TransAlta Corporation (TAC - Free Report) announced that Brookfield Renewable Partners (BIP - Free Report) and its institutional partners will make an investment of $750 million, which will enable TransAlta to achieve its goal of transition to 100% clean energy by 2025. The funding will also assist TransAlta to enhance the value of its shareholders.
Details of Investment and Utilization
The investments will be made in two tranches, both having an interest rate of 7%. The first tranche of $350 million, in the form of Exchangeable Debentures, is expected in May 2019. The second tranche of $400 million, in the form of Redeemable Preferred Shares, is anticipated in October 2020.
TransAlta will utilize $350 million to advance the company's coal to gas transition strategy, up to $250 million to buy back shares over three years, and the remainder of the investment to advance the development of existing and new growth projects, and for general corporate purposes.
Long-Term Goals of TransAlta
In addition to transition to clean energy, TransAlta targets to reduce senior indebtedness to $1.2 billion by the end of 2020. To that end, it aims to lower recourse debt of the company by 60% in 2020 from 2015 levels. It will utilize internally generated cash flow and contribution from its new growth projects to redeem outstanding debts.
TransAlta’s Canadian coal to gas conversion will extend cumulative fleet life by nearly 75 years, and lower fixed and sustaining costs by roughly 15%, which will definitely have a positive impact on margins of the company.
Rising Focus on Clean Energy
Per a release from the U.S. Energy Information Administration (EIA), the United States will add 72 gigawatts (GW) of new wind and solar photovoltaic (PV) capacity between 2018 and 2021, courtesy of declining capital costs and the availability of tax credits. EIA also projects nearly 101 GW of coal fired generation to retire by 2050.
TransAlta is also playing a significant role to lower emission level by gradually shifting toward clean energy.
Shares of TransAlta Corporation have outperformed the industry in a year’s time.
TransAlta currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other top-ranked stocks from the same industry include Alliant Energy Corporation (LNT - Free Report) and IDACORP Inc. (IDA - Free Report) , both holding a Zacks Rank #2.
Long-term earnings growth of Alliant Energy is projected at 5.96%. The Zacks Consensus Estimate for 2019 has moved upward by 0.9% in the past 60 days to $2.24 per share.
Long-term earnings growth of IDACORP is pegged at 3.88%. The Zacks Consensus Estimate for 2019 has been upwardly revised by 0.5% in the past 60 days to $4.44 per share.
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