TransAlta makes major moves in Q3, including renewables IPO

Canada-based TransAlta Corp. (TSX:TA) said in its Oct. 31 earnings report that it made substantial advances in the third quarter on its growth and recontracting strategies.

Since the second quarter, it has secured a total of 369 MW in long-term contracts in Eastern Canada, Australia and the U.S which brings the total for the year to about 835 MW. It also created TransAlta Renewables, establishing a vehicle for pursuing growth opportunities and generating proceeds to pay down debt, which was the primary driver of debt balances declining by C$343m in the quarter. Furthermore, it added 213 MW of long-term contracted wind assets to the portfolio, and is capturing a full year of the Solomon acquisition in 2013.

“We set out this year to add long term contracts, advance our growth strategy, improve our marketing business and run a strong operation,” said Dawn Farrell, President and CEO. “Results in the third quarter reflect a solid performance by our team on all of these fronts.”

The 2013 strategic accomplishments include:

  • contract extension for 245 MW in Australia;
  • acquisition of 144 MW Wyoming wind farm;
  • formation of TransAlta Renewables;
  • start-up of Sundance Unit 1 and Sundance Unit 2
  • 24-year contract with the City of Riverside, Calif., for 86 MW at CalEnergy LLC;
  • 24-year contract with Salt River Project in Arizona for 50 MW at CalEnergy LLC;
  • 20-year contract for 74 MW at Ottawa power plant;
  • Approval of 11-year contract with Puget Sound Energy for up to 380 MW at the coal-fired Centralia Thermal plant in Washington state; and
  • commercial operation of 68 MW New Richmond Wind Farm.

On Oct. 30, TransAlta announced a long-term contract extension to supply power to the BHP Billiton Nickel West operations in Western Australia from its Southern Cross Energy facilities. The extension is effective immediately and replaces the previous contract which was set to expire at the beginning of 2014. Operating since 1996, Southern Cross has a total installed capacity of 245 MW from the Kambalda, Mt. Keith, Leinster, and Kalgoorlie power stations.

On Oct. 21, TransAlta Renewables announced the acquisition, through one of TransAlta Corp.’s wholly owned subsidiaries, of an economic interest in a 144 MW wind farm in Wyoming for about US$102m from a wholly owned subsidiary of NextEra Energy Resources LLC. The wind farm is fully operational and contracted under a long-term contract until 2028 with an investment grade counterparty. At closing, the economic interest in the wind farm will be acquired by TransAlta Renewables from TransAlta Corp. in consideration for a payment equal to the original purchase price of the acquisition. TransAlta Corp. will fund the acquisition through a US$102m loan to TransAlta Renewables. TransAlta Renewables expects to repay the loan with free cash flow from operations over the first 36 months and through a long-term debt refinancing that is expected to be completed in conjunction with other financing needs of TransAlta Renewables. The acquisition is subject to regulatory approvals and is expected to close by the end of December.

On Aug. 9, TransAlta Corp. transferred 28 indirectly owned wind and hydroelectric generating assets to TransAlta Renewables through the sale of all the issued and outstanding shares of two subsidiaries: Canadian Hydro Developers and Western Sustainable Power.

On Aug. 30, TransAlta Corp. announced the execution of an agreement for a 20-year power supply term with the Ontario Power Authority for the Ottawa gas-fired facility, effective January 2014. Under the new deal, the plant will become dispatchable. This will assist in reducing the incidents of surplus baseload generation in the market, while maintaining the ability of the system to reliably produce energy when it is needed.

On Sept. 17, TransAlta Corp. announced that CalEnergy LLC, a joint venture between TransAlta and MidAmerican Energy Holdings, executed a 50 MW long-term contract for renewable geothermal power with Salt River Project which runs from 2016 to 2039.

In December 2010, the coal-fired Units 1 and 2 of the Sundance facility in Canada were shut down due to conditions observed in the boilers at both units. On July 20, 2012, an arbitration panel concluded that Unit 1 and Unit 2 were not economically destroyed. So Unit 1 was returned to service on Sept. 2 and Unit 2 was returned to service on Oct. 4.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.