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.
Key Investment Data
- Opportunity Score: 45
- Ticker: TSE:RNW
- Sector: Utilities
- Industry: Utilities - Renewable
- Market Cap: 5.28B
- P/E: 38.79
- Dividend Yield: 4.75%
- Payout Ratio (TTM): 183.80%
- Canadian Dividend Aristocrat: NO
- Chowder Score: Members Only
- Revenue Growth: Members Only
- Dividend Growth: Members Only
- Dividend Growth Fit: 2/10
- Dividend Income Fit: 4/10
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.
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.
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.
|TickerKey||Ticker||Company||Sector||Industry||Score||Quote||Market Cap||P/E||FPE||EPS||Yield Raw||PayoutRatio||Payments||Dividend||Chowder||GrowthRating||IncomeRating||Tollbooth||Ambassador||Achiever||Aristocrat||King||Country||Graph|
|TSE:BEPC||BEPC||Brookfield Renewable Partners L.P.||Utilities||Utilities - Renewable||43.64||52.30||18.70||0.00||0.00||0.00||2.9300||0.0000||4||1.22||2.9300||3||5||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:BEP.UN||BEP.UN||Brookfield Renewable Partners L.P.||Utilities||Utilities - Renewable||37.07||48.05||13.22||0.00||0.00||-1.00||3.1900||0.0000||4||1.22||9.5700||4||2||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:AQN||AQN||Algonquin Power & Utilitties Corp||Utilities||Utilities - Renewable||75.77||19.62||11.96||10.58||10.58||0.89||4.3800||0.0000||4||0.68||13.4000||8||8||Tollbooth - Unregulated||NO||YES||YES||NO||Canada||1|
|TSE:NPI||NPI||Northland Power Inc.||Utilities||Utilities - Renewable||48.33||40.00||9.04||46.13||46.13||0.87||3.0000||130.9000||12||1.20||4.0600||3||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:RNW||RNW||TransAlta Renewables Inc.||Utilities||Utilities - Renewable||47.08||20.41||5.39||40.00||40.00||0.50||4.6000||183.8000||12||0.94||5.8600||2||4||Tollbooth - Unregulated||NO||NO||NO||NO||Canada||1|
|TSE:BLX||BLX||Boralex Inc.||Utilities||Utilities - Renewable||40.05||36.70||3.73||92.39||92.39||0.38||1.8000||165.9000||4||0.66||5.0300||4||3||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
|TSE:INE||INE||Innergex Renewable Energy Inc||Utilities||Utilities - Renewable||56.86||19.93||3.56||0.00||0.00||0.20||3.6100||0.0000||4||0.72||5.3700||5||7||Tollbooth - Unregulated||NO||NO||YES||NO||Canada||1|
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.