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TransAlta coal generators get boost amid higher prices, fuel flexibility

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TransAlta coal generators get boost amid higher prices, fuel flexibility

Despite being slated for retirement or fuel transition over the coming years, TransAlta Corp.'s fleet of coal-fired power plants delivered higher profits in the second quarter than in the same period in 2018 as Alberta power prices rose and costs dropped.

Even though total output from the Calgary, Alberta-based company's Canadian coal plants slipped in the second quarter, comparable EBITDA per generated megawatt-hour increased to C$24 in the second quarter from C$16 a year earlier. Performance in the coal segment was stronger than anticipated, and CEO Dawn Farrell said the company now expects to end 2019 at the upper end of its free cash flow guidance. The completion of a pipeline to fuel units at some of its Central Alberta plants allowed TransAlta the flexibility to take advantage of low natural gas prices.

"Canadian coal is higher than expected due to more dispatching at the Sundance facilities in response to some stronger prices in the market and the ability of the plant to co-fire more aggressively now that the Pioneer Pipeline is operational," Farrell said on an Aug. 9 conference call. "The pipeline is flowing about 50 MMcf/d during the start-up phase; firm throughput of approximately 130 MMcf/d of natural gas can commence in November. The completion of that pipeline is the cornerstone towards our strategy of transitioning to gas."

TransAlta plans to convert some coal-fired units to gas, which will allow them to operate beyond their scheduled retirement in 2030. Pioneer, which TransAlta owns jointly with Tidewater Midstream & Infrastructure Ltd., will allow TransAlta to complete the transition to full gas fueling at some units between 2020 and 2023. The company's swap of interests in generating units with Capital Power Corp. will give it full control of its Keephills 3 unit.

"The economic change from this swap is insignificant in the short term; however, we now have complete flexibility in how we operate the mine and transition our assets to gas," Farrell said.

Separately on Aug. 9, TransAlta reported comparable EBITDA of C$215 million for the second quarter, down from C$248 million in the year-ago quarter. The S&P Global Market Intelligence consensus comparable EBITDA estimate for the quarter was C$210.1 million. Farrell said the company anticipated lower EBITDA in 2019 as contracts expired for natural gas-fired plants in Ontario.