TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA) (NYSE: TAC) announced today (12/17) an investment in the Tidewater gas pipeline and an investment in a wind project in the Alberta market. The Company also provided its outlook for 2019. In summary, TransAlta will:
- exercise its option to acquire 50 percent ownership in the gas pipeline connecting Tidewater Midstream and Infrastructure Ltd.'s ("Tidewater") Brazeau River Complex to TransAlta's generating units at Sundance and Keephills;
- invest $275 million in our 207 MW Windrise wind project, which was selected by the Alberta Electric System Operator ("AESO") as one of the two successful projects in the Renewable Electricity Program ("REP") Round 3; and
- expect to deliver between $270 million and $330 million of free cash flow in 2019.
"We are excited to be building a wind project in Alberta with a long-term contract backed by the Alberta government," said Dawn Farrell, President and Chief Executive Officer. "We are also very pleased to be entering into a strong partnership with Tidewater. The Tidewater pipeline, which is currently under construction, is a key building block in our strategy to convert our coal plants to gas and extends their lives well into the 2030s."
Tidewater Pipeline
TransAlta has exercised its option to acquire 50 percent ownership in the Tidewater gas pipeline. Tidewater will construct and operate the 120 km natural gas pipeline, which will have an initial throughput of 130 MMcf/d with the potential to expand to approximately 440 MMcf/d. The pipeline will allow TransAlta to increase the amount of natural gas it co-fires at its Sundance and Keephills coal-fired units, resulting in lower carbon emissions and costs. As well, the pipeline will provide a significant amount of the gas required for the full conversion of the coal units to natural gas. The investment for TransAlta will amount to approximately $90 million. Construction of the pipeline commenced last month and the pipeline is expected to be fully operational by the second half of 2019. TransAlta's investment is subject to final regulatory approvals.
Alberta Renewable Energy Program Project - Windrise
Our 207 MW Windrise wind project was selected by the AESO as one of the two successful projects in the third round of the Renewable Electricity Program. The Windrise facility, which is in the county of Willow Creek, is underpinned by a 20-year Renewable Electricity Support Agreement with the AESO. The project is expected to cost approximately $275 million and is targeted to reach commercial operation during the second quarter of 2021.
The combined annualized EBITDA from these two projects, based on the first full-year of operation, is in the range of $30 million to $40 million.
Outlook
In addition to these growth initiatives, TransAlta also provided its 2019 Outlook.
For 2019, we expect our annual free cash flow ("FCF") to be in the range of $270 million to $330 million. This range reflects the expiry of the Mississauga contract, the step down in the Poplar Creek contract, and capacity factors for the Sundance units consistent with 2018 levels. The forecast assumes power prices in Alberta to be in the range of $50/MWh to $60/MWh and assumes the current Alberta Carbon Competitiveness Incentive Regulations remain in place throughout 2019.
Click here to read the full press release.
