Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TransAlta Corp (TAC, Financial) delivered strong financial and operational performance in 2024, achieving adjusted EBITDA of $1.25 billion and free cash flow of $569 million, both at the upper range of guidance.
- The company successfully integrated the Heartland acquisition, adding 1.75 gigawatts of complementary assets to its Alberta portfolio, enhancing its competitive position.
- TransAlta Corp (TAC) completed several growth projects, including the Horizon Hill and White Rock wind facilities, contributing over $175 million in adjusted EBITDA annually.
- The company returned $214 million to shareholders through dividends and share repurchases, and announced an 8% increase in its common share dividend.
- TransAlta Corp (TAC) continues to reduce CO2 emissions, achieving a 70% reduction in Scope 1 and 2 greenhouse gas emissions since 2015, with plans to cease coal-fired generation by the end of 2025.
Negative Points
- The Alberta spot power prices declined significantly in 2024, impacting revenue from the hydro and gas segments.
- Corporate costs increased year over year due to higher spending on strategic and growth initiatives.
- The regulatory review process for the Heartland acquisition was lengthy, resulting in the divestment of certain facilities and a purchase price reduction.
- Free cash flow in the fourth quarter was lower due to higher sustaining capital expenditures and increased spending on growth opportunities.
- The company anticipates higher OM&A expenses in 2025 due to the full-year impact of the Heartland acquisition and ongoing growth initiatives.
Q & A Highlights
Q: What are TransAlta's strategic priorities for M&A in 2025, and which geographies or asset types are most attractive?
A: John Kousinioris, President and CEO, mentioned that TransAlta is focusing on opportunities in North America, particularly the United States. They are interested in legacy gas assets and renewables, with a focus on Western North America, especially the Pacific Northwest and the desert Southwest. Joel Hunter, CFO, added that they are looking for opportunities similar in size to the Heartland acquisition, around $500 to $750 million.
Q: Can you provide more details on the data center development at Keephills and what potential outcomes could look like?
A: John Kousinioris explained that the development is being approached in phases, starting with Keephills 2, followed by Keephills 3, and then Sundance. The initial offering would be 400 megawatts from Keephills 2, with the unit providing behind-the-fence generation for a data center, supplemented by grid connection. Extensive preliminary work is being done to facilitate commercial offerings to potential customers.
Q: How are discussions with potential data center customers progressing, and has recent economic or political uncertainty affected these conversations?
A: John Kousinioris stated that discussions with potential customers, including hyper scalers and co-locators, are ongoing and constructive. Recent economic or political uncertainties have not significantly impacted these discussions. The focus remains on supply chain considerations, particularly regarding the time to delivery for key components.
Q: What is the strategic aim of potential M&A of legacy gas assets in the U.S., and how does it align with TransAlta's capabilities?
A: John Kousinioris highlighted that TransAlta's strategy is to leverage its expertise in running various types of generation, customer solutions, and energy marketing. The aim is to create a platform for growth in the U.S., particularly in the Pacific Northwest, aligning with TransAlta's internal skills and capabilities to create shareholder value.
Q: How does TransAlta plan to manage its investment capacity and maintain its target debt-to-EBITDA ratio?
A: Joel Hunter explained that TransAlta aims to maintain a debt-to-EBITDA ratio of 3 to 4 times, providing financial flexibility. They exited last year at 3.6 times and have capacity for investments in the range of $500 to $750 million without needing to issue equity or sell assets. However, they remain open to asset sales or equity issuance if larger opportunities arise.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
