Fourth Quarter 2022 Financial Highlights
- Adjusted EBITDA(1),(2) of
$134 million - Free cash flow ("FCF")(1),(3) of
$94 million - Cash available for distribution ("CAFD")(1) of
$58 million or$0.22 per share - Earnings before income taxes of
$50 million - Cash flow from operating activities of
$89 million
Full-Year 2022 Financial Highlights
- Adjusted EBITDA(1),(2) of
$487 million , an increase of 5% from 2021 - Free cash flow ("FCF")(1),(3) of
$347 million - Cash available for distribution ("CAFD")(1) of
$243 million or$0.91 per share - Earnings before income taxes of
$91 million - Cash flow from operating activities of
$257 million
Other Business Highlights & Updates
- Completed and executed contract extensions and renewals with all customers including the Ontario Independent Electricity System Operator ("IESO") at the
Sarnia cogeneration facility ("Sarnia") - Reached agreement with BHP Nickel West to expand the
Mount Keith transmission system to support their Northern Goldfields-based operations - Announced 10-year contract extension at
Kent Hills withNew Brunswick Power Corporation ("NB Power ") and advanced rehabilitation efforts, with the facility expected to return to service in the second half of 2023. The parties will also evaluate the installation of a battery energy storage system and potential repowering at the end of life - Announced appointment of Mr.
Michael Novelli to the Board of Directors as the TransAlta nominee onNov. 3, 2022
"We were pleased to complete the recontracting at
Fourth Quarter and Year Ended
$ millions, unless otherwise stated | 3 Months Ended | Year Ended | ||
Renewable energy production | 1,264 | 1,319 | 4,658 | 4,332 |
Revenues | 154 | 138 | 560 | 470 |
Adjusted EBITDA(2) | 134 | 141 | 487 | 463 |
Free cash flow(2) | 94 | 123 | 347 | 357 |
Cash available for distribution(2) | 58 | 91 | 243 | 275 |
Earnings before income taxes | 50 | 40 | 91 | 150 |
Net earnings attributable to common | 40 | 43 | 74 | 140 |
Cash flow from operating activities | 89 | 71 | 257 | 336 |
Net earnings (loss) per share | 0.15 | 0.16 | 0.28 | 0.52 |
Free cash flow per share(2),(3) | 0.35 | 0.46 | 1.30 | 1.34 |
Cash available for distribution per | 0.22 | 0.34 | 0.91 | 1.03 |
Dividends declared and paid per | 0.23 | 0.23 | 0.94 | 0.94 |
Fourth Quarter 2022 Results Summary
The Company's renewable power production decreased by 55 GWh for the three months ended
Adjusted EBITDA decreased
FCF and CAFD for the three months ended
Net earnings attributable to common shareholders decreased by
Cash flow from operating activities for the three months ended
Full-Year 2022 Results Summary
The Company's renewable power production for the year ended
Adjusted EBITDA for the year ended
Overall, FCF and CAFD for the year ended
Net earnings attributable to common shareholders for the year ended
Cash flow from operating activities for the year ended
Significant Events and Other Updates
Contract Renewals with the IESO at Sarnia Cogeneration and Melancthon 1 Wind Facilities
On
Sarnia Industrial Contract Extensions
During the second and fourth quarters of 2022, the Company executed contracts for the supply of electricity and steam, from the
On
Kent Hills Wind Facilities Update
On
Board of Director Changes
On
On
Notes | |
(1) | Includes production from Canadian Wind, Canadian Hydro and US Wind and Solar and excludes Canadian, US and Australian gas-fired generation. Production is not a key revenue driver for gas-fired facilities as most of their revenues are capacity-based. |
(2) | Adjusted EBITDA refers to earnings before interest, taxes, depreciation and amortization including finance lease income and adjusted for certain other items. FCF includes the deduction of sustaining capital expenditures and distributions to non-controlling interests and excludes the effects of timing and working capital on distributions from subsidiaries of TransAlta in which the Company holds an economic interest. CAFD refers to adjusted funds from operations less principal repayments of amortizing debt. These items are not defined and have no standardized meaning under IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings trends more readily in comparison with prior periods' results. Please refer to the Reconciliation of Non-IFRS Measures section of this news release including, where applicable, reconciliations to measures calculated in accordance with IFRS. |
(3) | FCF per share is calculated as free cash flow divided by the weighted average number of common shares outstanding during the period of 267 million shares as at |
Non-IFRS Measures
We evaluate our performance using a variety of measures to provide management and investors with an understanding of our financial position and results. Certain of the measures discussed in this earnings release are not defined under IFRS and therefore should not be considered in isolation, as a substitute for, as an alternative to, or more meaningful than measures as determined in accordance with IFRS when assessing our financial performance or liquidity. These measures have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers.
The Company's key non-IFRS measures are adjusted EBITDA, FCF and CAFD.
Adjusted EBITDA
Adjusted EBITDA is an important metric for management since it represents our core business profitability. Interest, taxes, depreciation and amortization are not included, as differences in accounting treatments may distort our core business results. We present adjusted EBITDA along with operational information of the assets in which we own an economic interest so that readers can better understand and evaluate the drivers of those assets in which we have an economic interest. Since the economic interests are designed to provide the Company with returns as if we owned the assets themselves, presenting the operational information and adjusted EBITDA provides a more complete picture for readers to understand the underlying nature of the investments and the resultant cash flows that would otherwise only be presented as finance income from the investments.
Adjusted EBITDA is comprised of our reported EBITDA adjusted to exclude the impact of unrealized mark-to-market gains and losses, asset impairments and insurance recoveries, plus the adjusted EBITDA of the facilities in which we hold an economic interest, which is the facilities' reported EBITDA adjusted for: 1) finance lease income and the change in the finance lease receivable amount; 2) contractually fixed management costs; 3) interest earned on the prepayment of certain transmission costs; 4) the impact of unrealized mark-to-market gains or losses; and 5) asset impairments.
Free Cash Flow
FCF represents the amount of cash that is available from operations and investments in subsidiaries of TransAlta in which we have an economic interest, to invest in growth initiatives, to make scheduled principal repayments on debt, repay maturing debt, pay common share dividends or repurchase common shares. Changes in working capital are excluded so that FCF is not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and the timing of receipts and payments.
FCF is calculated as the cash flow from operating activities before changes in working capital, less sustaining capital expenditures, distributions paid to subsidiaries' non-controlling interest, finance income from economic interests and principal repayments on lease obligations, plus FCF of the assets owned through economic interests, which is calculated as adjusted EBITDA from the economic interests less interest expense, sustaining capital expenditures, current income tax expense, insurance recovery and working capital and other timing. FCF per share is calculated using the weighted average number of common shares outstanding during the period.
Cash Available for Distribution
CAFD can be used as a proxy for the cash that will be available to common shareholders of the Company. CAFD is calculated as FCF less tax equity distributions and scheduled principal repayments of amortizing debt.
One of the primary objectives of the Company is to provide reliable and stable cash flows and presenting FCF and CAFD helps readers assess our cash flows in comparison to prior periods. See the Reconciliation of Non-IFRS Measures section's of the MD&A for additional information.
Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below.
Reconciliation of Non-IFRS Measures
Since the economic interests are designed to provide the Company with returns as if we owned the assets ourselves, presenting the operating information and adjusted EBITDA provides a more complete picture to understand the underlying nature of the investments and the resultant cash flows that would otherwise only be presented as finance income from investments.
The following tables reflect adjusted EBITDA and provides reconciliation to earnings before income taxes for the three months and year ended
Owned Assets | Economic Interests | |||||||||
3 months ended Dec. $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 73 | 3 | 78 | — | 31 | 7 | 46 | 238 | (84) | 154 |
Fuel, royalties and | 4 | 1 | 40 | — | 1 | 4 | 6 | 56 | (11) | 45 |
Gross margin | 69 | 2 | 38 | — | 30 | 3 | 40 | 182 | (73) | 109 |
Operations, | 9 | 3 | 8 | 6 | 6 | 2 | 10 | 44 | (18) | 26 |
Taxes, other than | 2 | 1 | (1) | — | 1 | — | — | 3 | (1) | 2 |
Net other operating | (1) | — | 5 | — | (3) | — | — | 1 | 3 | 4 |
Adjusted EBITDA(4) | 59 | (2) | 26 | (6) | 26 | 1 | 30 | 134 | (57) | 77 |
Depreciation and | (34) | |||||||||
Finance income | 16 | |||||||||
Interest income | 2 | |||||||||
Interest expense | (13) | |||||||||
Loss on sale of assets | 2 | |||||||||
Earnings before | 50 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. Refer to Additional IFRS Measures & Non-IFRS Measures of this earnings release. |
Owned Assets | Economic Interests | |||||||||
3 months ended Dec. $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 65 | 6 | 68 | — | 32 | 6 | 52 | 229 | (91) | 138 |
Fuel, royalties and other | 3 | — | 38 | — | — | 4 | 1 | 46 | (5) | 41 |
Gross margin | 62 | 6 | 30 | — | 32 | 2 | 51 | 183 | (86) | 97 |
Operations, | 11 | 2 | 8 | 4 | 4 | 1 | 9 | 39 | (14) | 25 |
Taxes, other than | 1 | 1 | (1) | — | 2 | — | — | 3 | (2) | 1 |
Adjusted EBITDA(4) | 50 | 3 | 23 | (4) | 26 | 1 | 42 | 141 | (70) | 71 |
Depreciation and | (49) | |||||||||
Asset impairment | (7) | |||||||||
Finance income related | 40 | |||||||||
Interest income | 1 | |||||||||
Interest expense | (14) | |||||||||
Foreign exchange loss | (2) | |||||||||
Earnings before income | 40 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. Refer to Additional IFRS Measures & Non-IFRS Measures of this earnings release. |
Owned Assets | Economic Interests | |||||||||
Year ended $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 233 | 29 | 300 | — | 114 | 26 | 176 | 878 | (318) | 560 |
Fuel, royalties and | 16 | 6 | 177 | — | 3 | 15 | 11 | 228 | (29) | 199 |
Gross margin | 217 | 23 | 123 | — | 111 | 11 | 165 | 650 | (289) | 361 |
Operations, | 40 | 8 | 33 | 22 | 18 | 5 | 33 | 159 | (56) | 103 |
Taxes, other than | 7 | 2 | — | — | 5 | — | — | 14 | (5) | 9 |
Net other operating | (12) | — | 5 | — | (3) | — | — | (10) | (4) | (14) |
Adjusted EBITDA(4) | 182 | 13 | 85 | (22) | 91 | 6 | 132 | 487 | (224) | 263 |
Depreciation and | (141) | |||||||||
Asset impairment | (31) | |||||||||
Finance income | 40 | |||||||||
Interest income | 6 | |||||||||
Interest expense | (50) | |||||||||
Finance lease | 1 | |||||||||
Foreign exchange | 1 | |||||||||
Loss on sale of | 2 | |||||||||
Earnings before | 91 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. |
Owned Assets | Economic Interests | |||||||||
Year ended $ millions | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | Investments in | IFRS | |
Revenues(1) | 224 | 29 | 217 | — | 100 | 22 | 182 | 774 | (304) | 470 |
Fuel, royalties and other | 10 | 3 | 119 | — | 2 | 10 | 5 | 149 | (17) | 132 |
Gross margin | 214 | 26 | 98 | — | 98 | 12 | 177 | 625 | (287) | 338 |
Operations, maintenance | 38 | 7 | 30 | 19 | 15 | 4 | 36 | 149 | (55) | 94 |
Taxes, other than income | 6 | 2 | — | — | 5 | — | — | 13 | (5) | 8 |
Adjusted EBITDA(4) | 170 | 17 | 68 | (19) | 78 | 8 | 141 | 463 | (227) | 236 |
Depreciation and | (150) | |||||||||
Asset impairment charge | (17) | |||||||||
Finance income related to | 108 | |||||||||
Interest income | 6 | |||||||||
Interest expense | (42) | |||||||||
Finance lease income | 1 | |||||||||
Foreign exchange gain | 8 | |||||||||
Earnings before income | 150 |
(1) | Adjusted EBITDA excludes the impact of unrealized mark-to-market gains or losses. Amounts related to economic interests include finance lease income adjusted for change in finance lease receivable. |
(2) | Amounts related to economic interests include interest earned on the prepayment of certain transmission costs. |
(3) | Amounts related to economic interests include the effect of contractually fixed management costs. |
(4) | Adjusted EBITDA is a non-IFRS measure and has no standardized meaning under IFRS. |
Reconciliation of Reported Cash Flow from Operating Activities to FCF and CAFD
3 Months Ended | Year Ended | |||
$ millions |
|
|
|
|
Cash flow from operating activities | 89 | 71 | 257 | 336 |
Change in non-cash operating working capital balances | (3) | 44 | (5) | (13) |
Cash flow from operations before changes in working capital | 86 | 115 | 252 | 323 |
Adjustments: | ||||
Sustaining capital expenditures – owned assets | (19) | (8) | (38) | (19) |
Distributions paid to subsidiaries' non-controlling interest | — | — | — | (3) |
Finance income – economic interests(1) | (16) | (40) | (40) | (108) |
Principal repayments of lease obligations(2) | — | — | (1) | (1) |
FCF - economic interest | 43 | 56 | 174 | 165 |
FCF(3) | 94 | 123 | 347 | 357 |
Deduct: | ||||
Tax equity distributions | (10) | (9) | (37) | (30) |
Principal repayments of amortizing debt | (26) | (23) | (67) | (52) |
CAFD(3) | 58 | 91 | 243 | 275 |
Weighted average number of common shares outstanding in the period (millions) | 267 | 267 | 267 | 267 |
FCF per share(3) | 0.35 | 0.46 | 1.30 | 1.34 |
CAFD per share(3) | 0.22 | 0.34 | 0.91 | 1.03 |
(1) | Refer to the Reconciliation of FCF to Finance Income Related to Subsidiaries of TransAlta below in this earnings release. |
(2) | Includes owned assets and economic interests. |
(3) | These items are non-IFRS measures and have no standardized meaning under IFRS. Refer to the Additional IFRS Measures and Non-IFRS Measures sections for further details. |
Reconciliation of FCF to Finance Income Related to Subsidiaries of TransAlta
The following table is a reconciliation of the finance income recognized on those assets we hold an economic interest in.
3 Months Ended | Year Ended | |||
$ millions |
|
|
|
|
Finance income related to subsidiaries of TransAlta | 16 | 40 | 40 | 108 |
Tax equity distributions | 10 | 9 | 37 | 30 |
Principal repayments of amortizing debt | 2 | — | 13 | — |
Return of capital and redemptions | 12 | 7 | 92 | 24 |
Effects of changes in working capital and other timing | 3 | — | (8) | 3 |
FCF(1) | 43 | 56 | 174 | 165 |
(1) | This item is a non-IFRS measure and has no standardized meaning under IFRS. Refer to the Non-IFRS Measures section of this earnings release for further details. |
Reconciliation of Adjusted EBITDA to FCF and CAFD
The table below bridges our adjusted EBITDA to our FCF and CAFD for the three months and year ended
Owned Assets | Economic Interests | |||||||
3 months ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind and | Australian | Total | |
Adjusted EBITDA(2) | 59 | (2) | 26 | (6) | 26 | 1 | 30 | 134 |
Provisions and contract liabilities | 2 | — | — | — | — | — | — | 2 |
Interest expense | — | — | — | (8) | (2) | — | (6) | (16) |
Current income tax expense | (2) | — | — | (2) | — | — | (5) | (9) |
Realized foreign exchange loss | — | — | — | 1 | — | — | — | 1 |
Sustaining capital expenditures | (5) | (1) | (13) | — | (1) | — | (2) | (22) |
Interest income | — | — | — | 2 | — | — | 2 | 4 |
FCF(3) | 54 | (3) | 13 | (13) | 23 | 1 | 19 | 94 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (10) | — | — | (10) |
Principal repayments of amortizing | (24) | — | — | — | — | — | (2) | (26) |
CAFD(3) | 30 | (3) | 13 | (13) | 13 | 1 | 17 | 58 |
1) | US Wind and Solar includes the North |
(2) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to earnings before income taxes above. |
(3) | FCF and CAFD are defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to cash flow from operating activities above. |
Owned Assets | Economic Interests | |||||||
3 months ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | |
Adjusted EBITDA(1) | 50 | 3 | 23 | (4) | 26 | 1 | 42 | 141 |
Interest expense | — | — | — | (8) | (1) | — | (6) | (15) |
Current income tax recovery | 12 | — | — | (2) | — | — | (2) | 8 |
Realized foreign exchange gain | — | — | — | 1 | — | — | — | 1 |
Sustaining capital expenditures | (4) | (1) | (4) | — | — | (3) | — | (12) |
Currency adjustment and interest | — | — | — | 1 | — | — | — | 1 |
Other | — | — | — | — | (1) | — | — | (1) |
FCF(2) | 58 | 2 | 19 | (12) | 24 | (2) | 34 | 123 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (9) | — | — | (9) |
Principal repayments of amortizing | (23) | — | — | — | — | — | — | (23) |
CAFD(2) | 35 | 2 | 19 | (12) | 15 | (2) | 34 | 91 |
(1) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to earnings before income taxes above. |
(2) | During 2022, the tax withheld from dividend payments in the US Wind and Solar segment comparative figures was reclassified to other to conform to the current periods presentation. |
(3) | FCF and CAFD are defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to cash flow from operating activities above. |
Owned Assets | Economic Interests | |||||||
Year ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | |
Adjusted EBITDA(2) | 182 | 13 | 85 | (22) | 91 | 6 | 132 | 487 |
Provisions and contract liabilities | 1 | — | (11) | — | — | — | — | (10) |
Interest expense | — | — | — | (41) | (4) | — | (24) | (69) |
Current income tax expense | (1) | — | — | (2) | — | — | (20) | (23) |
Realized foreign exchange gain | — | — | — | 2 | — | — | — | 2 |
Sustaining capital expenditures | (15) | (3) | (20) | — | (3) | — | (5) | (46) |
Currency adjustment and interest income | — | — | — | 6 | — | — | 5 | 11 |
Principal repayments lease obligations | (1) | — | — | — | — | — | — | (1) |
Other | — | — | — | — | (4) | — | — | (4) |
FCF(3) | 166 | 10 | 54 | (57) | 80 | 6 | 88 | 347 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (37) | — | — | (37) |
Principal repayments of amortizing debt | (54) | — | — | — | — | — | (13) | (67) |
CAFD(3) | 112 | 10 | 54 | (57) | 43 | 6 | 75 | 243 |
(1) | US Wind and Solar includes the North |
(2) | Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to earnings before income taxes above. |
(3) | FCF and CAFD are defined in the Additional IFRS Measures and Non-IFRS Measures sections and reconciled to cash flow from operating activities above. |
Owned Assets | Economic Interests | |||||||
Year ended | Canadian Wind | Canadian Hydro | Canadian | Corporate | US Wind | Australian | Total | |
Adjusted EBITDA(1) | 170 | 17 | 68 | (19) | 78 | 8 | 141 | 463 |
Provisions | (6) | — | 12 | — | — | — | — | 6 |
Interest expense | — | — | — | (33) | (2) | — | (24) | (59) |
Current income tax expense | — | — | — | (2) | — | — | (11) | (13) |
Realized foreign exchange gain | — | — | — | 3 | — | — | — | 3 |
Sustaining capital expenditures | (11) | (3) | (6) | — | (1) | (4) | (20) | (45) |
Distributions paid to subsidiaries' non- | (3) | — | — | — | — | — | — | (3) |
Currency adjustment and interest income | — | — | — | 6 | — | — | 2 | 8 |
Principal repayments lease obligations | (1) | — | — | — | — | — | — | (1) |
Other | — | — | — | — | (2) | — | — | (2) |
FCF(2) | 149 | 14 | 74 | (45) | 73 | 4 | 88 | 357 |
Deduct: | ||||||||
Tax equity distributions | — | — | — | — | (30) | — | — | (30) |
Principal repayments of amortizing debt | (52) | — | — | — | — | — | — | (52) |
CAFD(2) | 97 | 14 | 74 | (45) | 43 | 4 | 88 | 275 |
(1) | Adjusted EBITDA is defined in the Non-IFRS Measures section of this earnings release and reconciled to earnings before income taxes above. |
(2) | FCF and CAFD are defined in the Non-IFRS Measures section of this earnings release and reconciled to cash flow from operating activities above. |
About
Cautionary Statement Regarding Forward Looking Information
This news release contains forward looking statements, including statements regarding the business and anticipated financial performance of the Company that are based on the Company's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In some cases, forward-looking statements can be identified by terminology such as "plans", "expects", "proposed", "will", "anticipates", "develop", "continue", and similar expressions suggesting future events or future performance. In particular, this news release contains forward-looking statements, pertaining to, without limitation, the following: the remediation of the
The forward-looking statements contained in this news release are based on current expectations, estimates, projections and assumptions, having regard to the Company's experience and its perception of historical trends, and includes, but is not limited to, expectations, estimates, projections and assumptions relating to: sufficiency of our budgeted capital expenditures in carrying out our business plan; applicable laws, regulations and government policies; the availability and cost of labour, services and infrastructure; and the satisfaction by third parties of their obligations, including under power purchase agreements. These statements are subject to a number of risks and uncertainties that could cause actual plans, actions and results to differ materially from current expectations including, but not limited to: competitive factors in the renewable power industry; operational breakdowns, failures, or other disruptions; failure to meet financial expectations; inability to achieve our ESG targets; general domestic and international economic and political developments, including armed hostilities, the threat of terrorism, cyberattacks, diplomatic developments or other similar events; equipment failure and our ability to carry out or have completed the repairs in a cost-effective or timely manner, or at all, including if the remediation at the
Note: All financial figures are in Canadian dollars unless noted otherwise.
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