Canada-based TransAlta Corp. (TSX: TA) (NYSE: TAC) said April 26 that in the first quarter of 2012 a 23 MW uprate on its Keephills 2 unit in Alberta was completed and that by the end of the year TransAlta expects to complete 61 MW of uprates in this market.
The company also reported in its first quarter earnings statement that it had strong fleet availability of 91.7% in the quarter, compared to 90.3% over the same period last year. However, lower realized prices due to soft market conditions, and higher planned maintenance activities, reduced comparable earnings, comparable EBITDA and funds from operations.
“The diversity and strength of our fleet enabled us to partially offset some of the difficult pricing conditions and higher planned major maintenance we had in the quarter,” said Dawn Farrell, TransAlta President and CEO. “While our financial results were down in the first quarter of 2012 compared to the first quarter of 2011, we still generated strong cash to cover our dividend, support our sustaining capital and have free cash left over for reinvestment.”
TransAlta announced that the Pioneer partners have concluded front-end study and will not proceed with a carbon capture and storage (CCS) demonstration project. Project Pioneer was a joint effort by TransAlta, Capital Power, Enbridge, and the federal and provincial governments to demonstrate the commercial-scale viability of CCS technology. The first, essential step of the project was to prove the technical and economic feasibility of CCS through a front end engineering and design (FEED) study before making any major capital commitments.
Following the conclusion of the FEED study, the industry partners determined that although the technology works and capital costs are in-line with expectations, the revenue from carbon sales and the price of emissions reductions aren’t enough to allow the project to proceed at this time. “While we are disappointed that Project Pioneer will not go ahead, we now know the technology works and we still believe there is a future for CCS,” said Farrell.
Project Pioneer involved the planned construction of a carbon capture facility at the Keephills 3 coal-fired plant west of Edmonton, Alberta. TransAlta and Capital Power are equal partners in the ownership of Keephills 3 with TransAlta responsible for operations. Project Pioneer was being designed to capture 1 million tonnes of CO2 per year.
Centralia power sales, costs become an issue
Farrell noted that the low natural gas price environment is impacting the company’s U.S. assets. “We are working hard to ensure our capital programs and arrangements with suppliers adjust to these new realities and we remain steadfast in our efforts to re-contract the Centralia plant,” Farrell said about a coal-fired plant in Washington state that is fired by coal out of the Powder River Basin. TransAlta said discussions continue with local customers in Washington state for long-term power contracts for Centralia. Depending on the outcome of those discussions, future power prices and discussions with some of suppliers, it is possible that a material adjustment to the carrying amount of the plant and associated tax asset could arise in 2012.
The Centralia coal plant is Washington state’s largest baseload power source with a net capacity of 1,376 MW. The Centralia plant provides 10% of the state’s power, but does have problems competing when hydropower production in the region is particularly strong. Centralia Gas, also known as the Big Hanaford plant, is a 248-MW natural gas combined-cycle facility that is also located at the Centralia coal-fired plant.
“We increased our overall fleet availability even with the planned outage we had at our Keephills 2 unit,” Farrell said about other first-quarter developments. “The outage was delivered on-time and on-budget and has set this unit up for end of life. With strong execution of our planned outages we remain on track to achieve our fleet availability goal of 89-90 per cent for the year.”
Also in the first quarter, TransAlta signed an agreement with MPS Canada Inc., a wholly-owned subsidiary of Mitsubishi Heavy Industries Ltd., for two gas turbines. The gas turbines are to be used in the construction of Sundance 7, TransAlta’s 800-MW combined cycle plant. “This agreement shows our commitment to growing in Alberta and delivering shareholder value while providing long-term low cost power to Albertans,” said Farrell.
For 2012, TransAlta will execute a heavy major maintenance program. In the quarter the major maintenance outage at Keephills 2 was completed on-time and on-budget. At Keephills 1 the major maintenance outage is underway. Other planned major maintenance outages are on track.