Transalta Power is in the Gas Transmission Business

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   Transalta Power has  made a number of moves to improve earnings and EBITDA.Most importantly they completed the extension of the Pioneer Pipeline to it's Sundance and Keephills generating units, in Alberta, ahead of schedule.If this project earns a positive return Transalta (TA) would be wise to expand this part of their business.Transalta is also proceeding with the coal to gas conversion on Sundance Unit 6 and their 100% owned Keephills 3.In addition, they filed a normal course issuer bid to purchase 2.4 million publicly traded shares at $21 million.Lastly they issued $350 million of debentures to repay Brookfield Asset Management for their investment.All of these transactions should help to move their stock up.
         Second Quarter Highlights
       EBITDA was $215 million for 3 months and $436 million for the 6 month period - a decline of $33 million and $48 million over 2018.However still in line with annual guidance expectations. There were small reductions in EBITDA from all operations except for Canadian coal.TA is still spending a significant amount of capital and energy converting their coal plants to gas.Free cash flow was $49 million which was in line with expectations.And TA believes that they will meet the top end of free cash flow guidance of $270 to $330 million.Still Transalta expects a pre-tax loss of $155 to $205 million mainly resulting from a write-down of their existing Keephills 3 operation.This,of course, is only an accounting transaction. and serves to reduce income tax.                                 

         More Changes to Come
     Transalta continues to buy new wind facilities and transfer them over to Transalta Renewables for which it has a majority control stake.It also continues to convert it's coal operations to gas feed operations.So in 2019 free cash flow will fall from $524 million to the $350 million area.And net income will be negative because it is taking a $205 million write-off from the conversion of a coal operation to gas feed.Investors are forced to use adjusted EBITDA to measure Transalta performance.And adjusted EBITDA will be about the same as in 2018,perhaps a bit lower.And TA has purchased 2.5 million shares to help increase e.p.s.
    But the main difference between Transalta Power in 2018 and 2019 is the acquisition of the Pioneer Pipeline and the $750 million investment y Brookfield Asset Management.These changes will be gradual but TA is starting to move in a new direction.This blog would like to see even greater involvement by Brookfield.And this blog would like to see TA sell off one or two of it's divisions that never see any growth in earnings,namely, it's coal and hydro operations.Like the captain above who has too many different ships to manage.The U.S. coal operation,in particular, has been a drag on earnings and would make a nice package  that could help reduce debt if unloaded.         http://www.aimco.com/ https://www.brookfield.com/