Transalta Power continues to Rebuild

This blog has watched and analysed Transalta Power (TA) since 2016.During this time blogs have been written on Wordpress,Linkedin and Workathon.And during this time Transalta has changed dramatically. It was in 2016 that Transalta reduced it's dividend by 80% to $.045 per quarter.However through a series of dividend increases (in 2021 and 2022) and recently that the present dividend is $.07 per quarter.The original decision to cut it's dividend created a lot of damage to it's stock price.But  management underwent changes and thedividend cut was approved so there would be more cash to transform it's operation from coal based to natural gas..Changes continued until 2025.So that now Transalta has no coal based power generation.

  Transalta also had a large stable of  renewable energy operations.These were chiefly wind, hydro and solar power generators.They were safer and cleaner but not producing large amounts of profit.Transalta decided to first form a separate company called Transalta Renewables and then to buy up Transalta Renewable shares.Now it owns 80% of Transalta Renewables which produces a small but steady cash flow to TA shareholders.This helps to stabilize the TA share price.TA shares are not as volatile as other shares and even as other utility shares.As it's beta statistic is.43 .In other words for every 1% change in the TSX index TA only moves .43%,

  In 2016 Transalta had a substantial percentage of it's power generation coming from coal.But the Alberta government forced them to close their coal operations and change the power source to natural gas powered generation.This made the output more stable.And they got cash subsidies for doing the conversion.At about this time TA decided to delist Transalta Renewables and include it as an asset of Transalta Power.Consequently by 2021 with both of these operations almost completed TA  had increased it's assets and it's market cap.But net income had not completely bounced back nor had it's dividend.

  In 2022 it made a venture into Australia.It built a combined-cycle generator in South Hedland and another plant that shares it's power with the massive BHP ,an Australian miner.Neither one is massively successful and they divert resources away from it's main thrust in North America.These projects are the main assets of Transalta Australia.TA Australia is a sizeable operation.Although the value of the assets were not obtained the annual revenue is about $500 million.This blog believes that  TA must obtain greater scale in Australia. or divest much of it to generate some cash.Especially after it has just acquired 2 generating facilities in Wyoming for 1 billion U.S. dollars..

 Transalta operations,especially amongst the renewable energy assets still has quite a few marginal power energy generators.And it has it's assets too spread out.This blog is recommending that some of it's non-core operations be divested for cash.Especially after the announcement that it is acquiring two plants in Colorado for $1 billionThe stock price fell by $2 after this announcement..In addition, it announced an $350 million equity offering that will help to pay for the two new plants.This brought the price back almost $1.It is suggested that non-renewable plants that are not very profitable and an unmanageable distance from Alberta should be looked at quite closely.This would include their Australian operations although they are not totally non-renewable.Savings here might open the possibility for a slightly larger dividend a couple of years out.But Transalta does not have the cash now for a dividend raise.

  Dale Mcintyre has a masters degree in economics.He writes articles (freelance) for Marketbeat,Yahoo Finance and Zacks Research.