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Introduction & Market Context
TransAlta (NYSE:TAC) Corporation (TSX:TA) presented its first quarter 2025 financial results on May 7, 2025, revealing a year-over-year decline in adjusted EBITDA amid lower spot pricing in Alberta’s electricity market. The company’s stock closed at $12.45 on the day of the presentation, down 2.01% in response to the results.
Despite the earnings decline, TransAlta highlighted its successful hedging strategy, which continued to deliver significant premiums above spot market prices, and outlined progress on several strategic growth initiatives including its investment in Nova Clean Energy and the repurposing of legacy generation sites.
Quarterly Performance Highlights
TransAlta reported first quarter 2025 adjusted EBITDA of $270 million, down from $342 million in the same period last year. Free Cash Flow (FCF) reached $139 million or $0.47 per share. The company maintained strong operational performance with fleetwide availability of 94.9%.
As shown in the following segmented results chart, most business units experienced year-over-year declines, with Hydro and Gas segments showing the most significant decreases:
The company’s Wind and Solar segment was a bright spot, growing from $89 million to $102 million, while the Energy Transition segment improved from $27 million to $37 million. However, these gains were offset by declines in other segments, particularly Hydro (down from $87 million to $47 million) and Gas (down from $125 million to $104 million).
TransAlta’s hedging strategy continued to deliver value, with the company achieving significant price premiums compared to Alberta’s spot market prices. The following chart illustrates how different segments of TransAlta’s portfolio performed relative to average spot prices:
The company’s hedged power price commanded a 178% premium to spot prices, while its Hydro assets achieved a 175% premium and Gas assets a 140% premium. This hedging approach has been crucial in maintaining financial stability despite lower spot market prices.
TransAlta’s forward hedging position also provides visibility into future earnings, as illustrated in this chart showing hedged volumes and prices through 2026:
The company noted that a $1 per MWh change in spot price would result in approximately $2 million impact on adjusted EBITDA for the balance of the year, highlighting the importance of its hedging program in reducing earnings volatility.
Strategic Initiatives
TransAlta is advancing several strategic growth initiatives, with a particular focus on its investment in Nova Clean Energy. This partnership gives TransAlta access to a development pipeline of over 4 GW of clean energy projects in the Western Electricity Coordinating Council (WECC) region.
The company is committing up to US$175 million to Nova Clean Energy through a revolver and term loan structure, which provides TransAlta with an annual return on capital and is secured against project values. The partnership includes an exclusive option to purchase advanced-stage clean energy projects at attractive risk-adjusted returns.
TransAlta is also making progress on repurposing its legacy generation sites, with significant opportunities at Centralia in Washington state and Keephills in Alberta:
The Centralia site, with approximately 12,000 acres of owned land, offers potential for 650+ MW of generation capacity using various fuel sources including gas, wind, solar, and battery storage. Commercial negotiations and project engineering have commenced for this site, with commercial operation targeted for 2027 or later.
Similarly, the Keephills Data Centre project in Alberta is advancing, with a virtual data room active and discussions progressing. This site offers 395+ MW of potential capacity and over 1,500 acres of priority land parcels for data centre placement.
Financial Management and Outlook
TransAlta successfully closed a $450 million green note offering during the quarter, which was 2.8 times oversubscribed. The 7-year notes carry a 5.625% coupon and allowed the company to repay a $400 million variable rate term loan, strengthening its financial position.
The company maintains solid credit ratings with S&P (BB+ stable) and DBRS (BBB low stable), supporting its financial flexibility for future growth initiatives.
For 2025, TransAlta reaffirmed its guidance with projected adjusted EBITDA of $1.15-1.25 billion and Free Cash Flow of $450-550 million. The company also outlined its key priorities for the year:
TransAlta increased its common share dividend by 8% during the quarter and repurchased 1.9 million shares year-to-date at an average cost of $12.42, demonstrating its commitment to returning value to shareholders while maintaining financial flexibility for growth.
Forward-Looking Statements
TransAlta’s presentation highlighted several forward-looking initiatives, including its progress toward reducing CO2 emissions by 75% from 2015 levels by 2026. The company positions itself as a clean electricity leader with a diversified and increasingly contracted portfolio.
Management emphasized TransAlta’s value proposition as a safe and reliable operator with high-potential legacy energy campuses and the financial strength to pursue growth opportunities. The company’s strategic focus on clean energy development, coupled with its strong hedging program and operational excellence, positions it to navigate the current challenging market conditions while advancing its long-term growth strategy.
Despite the quarterly earnings decline, TransAlta’s presentation demonstrated a clear strategic direction focused on clean energy transition, operational efficiency, and disciplined financial management, providing a roadmap for future growth beyond the current market challenges.
Full presentation:
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