CALGARY, ALBERTA–(Marketwire – Sept. 28, 2012) – TransAlta Corporation (TransAlta) (TSX:TA) (NYSE:TAC) announced that through its subsidiaries, it has successfully completed the acquisition of the Solomon power station for U.S. $318 million.
“TransAlta has been a valued behind-the-fence generator in Western Australia for the past 15 years and this acquisition fits well with our strategy of expanding in that region,” said Dawn Farrell, TransAlta President and CEO. “The Solomon power station is fully contracted and will provide immediate value to our shareholders, adding to both earnings and free cash flow per share.”
The Solomon power station is fully contracted with Fortescue Metals Group Ltd. (Fortescue) under a long-term Power Purchase Agreement (PPA) and will support their iron ore mining operations in the Solomon Hub, located in the Pilbara region of Western Australia. The initial term of the PPA is 16 years after which Fortescue has the option to either extend the PPA by an additional five years under the same terms, or to acquire the facility from TransAlta for a value equivalent to the five year extension.
The acquisition is expected to generate unlevered after-tax returns in the low double digits and pre-financing cash flows of approximately $40 million per year.