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TransAlta coal shutdown leads to exodus of skilled miners

TransAlta Corp.'s plan to shed staff at an Alberta coal mine is running ahead of schedule and causing headaches for the province's largest power generator.

Productivity at the company's giant surface coal mine adjacent to two central Alberta generating plants has been hurt as miners facing future layoffs defect to new positions in Canada's busy mining sector. The problem at the Highvale mine that feeds the company's Sundance and Keephills generators will persist throughout 2017, even as TransAlta brings in contractors to cover the labor shortfall, CEO Dawn Farrell said on the company's second-quarter conference call.

Alberta's government has accelerated the shutdown of coal-fired generators that provide much of its baseload power. All coal plants are legislated to shut down by 2030, although TransAlta and other operators plan to convert existing facilities to gas burners much sooner, leading to significant mining curtailment. TransAlta operates Highvale, which produces about 13 million metric tons of low-sulfur coal annually, through its SunHills Mining LP. While the government has offered programs to ease the coal transitions, miners facing an uncertain future are moving to more-secure jobs.

"In November we announced the new policy framework which included the off-coal payments for TransAlta as we move towards getting off coal in this province," Farrell said on the Aug. 10 call. "Then by April, TransAlta announced our intention to advance our movement off coal on to gas of our power plants. So effectively what that did, unfortunately, is really, really made a lot of the people that worked up in that mine nervous."

Productivity at Highvale, located about 70 kilometers west of Edmonton, Alberta, was significantly impacted by the labor constraints in the second quarter, CFO Donald Tremblay said on the call. The fuel shortfall will affect Sundance units 1 through 6 and Keephills units 1 to 3, he said. While the labor drought will last throughout the year, the company expects generation at the plants to be reduced for a shorter period as it rebuilds coal inventories. Farrell admitted that the higher-than-expected attrition rate caught Calgary, Alberta-based TransAlta off-guard.

"Where we got behind is, as there was higher attrition and people leaving — experienced people leaving to go up north — we were having trouble getting experienced people to work for the mine because of its expected short time frame," Farrell said. "People don't want to move their families in if they think they're only going to be there for three or four years. So we got behind on our hiring and that caused an issue that we didn't get ahead of fast enough."

On Aug. 9 TransAlta reported second-quarter 2017 comparable EBITDA of C$268 million, up C$20 million year over year from C$248 million in the same period of 2016. On a net basis it had a loss attributable to common shareholders of C$18 million, or 6 Canadian cents per share, compared to net earnings of C$6 million, or 2 cents per share, in the 2016 second quarter. The company said the loss was partially due to accelerated depreciation of power plants affected by the coal phase-out program.