November 28, 2016 - 9:15 AM EST
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Blog Coverage Transalta Signs MoU with the Government of Alberta to Receive Compensation for Premature Closure of its Coal-Fired Power Plants

Upcoming AWS Coverage on NiSource Post-Earnings Results

LONDON, UK / ACCESSWIRE / November 28, 2016 / Active Wall St. blog coverage looks at the headline from Transalta Corp. (NYSE: TAC) as the company announced on November 24, 2016, that it has signed an Memorandum of Understanding (MoU) with the Government of Alberta, Canada, wherein it accepted compensation for prematurely closing three coal-fired power plants – Keephills 3, Genesee 3, and Sheerness. As part of the MoU the three plants which are in Alberta, Calgary, Canada, will close their operations completely on or before December 31, 2030. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of Transalta's competitors within the Diversified Utilities space, NiSource Inc. (NYSE: NI), reported on November 01, 2016, third quarter 2016 earnings. AWS will be initiating a research report on NiSource in the coming days.

Today, AWS is promoting its blog coverage on TAC; touching on NI. Get all of our free blog coverage and more by clicking on the links below:

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TransAlta is Canada's largest publicly traded electricity generator and marketer. It currently owns 3,866 megawatts of generating capacity, about 34% of Alberta's installed generating capacity. Approximately 91% of its generating capacity falls under the government's power purchase agreements.

Commenting on the development, Dawn Farrell, President and CEO, said:

"We have reached a mutually beneficial agreement on the transition payments to enable the coal retirements in the post-2030 period and memorialized our intention to work collaboratively with the government in a manner that supports TransAlta's future investment in Alberta."

Terms of the MoU

As per terms of the MoU, Alberta's government will pay TransAlta $37.4 million annually in cash as transition fee. The annual payments will start in 2017 and continue till 2030 when the coal-fired power plants are to be shut completely.

TransAlta will work with the Alberta's government on the climate change plans and help it reach its objectives.

TransAlta and Alberta's government will work together to develop policy framework and assist in moving from coal-fired power generation to a more environmentally sustainable gas-fired power generation.

Though the three coal-fired power plants will discontinue use of coal for power generation, the plants need not shut down completely. They will be free to use any other mode of power generation including, solar, gas-power, hydro-based or wind-based technology.

TransAlta will be able to participate in the capacity auctions held by Alberta's government to meet the electricity demands of the region during the transition period.

The terms of agreement are not legally binding to the government of Alberta and it is not under obligation or any restrictions as a result of signing of the MoU.

Future plans

On November 25, 2016, TransAlta revealed its plans to develop a pumped hydro project at Brazeau dam in Drayton Valley. Once it secures a long-term commitment from the government of Alberta, it plans to start the construction of the power project in 2021. TransAlta also has plans to convert some of its coal-fired power plants to gas-powered plants by 2023. The move to shift was already in the wings; however, TransAlta was awaiting clarity on the government's stance on emission standards and coal compensation.

The annual transition fees received from the government of Alberta will help the company fund its investments in the new ventures. It will also help in alleviating investors' sentiments and increase confidence in the company's future.

Background

Alberta's Government announced on November 24, 2016, that it would compensate the three coal-fired electricity manufacturing companies – TransAlta Corp., Capital Power, and ATCO for the closure of their power plants ahead of time by 2030. Since these companies would be facing losses on their investments due to the premature closing of their plants, the government of Alberta has agreed to compensate the companies to the tune of $1.36 billion. The government would make annual total payments of $97 million to the companies, which would start in 2017 and end in 2030. The government will be using funds collected as carbon tax from large industrial emitters to make these payments and will not burden the consumers with a higher power bill.

The Alberta's government is looking at a cost-effective alternative to reduce greenhouse gas emissions and will be able to address 55% of the coal-fired power generation with this move. The government is also looking at energy auctions to boost storage and availability of electricity during the period of transition. It also plans to cap the cost of electricity to 6.8 cents a kilowatt/hour in the short-term so that homeowners are not affected by any price rise during the transition period.

Alberta's government had hired Terry Boston, a US electricity expert as a consultant to negotiate a coal phase-out with the coal-fired power manufacturers.

Sceptics are of the view that the government's step is a way to pre-empt any legal action from the affected companies for cancellation of contracts.

Stock Performance

Last Friday, the stock closed the trading session at $5.30, surging 24.71% from its previous closing price of $4.25. A total volume of 330.51 thousand shares have exchanged hands, which was higher than the 3-month average volume of 47.56 thousand shares. Transalta's stock price rallied 18.57% in the last month, 21.85% in the past three months, and 31.10% in the previous twelve months. Furthermore, since the start of the year, shares of the company have surged 52.77%. The company's shares have a dividend yield of 2.30% and currently have a market cap of $1.55 billion.

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Source: ACCESSWIRE Investor Awareness (November 28, 2016 - 9:15 AM EST)

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