TransAlta Q4 Earnings Call Highlights

Key Points

• TransAlta reported a strong 2025 with Adjusted EBITDA of CAD 1.1 billion, free cash flow of CAD 450 million (CAD 1.73/share) and 92.3% fleet availability, but guided lower for 2026 to Adjusted EBITDA CAD 950M–1.1B and free cash flow CAD 350M–450M largely due to Centralia ceasing operations and weaker Alberta power prices.
• The company signed an MOU with CPP Investments and Brookfield to develop a data center at Keephills with an initial ~230 MW PPA and potential expansion up to 1 GW, and separately has a tolling agreement to convert Centralia Unit Two to a 700 MW gas unit with ~$600 million capex, targeted FID in early 2027 and commercial operation in late 2028.
• TransAlta closed the acquisition of Far North Power for CAD 95 million (adds 310 MW and ~CAD 30M average annual Adjusted EBITDA), increased its dividend by 8% to CAD 0.28 annualized, and completed a leadership transition as Joel Hunter becomes CEO.

TransAlta NYSE: TAC executives highlighted what they described as a strong 2025 performance while outlining a lower 2026 outlook driven largely by the end of operations at Centralia and continued pressure on Alberta power prices. Management also provided new details around a data center memorandum of understanding (MOU) tied to its Keephills site, progress on the Centralia coal-to-gas conversion, and recently closed M&A activity in Ontario.

2025 results and operating backdrop

CEO John Kousinioris said TransAlta “delivered strong performance during 2025” while advancing strategic priorities. The company reported Adjusted EBITDA of CAD 1.1 billion and free cash flow of CAD 450 million, or CAD 1.73 per share, alongside average fleet availability of 92.3%. Kousinioris noted that lower power pricing in Alberta, subdued market volatility, and lower wind resources affected the operating environment, contributing to Adjusted EBITDA landing at the lower end of expectations, while free cash flow was slightly above the midpoint of 2025 guidance.

Management also pointed to record safety performance, citing a total recordable injury frequency rate of 0.12 in 2025 versus 0.56 in 2024 and a target of 0.37.

Key strategic developments: data centers, Centralia, and Far North Power

Incoming CEO Joel Hunter announced an MOU with CPP Investments and Brookfield to advance a data center development in Alberta, under which TransAlta would be the exclusive site and power provider. Hunter said the framework contemplates phased development at the company’s Keephills site in Parkland County, including an initial long-term power purchase agreement for approximately 230 MW and the evaluation of additional phases aggregating up to 1 GW of demand.

On timing, management said it expects definitive agreements to be completed “in year,” and indicated ramp-up would be gradual. Executives declined to provide additional commercial terms such as risk sharing and termination provisions, citing restrictions under the MOU, but emphasized that the arrangement includes a long-term PPA that contracts merchant cash flows.

Separately, TransAlta reiterated details of its long-term tolling agreement with Puget Sound Energy (PSE) to convert Centralia Unit Two from coal to natural gas. Hunter said the agreement provides a fixed-price capacity payment and grants PSE exclusive rights to capacity, energy, ancillary attributes, and dispatch rights to the 700 MW facility. Once converted, the unit would be fully contracted until 2044. The company expects approximately $600 million in capital expenditures for the conversion and life extension, with an anticipated build multiple of 5.5x. The target commercial operation date is late 2028, with a final investment decision (FID) targeted for early 2027 after approvals.

Management also discussed a temporary U.S. Department of Energy order requiring the facility to remain available to operate for 90 days through March 16, 2026. Executives said TransAlta is complying and does not expect the order to impede conversion work; the company said its 2026 outlook does not include any impact from the order because it expects to recover related costs.

On M&A, Hunter said the acquisition of Far North Power Corporation closed earlier in the month. The portfolio includes four natural gas-fired facilities totaling 310 MW (Iroquois Falls 120 MW, Kingston 110 MW, North Bay 40 MW, and Kapuskasing 40 MW). The assets were acquired for CAD 95 million and are expected to add about CAD 30 million of average Adjusted EBITDA per year, with roughly 68% of gross margin contracted to 2031.

Quarterly and segment performance

For the fourth quarter, TransAlta generated CAD 247 million of Adjusted EBITDA, which Hunter said was CAD 35 million lower than Q4 2024, primarily due to lower Alberta and Mid-C power prices and subdued market volatility affecting energy marketing.

• Hydro: Adjusted EBITDA of CAD 39 million (down from CAD 57 million), driven by lower spot power and ancillary prices in Alberta and lower merchant volumes.
• Wind and solar: Adjusted EBITDA of CAD 102 million (higher year over year), reflecting higher wind resource and availability.
• Gas: Adjusted EBITDA of CAD 96 million (down from CAD 116 million), mainly due to lower realized Alberta power prices and higher carbon pricing, partially offset by Heartland, higher Sarnia production, and favorable hedge settlements.
• Energy transition: Adjusted EBITDA of CAD 16 million, down CAD 10 million year over year due to lower Mid-C prices, partly offset by lower purchased power costs and favorable hedge settlements.
• Energy marketing: Adjusted EBITDA of CAD 21 million, down CAD 5 million on subdued market volatility.

Free cash flow in the quarter was CAD 93 million, up CAD 47 million year over year, which management attributed to the items above and lower sustaining capital expenditures.

Alberta pricing, hedging, and optimization

Hunter said Alberta’s average spot price was CAD 44/MWh in 2025, down from CAD 63/MWh in 2024, citing incremental new gas, wind, and solar supply and milder weather. Despite lower prices, management highlighted portfolio optimization and hedging performance:

• The gas fleet captured an average price of CAD 66/MWh, a 50% premium to the average spot price.
• The hydro fleet realized an average price of CAD 58/MWh, a 32% premium.
• Merchant wind realized an average price of CAD 24/MWh, impacted by increased intermittent supply in Alberta.
• TransAlta benefited from about 8,600 GWh of hedges at CAD 70/MWh on average and delivered roughly 3,900 GWh of ancillary service volumes, while increasing ancillary service volumes by 9% year over year through fleet optimization.

Looking ahead, management said it has approximately 8,500 GWh of Alberta generation hedged for 2026 at an average price of CAD 65/MWh, and about 4,000 GWh hedged for 2027 at CAD 71/MWh.

2026 outlook, capital priorities, and leadership transition

For 2026, management guided to Adjusted EBITDA of CAD 950 million to CAD 1.1 billion and free cash flow of CAD 350 million to CAD 450 million (or CAD 1.18 to CAD 1.51 per share). Factors cited included Centralia ceasing operations at the end of 2025, expectations for Alberta spot power prices of CAD 40 to CAD 60/MWh, a lower average hedge price than 2025, lower contributions from Sarnia due to contracted pricing stepping down, and the expiry and decommissioning of the Ada facility in Michigan. Offsetting items include expected realization of carbon credits against compliance costs in Alberta.

The company also announced an 8% increase in its common share dividend to CAD 0.28 per share on an annualized basis, marking the seventh consecutive annual increase, according to Kousinioris.

On capital and funding, executives said phase one of the Keephills data center opportunity requires “negligible” capital from TransAlta, with modest spending related to grid connection. For Centralia, management described the capital spending profile as manageable, with spending expected in 2027 and 2028 following a targeted FID in early 2027. Hunter said the company has “a number of levers,” including asset rotation, and referenced an option held by Brookfield to convert debt and hybrids into hydro equity up to the end of 2028, potentially increasing Brookfield’s ownership in hydro assets up to 49% if exercised.

Finally, Kousinioris said this was his last quarterly conference call as CEO and stated he fully supports Hunter as the next President and CEO. Hunter said he would announce a CFO successor in coming months.

TransAlta said it will host an Investor Day in Toronto on March 23, where it plans to provide a strategic update and a longer-term financial outlook, which Hunter said may extend to 2029 and factor in assumptions including Alberta power prices, phase one of the data center initiative, and Centralia returning to service later in 2028.

About TransAlta NYSE: TAC

TransAlta Corporation, originally founded in 1909 as Calgary Power Company Ltd., is a publicly traded energy company specializing in the development, ownership and operation of power generation and transmission assets. Headquartered in Calgary, Alberta, TransAlta has grown from its early hydroelectric roots into a diversified energy provider with a multi-fuel generating fleet.

The company's core business activities encompass power generation, asset management and energy trading services.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.