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TransAlta prioritizes coal-to-gas conversion work for 2018

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TransAlta prioritizes coal-to-gas conversion work for 2018

TransAlta Corp. will make the switch to natural gas from coal at its generators in central Alberta a priority in 2018 as it pivots to lower-emitting energy sources.

An agreement with a pipeline company will accelerate the fuel switch at the Sundance and Keephills power plants that will allow the company to add 75 years of combined life to the facilities just west of Edmonton, Alberta, and add more than C$1 billion in free cash flow, CEO Dawn Farrell said on a conference call. The transition will allow the plants to operate through 2039 after a deal was reached with provincial and federal regulators. Alberta had ordered all coal-fired plants to be shuttered by 2030.

The company reached an agreement with Tidewater Midstream and Infrastructure Ltd. in December 2017 to construct necessary infrastructure for the project. Alberta's government imposed the coal shutdown as part of a move to increase the share of generation it gets from renewables. A so-called carbon tax was included in the emissions-reform legislation, and Farrell said the Calgary, Alberta-based company's renewables business would provide valuable credits.

"We signed a [letter of intent] with Tidewater ... and that gives [us] natural gas facilities much more quickly than we could have ever anticipated and it allows us to accelerate our conversion-track timeframe by a year," Farrell said on the March 2 call to discuss TransAlta's fourth-quarter 2017 earnings results. By using emissions credits from its renewables portfolio, "depending on the price of carbon, these credits were somewhere between [C]$30 million and [C]$50 million, and will absolutely help us recover some of the lost value that occurred with our coal fleet due to the implementation of the climate leadership plan here in Alberta."

The company continues to talk with the province's grid operator to advance its Brazeau pumped storage project, which would add capacity to an existing hydroelectric facility to be used when intermittent sources such as wind and solar are unavailable. While preliminary engineering and government engagement have been undertaken, Farrell said the project is "a bit on hold" as the Alberta Electric System Operator and other agencies sort out the design of the province's power market and future needs.

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TransAlta is in talks with Alberta's grid operator to advance a pumped storage project at its Brazeau plant.

Source: TransAlta Corp.

"We see that project as a long-term project for Alberta because it basically is going to provide a lot of storage for renewables that are coming on," Farrell said. "Until there's actually a call for either storage or … renewables, and we can qualify in that call, and we can really advance some sort of long-term contract, we can't really do all that much more."

Separately on March 2, TransAlta reported C$275 million in fourth-quarter 2017 comparable EBITDA, a decrease from C$374 million in the fourth quarter of 2016. Despite the year-over-year drop, the result beats the S&P Capital IQ consensus estimate for fourth-quarter 2017 comparable EBITDA of C$263.6 million.