Q2 2024 TransAlta Corp Earnings Call
Chiara Valentini: which is set out here on slide 2, details further in our MD&A, and incorporated in full for the purposes of today's call. All amounts paid by us during today's call. Barring Canadian dollars unless otherwise noted, the non-IFRS terminals we used, including adjusted EBITDA and free cash flow, are also reconciled in the MD&A for your reference. On today's call, John and Joel will provide an overview of TransAlta's quarterly results, and after these remarks, we will open the call for questions. And with that, I will turn the call over to John. Thank you, Chiara.
All amounts referenced during todays call.
Paul.
Alright in Canadian dollars, unless otherwise noted the non I first terminology used including adjusted EBITDA and free cash flow are also reconciled in the MD&A for your reference.
On today's call, John and Joe will provide an overview of quarterly results and after these remarks, we will open the call for questions and with that let me turn the call over to John.
John Kousinioris: Good morning, everyone, and thank you for joining our second quarter 2024 conference. As part of our commitment towards reconciliation, I want to begin by acknowledging that TransAlta's head office, where we are today, is located in the traditional territories of the peoples of Treaty 7, which include the Blackfoot Confederacy, comprising the Siksika, the Piikani, and the Kainai First Nations, the Tsutsina First Nation, and the Stony Nakoda, including the Chiniki, Berespa, and the Good Stony First, The City of Calgary is also home to Métis Nation of Alberta District 5.
John: Thank you Kara good morning, everyone and thank you for joining our second quarter 2024 conference call.
Speaker Change: As part of our commitment towards reconciliation I want to begin by acknowledging that Transalta set office, where we are today dislocated in the traditional territories of the people to <unk>.
Which include the Blackbird Confederacy, comprising six ago Gaudy Abaci Knight first nations and <unk>.
Xena first nation, Emma Stone and Dakota, including the Janicki ferrous PA and the good Stony first nations the <unk>.
D of Calgary is also home to <unk> nation of Alberta districts, five and six.
John Kousinioris: I'm pleased to report that we saw another quarter of exceptional operating and financial results. We had strong performance from our contracted and merchant generating fleets, which benefited from our optimization and hedging strategies and improved average fleet availability of 90.8%. Our highly capable operating and world-class trading teams ultimately delivered adjusted EBITDA of $312 million, free cash flow of $172 million, or $0.57 per share, and net earnings attributable to common shareholders of $56 million, or $0.18 per share.
Speaker Change: I am pleased to report that we saw another quarter of exceptional operating and financial results. We had strong performance from our contracted and merchant generating fleets, which benefited from our optimization and hedging strategies and improved average fleet availability of 98%.
Speaker Change: Highly capable operating and world class trading teams ultimately delivered adjusted EBITDA of 312 billion free cash flow of 172 million or <unk> 57 per share and net earnings attributable to common shareholders of $56 million or <unk> 18 per share.
John Kousinioris: And we continue to maintain a strong balance sheet with over $1.7 billion in available liquidity, including $350 million in cash, which positions us well to deliver on our 2024 priorities. I have a number of updates on our strategic initiatives to share with you. First, and as you all know, we completed the transition of our Chief Financial Officer role at the beginning of July, and I'm very pleased to welcome Joel Hunter to his first quarterly conference call at TransAlta.
Speaker Change: And we continue to maintain a strong balance sheet with over $1 7 billion in available liquidity, including $350 million in cash, which positions us well to deliver on our 2024 priorities.
I have a number of updates on our strategic initiatives to share with you this quarter.
John Kousinioris: Joel brings over 26 years of experience spanning various areas in the energy sector to our company, and we're excited for him to join our team and drive our financial strategies forward. Next, I'm pleased to announce that we have achieved commercial operations at our 200 megawatt White Rock East and 200 megawatt Horizon Hill wind facilities in Oklahoma. Our OklahomaWIN facilities, along with the recently contracted sale under production tax credits, will contribute over $100 million to our company in adjusted EBITDA annually. Third, we continue to work on securing regulatory approval for the heartland generation trend. The regulatory review process with the Competition Bureau has proven to be more challenging and protracted than we originally anticipated.
Speaker Change: And as you all know we completed the transition of our Chief Financial Officer role at the beginning of July and I'm very pleased to welcome Joel Center to its first quarterly conference call at Transalta.
Speaker Change: <unk> brings over 26 years of experience spanning various areas in the energy sector to our company and we're excited for him to join our team and drive our financial strategies for them.
Speaker Change: Next I am pleased to announce that we have achieved commercial operations at our 200 megawatt quite Rockies and 200 megawatt Horizon Hill wind facilities in Oklahoma.
Speaker Change: Our Oklahoma wind facilities, along with the recently contracted sale under production tax credits will contribute over $100 million to our company and adjusted EBITDA annually.
Speaker Change: Third we continue to work on securing regulatory approval for the Heartland generation transaction.
The regulatory review process with the competition Bureau has proven to be more challenging and protracted than we originally anticipated.
Speaker Change: We have been working to address the bureau's perspective regarding the transaction and the Alberta electricity market and expect to have a better sense of the timing and likelihood of the success of the transaction in the coming weeks.
John Kousinioris: Fourth, we're seeing an acceleration of significant opportunities at our legacy thermal sites in Alberta and Washington. We have previously advocated for and supported a number of these market reforms. The restructuring is intended to result in stronger incentives for dispatchable generation and provide long-term signals for investment to promote grid reliability. The design is to be broadly finalized by the end of 2024, with implementation expected to occur during the 2026 calendar year.
Speaker Change: Fourth we're seeing an acceleration of significant opportunities at our legacy thermal sites in Alberta, and Washington State, which I will speak to later in the call.
Speaker Change: And finally during the quarter there were a number of regulatory announcements made by the government of Alberta on the restructured energy market.
Speaker Change: Last month, the Ministry of affordability and utilities published an open letter providing direction to the Alberta electric system, operator on the design and implementation of a restructured energy market and the products.
Speaker Change: The restructured energy market is expected to include the introduction of the day ahead market strategic energy bidding mechanisms the allowance of a higher price cap and potentially negative pricing and shorter settlement windows shifting from hourly.
Speaker Change: Hourly intervals.
Speaker Change: We have previously advocated for and support a number of these market reforms.
Speaker Change: The restructuring it's intended to result in stronger incentives for dispatch of coal generation and provide long term signals for investment to promote grid reliability within the province.
Speaker Change: The design is to be broadly finalized by the end of 2024 with implementation expected to occur during the 2026 calendar year.
John Kousinioris: We are confident that through the consultation process in which we are actively involved, the right framework will be put in place to ensure strong future development opportunities for all forms of generation to responsibly achieve a net zero grid in a manner that ensures reliability and affordability for Alpine. We have seen multiple grid alerts since the beginning of this year, and the province hit new records for peak load twice in July. This meant that, for the remainder of the month, our gas fleet, as well as the gas fleets of the other market participants with more than 5% of generating capacity in the province, were constrained to a maximum bid price of $125 per megawatt hour. We did not, however, see a significant change in bidding behavior since July 20th.
Speaker Change: We are confident that through the consultation process in which we are actively involved the right framework will be put in place to ensure a strong future development opportunities for all forms of generation to responsibly achieved net zero grid in a manner that ensures reliability and affordability for alpha.
Speaker Change: We have seen multiple grid alerts since the beginning of this year and the province hit New Records for peak load twice in July these.
Speaker Change: These were periods, where our Alberta thermal fleet with very much required to ensure grid reliability illustrating its continued value and the need for additional capacity to backstop the intermittency of renewables in the products.
Speaker Change: The interim market power mitigation and supply Christian regulations that I spoke about during our last quarterly call took effect on July one.
Speaker Change: Due to high temperatures higher than expected load requirements and subsequent high pricing in July the offer price limit in the market power mitigation pool was triggered on July 20 <unk>.
Speaker Change: This meant that for the remainder of the month, our gas fleet as well as the gas fleet of the other market participants with more than 5% of generating capacity in the province, we're constrained to a maximum bid price of $125 per megawatt hour.
Speaker Change: We did not however, see a significant change in bidding behaviors since July 22.
Speaker Change: There continued to be scarcity pricing with high temperatures led to tightness in supply as well as more benign pricing when we experienced higher production from renewables.
John Kousinioris: While there was a large block of bids at 125 cents per megawatt hour during certain hours, the spot price settled higher on a number of occasions as a result of the bidding behavior of unconstrained market participants during periods of tighter supply. Both sites have highly skilled labor, existing transmission infrastructure, water rights, proximate access to fiber optic networks, cooling ponds, rail access, and connectivity to natural gas pipelines. The existing infrastructure at our brownfield sites can significantly reduce timelines for permitting, and their access to transmission gives them a real advantage in speed to available power supply.
Speaker Change: While there was a large block of bids at $125 per megawatt hour during certain hours the spot price settled higher on a number of occasions as a result of the bidding behavior of unconstrained market participants during periods of tighter supply.
Speaker Change: We continue to believe given current market conditions that the interim regulations will have a limited impact on our portfolio.
Speaker Change: As a reminder, the interim regulations are set to expire on November 32027 at which time the restructured energy market is expected to be fully implemented.
Speaker Change: Okay.
Speaker Change: We are increasingly excited about the opportunities to support the energy transition in our core markets from our legacy generating sites.
Speaker Change: Our legacy thermal sites in Alberta, Centralia at Sarnia have great value and unique advantages through enhancement redevelopment and Repurposing, we have the ability to extend their operating lives and potentially repower them with a combination of new and existing technologies and build out the infrastructure required to meet.
Speaker Change: To meet the growing needs of the future.
Speaker Change: They are well suited to backstop, the intermittency of renewables and serve the growing demand for electricity from data centers in a resource constrained environment, where permitting and interconnection can be challenging for new supply.
Speaker Change: Our legacy sites in Alberta have close to one three gigawatts of operating capacity at Sundance unit, six and keep hold units two and three.
Speaker Change: And we have a further two one gigawatts of vital infrastructure at Sundance and key pills and over 40000 acres of land available to meet customer needs.
Speaker Change: Similarly in Washington State, our Centralia site has one three gigawatts of generating facilities in over 12000 acres of land that can be repurposed to meet customer needs. Both sites have highly skilled labor existing transmission infrastructure water rates approximate access to fiber optics networks.
Speaker Change: Cooling ponds rail access and connectivity to natural gas pipelines.
Speaker Change: We are currently in exploratory discussions with several potential counterparties to determine how to best meet their potential energy needs from both our Centralia in Alberta energy campuses.
Speaker Change: The existing infrastructure at our brownfield sites can significantly reduce timelines for permitting and their access to transmission gives them a real advantage and speed to available power supply.
Speaker Change: We are uniquely positioned to respond to the growing need for timely affordable reliable and clean power for both existing and new customers.
Speaker Change: Joel will now provide more details on the quarter.
Joel: Thank you John and good morning, everyone.
Joel: Let me start my comments this morning with a discussion on our segmented results led by our Alberta portfolio. We are very pleased with our second quarter operational performance and financial results, Despite a challenging pricing environment.
Joel: Strong performance from the gas segment, driven by high availability strong production and higher realized prices from hedging activities delivered adjusted EBITDA of $146 million during the quarter.
Joel: Hydro segment produced adjusted EBITDA of $83 million broadly in line with our expectations due to lower Alberta spot prices, which were partially offset by the sale of environmental attributes and favorable hedges.
Joel: The wind and solar segment delivered adjusted EBITDA of $88 million or 76% increase compared to the same period last year due to the addition of the northern Goldfield solar White rock Eastern West Horizon Hill, and the return to service of Kent Hills.
Joel: The energy transition segment delivered $3 million of adjusted EBITDA, which decreased year over year due to an extended planned outage at Centralia and increased economic dispatch as a result of lower market prices at mid C. <unk>.
Joel: The Centralia facility returned to full operating capacity in the third quarter.
Joel: Finally, our energy marketing segment delivered solid performance with adjusted EBITDA of $30 million due to hedging activities.
Joel: Overall, the second quarter was strong delivering free cash flow of $172 million or <unk> 57 per share year to date, we've achieved 381 $381 million or $1 25 per share of free cash flow approximately 73% at the midpoint of our annual guidance of $525 million.
John Kousinioris: Turning to the Alberta segment, the second quarter spot price averaged $45 per megawatt hour, which was significantly lower than the average price of $160 per megawatt hour for the same period in 2023. The decline year over year was primarily due to incremental generation from the addition of new gas, wind, and solar supply, and lower natural gas prices.
Joel: Turning to the Alberta segment, the second quarter spot prices averaged $45 per megawatt hour, which was significantly lower than the average price of $160 million $168 per megawatt hour for the same period in 2023, the decline year over year was primarily due to incremental generation from the addition of new gas.
Joel: Wind and solar supply and lower natural gas prices weather conditions for the second quarter were also milder compared to the second quarter of 2023, which had more periods of extremely hot weather and constrained supply.
Joel: In response to these proceed declines in power prices, we proactively deploy hedging strategies to enhance our portfolio margins and significantly mitigated the impact of these lower margin power prices in the second quarter, we maintained hedge volumes of approximately 2100 gigawatt hours and an average price of $84 per megawatt hour.
Joel: We also enhanced our margins through our optimization activities.
Joel: Able to capture higher margins by fulfilling many of our higher price hedges with purchase power during more priced hours. This strategy led to a $97 per megawatt hour realized merchant power price for the Alberta electricity portfolio, which includes all of our hedging at.
Joel: Optimization activities and merchant revenues from the operation of our facilities.
Joel: By employing this strategy, we were able to effectively optimize costs for production capacity and delivering sillery surfaces across our Alberta fleet, which resulted in a realized merchant power price that was significantly above the hedged in spot power prices.
Joel: Looking at the balance of the year, we have approximately 4500 gigawatt hours of our Alberta portfolio generation hedged at an average price of $85 per megawatt hour, which is well above the current forward curve.
John Kousinioris: For 2025 and 2026, our team has hedged production at an average price of approximately $80 per megawatt hour, also well above the current forward curve levels for both years. Going forward, we will continue to lock in opportunistic hedges to secure earnings and cash flows and limit the downside impact of lower spot prices and excess supply conditions anticipated over the next two years. Turning back to hydro, the fleet continues to see strong realized prices and production during peak hours, demonstrated by the continued outperformance of the average spot price quarter after quarter.
Joel: For 2025 and 2026, our team is hedged production at an average price of approximately $80 per megawatt hour also well above the current forward curve for both years.
Joel: Going forward, we will continue to lock in opportunistic hedges to secure earnings and cash flows and limit the downside impact of lower spot prices and excess supply conditions statistic weighted over the next two years.
Joel: Turning back to Hydro fleet continues to see strong realized pricing and production during peak hours demonstrated by the continued outperformance to the average spot price quarter after quarter.
Joel: The premium to spot electricity prices has averaged approximately 28% over the last three years and axillary services earn on average 51% of spot prices.
John Kousinioris: Looking forward, we expect the segment will continue to receive a premium to spot pricing performed within our 2024 guidance expectation. Our results in the first half of the year show the value of our diversified fleet and our optimization and hedging strategy. We continue to have relatively high hedge positions, which are reflected in our strong results here today. Hedges have been executed both financially and through our commercial and industrial business to mitigate the impact of new renewable and gas-fired supply additions in Alberta.
Joel: Looking forward. We expect this segment will continue to receive a premium to spot pricing performed within our 2024 guidance expectations.
Joel: Energy production was lower in the second quarter, which was offset by higher ancillary services volumes during.
Joel: During lower demand and pricing periods and shoulder season, we focused on refilling, our reservoirs in order to be optimized for peak peak demand and when the market needs. The waterflood at most which we've seen with extreme heat and numerous high priced hours over the past months. Our hydro fleet has performed exceptionally well throughout July is to demonstrate its value during peak demand periods.
Joel: I'll.
Joel: I'll now pass it back to John Scott 124 guidance and balance of year priorities.
John Scott: Thanks, Joel as Joel highlighted in his remarks, we are confident in our ability to meet our 2024 guidance is for tracking to the upper end of our adjusted EBITDA and free cash flow ranges our results in the first half of the year. So the value of our diversified fleet and our optimization of hedging strategies.
Joel: We continue to have relatively high hedge positions, which are reflected in our strong results year to date hedges.
Joel: Hedges have been executed both financially and through our commercial and industrial business to mitigate the impact of new renewable and gas fired supply additions in Alberta, we have hedged positions that are significantly above current forward prices in 2024 and have secured attractive hedge positions for 2025 and 2026.
John Kousinioris: We have hedge positions that are significantly above current forward prices in 2024 and have secured attractive hedge positions for 2025 and 2026. We remain committed to returning value to our shareholders, and since the end of the quarter, we have purchased approximately 2 million additional common shares for a total of $21 million at an average cost of $9.82 per common share.
Joel: Second we do not expect to experience adverse impacts from the regulatory evolution of the electricity market in Alberta, given the positioning of our merchant portfolio.
Joel: Fact, we see numerous opportunities to meet the essential needs of the market and new and existing customers from our legacy fleet.
Joel: And third we're confident in the ability of our fleet to deliver strong operational results as has been the case so far this year.
Joel: We remain committed to returning value to our shareholders. We were very active in the market through the first six months of the year and as of June 30th have returned $89 million to our shareholders through share repurchases, which is approximately 59% of our 2020 target, resulting in a reduction of almost nine.
Joel: 5 billion common shares.
Joel: And since the end of the quarter, we have purchased approximately 2 million additional common shares for a total of $21 million at an average cost of $9 82 per common share.
Joel: We will continue to repurchase shares given our current share price, which we believe to be undervalued.
Joel: We believe our $150 million share repurchase plan is an appropriate and balanced use of our capital as our liquidity and financial performance.
Joel: Amidst us to pursue opportunistic growth with returns that meet our strict thresholds, while maintaining our balance sheet strength and resilience.
John Kousinioris: As I look at our strategic priorities for 2024, we're focused on the following key goals: Achieving EBITDA and free cash flow within our 2024 guidance; Executing our Enhanced Common Share Repurchase Program for 2024 and advancing our ESG. Our growth team is focused on our development pipeline and advancing high quality and attractive return projects. We will be patient in deploying capital, and we'll balance what is best for our shareholders in both the near and long term.
Speaker Change: As I look at our strategic priorities for 2024, we're focused on the following key goals first improving our leading and lagging safety performance indicators, while achieving strong fleet availability of 93, 1%.
Joel: Achieving EBITDA free cash flow within our 2024 guidance ranges.
Joel: Executing our enhanced common share repurchase program for 2024 and advancing our ESG program.
Joel: We also look forward to closing and integrating the Heartland generation transaction provided we are able to satisfactorily complete the current review of the transaction by the competition here.
Joel: We remind everyone that our growth targets are aspirational as we continue to be prudent and disciplined in our growth plan.
Joel: Our growth team is focused on our development pipeline and advancing high quality and attractive return projects.
Joel: As I mentioned earlier were seeing considerable opportunity to support the energy transition in our core jurisdictions.
Joel: In particular at our legacy thermal sites, where we are actively pursuing redevelopment or re contracting opportunities to serve a growing customer base.
Joel: We'll be patient in deploying capital and we'll balance what is best for our shareholders in both the near and long term.
John Kousinioris: I'd like to close by highlighting what I think makes TransAlta a highly attractive investment and a great value opportunity. First, our cash flows are strong and underpinned by a growing, high quality, increasingly contracted, and diversified portfolio. Fourth, we have a diversified development pipeline and a talented development team focused on securing appropriate returns as it works to advance our Clean Electricity Growth Plan. And fifth, our company has a sound financial foundation, our balance sheet is strong, and we have ample liquidity to return cash flow to our shareholders through share repurchases and pursue and deliver growth when returns meet our threshold.
Joel: I'd like to close by highlighting what I think makes transalta, a highly attractive investment and a great value opportunity.
Joel: Our cash flows are strong and underpinned by a growing high quality increasingly contracted and diversified portfolio.
Joel: Our business is driven by our unique reliable at perpetual hydro portfolio are contracted with the solar portfolio and our efficient gas portfolio all of which are complemented by our world class asset optimization and energy marketing capabilities.
Joel: Second we are clean electricity leader with a focus on tangible greenhouse gas emissions reductions we remain on track to achieve our ambitious cotwo reduction targets and remain committed to net zero by 2045.
Joel: Third we have a tremendous resource in our legacy thermal sites, which we are now actively looking to enhance redevelop and repurpose to meet the evolving needs of our customers.
Joel: We have a diversified development pipeline and a talented development team focused on securing appropriate returns as it works to advance our clean electricity growth plan ambition.
Joel: And fifth our company has a sound financial foundation, our balance sheet is strong and we have ample liquidity to return cash flow to our shareholders through share repurchases and pursue and deliver growth when returns meet our thresholds.
John Kousinioris: Our people are our greatest asset, and I want to thank all our employees and contractors for the outstanding work they have done to deliver strong results during the quarter and set the company up for success for the balance of the economy. Thank you. I'll turn the call back over to Chiara.
Joel: Finally, we have our people.
Joel: Our people are our greatest asset and I want to thank all our employees and contractors for the outstanding work. They have done to deliver strong results during the quarter and set the company up for success for the balance of the year.
Joel: Thank you I will turn the call back over to Keira.
Unknown Executive: Amy, would you please open the call for questions from the audience... And our first question comes from Patrick Kenny with National Bank Financial. Your line is open. Obviously, a lot of moving parts here, John, as you mentioned, related to, I was just wondering how you see the merits of the deal stack up to, you know, some of these other new opportunities that might be now available for that 600 plus million dollars of capital. Yeah, good morning, Patrick.
Amy: Thank you John Amy would you. Please open the call for questions.
Joel: Okay.
Amy: Okay. Thank you and as a reminder to ask a question you will need to press star one one on your telephone.
Speaker Change: And wait for your name to be announced to withdraw your question. Please press star one again, please standby will be compile the Q&A roster.
Speaker Change: And our first question comes from Patrick Kenny with National Bank Financial Your line is open.
Patrick Kenny: Thank you and good morning, everybody.
Speaker Change: Maybe just starting with the Heartland transaction, obviously, a lot of moving parts here John as you mentioned are related to that.
Speaker Change: The Alberta market reforms and of course.
Speaker Change: Now new load growth emerging in the U S. So.
Speaker Change: Just wondering how you see the merits of the deal stack up to some of these other new opportunities that might be.
Speaker Change: Now available for that 600 plus million dollars of capital in.
Joel: What assets you might look at from a strategic standpoint should the competition approval fall through.
John Kousinioris: Look, we continue to work on trying to get the Heartland transaction completed. We're engaged with the regulators to see that transaction through. And look, we will be very disciplined as a company. We had an investment thesis in connection with that transaction. There were, you know, it was the mix of assets that they had that were interesting to our company at the price that we had agreed to pay for the assets. And, you know, with the view to being able to take the skill sets that our organization has to bring to bear on those assets to gain an advantage for the company, we do continue to see benefits from that transaction.
Speaker Change: Yes, good morning.
Joel: Patrick look we continue to work on trying to get the Heartland transaction completed we're engaged with the regulators on seeing.
Joel: That transaction through and look we will be very disciplined as a company we had.
Joel: An investment thesis in connection with that transaction there were.
Joel: It was the mix of assets that they had that were interesting to our company at the price that we had agreed to pay for the assets and with a view to being able to take the skill sets that our organization has to bring to bear.
Joel: On those assets to gain advantage for the company, we do continue to see.
John Kousinioris: But as I mentioned in my comments, you know, we're in the middle of working through the perspectives that the Competition Bureau has on the transaction and the Alberta energy market generally. Look, we see a lot of opportunities. We see opportunities on both sides of the border, and I'd probably put them into two categories.
Joel: Benefits for that transaction, but.
Joel: As I mentioned in my comments.
Joel: We're in the middle of working through the <unk>.
Joel: Perspective that the competition Bureau has on the transaction and the Alberta energy market generally.
Joel: Look we see a lot of opportunities we see opportunities on both sides of the border and I'd, probably put them into two categories I begin with our legacy assets.
John Kousinioris: I'd begin with our legacy assets. We're very excited about the kinds of conversations we're having at Alberta Thermal, you know, both in respect of data centers potentially entering the market in Alberta but also in the context of the kind of value that those assets have to ensure reliability in the province of Alberta. And similarly, we're seeing, you know, exactly the same kind of conversations that are in the Centralia facility, you know, touching both of those two broad areas of customers. Okay, great, thanks for that; I'll jump back in the queue.
Joel: We're very excited about the kinds of conversations we're having at Alberta thermal.
Joel: Both in respect to datacenters potentially entering the market in Alberta, but also.
Joel: In the context of the kind of value that those assets have.
Joel: To ensure reliability in the province of Alberta, and similarly, we're seeing exactly the same kind of conversations that our centralia facility.
Joel: <unk> facility.
Joel: Touching both of those two broad areas of customers.
Joel: As you knew from our sort of organic growth pipeline a lot of that had in Alberta heavy focus in the near term. So we paused that given some of the uncertainty in the room, but we continue to develop other projects within our portfolio.
Joel: And each of the three jurisdictions in which we operate in and continue to actively look at the M&A market and Joel I would say when we look at the M&A market, we are definitely seeing.
Joel: The opportunities on the renewable side, but also on the on the on the gas side for sure, especially in areas of the U S market that we're interested in like the Pacific northwest of the desert southwest.
Joel: Got it okay. Thanks, and then maybe drilling down a little bit more into the Alberta Ram design now that you have a bit more clarity on.
Speaker Change: How are your assets might lineup from a competitive standpoint.
Speaker Change: Can you maybe expand on your comments around pursuing repowering and re contracting opportunities.
Speaker Change: Are we talking about potential tolling agreements with the ACO or more so trying to secure longer term contracts with co location customers.
Speaker Change: Yes.
Speaker Change: I would say that look it's early days in terms of the kinds of discussions that we're having but but.
Speaker Change: Maybe I'll answer the question. This way we are actively engaged in discussions with respect to the potential of siting or the migration of data centers up in 12 or die and out of our facility specifically so that would be.
Joel: Number one and kind of.
Joel: The form that those kind of arrangements would take place would vary depending on the customer that would that we would have but they would be longer term in nature.
Speaker Change: Look they're super focused on reliability and access to power and Theres a lot of advantages.
Joel: Alberta provides including a relatively welcome welcoming I would say.
Joel: Political environment in terms of.
Joel: The support that we've gotten from the leadership of the provinces.
Joel: To have these kinds of facilities come into the jurisdiction and then secondly, our analysis would show that as the market evolves in the province of Alberta.
Joel: The need for the coal to gas converted units not just one or two of them, but a significant number like 456 units. If you want any redundancy is going to be critically important to slow growth.
Joel: In the province going forward so.
Joel: <unk>.
Speaker Change: The role that those units would play in the context of the revenue is something we're also in the middle of discussions.
Speaker Change: Okay I appreciate that thanks John.
Speaker Change: Joel I know, it's only been a month, but as you get a closer look at the portfolio of assets.
Speaker Change: And I know this is very much conversation with John and the board, but curious to get your initial thoughts around potential capital recycling opportunities or.
Speaker Change: Other initiatives to maximize the value of certain assets.
Joel: Yes, My first month here and first of all very pleased with the results that we saw during the quarter here and what we're seeing.
Speaker Change: Month of July here, just given.
Speaker Change: Power prices have been.
Speaker Change: When we look at the portfolio, yes capital recycling will become an important part of our strategy going forward, where we can add value to the shareholder and what I mean by that if we see an opportunity where we can sell an asset that said say at 10 times multiple and redeploy that cash.
Speaker Change: In something that's at a six times multiple.
Speaker Change: For example, if that's going to add value to the shareholder at the end of the day.
Speaker Change: So again were very opportunistic here with respect to our portfolio management going forward and how we redeploy that capital.
Speaker Change: Okay, great. Thanks for that I'll jump back in the queue.
John Kousinioris: Thank you. And our next question comes from the line of Mark Jarvi with CIBC Capital Markets. Your line is open; take profits from an attractive sale and put them into undervalued assets. That's something you consider capital recycling around support and the buyback. Just given the activity you've seen today, is there a likelihood that $150 million will be spent on recycling? And it's interesting. We've just wrapped up a series of board meetings, and it was a topic that we had discussed with our board about.
Speaker Change: Thank you and our next question comes from the line of Mark Jarvi with CIBC capital markets. Your line is open.
Mark Jarvi: Yes, good morning, everyone.
Mark Jarvi: Just starting on the buyback.
Speaker Change: Picking up on the last comments choice made about capital recycling and ability.
Speaker Change: To take profits from a from an attractive sales put them into undervalued assets.
Speaker Change: Something you consider capital recycling around supporting the buyback.
Speaker Change: Even the activity you're seeing today is there a likelihood that the $150 million for.
Speaker Change: So target gets increase given the fact, you've got strong free cash flow, maybe not a lot of near term.
Speaker Change: Investments on your growth platform right now.
Speaker Change: Yes.
Speaker Change: Mark why don't I start and then maybe Joel can supplement it.
Speaker Change: Look.
John Kousinioris: I mean, I think we would tend to think of it in the context of, you know, if there was something that we were looking to do to either shore up our balance sheet, or, more to the point, an acquisition that made sense for us, or something that we were trying to pursue that would have a significant impact on the cash flows of the company going forward, those are the kinds of opportunities that we would be primarily looking to recycle our capital for. With respect to the share buybacks, we're very comfortable with that $150 million target that we have.
Speaker Change: When we.
Speaker Change: When we think of the recycling and it's interesting we just wrapped up a series of board meetings.
Joel: It was a topic that we that we had.
Speaker Change: Chatted with our board about.
Speaker Change: I think we would tend to think of it in the context.
Speaker Change: If there was something that we were looking to do to either a shore up our balance sheet or I would say more to the point of an acquisition that made sense for us or something that we were trying to pursue that would have a significant impact on.
John Kousinioris: And we're well over 60% of the way there to meeting that this year. It's something that we evaluate all of the time. You know, and Joel can speak to this in a second. Average price year to date is around 944 per share.
Speaker Change: The cash flows of the company going forward those are the kinds of opportunities that we would be primarily looking.
Speaker Change: To recycle our capital for with respect to the share buybacks, we're very comfortable with that $150 million target that we have and we're well over 60% of the way there to meeting that this year, it's something that we evaluate all of the time.
Speaker Change: And Joel can speak to this.
Joel: But we continue to look at what the value is to our shareholders of doing that versus some of the other opportunities that we have and it's an ongoing discussion that we have Joe I don't know if you have any I would just add to that John.
Speaker Change: Mark we at the beginning of year, we said that we would like to.
Joe: Have up to $150 million of share buybacks year to date, we're roughly 70, 474% through that.
Joe: Through the month of July.
John Kousinioris: So again, as we look forward here, we'll continue to buy back our shares, and when we hit that $150 million cap, we'll re-examine at that point in time to say, should we expand that further? Just given that, as John mentioned, we feel our shares are undervalued at this point in time, and this is a good way to return capital to the shareholders through our share buybacks. So we'll continue to re-evaluate it going forward.
Joe: Average price year to date is around $9 44 per share. So again as we look forward here that we will continue to buyback our shares and we hit that $150 million cap <unk>.
Speaker Change: Reexam at that point in time to say should we expand that further just given that as John mentioned, we feel our shares are undervalued at this point in time and.
John: This is a good way to return capital to shareholders through our share buybacks. So we'll continue to reevaluate it going forward here.
John Kousinioris: And then John, your comments about the Heartland deal and remaining disciplined, depending on what the Competition Bureau says, if they feel it made sense for you to buy, want to select assets or, you know, shed some of those assets. Are you open to some concessions? Is it sort of an all or nothing deal for you?
Speaker Change: Understood.
Speaker Change: And then John your comments about the Heartland deal and remained disciplined depending on what the competition Bureau says if they felt it made sense for you to buy or select out that sir.
Speaker Change: Some of those assets are you open to some concessions or is it sort of an all or nothing referring you or maybe not in a position to comment on that right now.
John Kousinioris: Or maybe you're not even in a position to comment on that? Is there still potential where you think it is outside of the market? And if not, then is there rationalization that has to happen here? Or do you solve it more on the demand side, trying to bring in more to the market? Just wondering how you make sure those assets stay relevant and stay profitable in the years ahead. Yep. You were a little bit muffled, and maybe it's just my age, Mark, but I think I got the gist of what you were saying.
Speaker Change: Yes, no mark.
Speaker Change: It's a great question. So look the conversations we've had the bureau continues to be.
Speaker Change: Sure.
Speaker Change: Dynamic I would say and with respect to concessions. It is something that we would consider in the event. The overall thesis that we have for the transaction, but as I mentioned before we have.
Speaker Change: Internal return expectations and a thesis around the transaction that we're going to stick to our very disciplined sort of perspective.
Speaker Change: It needs to fall within I would say the parameters of what the original sort of investment thesis. We're in if that becomes challenge then.
Speaker Change: Clearly have to be in a position, where we would reevaluate it.
Speaker Change: Okay, and then John you made a comment about the value of the coal to gas converted assets.
John: The need there for reliability during periods of market. If you look at where the forward curve is obviously, it's at a level where they are not that profitable average pricing is not always the same as realized prices of those units but.
Speaker Change: Is there still a potential where do you think and out of the market.
Speaker Change: Passenger payment makes sense.
John Kousinioris: And if not then is a rationalization that has to happen here or do you solve it more on the demand side trying to bringing load to the market just wondering how should those assets stay relevant to stay profitable in the years ahead.
Speaker Change: Yes.
Speaker Change: You were a little bit muffled and maybe it's just my by age.
Speaker Change: Park, but but I think I got the gist of what you were saying so look we we continually assess.
John Kousinioris: So look, we continually assess the fleet and the viability of cold gas assets in the market. I think their role in the market is going to change. So I would say, you know, when you look at the hedging program that we have for the balance of this year going into 2025 and also into 2026, that is all oriented towards and orchestrated towards kind of providing a base level of an envelope of operability for those particular units. So we do have confidence in the ability of the units that provide value for us in the energy market. But more importantly, I think we're looking at the units from an optionality perspective.
Speaker Change: The fleet and the viability of the coal to gas.
Speaker Change: Assets in the market I think their role in the market is going to change so I would say.
Speaker Change: When you look at the hedging program that we have.
Speaker Change: For the balance of this year going into 2025 and also into 2026 that is all oriented towards that orchestrated towards kind of providing a base level of an envelope of operability effectively of those particular units. So we do have confidence.
Speaker Change: And the ability of the.
Speaker Change: The units that provide value for us in the energy market, but more importantly, I think we're looking at the units from a from an optionality perspective, so when we look at them in that context.
John Kousinioris: So when we look at them in the context of the energy market, that's one thing we can do. But we also look at them in terms of what role they can provide from a reliability perspective? What role can they provide from a data center perspective? It's all of those kinds of things.
Speaker Change: The energy market. That's one thing we can do but we also look at them in terms of what more can they provide from a reliability perspective, what role can they provide from a data center perspective.
John Kousinioris: And it wouldn't surprise me that, as time goes by, we will assess those units. Does it make sense to keep them on the market? Do you think it makes sense to mothball them, for example, or get to a place where, you know, we hold them in reserve? And I think... If you had to say lean in one way right now, Blain, is it... A bilateral contract with data centers and new load, or is it more likely some sort of support from the government for liability and a contract capacity payment that keeps those assets relevant in the market?
Speaker Change: It's all of those kinds of things and it wouldn't surprise me that if time goes by.
Speaker Change: We will assess those units does it make sense to keep them in the market does it make sense to mothball them for example, or get to a place where we hold them in reserve.
Speaker Change: And I think.
Speaker Change: My view would be that over time, you'd likely see them become more contracted I would think blamed in the room as well here than kind of the way. They are today I think the removal of all played out or if you want to add to that but that's right. John I think you hit on it.
Blain: Two ways, one we do see a need from a reliability standpoint, we definitely have talked about that in the past and second with the data potential data center look data datacenter load that's coming to the province.
Blain: There is an option for them to secure some long term contracts in that fashion.
Speaker Change: If you had to say leaning one way right now believe it is it.
John Kousinioris: Lateral contract for data centers and the load or is it more likely some sort of support from the government for reliability in our contract capacity payments that keeps those markets those assets relevant in the market.
John Kousinioris: Yeah, Mark, I would say, look, it's early days on all the discussions that we're having, but I would say that we're pursuing, broadly speaking, both. Our next question comes from the line of Maurice Choy with RBC Capital Markets. Your line is open.
Mark Jarvi: Yes, Mark.
Mark Jarvi: But I would say look it's early days on all of the discussions that we're having but I would say that we're pursuing broadly speaking both avenues.
Maurice Choy: Got it okay. Thanks for the time today.
Maurice Choy: Thank you.
John Kousinioris: Think about this program, it's an environment thing, it's just a different approach to management, is something you're seeing, just helping you understand what's changed. Yeah, I think, you know, Maurice, first of all, good morning. We've always had an evergreen look, I would say, at the broad portfolio of assets that we have. We always evaluate them in terms of what their value is in TransAlta, and what their value is in the hands of others outside of TransAlta. So that's a live piece of work that we do annually. It's Joel's team that does that for us.
Speaker Change: Our next question comes from the line of various Choi with RBC capital markets. Your line is open.
John Kousinioris: Yeah.
Speaker Change: Thanks, and good morning, everyone, maybe just keeping with the capital recycling team here.
Speaker Change: Obviously, having an active program is something quite new for the company and being quite rare across south sector as well.
Speaker Change: Can you just elaborate on what caused the management and the board too.
Speaker Change: Think about this program, it's an environment thing.
Speaker Change: Put your management.
Speaker Change: Something you're seeing helping you understand what changed.
Speaker Change: Yes, I think.
Mark Jarvi: Bruce first of all good morning.
John Kousinioris: We've always.
John Kousinioris: We've always had an evergreen look I would say at the broad portfolio of assets.
John Kousinioris: That we have we always evaluate that in terms of what their value in transalta, what's their value in the hands of others outside of Transalta. So that's.
Speaker Change: Alive.
Speaker Change: Piece of work that we do annually. It's it's joel's team that does that for us.
John Kousinioris: And now as we go forward, you know, candidly, we just kind of say, look, there are some great opportunities. I'm actually more optimistic about the kinds of things that we can do, both in terms of new things that we can do, but also in terms of the value of the legacy assets. So the need to take more of an asset management, kind of a broader portfolio approach as we look to maximize value for the shareholders, I think has become, I don't know what the right word would be, Joel, probably more acute, or it's more top of mind for us. So, you know, we've got 79 facilities in three different countries.
Speaker Change: And now as we go forward candidly, we just kind of say look there are some great opportunities.
John Kousinioris: Actually more optimistic about the kinds of things that we can do both from in terms of new things that we can do but also in terms of the value of the legacy assets. So the need to take.
John Kousinioris: Take more of an asset management kind of a broader portfolio approach as we look to maximize value for the shareholders. I think has become I don't know what the rate would be probably more acute or it's more top of mind for us. So.
Speaker Change: We've got 79 facilities in three different countries.
John Kousinioris: <unk>.
Joel: The majority of our cash flows come from a subset of those facilities. So we do have facilities that would be more core and we have facilities that probably drove would be viewed as being a bit less core. So so it's just part of the mix that we see and then when we look at the opportunity set and the ability to create value. It's just I think.
Joel: More top of mind I think that before.
John Kousinioris: Okay.
Joel: Quick follow up to that is obviously.
Speaker Change: We're going to ask you, what's noncore, but I guess, what what is core rather than obviously at legacy sites.
John Kousinioris: Yeah, I mean, when I think of our core assets right now, just in terms of the opportunity set, you know, our legacy coal-to-gas assets in Alberta, our facility down in Centralia, just given the opportunity sets that we're seeing right now, certainly our hydro fleet is a core asset, and we think Sarnia is important. And right now, for us, Australia is a very important business; we have a mixture of, you know, everything from small hydro to individual wind farms, which are at different stages of their contractiveness and life cycles that may or may not, depending on the circumstances, make sense for us to consider recycling. But hopefully, that gives you a little bit of a flavor.
Joel: Yes, I mean, when I think of our.
Joel: Our core assets right now just in terms of the opportunity set our legacy coal.
Joel: Coal to gas assets in Alberta, our facility down in Centralia, just given the opportunity set that we're seeing right now certainly our hydro fleet.
John Kousinioris: As a core asset we think Sarnia is important and right now for US Australia is a very important business. We have a mixture of everything from small hydro to individual wind farms, which are at different stages of their contracted nissin and life cycles that may or may not depending on the circumstances.
John Kousinioris: Makes it makes sense for us to consider recycling, but hopefully that gives you a little bit of a flavor. Joanna if you want to add anything yes, I would just say one thing to hear is that there has to be a good use of proceeds.
John Kousinioris: Can it be opportunistic here going forward to John's point that if we see a real opportunity here, where we can really add value longer term.
Speaker Change: Q recycle capital.
John Kousinioris: So again, it's always been part of our DNA here, but.
Speaker Change: Jon mentioned as we see opportunities here going forward with our legacy assets and just new opportunities within our existing markets.
John Kousinioris: That said, we just have to consider capital recycling is part of the financing going forward.
John Kousinioris: And so to finish up on the capital allocation question I guess, how do you Valerie.
Speaker Change: Holistically, how the program's doing it today.
Speaker Change: Sure accretion thing is it.
Speaker Change: Can you just help them that what other conventional areas that you're kind of using.
Joel Hunter: Joel, I don't know if you want to add anything? Yeah, I just say one thing to hear is that there has to be a good use of So I'd say, you know, when we think about allocating our capital, Maurice, there's a bunch of things that we have to look at. It has to have the appropriate risk-adjusted returns, has to be accretive to our EBITDA, to our earnings per share, to our free cash flow, and has to fit within our credit metrics as well.
John Kousinioris: So I'd say, when we think about allocating our capital more since it's a bunch of things that we have to look at it has to have the appropriate risk adjusted returns has to be accretive to our EBITDA to our earnings per share to our free cash flow.
Joel Hunter: And it has to fit within our credit metrics as well so.
Joel Hunter: So there are a lot of criteria that we look at, you know, and ultimately, for redeploying capital, what we'd like to see is, can we extend the duration of our portfolio, maybe underpinned by a long-term contract, for example? There are a lot of criteria that we look at. So, as you know, at the end of the day, we are earning, you know, appropriate risk-adjusted returns for our shareholders. If I could just finish up with one question from, I guess, a Q1 call.
Speaker Change: What are the criteria that we look at and ultimately for redeploying capital we'd like to see is when can we extend the duration of our portfolio maybe underpinned by long term contracts. For example, so there's a lot of criteria that we look at.
Joel Hunter: So as at the end of the day that we are earning.
Joel Hunter: Appropriate risk adjusted returns for our shareholders.
Speaker Change: Thanks, if I could just finish up with one question from I guess, the Q1 call I think you mentioned in the past that you expect 2025.
John Kousinioris: I think you mentioned in the past that you expect 2025. Yeah, Maurice, we, you know, when we think of 2025, and we look at the hedge position we have, and we look at some of the opportunities that we have, with respect to the fleet, we continue to feel pretty comfortable and confident about how 2025 is wrapping up. I think we're in pretty good shape. Thank you very much. Okay, great. Thanks, Matt.
Speaker Change: It could be in line between 24, and I think thats from an EBITDA and free cash flow perspective and dollars per share.
Speaker Change: Is that still a view that you hope.
John Kousinioris: Yes.
John Kousinioris: Morris.
John Kousinioris: When we think of 2025 and we look at the hedge position. We have we look at some of the opportunities that we have.
John Kousinioris: With respect to the fleet, we continue to feel pretty comfortable confident about how 2025 is wrapping up to to be.
John Kousinioris: I think we're pretty good shape.
Speaker Change: Thank you very much.
John Kousinioris: Yes.
Speaker Change: And our next question comes from the line of John Mould with TD Cowen Your line is open.
Speaker Change: Hi, good morning, everybody.
Speaker Change: Maybe just going back to redevelopment and re contracting and looking at your.
Speaker Change: Your Alberta fleet, how does the age and emissions level of of your sub critical cologuard units figure into the discussions youre, having and when you think about re contracting those units like what is the maximum capacity factor that you think.
Speaker Change: Those older units basically excluding <unk> three here.
Speaker Change: Could reasonably reasonably support on on an annual basis, just just given there.
John Kousinioris: <unk>.
Speaker Change: Yes no.
John Kousinioris: Thank you John for that and good morning.
John Kousinioris: Look let.
Speaker Change: Let me give you a sense of sort of a flavor of some of our.
Speaker Change: At least preliminary sort of thoughts that we have around that and maybe some of the early perspective that we're getting from the market.
John Kousinioris: <unk>.
Speaker Change: I think the units can run fairly reliably I think now that they've switched over to gas from coal, having high eighty's and into even the low 90% kind of availability I would say plain Joel would be something that we would expect to see.
Speaker Change: I think they're relatively good from our ambitions.
Speaker Change: Output perspective, I mean, we have basically the cotwo emissions that come out of those units.
Speaker Change: Compared to what they were like.
Speaker Change: From a coal perspective, they are very very cost effective I think at least some of the discussions we've had don't require a fully behind the fence solution. So the ability to actually be linked to the grid to be able to provide some of that backstop is is something thats helpful. And then we do have.
Speaker Change: A reasonably sized.
Speaker Change: Our renewables fleet in the province of Alberta, So when you think of our hydro and we think of the wind the hydro from a rep perspective to be able to sort of shelter some of that.
Speaker Change: Carbon emissions that come from the units and then from the from the wind perspective, not just <unk>, but actually generation.
Speaker Change: From a merchant perspective to the extent it doesn't need to be perfectly shaped I think there is a mix of levers that we have that we can pull that create a pretty attractive.
Operator: Operator, I think two.
Speaker Change: Two people that would be interested in it and I think the units overall, when I think of Sundance six and I think of K two NK three I mean, they are well maintained units.
Speaker Change: Very very rigorous in terms of our asset management programs.
John Kousinioris: Sure.
Speaker Change: We spend the appropriate amount of sustaining capital and we have a really talented operating and maintenance team to oversee those units overall I'd say, we feel we feel pretty good about the offering.
John Kousinioris: And maybe just on the redevelopment side, you know, rather than recontracting, can you give us a flavor of just, I would say, John, it depends on the jurisdiction. So when we look at the U.S., for example, the discussions would be, Okay, thanks for all that color. Maybe one last one.
Speaker Change: Okay, great, Thanks, and maybe just.
Speaker Change: On the redevelopment side.
Speaker Change: Rather than re contracting can you give us a flavor of just.
John Kousinioris: Where.
Speaker Change: From a technology perspective, your redevelopment discussions.
John Kousinioris: Centered or they've been weighted.
Speaker Change: More towards the gas side of.
Speaker Change: Things are more mix of gas storage and.
John Kousinioris: And maybe solar in the Canadian context.
Speaker Change: I'm wondering how does the.
Speaker Change: Without going too far down the rabbit hole, but I'm wondering does the CER sorry about that.
Speaker Change: And it means two things the clean electricity regulation because that.
Speaker Change: Play into this at all is that is that kind of a constraint at all.
Speaker Change: Something done here or something that you see playing out over time.
John Kousinioris: I would say John.
John Kousinioris: It depends on the jurisdiction. So when we look at the U S. For example, the discussions would be.
John Kousinioris: Certainly gas.
John Kousinioris: But.
John Kousinioris: With a mixture of what I would call clean electricity around.
Speaker Change: Facility, certainly given our land holdings to be able to help decarbonize, so imagine and we're thinking of them as campuses. So imagine some gas fire generation storage and we're pretty much to use a canadianism right et cetera, effectively from a transmission perspective.
John Kousinioris: In that part of the World just Centralia right now you might see a bit of solar where you might see a bit of when you might see a little bit of of storage kind of attached to a repurposing of some of the facilities towards gas.
Speaker Change: Australia again a mixture.
John Kousinioris: Already done a bunch of high what we call hybrid kind of solutions.
Speaker Change: For customers.
John Kousinioris: A mixture of gas and solar in that jurisdiction and storage may be a little bit of wind continues to be the case.
Alberto: Alberto right now.
Speaker Change: <unk> been I would say probably more focused on gas I'd say blame that they have been on adding.
John Kousinioris: Other.
Speaker Change: Kind of.
Speaker Change: Technologies I think to the to the mix, we do think that the need for reliability to address the intermittency and the province that storage will be increasingly important as well at least from a transalta perspective as we go forward, but hopefully that gives you a bit of a flavor it depends by the jurisdiction and.
Speaker Change: It is a little bit of all of the above kind of solutions and look we have the ability and have a long history of being able to do everything from wind to solar to hydro to gas. So we're very very including storage, which we have both here and in Australia. So we're very comfortable with all of the technology types.
Speaker Change: Okay. Thanks for all that color and maybe one last one I realize youre not going to want to put timelines on all this but I guess the aspirational when you think about.
John Kousinioris: I, you know, I realized you're, you're not going to want to put timelines on all this. But I guess aspirationally, when you think about, you know, the the demand for firm supply, and, and, you know, what the opportunities you've got in your legacy sites, you know, what are you or what are you kind of hopeful that that, you know, you could have a little more clarity on what your opportunity set is going to look, What I think of the next year, I suspect we'll be able to do some really interesting things, I think, in some of these.
Speaker Change: The demand for firm supply and.
John Kousinioris: <unk>.
John Kousinioris: Sure.
John Kousinioris: The opportunities you've got in your legacy sites.
John Kousinioris: Are you or what are your kind of hopeful that that.
John Kousinioris: You could have a little more clarity on what your opportunity set is going to look like here.
Speaker Change: Look we're actively working.
Speaker Change: In each of the three jurisdictions here like I can't give you a <unk>.
Speaker Change: Specific date.
John Kousinioris: John other to say that.
Speaker Change: Bye bye.
Speaker Change: By team, sometimes gets frustrated with me, what given sort of bye bye and patients on it.
Speaker Change: But look we.
Speaker Change: We need to take the time that we need to do things in an appropriate way and some of the things that we're looking to do is going to require a bit of regulatory input. So that's going to require.
Speaker Change: A little bit of.
Speaker Change: Creativity on our part.
John Kousinioris: To make sure that we meet the needs of an appropriate way with our customers, but certainly Joel Blaine.
John Kousinioris: What I think of the next year I suspect, we'll be able to.
John Kousinioris: To do some really interesting things I think in some of these facilities.
John Kousinioris: Okay, I'll leave it there. Thank you very much for taking my questions. Thank you. I have a follow-up question about spending money that you had previously thought you would have spent on. I think it was on Sundance, I believe.
Speaker Change: Okay I'll leave it there. Thank you very much for taking my questions.
Speaker Change: Thank you.
John Kousinioris: And our next question comes from the line of Benjamin Pham with BMO capital markets. Your line is open.
Speaker Change: Hi, Thanks, good morning.
Speaker Change: And a follow up question.
John Kousinioris: Two.
Speaker Change: Youre accurate to what's core in your portfolio you pretty much everything except your non hydro renewables as part of your answer.
Speaker Change: Pat just surprised given that your aspiration at the 70% preneed.
John Kousinioris: Renewables.
Speaker Change: Can you square that up.
Speaker Change: And so any sort of maybe just a change of heart or not.
Speaker Change: It targets that you put out.
John Kousinioris: Yes.
John Kousinioris: <unk>.
Speaker Change: We continue to see.
Speaker Change: Even with the evolution of the kind of assets that we're talking about.
Speaker Change: Broad continued path to decarbonization for the company.
Speaker Change: Look I look at the next I think just the last quarter I think something like 55% of our EBITDA came from renewables in in Q2 of this year, we expect that trend to continue we have a lot of wind farms.
Speaker Change: We have we also have a gas facility for example in Michigan.
John Kousinioris: We have a number of different kinds of.
Speaker Change: Of assets that constitute a large fleet and then when you look at our development pipeline.
Speaker Change: <unk> to be more on the wind slash solar slash I'd say storage perspective in Blaine I'd also put pump storage as being something that we do so we continue to see the evolution of the company over time to be cleaner I think we take our decarbonization goals very very seriously they do factor into when you know what.
John Kousinioris: Joel was talking about the criteria.
Speaker Change: He had we always have an eye to emissions and how were performing as a company there, but when we look at the legacy facilities.
Speaker Change: Facilities, we do.
John Kousinioris: Envision.
John Kousinioris:
Speaker Change: An extended life for those then and probably I would say blended add emissions profiles that are probably lower than their legacy emissions profiles have been so.
Speaker Change: We're staying the course I would say broadly overtime.
Speaker Change: And then.
Speaker Change: Maybe more specific.
Speaker Change: <unk> Kota gas facilities.
Speaker Change: You mentioned I think repowering when your earlier comments is that.
Speaker Change: Is that comment more in conjunction with potentially an AI.
Speaker Change: <unk> contract on that what that would be a requirement to repower aside and spending money that you had previously thought you would spend on I think it was on Sundance ability.
John Kousinioris: Yeah, when I think of those assets, we've got enough capacity there right now to meet the kinds of needs. But look, when we talk to some of the people that we're in discussions with, the kinds of load requirements are pretty high. Like we're talking, you know, 500 megawatts, 1000 megawatts; it's not like it's 100 megawatts. So given kind of the legacy footprint that we have there, there is not an immediate near-term, I would say, but a longer-term ability to potentially enhance the site given we've got cooling plants there, transmission is there, the labor force is there.
John Kousinioris: Yes.
Speaker Change: Think of those assets, we look we've got enough capacity there right now to meet the kinds of needs, but look when we talk to some of the people that were in discussions with the kind of load requirements are pretty high like we're talking 500 megawatts 1000 megawatts theyre not and felt like it's a 100 megawatts. So so given kind of the legacy foot.
John Kousinioris: Print.
John Kousinioris: That we have there there is not a not an immediate near term I would say, but our longer term ability to potentially enhance the site give it I mean, we've got cooling pumps. Their transmission is there the labor force is there.
John Kousinioris: We've got gas supply that is an example for us there. So you know, our ability to, you know, take what we have and potentially bring it back to life or do it in an efficient way is something that remains on the table, depending on how the demand for load progresses over time. And then we can expand on my question. And like, for example, if the life of that might be 10 years left, depending on what the regulations are going to be.
John Kousinioris: We've got gas supply that example for US there so our ability to.
John Kousinioris: Take what we have.
John Kousinioris: Potentially bring it back to life and do it in an efficient way is something that remains on the table depending on how the demand for load progresses over time.
John Kousinioris: And then.
Speaker Change: Expand on my question on like for example, if.
John Kousinioris: If you have.
John Kousinioris: Our converted gas plant.
John Kousinioris: Right.
John Kousinioris: The life and that might be 10 years.
John Kousinioris: Depending on what the regulations are going to be.
Speaker Change: Is that is it adequate and not for acceptable to an AI load or would they need something that's more efficient and less emissions and a bit of a longer life.
John Kousinioris: Yeah, we're not seeing, I think, look, what we are seeing, at least in the discussions that we've had, what really matters right now is a high focus on reliability, a very high focus on speed to market. And, you know, like, I think gas prices are at 80 cents. I mean, whether you're at a seven times heat rate or a 10 times heat rate, it isn't going to make much of a difference from a variable cost perspective on the fuel side in terms of driving their decision on what they need.
Speaker Change: Yes, we're not we're not seeing.
Speaker Change: I think look what we are seeing at least in the discussions that we've had what really matters right now is a high focus on reliability.
John Kousinioris: A very high focus on speed to market and you know.
John Kousinioris: Gas prices are at 80 sets I mean, whether you are at seven times heat rate or 10 times heat rates it isn't going to make much of a difference candidly from a variable cost perspective on the fuel side in terms of driving their decision to what they need over time, they're going to want it to be cleaner for sure.
John Kousinioris: Over time, they're going to want it to be cleaner, for sure. You know, and right now, you mentioned the CER. That's something that we're acutely aware of, and we're thinking about. But, you know, my view is that the whole regulatory scheme will evolve over time, given the needs for reliability and affordability in each of the markets in which we are. So we continue to be engaged in these kinds of discussions, and I'd say, Blain, we're not seeing each other. Thank you, and there are no further questions at this time. I would now like to turn the conference back to Ms. Valentini for her closing remarks.
John Kousinioris: And right now you mentioned the CER, that's something that we're acutely aware of and we're thinking of but.
John Kousinioris: My view is that that the.
John Kousinioris: The scheme the whole regulatory scheme, we'll yet evolve over time.
Blain: Given the needs for reliability and affordability in each of the markets in which we are at so we continue to be engaged in these kinds of discussions and I would say blayne, we're not seeing.
Blain: Any kind of impediments at least initially in terms of the kinds of discussions we're having.
Blain: Interesting okay. Thank you.
Ms. Valentini: Thank you.
Ms. Valentini: Thank you and there are no further questions at this time I would now like to turn the conference back to MS. <unk> for closing remarks.
Ms. Valentini: Great. Thank you everyone that concludes our call for today, if you have any further.
Ms. Valentini: Please don't hesitate to reach out to the Transalta Investor Relations team. Thank you very much and have a great day.
Ms. Valentini: And this concludes today's conference call you may now disconnect.
John Kousinioris: Yeah.
John Kousinioris: [music].
John Kousinioris: Okay.
John Kousinioris: Yes.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: [music].
John Kousinioris: Okay.
John Kousinioris: Yes.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: Sure.
John Kousinioris: Yes.
John Kousinioris: Okay.
John Kousinioris: Sure.
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: [music].
John Kousinioris: So.
John Kousinioris: Dan.
John Kousinioris: [music].
John Kousinioris: Okay.
John Kousinioris: [music].
John Kousinioris: Yes.
John Kousinioris: [music].
John Kousinioris: Okay.
John Kousinioris: [music].
John Kousinioris: Sure.
John Kousinioris: [music].
John Kousinioris: Yes.
John Kousinioris: Yes.
John Kousinioris: [music].
John Kousinioris: Okay.
John Kousinioris: Okay.
John Kousinioris: [music].