6. TransAlta Corporation (NYSE:TAC)
Number of Hedge Fund Holders: 36
On June 10, TD Securities resumed coverage of TransAlta Corporation (NYSE:TAC) with a Buy rating. It also set a C$26 price target on the stock. The update came following the completion of the company’s bought deal equity offering. The firm said the stock’s 13% pullback since the announcement of TransAlta’s acquisition of Colorado gas-fired peaking assets reflects concerns about the assets’ characteristics and the company’s valuation. Even so, TD Securities believes the acquisition aligns with TransAlta’s strategy to expand its presence in the Western US. The firm also expects near-term progress on the broader Alberta data center opportunity.
Earlier, on June 4, Reuters reported that TransAlta would acquire two natural gas-fired peaking facilities near Denver, Colorado, from Blackstone for about $1 billion. It would strengthen its position in the Western US power market. Power producers have been adding flexible gas-fired generation capacity to meet rising electricity demand as the industry prepares for rapid growth in consumption, driven in part by power-hungry data centers.
The two facilities, Mountain Peak Power and Canyon Peak Power, have a combined generation capacity of 318 megawatts. They are fully contracted under long-term tolling agreements with investment-grade customers for more than 25 years. The transaction includes assuming $750 million in project-level debt and raising about $250 million in equity through a C$350 million bought deal share offering.
The facilities are expected to generate about $80 million in annual adjusted core profit and approximately $33 million in free cash flow, with additional upside from performance incentives.
TransAlta Corporation (NYSE:TAC) owns, operates, and develops a diversified fleet of power generation assets across Canada, the United States, and Australia. The company supplies affordable, energy-efficient, and reliable electricity to municipalities, businesses, medium and large industrial customers, and utility providers.
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