TransAlta Corp. Q2 FY2025 earnings call

• Acknowledged operating on traditional territories of Indigenous Peoples across Canada, Australia, and the US. • Delivered adjusted EBITDA of $349 million, free cash flow of $177 million, and 91.6% average fleet availability in Q2 2025. • Successfully recontracted Melancthon 1, Melancthon 2, and Wolfe Island wind facilities in Ontario, with new contracts extending to 2031 and 2034. • Engaged with Alberta government and AESO on data center strategy and restructured energy market design. • Progressed on Alberta data center strategy, with AESO releasing Phase 1 details and commencing Phase 2. • Actively engaged in commercial negotiations for Centralia site, targeting definitive agreement by year-end.

Hydro segment adjusted EBITDA increased to $126 million from $83 million last year. Wind and Solar segment produced adjusted EBITDA of $89 million, inline with Q2 2024. Gas segment adjusted EBITDA decreased to $128 million from $142 million in 2024. Energy Transition segment delivered adjusted EBITDA of $19 million, a $17 million increase year-over-year. Energy Marketing adjusted EBITDA decreased by $13 million to $26 million. Corporate adjusted EBITDA was in line with last year at $39 million.

• Remain confident in meeting 2025 guidance range. • Higher adjusted EBITDA offset by higher sustaining capital expenditures and net current tax/interest expenses. • Expect to continue optimizing fleet and reducing production in low-priced, high-supply hours. • Increased hedge position for next year to approximately 7,000 gigawatt hours at an average price of $67 per megawatt hour.

• Uncertainties in finalizing terms for data center MOU. • Potential impacts of changes in carbon pricing policies. • Dependencies on timely execution of demand transmission service contracts and Phase 2 developments.

Q: What are the gating factors to successfully execute an MOU for data centers?

A: It takes time to finalize all terms associated with the MOU, as we're working with customers and the AESO's approach to data centers has evolved. There aren't significant impediments, just the need for time to get it done properly.

Q: Update on midlife natural gas M&A?

A: There's an increasing focus on midlife natural gas M&A, with opportunities seen south and north of the border, particularly in core markets like the West, PAC Northwest, and Desert Southwest. Interest also extends to renewables, with overlapping multiples in some areas.

Q: Timeline for data center MOU?

A: The timeline has shifted due to clarity from the AESO in June on data center phases. While the DTS is expected to be executed in mid-September, the MOU timeline is separate and progressing orderly, with confidence in the process.

Q: Potential fleet investments in Alberta?

A: Modest capital investment is needed, as units are in good shape operationally. The fleet has optionality, and relatively modest capital (tens of millions) is required to ensure units can run, with focus on meeting load growth in the 2030s.

Q: Carbon credit sales and data center discussion?

A: Carbon pricing continuation is assumed for planning. Environmental attributes from Hydro and Wind are valuable, monetized to ensure fleet competitiveness and meet data center customer needs, providing a significant advantage.