TransAlta reaps benefits of high Alberta power prices

TransAlta Corp. is reaping the benefits of higher power prices in Alberta.

On Thursday, the Calgary-based utility company credited its fourth-quarter and full-year 2021 performance in large part to the performance of its Alberta electricity portfolio, which it said benefited from increased power demand and strong market prices for energy commodities during the period.

According to the company, TransAlta's Alberta electricity portfolio generated a gross margin of $864 million in the three months ended Dec. 31, 2021, an increase of $405 million compared to the same period in 2020.

In a news release, TransAlta said the increase was due to "strengthened power prices in the province and optimization of production during periods of favourable pricing, partially offset by higher natural gas and carbon pricing and higher transmission costs."

For the three months ended Dec. 31, 2021, TransAlta reported a loss of $78 million or 29 cents per share in its fourth quarter, compared with a loss of $167 million or 61 cents per share in the same quarter a year earlier.

Revenue totalled $610 million, up from $544 million.

On an adjusted basis, TransAlta said it earned $270 million, an increase of 15 per cent over the same period in 2020. The company's free cash flow for the quarter was $106 million or 39 cents per share, up from $52 million or 19 cents per share in the same quarter a year earlier.

It said the gains were partially offset by lower production at its Centralia Unit 2 due to a transformer failure that has now been resolved and an unplanned outage at its Kent Hills 1 and 2 wind facilities.

'Record year'

For the full year, TransAlta reported adjusted earnings of $1.26 billion, an increase of $336 million compared to 2020.

"2021 was a record year for TransAlta. We achieved outstanding financial results, with exceptional performance from our Alberta hydro and gas fleets," said chief executive John Kousinioris in the release.

According to TransAlta, Alberta's annual demand for electricity expanded by approximately three per cent from 2020 to 2021 as the province recovered from the economic impacts of the COVID-19 pandemic.

The average pool price for electricity increased from $47 per megawatt-hour in 2020 to $102 per MWh in 2021, the company said. Pool prices were higher in each quarter compared to 2020, a fact TransAlta attributed to competition among generators, higher demand in the province, tighter supply conditions due to higher planned outages, and higher natural gas and carbon prices.

"In addition, in 2021, Alberta experienced very strong weather-driven demand in February, June, July and December," the company stated.

TransAlta's Alberta electricity portfolio achieved a realized power price of $109 per MWh for the full year, compared to the Alberta spot pool price which averaged $102 per MWh, the company said.

Electricity prices in Alberta have been in the spotlight in recent weeks, as consumers have complained about skyrocketing utility rates.

Consumers' Coalition of Alberta spokesman Jim Wachowich said last week that homeowners who haven't signed onto a fixed contract for their heating and electricity instead choosing to pay a floating rate that fluctuates with market prices are reporting doubling, even tripling of their bills.

Analysts say a major reason behind the spike in electricity prices is the surging price of natural gas, which has coincided with Alberta's rapid and dramatic progress in weaning itself off cheap coal-fired electricity. The conversion of coal power plants to cleaner-burning natural gas facilities is putting more pressure on electricity bills.

In the fourth quarter, TransAlta announced it had completed its completed conversion of its Keephills Unit 3 power plant west of Edmonton, the last of three coal-to-gas conversions at its Alberta thermal power generation facilities.

TransAlta, which has retired 3,795 megawatts of coal-fired generation since 2018, is now off of coal completely in its Canadian operations.