  | $ | 7.02 |
Total cost | 68 |  | 23 |
Weighted average book value of shares cancelled | 83 |  | 35 |
Amount recorded in deficit | 15 |  | 12 |
(1) As at Dec. 31, 2019, includes 189,900 (2018 - 204,000) shares that were repurchased but were not cancelled due to timing differences between the transaction date and settlement date. C. Shareholder Rights Plan The Corporation initially adopted the Shareholder Rights Plan in 1992, which was amended and restated on April 26, 2019 to reflect current market practice and to reflect changes to the take-over bid regime. As required, the Shareholder Rights Plan must be put before the Corporation’s shareholders every three years for approval, and it was last approved on April 26, 2019. The primary objective of the Shareholder Rights Plan is to encourage a potential acquirer to meet certain minimum standards designed to promote the fair and equal treatment of all common shareholders. When an acquiring shareholder acquires 20 per cent or more of the Corporation’s common shares, except in limited circumstances including by way of a “permitted bid” or a "competing permitted bid" (as defined in the Shareholder Rights Plan), the rights granted under the Shareholder Rights Plan become exercisable by all shareholders except those held by the acquiring shareholder. Each right will entitle a shareholder, other than the acquiring shareholder, to purchase additional common shares at a significant discount to market, thus exposing the person acquiring 20 per cent or more of the shares to substantial dilution of their holdings. D. Earnings per Share
Year ended Dec. 31 | 2019 | 2018 | 2017
Net earnings (loss) attributable to common shareholders | 52 |  | (248) |  | (190) |
Basic and diluted weighted average number of common shares outstanding (millions) | 283 |  | 287 |  | 288 |
Net earnings (loss) per share attributable to common shareholders, basic and diluted | 0.18 |  | (0.86) |  | (0.66) |
E. Dividends On Oct. 9, 2019, the Corporation declared a quarterly dividend of $0.04 per common share, payable on Jan. 1, 2020. On Jan. 16, 2020, the Corporation declared a quarterly dividend of $0.0425 per common share, payable on Apr. 1, 2020. There have been no other transactions involving common shares between the reporting date and the date of completion of these consolidated financial statements. Preferred Shares A. Issued and Outstanding All preferred shares issued and outstanding are non-voting cumulative redeemable fixed rate first preferred shares.
As at Dec. 31 | 2019 |  | 2018 |
Series | Number of shares (millions) | Amount | Number of shares (millions) | Amount
Series A | 10.2 |  | 248 |  | 10.2 |  | 248 |
Series B | 1.8 |  | 45 |  | 1.8 |  | 45 |
Series C | 11.0 |  | 269 |  | 11.0 |  | 269 |
Series E | 9.0 |  | 219 |  | 9.0 |  | 219 |
Series G | 6.6 |  | 161 |  | 6.6 |  | 161 |
Issued and outstanding, end of year | 38.6 |  | 942 |  | 38.6 |  | 942 |
I. Series G Cumulative Redeemable Rate Reset Preferred Shares Conversion On Aug. 30, 2019, the Corporation announced that, after taking into account all election notices received by the Sept. 15, 2019, deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series G (the “Series G Shares”) into Cumulative Redeemable Floating Rate Preferred Shares Series H (the “Series H Shares”), there were 140,730 Series G Shares tendered for conversion, which was less than the one million shares required to give effect to conversions into Series H Shares. Therefore, none of the Series G Shares were converted into Series H Shares on Sept. 30, 2019. As a result, the Series G Shares will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board. The annual dividend rate for the Series G Shares for the five-year period from and including Sept. 30, 2019, to, but excluding, Sept. 30, 2024, will be 4.988 per cent, which is equal to the five-year Government of Canada bond yield of 1.188 per cent, determined as of Aug. 30, 2019, plus 3.80 per cent, in accordance with the terms of the Series G Shares. II. Series E Cumulative Redeemable Rate Reset Preferred Shares Conversion On Sept. 17, 2017, the Corporation announced that, after taking into account all election notices received by the Sept. 15, 2017, deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series E (the “Series E Shares”) into Cumulative Redeemable Floating Rate Preferred Shares Series F (the “Series F Shares”), there were 133,969 Series E Shares tendered for conversion, which was less than the one million shares required to give effect to conversions into Series F Shares. Therefore, none of the Series E Shares were converted into Series F Shares on Sept. 30, 2017. As a result, the Series E Shares will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board. The annual dividend rate for the Series E Shares for the five-year period from and including Sept. 30, 2017, to, but excluding, Sept. 30, 2022, will be 5.194 per cent, which is equal to the five-year Government of Canada bond yield of 1.544 per cent, determined as of Aug. 31, 2017, plus 3.65 per cent, in accordance with the terms of the Series E Shares. III. Series C Cumulative Redeemable Rate Reset Preferred Shares Conversion On June 16, 2017, the Corporation announced that, after taking into account all election notices received by the June 15, 2017, deadline for the conversion of the Cumulative Redeemable Rate Reset Preferred Shares, Series C (the “Series C Shares”) into Cumulative Redeemable Floating Rate Preferred Shares Series D (the “Series D Shares”), there were 827,628 Series C Shares tendered for conversion, which was less than the one million shares required to give effect to conversions into Series D Shares. Therefore, none of the Series C Shares were converted into Series D Shares on June 30, 2017. As a result, the Series C Shares will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board. The annual dividend rate for the Series C Shares for the five-year period from and including June 30, 2017, to, but excluding, June 30, 2022, will be 4.027 per cent, which is equal to the five-year Government of Canada bond yield of 0.927 per cent, determined as of May 31, 2017, plus 3.10 per cent, in accordance with the terms of the Series C Shares. IV. Series A Cumulative Fixed Redeemable Rate Reset Preferred Shares Conversion On March 17, 2016, the Corporation announced that 1,824,620 of its 12.0 million Series A Cumulative Fixed Redeemable Rate Reset Preferred Shares (“Series A Shares”) were tendered for conversion, on a one-for-one basis, into Series B Cumulative Redeemable Floating Rate Preferred Shares (“Series B Shares”) after having taken into account all election notices. As a result of the conversion, the Corporation had 10.2 million Series A Shares and 1.8 million Series B Shares issued and outstanding at Dec. 31, 2019. The Series A Shares pay fixed cumulative preferential cash dividends on a quarterly basis for the five-year period from and including March 31, 2016, to, but excluding, March 31, 2021, if, as and when declared by the Board based on an annual fixed dividend rate of 2.709 per cent. The Series B Shares pay quarterly floating rate cumulative preferential cash dividends for the five-year period from and including March 31, 2016, to, but excluding, March 31, 2021, if, as and when declared by the Board based on the 90-day Treasury Bill rate plus 2.03 per cent. V. Preferred Share Series Information The holders are entitled to receive cumulative fixed quarterly cash dividends at a specified rate, as approved by the Board. After an initial period of approximately five years from issuance and every five years thereafter (“Rate Reset Date”), the fixed rate resets to the sum of the then five-year Government of Canada bond yield (the fixed rate “Benchmark”) plus a specified spread. Upon each Rate Reset Date, the shares are also: ▪Redeemable at the option of the Corporation, in whole or in part, for $25.00 per share, plus all declared and unpaid dividends at the time of redemption. ▪Convertible at the holder’s option into a specified series of non-voting cumulative redeemable floating rate first preferred shares that pay cumulative floating rate quarterly cash dividends, as approved by the Board, based on the sum of the then Government of Canada 90-day Treasury Bill rate (the floating rate “Benchmark”) plus a specified spread. The cumulative floating rate first preferred shares are also redeemable at the option of the Corporation and convertible back into each original cumulative fixed rate first preferred share series, at each subsequent Rate Reset Date, on the same terms as noted above. Characteristics specific to each first preferred share series as at Dec. 31, 2019, are as follows:
Series | Rate during term | Annual dividend rate per share ($) | Next conversion date | Rate spread over Benchmark (per cent) | Convertible to Series
A | Fixed | 0.67725 |  | March 31, 2021 | 2.03 |  | B
B | Floating | 0.93575 |  | March 31, 2021 | 2.03 |  | A
C | Fixed | 1.00675 |  | June 30, 2022 | 3.10 |  | D
D | Floating | — |  | — |  | 3.10 |  | C
E | Fixed | 1.29850 |  | Sept. 30, 2022 | 3.65 |  | F
F | Floating | — |  | — |  | 3.65 |  | E
G | Fixed | 1.32500 |  | Sept. 30, 2024 | 3.80 |  | H
H | Floating | — |  | — |  | 3.80 |  | G
B. Dividends The following table summarizes the value of preferred share dividends declared in 2019, 2018 and 2017:
| Total dividends declared |  |
Series | 2019 | 2018 | 2017
A | 5 |  | 9 |  | 5 |
B | 1 |  | 1 |  | 1 |
C | 8 |  | 14 |  | 9 |
E | 9 |  | 15 |  | 8 |
G | 7 |  | 11 |  | 7 |
Total for the year | 30 |  | 50 |  | 30 |
TransAlta’s capital is comprised of the following:
As at Dec. 31 | 2019 | 2018 | Increase/ (decrease)
Long-term debt(1) | 3,212 |  | 3,267 |  | (55) |
Exchangeable securities | 326 |  | — |  | 326 |
Equity |  |  |
Common shares | 2,978 |  | 3,059 |  | (81) |
Preferred shares | 942 |  | 942 |  | — |
Contributed surplus | 42 |  | 11 |  | 31 |
Deficit | (1,455) |  | (1,496) |  | 41 |
Accumulated other comprehensive income | 454 |  | 481 |  | (27) |
Non-controlling interests | 1,101 |  | 1,137 |  | (36) |
Less: available cash and cash equivalents(2) | (411) |  | (89) |  | (322) |
Less: principal portion of restricted cash on TransAlta OCP Bonds(3) | (10) |  | (27) |  | 17 |
Less: fair value asset of hedging instruments on long-term debt(4) | (7) |  | (10) |  | 3 |
Total capital | 7,172 |  | 7,275 |  | (103) |
(1) Includes lease obligations, amounts outstanding under credit facilities, tax equity liabilities and current portion of long-term debt. (2) The Corporation includes available cash and cash equivalents as a reduction in the calculation of capital, as capital is managed internally and evaluated by management using a net debt position. In this regard, these funds may be available and used to facilitate repayment of debt. (3) The Corporation includes the principal portion of restricted cash on TransAlta OCP bonds because this cash is restricted specifically to repay outstanding debt. (4) The Corporation includes the fair value of economic and designated hedging instruments on debt in an asset, or liability, position as a reduction, or increase, in the calculation of capital, as the carrying value of the related debt has either increased, or decreased, due to changes in foreign exchange rates.
Disclosure of investment grade credit rating | The Corporation has an investment-grade credit rating from DBRS (stable outlook). In 2019, Moody's reaffirmed its issuer rating of Ba1 and revised their rating outlook to stable from positive. During 2019, Fitch Ratings downgraded the Corporation below investment grade to BB+ with a stable outlook; DBRS reaffirmed the Corporation’s Unsecured Debt rating and Medium-Term Notes rating of BBB (low), the Preferred Shares rating of Pfd-3 (low) and Issuer Rating of BBB (low) with a stable outlook; and Standard and Poor’s downgraded the Corporation’s Unsecured Debt rating and Issuer Rating to BB+ with stable outlook. The Corporation remains focused on strengthening its financial position and cash flow coverage ratios. Credit ratings provide information relating to the Corporation's financing costs, liquidity and operations and affect the Corporation's ability to obtain short-term and long-term financing and/or the cost of such financing. Key rating agencies assess TransAlta’s credit rating using a variety of methodologies, including financial ratios. The methodologies and ratios used by rating agencies to assess our credit rating are not publicly disclosed. We have developed our own definitions of ratios and targets to help evaluate the strength of our financial position. These metrics and ratios are not defined under IFRS and may not be comparable to those used by other entities or by rating agencies. These ratios are summarized in the table below:
As at Dec. 31 | 2019 | 2018 | Target
Funds from operations before interest to adjusted interest coverage (times) | 4.5 |  | 4.8 |  | 4 to 5
Adjusted funds from operations to adjusted net debt (%) | 19.0 |  | 20.8 |  | 20 to 25
Adjusted net debt to adjusted comparable earnings before interest, taxes, depreciation and amortization (times) | 3.9 |  | 3.6 |  | 3.0 to 3.5
Disclosure of cash flow statement | For the years ended Dec. 31, 2019 and 2018, cash inflows and outflows are summarized below. The Corporation manages variations in working capital using existing liquidity under credit facilities.
Year ended Dec. 31 | 2019 | 2018 | Increase (decrease)
Cash flow from operating activities | 849 |  | 820 |  | 29 |
Change in non-cash working capital | (121) |  | 44 |  | (165) |
Cash flow from operations before changes in working capital | 728 |  | 864 |  | (136) |
Dividends paid on common shares | (45) |  | (46) |  | 1 |
Dividends paid on preferred shares | (40) |  | (40) |  | — |
Distributions paid to subsidiaries’ non-controlling interests | (106) |  | (165) |  | 59 |
Property, plant and equipment expenditures | (417) |  | (277) |  | (140) |
Inflow | 120 |  | 336 |  | (216) |

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