TransAlta sees big slump in Centralia coal plant output in first half of 2016

TransAlta Corp. said in an Aug.9 quarterly financial report that for the three and six months ended June 30, 2016, production at its coal-fired Centralia power plant in Washington state decreased 538 GWh and 721 GWh, respectively, compared to the same periods in 2015, due mainly to increased economic dispatching.

Lower prices during the first and second quarters of 2016 provided TransAlta with the opportunity to shut down its own generation earlier and supply its contractual obligation by buying cheaper power in the market. It used that time to execute planned major maintenance on both Centralia units.

Comparable EBITDA for Centralia improved by C$8 million for the second quarter of 2016 compared to the same period in 2015 as a result of the favorable impact of economic dispatching which benefited from lower prices for purchased power and higher volumes of contracted production compared to the prior year. TransAlta also benefited from the favorable impacts of foreign exchange and mark-to-market on certain forward financial contracts that do not qualify for hedge accounting. These improvements were partially offset by reversals of coal inventory impairments from previous quarters and the consumption of previously impaired coal in 2015.

Comparable EBITDA decreased by C$18 million for the first six months of 2016 compared to the same period in 2015 as a result of the unfavorable impacts from economic dispatching in the first quarter of 2016 due to lower realized prices on contracted production, unfavorable impacts of mark-to-market on certain forward financial contracts that do not qualify for hedge accounting, higher consumption of previously impaired coal in 2015, and unfavorable impacts of foreign exchange.

Depreciation and amortization for the second quarter of 2016 was higher by C$10 million due to lower discount rates being applied to the company’s decommissioning obligation for the long-shut Centralia coal mine next to the power plant, as opposed to in the first quarter of 2016, where higher discount rates triggered a recovery. As the mine is in the reclamation stage, the adjustment flows directly to earnings.

Fuel for Centralia is purchased primarily from external suppliers in the Powder River Basin and delivered by rail. The delivered cost of fuel per MWh for the remainder of 2016 is expected to decrease by approximately 14% due primarily to favorable renegotiations to reduce costs with suppliers.

Centralia is Washington’s largest baseload power source with a net capacity of 1,340 MW.

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.