Australia has beautiful,quiet beaches like the one in the picture above and Transalta built 2 power projects near the beach in Australia in 2017.They built the South Hedland gas transmission project and the Solomon Power Station.But they lost the contract to supply power from the Solomon Power Station and had to sell the power station at a loss in 2018.They took a small loss in the first quarter and a very large loss ($105 million) in Q2.There may be a another small loss in Q3 but it appears that the worst is over.In addition, prices for power and other Transalta services have moved up in Alberta. In total,Q2 showed mixed results as although free cash flow was higher by $66 million over 2017 adjusted EBITDA was down by almost 20% over 2017.
Q2 and 6 Months
The second quarter showed funds from operations at $188 million almost the same as in 2017.But free cash flow showed a 220% increase from $30 million to $96 million.And for 6 months free cash flow increased from $209 million to $334 million.While net debt decreased by $345 million resulting in a debt/equity ratio of 3.0.At the same time TA acquired two construction ready wind projects in United States.TA also purchased and cancelled 587,300 common shares.And TA's interest in Transalta Renewables reduced from 64 to 61%. TA exercised the early redemption of 6.40% debentures due November,2019 for $425 million funded from a coal bond offering of $345 million at a lower interest rate.These pretty good results were somewhat marred by the charge against income from The Solomon Power Station sale.
Overall Results
Transalta Power has improved it's finances considerably since 2015.For example, it has acquired 3 or 4 wind projects which have been transfrerred to Transalta Renewables which kept it's majority interest in RNW.And it has produced a steady cash flow that has been used to reduce it's debt and was up this quarter.Transalta was trading higher until the first quarter of 2016 when it reduced it's dividend and the stock fell to the $4 area (see workathon 22/02/2017 and 25/10/2016).It has gradually climbed back to the $7.50 level.The cash flow used to pay it's dividend has been used to pay down debt for which in total $1.2 billion has been eliminated since 2015.Transalta Power will continue it's steady climb back to $8.50.The loss on the Solomon power plant will slow it down temporarily.But more importantly this climb will be helped by the increase in oil prices and power prices in Alberta.
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