TransAlta Corp. Q4 FY2024 earnings call

Key points include: Closing the Heartland acquisition and integrating its assets; growth team completing projects like Horizon Hill Wind, White Rock wind facilities, and Mount Keith transmission expansion; returning $214 million to shareholders; reducing CO2 emissions by 70% since 2015 and ceasing coal-fired generation by end of 2025; Board approving an 8% dividend increase; and advancing contracting and development opportunities at legacy thermal sites.

The Hydro segment generated adjusted EBITDA of $316 million for the full year, with Q4 adjusted EBITDA of $57 million. The Wind and Solar segment delivered adjusted EBITDA of $316 million for the full year, a 23% increase compared to 2023, and $95 million in Q4, a 16% increase. The Gas segment achieved 92.2% availability and had adjusted EBITDA of $535 million for the full year, with Q4 adjusted EBITDA of $116 million. The Energy Transition segment had full year adjusted EBITDA of $91 million (decrease) and Q4 adjusted EBITDA of $28 million. The Energy Marketing segment had full year adjusted EBITDA of $131 million (20% increase) and Q4 adjusted EBITDA of $27 million (increase).

2025 adjusted EBITDA is expected to be in the range of $1.15 billion to $1.25 billion, and free cash flow in the range of $450 million to $550 million. Expect to make accretive share buybacks in 2025 of up to $100 million. Focus on maintaining adjusted debt-to-EBITDA in 3x to 4x range, returning capital to shareholders, and pursuing growth opportunities while maintaining balance sheet strength.

Q: Good morning, everyone. Just taking a look at the 2025 priorities, they include strategic M&A. When you think about kind of the geographies, or asset types or modalities that you're looking at, what are most attractive and what are the least attractive?

A: Good morning, Robert, why don't I start responding to the question, and maybe I'll turn it over to Joel to add any color that he has. So look, we are seeing a number of opportunities throughout North America, particularly in the United States from an M&A perspective. And broadly speaking, they fall into two categories from our perspective, one is legacy gas assets that we see operating in certain jurisdictions. And interestingly for us, renewables. There's a lot of focus on natural gas-fired generation right now, and we're actually seeing potentially, at times, better value of renewables side than on the gas side. In terms of the geographies, I would say that we're primarily focused on, I think Joel is fair to say, kind of Western North America. So there is Alberta, but our focus is much more on the western part of the United States. With a particular focus on, I would say, the Pacific Northwest and the Desert Southwest right now, as being sort of core just focus areas for our organization. We have a lot of expertise trading power in the region. We've operated in the Pacific Northwest, for a considerable period of time. And are extremely comfortable with the region and, candidly, like its long-term prospects when we're looking at load growth, and all of the opportunities we see there. Joel, I don't know if you want to add anything to that.

Q: All right. Really appreciate that color. And then maybe just moving over to the Keephills data center development. You're now in the technical kind of phase. Can you maybe add a little bit more color on what you think a potential outcome could be here? Is this just bringing back some existing, or improving the reliability and kind of utilization of existing capacity? Or could there be something more fulsome here, including further developments? Can you maybe just put some outcomes of what this could look like?

A: Yes. Happy to. I think the way we're thinking of it is actually in - I think it's fair to say, a three-phased approach. So Keephills would be the initial campus that we're focused on, as an offering for data centers, followed by Sheerness. So we're quite pleased by what we're seeing at Sheerness from a potential perspective. And then with a focus after that, more around Sundance, which is probably. Joel, I think it's fair to say more in the vein of a bit more of a redevelopment, piece there for Sundance. Right now, we would envision - and the work that we're doing is primarily around Keephills 2 at the moment as an offering. The idea would be that, that unit would provide, notionally, behind-the-fence extension for a data center, but with a connection to the grid. So 90% or so would be powered essentially from our unit there, with the remaining 10% of reliability coming off of the grid. The work we've done is pretty extensive. We have a lot of the opportunity mapped out, everything from geotechnical work in terms of where the data center actually locate, because they actually require quite a large footprint in terms of what they would require. Right through to looking at, how the water would flow to cool the facility, how the electrons would flow either from the grid, or from the facility to a substation, to be stepped down to actually work for the facility. We've done zoning work there. The county is very, very supportive, and we have a real good handle on the fiber network and what its capabilities are. So we're optimistic. But our goal is, to be in a position where we have really done an extensive set of preliminary work, to make kind of the commercial offering and the technical assessment, for our customers as easy as possible. So we're front-ending deliberately from our perspective, as much as we can in terms of the offer that we'll be providing. And our discussions continue.