TransAlta buys renewable assets, offsets coal-fired generation

Coal-based TransAlta makes first acquisition of renewable energy generating

TransAlta Corp. (TSX:TA) has signed a deal to buy 71 megawatts of solar and wind power generation capacity in the U.S. in a deal worth US$75.8 million.

The assets acquired from an affiliate of Rockland Capital LLC include 21 MW of solar projects in Massachusetts and a 50 MW wind facility in Minnesota.

The company said the projects are contracted under long-term power purchase agreements ranging from 20 to 30 years.

TransAlta has been working to reduce its reliance on coal-fired power plants in recent years.

Chief executive Dawn Farrell says the deal marks the company’s first solar power project as it works to diversify its portfolio.

“The expansion into new geographic markets and technologies further enhances our position as a leader in renewable energy and provides potential for future opportunities in the U.S solar and wind space,” Farrell said in a statement Monday.

TransAlta is a major power producer based in Calgary with assets in Canada, the U.S. and Australia.

The solar facilities, consisting of four ground mounted projects and four roof-top projects, are all long-term contracted with solid cash flows from multiple counterparties, TransAlta said in the release.

The solar assets are qualified under phase one of the Massachusetts Solar Renewable Energy Credit (SREC-I) program, established to encourage investment in distributed solar generation.

The wind facility, which uses 32 GE 1.5 MW XLE turbines, has been operational since March 2014 and is contracted under three long-term power purchase agreements until 2034 with high quality counterparties.

“The acquisition marks our first solar project and aligns with our strategy of growing our renewables platform, diversifying our portfolio, and increasing the pipeline of assets for potential future drop-downs into TransAlta Renewables,” said Farrell.

TransAlta – Investment Highlights

• Attractive cash-on-cash yield acquisition metrics of approximately 9.6%, and TEV/EBITDA of 8.8x

• Expands TransAlta’s renewable platform in the U.S. and into solar

• Combined with the recent wind assets to be acquired through the Suncor transaction, expands the potential drop-down candidates for TransAlta Renewables

• Long-term contracted cash flows with high quality counterparties

• Provides further geographic, technology and counterparty diversification

With files from The Canadian Press.