TransAlta Renewables – One of the best in clean energy space

TransAlta Renewables is a renewable energy company and a sponsored vehicle of TransAlta Corporation. It is the largest generator of wind power in Canada and owns one of the largest wind portfolios in North America. The company focuses on building a pipeline of renewables, on-site, and cogeneration projects in Canada, the US, and Australia.

TransAlta Renewables owns renewable energy facilities across different regions and multiple technologies. It operates fully contracted renewable power generation facilities including wind, solar, hydro, and gas.

The company owns and operates 23 wind farms, 13 hydro facilities, seven natural gas plants, one solar facility, one natural gas pipeline, and one battery storage project across geographies. The wind asset portfolio is the largest accounting for more than 50% of the cash flow generated, followed by natural gas, hydro, and solar.

With more than a century’s experience, TransAlta Renewables has strong operating expertise and extensive experience in constructing and developing projects. Highly contracted renewable and natural gas power generation assets, and long-term contracts with strong counterparties enables stable cash flow.

DISCLOSURE: Please note that links to merchants mentioned within this post might be using an affiliate link. Using an affiliate link means that, at zero cost to you, I might earn a commission if you buy something through that affiliate link.

Key Investment Data

 

Revenue Growth & Market Exposure

TransAlta Renewables is diversified with facilities that are highly contracted and located in various geographies. The company primarily deals with renewable and natural gas power generation. Most of its renewables facilities have an established track record of operating history and performance.

The company owns directly or through economic interests more than 2,555 MW of gross generating capacity. Most of its assets are strategically located to supply power to growing industrial regions. TransAlta Renewables typically enters into long term power purchase agreements with corporations for the sale of power generated by the projects. Its portfolio consists of highly contracted facilities with a weighted average contract life of 12 years that grants enough visibility to future cash flows. 

TransAlta’s renewables production from US wind and solar increased due to higher production at Big Level and Antrim. Its wind battery storage facility also commenced commercial operations in October 2020.

TransAlta Renewables is growing organically as well as through acquisitions. It has successfully integrated $3.4 billion worth of acquisitions since its IPO in 2013. The company is in a good position to benefit from the fast-growing renewable energy trend worldwide. Its widespread asset base, operational excellence, and financial strength grant it strong support for pursuing future growth opportunities.

TransAlta Renewables has a strong pipeline of 900 MW of on-site generation pipeline and 2,000 MW of renewables pipeline under evaluation. The company added six wind farms and a solar facility over the last five years. Growing demand for new wind projects in Canada, the US, and Australia acts as a strong tailwind for the company.

A good track record of operational excellence helps TransAlta to extend its long-term contracts with existing customers. With nearly 100 years in business, TransAlta Renewables has developed extensive knowledge of the energy market and long term relations with regulators and customers. Strong sponsorship from TransAlta Corp. further provides an excellent source of drop-down of assets and growth opportunities.

Dividends

TransAlta Renewables is a Canadian Dividend Aristocrat with a history of decent dividend growth. The company has compounded its payout at a rate of more than 4% annually, over the last five years. It last raised its dividend by 6.8% in 2017 and offers a dividend yield of 4.4% currently but has a high payout ratio. TransAlta Renewables targets to pay out up to 80% to 85% of cash available for distribution to the shareholders.

TransAlta Renewables has a proven track record of growing cash flows. The company’s cash flows are derived from a diversified asset base consisting of wind, natural gas, hydro and solar facilities. Long-term regulatory contracts lead to stable and recurring cash flows for the company which have supported its stable dividend payouts. 

TransAlta Renewables’ business is subject to stringent environmental laws and regulations by the federal, provincial, state, and municipal governments. Necessary environmental permits and laws need to be strictly followed. All these act as significant entry barriers for newcomers.

The company also has easy access to growth capital. The company’s cash available for distribution stood at $73 million or $0.27 per share in the most recent quarter. TransAlta Renewables’ cash flows remain unaffected due to its highly contracted asset portfolio and financial strength of customers. The company has a strong balance sheet with ample liquidity to provide additional flexibility in the current situation. The company expects its EBITDA to range between $445-$475 million and CAFD of $300-$330 million in FY2020.

TransAlta Renewables’ extensive expansion projects grant it good visibility for future dividend growth. U.S. market fundamentals should drive future growth and acquisition opportunities. The company is also focusing on growing and broadening its corporate customer base which should further strengthen its cash flow visibility.

Microsoft, Partners HealthCare, and New Hampshire Electric were new additions to its customers’ list. Excellent track record of extensions beyond original contract term and the backing of TransAlta Corporation, Canada’s largest wholesale power generators, provide solid support to TransAlta Renewables.

RNW Yield 2021
Make your own charts. Try Stock Rover NOW!

Competition

Brookfield Renewable Partners, Algonquin Power & Utilities Corp, Northland Power are TransAlta Renewables’ strong competitors.

Brookfield Renewable Partners’ business model is based on owning and operating renewable energy power plants, with over 100 years of experience in power generation.

Algonquin Power & Utilities is a diversified generation, transmission, and distribution utility based in North America. The company owns a strong portfolio of long-term contracted wind, solar and hydroelectric assets. Northland Power is another power producer operating clean and green power infrastructure assets in Canada, Europe, and a few other geographies. 

TickerKeyTickerCompanySectorIndustryScoreQuoteMarket CapP/EFPEEPSYield RawPayoutRatioPaymentsDividendChowderGrowthRatingIncomeRatingTollboothAmbassadorAchieverAristocratKingCountryGraph
TSE:BEPCBEPCBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable43.6452.3018.700.000.000.002.93000.000041.222.930035Tollbooth - UnregulatedNONONONOCanada1
TSE:BEP.UNBEP.UNBrookfield Renewable Partners L.P.UtilitiesUtilities - Renewable37.0748.0513.220.000.00-1.003.19000.000041.229.570042Tollbooth - UnregulatedNONONONOCanada1
TSE:AQNAQNAlgonquin Power & Utilitties CorpUtilitiesUtilities - Renewable75.7719.6211.9610.5810.580.894.38000.000040.6813.400088Tollbooth - UnregulatedNOYESYESNOCanada1
TSE:NPINPINorthland Power Inc.UtilitiesUtilities - Renewable48.3340.009.0446.1346.130.873.0000130.9000121.204.060034Tollbooth - UnregulatedNONONONOCanada1
TSE:RNWRNWTransAlta Renewables Inc.UtilitiesUtilities - Renewable47.0820.415.3940.0040.000.504.6000183.8000120.945.860024Tollbooth - UnregulatedNONONONOCanada1
TSE:BLXBLXBoralex Inc.UtilitiesUtilities - Renewable40.0536.703.7392.3992.390.381.8000165.900040.665.030043Tollbooth - UnregulatedNONOYESNOCanada1
TSE:INEINEInnergex Renewable Energy IncUtilitiesUtilities - Renewable56.8619.933.560.000.000.203.61000.000040.725.370057Tollbooth - UnregulatedNONOYESNOCanada1

Bottom Line

TransAlta Renewables is a shareholder-friendly company with over 90% TSR since its IPO. It ranks amongst the largest renewable independent power producers in Canada. It has a highly dispatchable generation to complement growth in an intermittent generation.

TransAlta Renewables has a significant number of growth projects in advanced or early staged development. It is well-funded and well-positioned to capitalize on future organic and acquisition opportunities.

RNW PE 2021
Make your own charts. Try Stock Rover NOW!

A Winning Investment Strategy

My portfolio is generating over 12% annual returns since 2009. It's not from the beginning of the year or from 2019, it's from 2009 !!! That's a consistent return which means using the rule of 72, I double my portfolio every 6 years.

My approach is simple but you need key data that I have cultivated with the Dividend Snapshot Screeners. No other investment services provide you with easy to understand data but also actionable data. No hidden magic.

In fact, I have tried all of the investment services for dividend investors like a crash test dummy of investment services. Just ask me, and you'll learn why there was nothing I could use out there and that's how the Dividend Snapshot Screeners were borned!

Join 128,000+ Monthly Investors & Build a Winning Portfolio

DISCLOSURE: Please note that I may have a position in one or many of the holdings listed. For a complete list of my holdings, please see my Dividend Portfolio.

DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.