[Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) This section outlines the nature of forward-looking statements, including predictions, estimates, and assumptions, and highlights the inherent risks and uncertainties that could cause actual results to differ materially [Forward-Looking Statements Overview](index=2&type=section&id=Forward-Looking%20Statements%20Overview) This section outlines the nature of forward-looking statements, including predictions, estimates, and assumptions, and highlights the inherent risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are predictions based on estimates and assumptions, subject to risks and uncertainties that could cause actual results to differ materially[4](index=4&type=chunk)[5](index=5&type=chunk) - Key areas covered by forward-looking statements include strategic objectives, capital allocation, sustainability goals, 2025 Outlook, financial and operational performance, asset optimization, growth strategies, ongoing transactions, project costs/schedules, regulatory outcomes, industry conditions, and legal proceedings[6](index=6&type=chunk)[7](index=7&type=chunk) - Assumptions underlying these statements include no significant changes to laws, regulations, market conditions, power/gas prices, interest/foreign exchange rates, demand for generation, facility integrity, debt ratings, or unforeseen economic events[6](index=6&type=chunk)[8](index=8&type=chunk) - Adverse factors include fluctuations in power/commodity prices, changes in supply/demand, ability to contract generation, development/acquisition risks, financing difficulties, ESG target achievement, regulatory changes, operational risks, cybersecurity threats, economic risks, and legal disputes[8](index=8&type=chunk)[11](index=11&type=chunk) [Description of the Business](index=4&type=section&id=Description%20of%20the%20Business) TransAlta Corporation is a major Canadian publicly traded power generator with a diverse fleet across Canada, the U.S., and Western Australia [Business Overview](index=4&type=section&id=Business%20Overview) TransAlta Corporation is a major Canadian publicly traded power generator with a diverse fleet across Canada, the U.S., and Western Australia, including hydro, wind, solar, battery storage, natural gas, and coal - TransAlta is one of Canada's largest publicly traded power generators, operating a diverse fleet (hydro, wind, solar, battery storage, natural gas, coal) across Canada, the U.S., and Western Australia[12](index=12&type=chunk) - Strategic priorities include optimizing the Alberta portfolio, executing growth, realizing value from legacy assets, maintaining financial strength, defining next-gen power solutions, and leading in ESG and market policy[13](index=13&type=chunk) [Portfolio of Assets](index=4&type=section&id=Portfolio%20of%20Assets) TransAlta's asset portfolio is geographically diversified and includes both merchant and high-quality contracted assets, with a total gross installed capacity of 9,014 MW as of June 30, 2025 - The asset portfolio is geographically diversified across core markets (Canada, U.S., Western Australia) and includes both merchant and high-quality contracted assets[14](index=14&type=chunk)[15](index=15&type=chunk) - Merchant exposure is primarily in Alberta (**58% of capacity**), managed through hedging strategies with commercial and industrial (C&I) customers and financial hedges[15](index=15&type=chunk)[16](index=16&type=chunk) Total Gross Installed Capacity (MW) | Segment | Alberta (MW) | Canada (excl. AB) (MW) | U.S. (MW) | Western Australia (MW) | Total (MW) | Number of facilities | | :---------------- | :----------- | :--------------------- | :-------- | :--------------------- | :--------- | :------------------- | | Hydro | 834 | 88 | — | — | 922 | 24 | | Wind & Solar | 764 | 751 | 1,024 | 48 | 2,587 | 36 | | Gas | 3,650 | 705 | 29 | 450 | 4,834 | 26 | | Energy Transition | — | — | 671 | — | 671 | 2 | | **Total** | **5,248** | **1,544** | **1,724** | **498** | **9,014** | **88** | [Contracted Capacity](index=5&type=section&id=Contracted%20Capacity) Approximately 52% of TransAlta's total installed capacity is contracted with creditworthy counterparties, providing stable long-term earnings with a weighted average contract life of 5 years - Approximately **52% of total installed capacity** is contracted with creditworthy counterparties, providing stable long-term earnings and cash flow[15](index=15&type=chunk)[19](index=19&type=chunk) Contracted Capacity | Segment | Contracted Capacity (MW) | Contracted Capacity as a % of Total Capacity (%) | | :---------------- | :----------------------- | :--------------------------------------------- | | Hydro | 88 | 10 | | Wind & Solar | 2,159 | 83 | | Gas | 2,071 | 43 | | Energy Transition | 381 | 57 | | **Total** | **4,699** | **52** | Weighted Average Contract Life (years) | Segment | Weighted Average Contract Life (years) | | :---------------- | :------------------------------------- | | Hydro | 1 | | Wind & Solar | 10 | | Gas | 4 | | Energy Transition | — | | **Total** | **5** | [Highlights](index=6&type=section&id=Highlights) This section presents TransAlta's consolidated financial and operational highlights, including performance metrics, revenues, and key financial indicators for Q2 and H1 2025 [Consolidated Financial and Operational Highlights](index=6&type=section&id=Consolidated%20Financial%20and%20Operational%20Highlights) For Q2 and H1 2025, TransAlta delivered strong operational performance with increased availability and production, despite a decrease in revenues, while maintaining strong liquidity - The acquisition of Heartland Generation in December 2024 added **1,747 MW** to gross installed capacity[23](index=23&type=chunk) Consolidated Financial and Operational Highlights (Q2 & H1 2025 vs. 2024) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :-------------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Availability (%) | 91.6 | 90.8 | +0.8 | 93.3 | 91.5 | +1.8 | | Production (GWh) | 4,813 | 4,781 | +32 | 11,645 | 10,959 | +686 | | Revenues (CAD millions) | 433 | 582 | -149 | 1,191 | 1,529 | -338 | | Adjusted EBITDA (CAD millions) | 349 | 316 | +33 | 619 | 658 | -39 | | Net (loss) earnings attributable to common shareholders (CAD millions) | (112) | 56 | -168 | (66) | 278 | -344 | | Cash flow from operating activities (CAD millions) | 157 | 108 | +49 | 164 | 352 | -188 | | Available liquidity (CAD millions) | 1,497 | N/A | N/A | 1,497 | N/A | N/A | | Adjusted net debt to adjusted EBITDA (times) | 3.8 | N/A | N/A | 3.8 | N/A | N/A | | Total assets (CAD millions) | 8,939 | N/A | N/A | 8,939 | N/A | N/A | | Total liabilities (CAD millions) | 7,276 | N/A | N/A | 7,276 | N/A | N/A | [Operating Performance](index=8&type=section&id=Operating%20Performance) TransAlta experienced improved availability across its fleet, particularly in Energy Transition and Hydro segments, contributing to increased overall production for both Q2 and H1 2025 Availability by Segment (%) | Segment | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hydro | 97.0 | 90.5 | 95.3 | 91.2 | | Wind and Solar | 94.7 | 94.3 | 94.3 | 93.9 | | Gas | 90.2 | 95.3 | 92.9 | 94.9 | | Energy Transition | 81.3 | 59.0 | 89.1 | 69.0 | | **Total** | **91.6** | **90.8** | **93.3** | **91.5** | - Higher availability in Q2 and H1 2025 was primarily due to lower planned and unplanned outages at the Centralia facility (Energy Transition) and in the Hydro segment, partially offset by higher unplanned outages in the Gas segment[35](index=35&type=chunk)[36](index=36&type=chunk) Total Production (GWh) | Segment | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hydro | 572 | 426 | 955 | 777 | | Wind and Solar | 1,513 | 1,499 | 3,418 | 2,997 | | Gas | 2,486 | 2,854 | 5,990 | 6,382 | | Energy Transition | 242 | 2 | 1,282 | 803 | | **Total** | **4,813** | **4,781** | **11,645** | **10,959** | - Total production increased by **1% in Q2** and **6% in H1 2025**, driven by Heartland gas facilities acquisition, improved Centralia availability, and higher Hydro production, partially offset by Gas segment dispatch optimization due to lower market prices[41](index=41&type=chunk)[45](index=45&type=chunk) Market Pricing (Q2 & H1 2025 vs. 2024) | Market Price Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :---------------------------------- | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Alberta spot power price ($/MWh) | 40 | 45 | -11% | 40 | 72 | -44% | | Mid-Columbia spot power price (US$/MWh) | 34 | 29 | +17% | 42 | 67 | -37% | | Ontario spot power price ($/MWh) | 36 | 28 | +29% | 50 | 31 | +61% | | Natural gas price (AECO) per GJ ($) | 1.64 | 1.14 | +44% | 1.83 | 1.54 | +19% | - Alberta spot power prices decreased significantly (**11% in Q2, 44% in H1**) due to a mild winter and increased supply[42](index=42&type=chunk)[43](index=43&type=chunk) - AECO natural gas prices increased (**44% in Q2, 19% in H1**) due to lower storage levels[42](index=42&type=chunk)[43](index=43&type=chunk) [Financial Performance Review of Consolidated Information](index=11&type=section&id=Financial%20Performance%20Review%20of%20Consolidated%20Information) Consolidated revenues decreased significantly in both Q2 and H1 2025, primarily due to lower derivative and trading activities and unfavorable market conditions, leading to a net loss Consolidated Statement of Earnings (Q2 & H1 2025 vs. 2024) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :-------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenues | 433 | 582 | 1,191 | 1,529 | | Fuel and purchased power | (173) | (154) | (450) | (477) | | Carbon compliance recovery (costs) | 74 | 8 | 25 | (32) | | Operations, maintenance and administration | (173) | (144) | (346) | (278) | | Depreciation and amortization | (150) | (131) | (296) | (255) | | Asset impairment charges | (13) | (5) | (28) | (6) | | Fair value change in contingent consideration payable | — | — | 34 | — | | Interest expense | (88) | (80) | (181) | (149) | | Foreign exchange loss | (17) | (1) | (21) | (6) | | (Loss) Earnings before income taxes | (95) | 94 | (46) | 361 | | Income tax expense | (11) | (28) | (18) | (57) | | Net (loss) earnings attributable to common shareholders | (112) | 56 | (66) | 278 | - Q2 2025 revenues decreased by **$149 million (26%)** due to higher unrealized mark-to-market losses from derivatives in Gas, Wind & Solar, Energy Transition, and Hydro segments, partially offset by the Heartland acquisition[49](index=49&type=chunk)[55](index=55&type=chunk) - H1 2025 revenues decreased by **$338 million (22%)** due to lower Alberta power prices, higher dispatch optimization in Gas, and increased unrealized mark-to-market losses, partially offset by the Heartland acquisition[58](index=58&type=chunk)[62](index=62&type=chunk) - Carbon compliance recovery increased significantly in both periods due to higher utilization of internally generated emission credits and lower fuel consumption in the Gas segment, despite an increase in carbon price[55](index=55&type=chunk)[62](index=62&type=chunk) - Asset impairment charges increased by **160% in Q2** and **367% in H1 2025**, mainly due to increased decommissioning and restoration provisions on retired assets and an impairment charge on Planned Divestiture assets[51](index=51&type=chunk)[60](index=60&type=chunk) [Adjusted EBITDA](index=14&type=section&id=Adjusted%20EBITDA) Adjusted EBITDA increased by 10% in Q2 2025 to $349 million, driven by Hydro and Energy Transition segments, but decreased by 6% in H1 2025 to $619 million Adjusted EBITDA (CAD millions) | Period | 2025 | 2024 | Change | | :---------------------- | :--- | :--- | :----- | | 3 months ended June 30 | 349 | 316 | +33 | | 6 months ended June 30 | 619 | 658 | -39 | - Q2 2025 Adjusted EBITDA increased due to higher environmental/tax attributes revenue and volumes in Hydro, and higher market optimization/availability in Energy Transition, partially offset by lower Gas and Energy Marketing contributions[66](index=66&type=chunk) - H1 2025 Adjusted EBITDA decreased due to lower Gas segment performance (dispatch optimization, lower prices, higher carbon price) and subdued market volatility in Energy Marketing, partially offset by positive contributions from Wind and Solar (new facilities) and Energy Transition (lower purchased power costs)[69](index=69&type=chunk) [Free Cash Flow](index=16&type=section&id=Free%20Cash%20Flow) Free Cash Flow (FCF) remained consistent in Q2 2025 at $177 million but decreased by $82 million (21%) in H1 2025 to $316 million Free Cash Flow (FCF) (CAD millions) | Period | 2025 | 2024 | Change | | :---------------------- | :--- | :--- | :----- | | 3 months ended June 30 | 177 | 177 | 0 | | 6 months ended June 30 | 316 | 398 | -82 | - FCF for Q2 2025 was consistent with Q2 2024, with higher Adjusted EBITDA offset by increased sustaining capital expenditures and net interest expense[72](index=72&type=chunk) - FCF for H1 2025 decreased due to lower Adjusted EBITDA, higher sustaining capital expenditures (Canadian gas facilities, Heartland acquisition), and increased net interest expense[76](index=76&type=chunk) [Capital Expenditures](index=18&type=section&id=Capital%20Expenditures) This section details TransAlta's capital expenditures, distinguishing between sustaining capital for maintenance and growth capital for new projects [Sustaining Capital Expenditures](index=18&type=section&id=Sustaining%20Capital%20Expenditures) Sustaining capital expenditures increased in both Q2 and H1 2025, primarily driven by higher major maintenance at Canadian gas facilities and Heartland-acquired assets - Sustaining capital expenditures are incurred for major maintenance to sustain existing capacity or production[79](index=79&type=chunk) Sustaining Capital Expenditures (CAD millions) | Segment | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hydro | 6 | 10 | 10 | 13 | | Wind and Solar | 7 | 4 | 11 | 7 | | Gas | 40 | 11 | 51 | 14 | | Energy Transition | — | 12 | — | 12 | | Corporate | 4 | 3 | 8 | (6) | | **Total** | **57** | **40** | **80** | **40** | - Total sustaining capital expenditures increased by **$17 million in Q2** and **$40 million in H1 2025**, mainly due to higher major maintenance for Canadian gas facilities and Heartland-acquired assets, offset by no major maintenance in Energy Transition[80](index=80&type=chunk)[81](index=81&type=chunk) [Growth and Development Capital Expenditures](index=19&type=section&id=Growth%20and%20Development%20Capital%20Expenditures) Growth and development capital expenditures decreased in H1 2025 compared to H1 2024, as many development projects achieved commercial operation in the first half of 2024 - Growth capital expenditures add megawatts or generate new incremental revenues, covering engineering, design, contracting, permitting, payroll, and overhead[83](index=83&type=chunk) Growth and Development Spending (CAD millions) | Segment | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :---------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hydro | 1 | 3 | 1 | 6 | | Wind and Solar | — | — | — | 48 | | Gas | 15 | 12 | 26 | 16 | | Energy Transition | 2 | — | 2 | — | | **Total** | **18** | **15** | **29** | **70** | - Growth and development capital expenditures were lower in H1 2025 compared to H1 2024, as many development projects achieved commercial operation in the first half of 2024[84](index=84&type=chunk) [Significant and Subsequent Events](index=19&type=section&id=Significant%20and%20Subsequent%20Events) This section outlines key corporate and financial events, including credit facility extensions, asset divestitures, senior note issuances, and dividend increases [Corporate and Financial Events](index=19&type=section&id=Corporate%20and%20Financial%20Events) TransAlta executed several key corporate and financial actions, including extending credit facilities, recontracting Ontario wind facilities, divesting Poplar Hill, and issuing senior notes - On July 16, 2025, TransAlta extended **$2.1 billion** in committed credit facilities, pushing maturity dates to June 30, 2029 (syndicated) and June 30, 2027 (bilateral)[85](index=85&type=chunk) - The company recontracted its Melancthon 1, Melancthon 2, and Wolfe Island wind facilities through the Ontario IESO MT2e, extending contracts until April 30, 2031, and April 30, 2034, respectively[86](index=86&type=chunk) - An agreement was signed for the divestiture of the **48 MW Poplar Hill asset**, as required by the Heartland Generation acquisition consent agreement[87](index=87&type=chunk) - TransAlta issued **$450 million of senior notes** with a **5.625% annual coupon**, maturing March 24, 2032, and used the proceeds to repay a **$400 million variable rate term loan facility**[88](index=88&type=chunk)[89](index=89&type=chunk) - A strategic investment was made in Nova Clean Energy, LLC, including a **US$75 million term loan** and **US$100 million revolving facility**, granting TransAlta exclusive rights to purchase Nova's late-stage development projects in the western U.S[91](index=91&type=chunk) - The Sundance Unit 6 facility was mothballed for up to two years, with flexibility to return to service based on market conditions[92](index=92&type=chunk) - The Board approved an **8% increase** to the common share dividend, raising it to **$0.065 per common share quarterly ($0.26 annualized)**, marking the sixth consecutive annual increase[93](index=93&type=chunk) - The company received approval for a Normal Course Issuer Bid (NCIB) to repurchase up to **14 million common shares** by May 30, 2026, allocating up to **$100 million** for share repurchases[95](index=95&type=chunk)[96](index=96&type=chunk) [Segmented Financial Performance and Operating Results](index=21&type=section&id=Segmented%20Financial%20Performance%20and%20Operating%20Results) This section provides a detailed review of TransAlta's financial and operating performance across its Hydro, Wind and Solar, Gas, Energy Transition, Energy Marketing, and Corporate segments [Overall Segmented Financial Performance](index=21&type=section&id=Overall%20Segmented%20Financial%20Performance) TransAlta's overall segmented financial performance in Q2 2025 saw an increase in Adjusted earnings before income taxes, but a decrease in Adjusted net earnings attributable to common shareholders Segmented Financial Performance (CAD millions) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :-------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Hydro Adjusted EBITDA | 126 | 83 | 173 | 170 | | Wind and Solar Adjusted EBITDA | 89 | 88 | 191 | 177 | | Gas Adjusted EBITDA | 128 | 142 | 232 | 267 | | Energy Transition Adjusted EBITDA | 19 | 2 | 56 | 29 | | Energy Marketing Adjusted EBITDA | 26 | 39 | 47 | 78 | | Corporate Adjusted EBITDA | (39) | (38) | (80) | (63) | | **Total Adjusted EBITDA** | **349** | **316** | **619** | **658** | | Adjusted earnings before income taxes | 122 | 112 | 150 | 256 | | (Loss) earnings before income taxes | (95) | 94 | (46) | 361 | | Adjusted net earnings attributable to common shareholders | 54 | 70 | 84 | 197 | | Net (loss) earnings attributable to common shareholders | (112) | 56 | (66) | 278 | - Adjusted earnings before income taxes increased by **$10 million (9%) in Q2 2025**, driven by higher Adjusted EBITDA and realized foreign exchange gains, partially offset by higher depreciation and interest expense[99](index=99&type=chunk)[100](index=100&type=chunk) - Net loss before income taxes increased by **$189 million (201%) in Q2 2025**, primarily due to higher unrealized mark-to-market losses across multiple segments and increased foreign exchange losses and asset impairment charges[99](index=99&type=chunk)[101](index=101&type=chunk)[104](index=104&type=chunk) - Adjusted earnings before income taxes decreased by **$106 million (41%) in H1 2025**, mainly due to lower Adjusted EBITDA, higher depreciation from new facilities, and increased interest expense[102](index=102&type=chunk)[104](index=104&type=chunk) - Net loss before income taxes increased by **$407 million (113%) in H1 2025**, driven by higher unrealized mark-to-market losses, asset impairment charges (including Planned Divestitures), and foreign exchange losses, partially offset by an impairment reversal[103](index=103&type=chunk)[105](index=105&type=chunk) [Hydro Segment](index=23&type=section&id=Hydro%20Segment) The Hydro segment showed strong performance in Q2 2025 with a 52% increase in Adjusted EBITDA, driven by higher environmental and tax attributes revenue, increased merchant and ancillary services volumes due to higher availability, and higher ancillary services prices Hydro Segment Performance (CAD millions, except GWh/%) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Availability (%) | 97.0 | 90.5 | +6.5 | 95.3 | 91.2 | +4.1 | | Total energy production (GWh) | 572 | 426 | +146 | 955 | 777 | +178 | | Adjusted revenues | 147 | 100 | +47 | 212 | 207 | +5 | | Adjusted EBITDA | 126 | 83 | +43 | 173 | 170 | +3 | | Adjusted earnings before income taxes | 118 | 75 | +43 | 156 | 155 | +1 | - Q2 2025 Adjusted revenues increased by **47%** due to higher environmental/tax attributes revenue (intercompany sales of emission credits), increased merchant and ancillary services volumes (higher availability), and higher ancillary services prices, partially offset by lower Alberta spot power prices[109](index=109&type=chunk)[113](index=113&type=chunk) - H1 2025 Adjusted revenues increased by **2%** due to higher merchant and ancillary services volumes, increased environmental/tax attributes revenue, and higher volume of favorable hedging positions settled, partially offset by lower Alberta spot power and ancillary services prices[110](index=110&type=chunk)[114](index=114&type=chunk) [Wind and Solar Segment](index=25&type=section&id=Wind%20and%20Solar%20Segment) The Wind and Solar segment saw a slight increase in Adjusted EBITDA for both Q2 and H1 2025, driven by higher environmental and tax attributes revenue and the full impact of new wind facilities. However, Adjusted earnings before income taxes decreased due to higher depreciation and amortization Wind and Solar Segment Performance (CAD millions, except GWh/%) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Gross installed capacity (MW) | 2,587 | 2,584 | +3 | 2,587 | 2,584 | +3 | | Availability (%) | 94.7 | 94.3 | +0.4 | 94.3 | 93.9 | +0.4 | | Total production (GWh) | 1,513 | 1,499 | +14 | 3,418 | 2,997 | +421 | | Adjusted revenues | 129 | 122 | +7 | 274 | 242 | +32 | | Adjusted EBITDA | 89 | 88 | +1 | 191 | 177 | +14 | | Adjusted earnings before income taxes | 37 | 41 | -4 | 86 | 87 | -1 | - Q2 2025 Adjusted revenues increased due to higher environmental/tax attributes revenue (emission credits sales), partially offset by lower tax attributes revenue from Oklahoma (lower wind resource) and lower Alberta pool prices[120](index=120&type=chunk)[122](index=122&type=chunk) - H1 2025 Adjusted revenues increased due to the full impact of White Rock and Horizon Hill wind facilities, higher environmental attributes revenue, increased production in Eastern Canada, and higher tax attributes revenue from Oklahoma facilities[121](index=121&type=chunk)[123](index=123&type=chunk) - Adjusted earnings before income taxes decreased in both periods due to higher depreciation and amortization from new wind facilities[120](index=120&type=chunk)[122](index=122&type=chunk)[124](index=124&type=chunk) [Gas Segment](index=27&type=section&id=Gas%20Segment) The Gas segment experienced a decrease in Adjusted EBITDA for both Q2 and H1 2025, primarily due to lower market prices, higher dispatch optimization, increased carbon prices, and higher natural gas prices. This was partially offset by positive contributions from the Heartland acquisition and increased utilization of emission credits Gas Segment Performance (CAD millions, except GWh/%) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Gross installed capacity (MW) | 4,834 | 3,087 | +1,747 | 4,834 | 3,087 | +1,747 | | Availability (%) | 90.2 | 95.3 | -5.1 | 92.9 | 94.9 | -2.0 | | Total production (GWh) | 2,486 | 2,854 | -368 | 5,990 | 6,382 | -392 | | Adjusted revenues | 282 | 300 | -18 | 648 | 646 | +2 | | Adjusted EBITDA | 128 | 142 | -14 | 232 | 267 | -35 | | Adjusted earnings before income taxes | 54 | 86 | -32 | 94 | 156 | -62 | - Q2 2025 Adjusted revenues decreased due to higher dispatch optimization (lower market prices), lower pool and realized power prices in Alberta, partially offset by the Heartland acquisition[131](index=131&type=chunk)[133](index=133&type=chunk) - Q2 2025 Adjusted EBITDA decreased due to lower adjusted revenues, higher OM&A (Heartland facilities), higher natural gas prices, and increased carbon price, partially offset by utilization of emission credits[131](index=131&type=chunk)[133](index=133&type=chunk) - H1 2025 Adjusted revenues increased slightly due to the Heartland acquisition and favorable hedge positions, offset by higher dispatch optimization and lower power prices in Alberta[132](index=132&type=chunk)[134](index=134&type=chunk) - H1 2025 Adjusted EBITDA decreased due to higher OM&A, natural gas prices, and carbon price, partially offset by Heartland contributions and emission credit utilization[132](index=132&type=chunk)[134](index=134&type=chunk) [Energy Transition Segment](index=29&type=section&id=Energy%20Transition%20Segment) The Energy Transition segment showed significant improvement in Q2 and H1 2025, with Adjusted EBITDA increasing by 850% and 93% respectively, primarily driven by higher production, improved availability at Centralia, and lower purchased power costs Energy Transition Segment Performance (CAD millions, except GWh/%) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Gross installed capacity (MW) | 671 | 671 | — | 671 | 671 | — | | Availability (%) | 81.3 | 59.0 | +22.3 | 89.1 | 69.0 | +20.1 | | Total production (GWh) | 242 | 2 | +240 | 1,282 | 803 | +479 | | Adjusted revenues | 88 | 65 | +23 | 241 | 276 | -35 | | Adjusted EBITDA | 19 | 2 | +17 | 56 | 29 | +27 | | Adjusted earnings before income taxes | 6 | (13) | +19 | 28 | (2) | +30 | - Q2 2025 Adjusted revenues increased by **35%** due to higher production driven by higher Mid-Columbia prices and higher availability[140](index=140&type=chunk) - Q2 2025 Adjusted EBITDA and Adjusted earnings before income taxes increased significantly due to higher adjusted revenues[140](index=140&type=chunk) - H1 2025 Adjusted revenues decreased by **13%** due to lower Mid-Columbia prices[142](index=142&type=chunk) - H1 2025 Adjusted EBITDA increased due to lower purchased power costs driven by higher availability, which resulted in fewer repurchases to fulfill contractual obligations during outages, partially offset by lower adjusted revenues[142](index=142&type=chunk)[145](index=145&type=chunk) [Energy Marketing Segment](index=31&type=section&id=Energy%20Marketing%20Segment) The Energy Marketing segment experienced a decrease in Adjusted revenues and Adjusted EBITDA for both Q2 and H1 2025, primarily due to subdued market volatility across North American natural gas and power markets and lower realized settled trades Energy Marketing Segment Performance (CAD millions) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Adjusted revenues | 34 | 48 | -14 | 62 | 97 | -35 | | Adjusted EBITDA | 26 | 39 | -13 | 47 | 78 | -31 | | Adjusted earnings before income taxes | 26 | 38 | -12 | 45 | 76 | -31 | - Adjusted revenues and Adjusted EBITDA decreased in both Q2 and H1 2025 due to comparatively subdued market volatility across North American natural gas and power markets and lower realized settled trades[147](index=147&type=chunk)[149](index=149&type=chunk) [Corporate Segment](index=32&type=section&id=Corporate%20Segment) The Corporate segment's Adjusted EBITDA decreased in both Q2 and H1 2025, primarily due to increased spending on strategic initiatives and Heartland-related corporate costs. Adjusted loss before income taxes also increased due to higher interest expense and unrealized foreign exchange losses Corporate Segment Performance (CAD millions) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Adjusted OM&A | 38 | 38 | — | 79 | 63 | +16 | | Adjusted EBITDA | (39) | (38) | -1 | (80) | (63) | -17 | | Adjusted loss before income taxes | (119) | (115) | -4 | (259) | (216) | -43 | | Loss before income taxes | (150) | (122) | -28 | (301) | (218) | -83 | - Adjusted EBITDA decreased in both Q2 and H1 2025 due to increased spending on strategic and growth initiatives and the addition of corporate costs related to Heartland[151](index=151&type=chunk)[152](index=152&type=chunk) - Adjusted loss before income taxes increased due to lower Adjusted EBITDA and higher interest expense (lower capitalized interest, higher credit facility fees), partially offset by higher realized foreign exchange gains[151](index=151&type=chunk)[152](index=152&type=chunk) - Loss before income taxes increased due to higher adjusted loss before income taxes, higher unrealized foreign exchange losses, and increased spending on ERP system upgrades[153](index=153&type=chunk) [Performance by Segment with Supplemental Geographical Information](index=33&type=section&id=Performance%20by%20Segment%20with%20Supplemental%20Geographical%20Information) This section provides a geographical breakdown of Adjusted EBITDA and Adjusted earnings (loss) before income taxes, highlighting regional contributions to overall performance [Adjusted EBITDA by Segment and Region](index=33&type=section&id=Adjusted%20EBITDA%20by%20Segment%20and%20Region) This section provides a geographical breakdown of Adjusted EBITDA and Adjusted earnings (loss) before income taxes, showing Alberta as the largest contributor to Adjusted EBITDA Adjusted EBITDA by Segment and Region (3 months ended June 30, 2025) | Region | Hydro | Wind & Solar | Gas | Energy Transition | Energy Marketing | Corporate | Total | | :------------------------ | :---- | :----------- | :-- | :---------------- | :--------------- | :-------- | :---- | | Alberta | 120 | 21 | 76 | (3) | 26 | (39) | 201 | | Canada, excluding Alberta | 6 | 32 | 27 | — | — | — | 65 | | US | — | 34 | 2 | 22 | — | — | 58 | | Western Australia | — | 2 | 23 | — | — | — | 25 | | **Adjusted EBITDA** | **126** | **89** | **128** | **19** | **26** | **(39)** | **349** | Adjusted EBITDA by Segment and Region (6 months ended June 30, 2025) | Region | Hydro | Wind & Solar | Gas | Energy Transition | Energy Marketing | Corporate | Total | | :------------------------ | :---- | :----------- | :-- | :---------------- | :--------------- | :-------- | :---- | | Alberta | 167 | 31 | 126 | (5) | 47 | (80) | 286 |\ | Canada, excluding Alberta | 6 | 80 | 54 | — | — | — | 140 | | U.S. | — | 76 | 5 | 61 | — | — | 142 | | Western Australia | — | 4 | 47 | — | — | — | 51 | | **Adjusted EBITDA** | **173** | **191** | **232** | **56** | **47** | **(80)** | **619** | [Optimization of the Alberta Portfolio](index=34&type=section&id=Optimization%20of%20the%20Alberta%20Portfolio) This section details TransAlta's strategy for its Alberta portfolio, including hedging, diversification, and the impact of market conditions on realized power prices [Alberta Portfolio Strategy and Performance](index=34&type=section&id=Alberta%20Portfolio%20Strategy%20and%20Performance) TransAlta's Alberta portfolio, comprising 58% of its capacity, is strategically managed through hedging and diversification of fuel types, despite lower overall production and spot prices - TransAlta's merchant exposure is primarily in Alberta, with **58% of capacity** located there and **77% available for the merchant market**, managed through hedging strategies and C&I customers[159](index=159&type=chunk)[164](index=164&type=chunk) - The Heartland acquisition added **1,747 MW of flexible capacity**, including contracted cogeneration and peaking generation, enhancing TransAlta's competitive position in Alberta[160](index=160&type=chunk)[193](index=193&type=chunk) Alberta Electricity Portfolio Production and Hedging (Q2 & H1 2025 vs. 2024) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | Change (QoQ) | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | Change (YoY) | | :------------------------------------ | :--------------------------- | :--------------------------- | :----------- | :--------------------------- | :--------------------------- | :----------- | | Total production (GWh) | 2,466 | 2,719 | -253 | 5,661 | 5,891 | -230 | | Production contracted or hedged (%) | 131% | 111% | +20% | 128% | 99% | +29% | | Hedged volumes (GWh) | 1,868 | 2,132 | -264 | 4,247 | 4,077 | +170 | | Adjusted gross margin ($ millions) | 271 | 219 | +52 | 433 | 442 | -9 | - Q2 2025 total production decreased by **9%** due to lower merchant production in Gas (dispatch optimization) and Wind & Solar (lower wind resource), partially offset by higher contract production in Gas (Heartland) and Hydro production[168](index=168&type=chunk)[169](index=169&type=chunk) - H1 2025 total production decreased by **4%** due to lower merchant production in Gas and Wind & Solar, partially offset by higher contract production in Gas (Heartland) and Hydro production[176](index=176&type=chunk)[177](index=177&type=chunk) Alberta Market and Portfolio Results (Q2 & H1 2025 vs. 2024) | Metric | 3 months ended June 30, 2025 | 3 months ended June 30, 2024 | 6 months ended June 30, 2025 | 6 months ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Alberta Spot power price average ($/MWh) | 40 | 45 | 40 | 72 | | Natural gas price (AECO) per GJ ($) | 1.64 | 1.14 | 1.83 | 1.54 | | Carbon compliance price per tonne ($) | 95 | 80 | 95 | 80 | | Realized merchant power price per MWh ($) | 111 | 97 | 111 | 105 | | Hedged power price average per MWh ($) | 70 | 84 | 70 | 86 | | Fuel cost per MWh ($) | 42 | 35 | 44 | 42 | | Carbon compliance (recovery) cost per MWh ($) | (8) | 11 | 6 | 13 | - Alberta spot power prices decreased to **$40/MWh** in both Q2 and H1 2025 due to milder weather and increased supply[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - Realized merchant power price per MWh increased due to favorable hedge positions settling[181](index=181&type=chunk)[182](index=182&type=chunk)[183](index=183&type=chunk) - Carbon compliance cost per MWh decreased due to higher utilization of emission credits, despite an increase in carbon price from **$80 to $95 per tonne**[183](index=183&type=chunk) [Selected Quarterly Information](index=39&type=section&id=Selected%20Quarterly%20Information) This section presents TransAlta's selected quarterly financial and operational trends, highlighting seasonal impacts and key factors influencing performance [Quarterly Financial and Operational Trends](index=39&type=section&id=Quarterly%20Financial%20and%20Operational%20Trends) TransAlta's quarterly results are seasonal, influenced by electricity market dynamics and fuel costs, with Q2 2025 seeing a net loss attributable to common shareholders - Results are seasonal, with higher maintenance costs in spring/fall and higher electricity prices in peak winter/summer[184](index=184&type=chunk) - Hydro production peaks in spring, while wind speeds are higher in winter[184](index=184&type=chunk) Selected Quarterly Financial Information (CAD millions, except per share) | Metric | Q3 2024 | Q4 2024 | Q1 2025 | Q2 2025 | | :-------------------------------------------- | :------ | :------ | :------ | :------ | | Revenues | 638 | 678 | 758 | 433 | | Carbon compliance costs (recovery) | 41 | 39 | 49 | (74) | | OM&A | 143 | 234 | 173 | 173 | | Depreciation and amortization | 133 | 143 | 146 | 150 | | Earnings (loss) before income taxes | 9 | (51) | 49 | (95) | | Net earnings (loss) attributable to common shareholders | (36) | (65) | 46 | (112) | | Net earnings (loss) per share attributable to common shareholders, basic and diluted | (0.12) | (0.22) | 0.15 | (0.38) | | Cash flow from operating activities | 229 | 215 | 7 | 157 | - Operating results were impacted by the Heartland acquisition (Dec 2024) and commissioning of new wind and solar facilities in 2023-2024[186](index=186&type=chunk) - Revenues were impacted by higher production in Q1/Q2 2025, unrealized mark-to-market gains/losses, and lower realized pricing in 2024 (new supply in Alberta) but higher in Q1/Q2 2025 (favorable hedge positions)[186](index=186&type=chunk)[187](index=187&type=chunk) - Carbon compliance costs were reduced in Q2 2025 by using internally generated and purchased emission credits for 2024 GHG obligations, despite higher carbon prices (**$95/tonne in 2025 vs. $80/tonne in 2024**)[188](index=188&type=chunk)[189](index=189&type=chunk) - OM&A increased due to strategic/growth initiatives, Heartland facilities, Kent Hills/White Rock/Horizon Hill return to service/addition, and ERP system upgrade planning[188](index=188&type=chunk)[189](index=189&type=chunk) - Cash flow from operating activities was impacted by unfavorable changes in non-cash operating working capital, higher unrealized foreign exchange losses in Q2 2025, and higher provisions[188](index=188&type=chunk)[190](index=190&type=chunk) [Strategic Priorities](index=41&type=section&id=Strategic%20Priorities) This section outlines TransAlta's core strategic objectives, including optimizing its Alberta portfolio, executing growth plans, maintaining financial strength, and leading in market policy [Company Strategic Objectives](index=41&type=section&id=Company%20Strategic%20Objectives) TransAlta is focused on investing in electricity solutions, optimizing its Alberta portfolio, realizing value from legacy assets, and executing a technology-agnostic growth plan - The company's strategy focuses on generating meaningful, risk-adjusted returns by optimizing legacy thermal assets, operating a diverse renewable fleet, leveraging marketing capabilities, and expanding with contracted clean energy and selective gas assets[191](index=191&type=chunk) - Key strategic priorities include: Optimize Alberta Portfolio, Realize the Value of Legacy Generating Facilities, Execute Growth Plan, Maintain Financial Strength and Capital Discipline, Define Next Generation of Power Solutions, and Lead in Market Policy Development[192](index=192&type=chunk)[193](index=193&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk) - Financial strength is maintained with **$1.5 billion in liquidity** (as of June 30, 2025), an **8% common share dividend increase** (to **$0.26/share annualized**), and a commitment to repurchase up to **$100 million in common shares**[197](index=197&type=chunk) - TransAlta actively engages in policy development, particularly in Alberta's restructured energy market, to support reliability, affordability, and decarbonization by 2050[199](index=199&type=chunk) [Growth](index=42&type=section&id=Growth) This section details TransAlta's development pipeline, including mid-stage and early-stage projects, and projects currently under construction, focusing on clean energy expansion [Development Pipeline Overview](index=42&type=section&id=Development%20Pipeline%20Overview) TransAlta's development pipeline includes 475 MW of mid-stage projects and 4,078 MW of early-stage projects, focusing on redeveloping existing thermal sites and pursuing greenfield opportunities - The development pipeline includes **475 MW of mid-stage projects** and **4,078 MW of early-stage projects**, with a focus on redeveloping existing thermal sites and pursuing greenfield/M&A opportunities in Alberta, Western Australia, and the western United States[201](index=201&type=chunk) Early-Stage Projects (MW) | Project Category | Thermal Generation | Wind | Solar | Storage | Total | | :--------------- | :----------------- | :--- | :---- | :------ | :---- | | Various | 1,625 | 983 | 230 | 1,240 | 4,078 | Mid-Stage Projects (MW) | Region | Thermal Generation | Wind | Solar | Storage | Total | | :---------------- | :----------------- | :--- | :---- | :------ | :---- | | Canada | — | 100 | — | — | 100 | | United States | — | 185 | 150 | — | 335 | | Western Australia | — | — | 40 | — | 40 | | **Total** | **—** | **285** | **190** | **—** | **475** | Projects Under Construction | Project | Type | Region | MW | Estimated spend (CAD millions) | Spent to date (CAD millions) | Target completion date | PPA Term (years) | Status | | :------------------------ | :----------- | :---------------- | :---- | :----------------------------- | :--------------------------- | :--------------------- | :--------------- | :----------------------------------------- | | Mount Keith West Network Upgrade | Transmission | Western Australia | n/a | $34 — $36 | $19 | Q4 2025 | 13 | All major equipment delivered and installed; on-track to be completed on schedule. | [Financial Position](index=44&type=section&id=Financial%20Position) This section provides an overview of TransAlta's consolidated statements of financial position, detailing changes in assets, liabilities, and equity [Consolidated Statements of Financial Position Changes](index=44&type=section&id=Consolidated%20Statements%20of%20Financial%20Position%20Changes) TransAlta's total assets decreased by $560 million to $8,939 million as of June 30, 2025, primarily due to lower current assets and non-current assets Significant Changes in Condensed Consolidated Statements of Financial Position (June 30, 2025 vs. Dec. 31, 2024) | Metric | June 30, 2025 (CAD millions) | Dec. 31, 2024 (CAD millions) | Increase/(decrease) (CAD millions) | | :-------------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------------- | | Total current assets | 1,443 | 1,773 | (330) | | Total non-current assets | 7,496 | 7,726 | (230) | | **Total assets** | **8,939** | **9,499** | **(560)** | | Total current liabilities | 1,828 | 2,569 | (741) | | Total non-current liabilities | 5,448 | 5,087 | 361 | | **Total liabilities** | **7,276** | **7,656** | **(380)** | | Total equity | 1,663 | 1,843 | (180) | - Current assets decreased by **$330 million**, mainly due to lower risk management assets (market prices, contract settlements) and lower cash and cash equivalents (operating/investing activities)[215](index=215&type=chunk)[217](index=217&type=chunk) - Current liabilities decreased by **$741 million**, primarily due to advance repayment of the variable rate term loan, lower risk management liabilities, reduced accounts payable, lower contingent consideration payable, and timing of dividend payments[215](index=215&type=chunk)[217](index=217&type=chunk) - Non-current assets decreased by **$230 million**, mainly from depreciation of PP&E and transfers to assets held for sale, and lower risk management assets, partially offset by higher long-term financial assets (Nova investment)[215](index=215&type=chunk)[218](index=218&type=chunk) - Non-current liabilities increased by **$361 million** due to the **$450 million senior notes offering** and higher risk management liabilities, partially offset by a decrease in decommissioning provisions[215](index=215&type=chunk)[218](index=218&type=chunk) - Total equity decreased by **$180 million** due to net losses, net losses on derivatives, dividends declared, and share repurchases under the NCIB[216](index=216&type=chunk)[218](index=218&type=chunk) [Financial Capital](index=46&type=section&id=Financial%20Capital) This section details TransAlta's capital structure, including debt, equity, credit facilities, and returns to capital providers, highlighting financial leverage and liquidity [Capital Structure](index=46&type=section&id=Capital%20Structure) TransAlta's total capital decreased slightly to $5,955 million as of June 30, 2025, with total consolidated net debt increasing to $3,892 million Capital Structure (June 30, 2025 vs. Dec. 31, 2024) | Component | June 30, 2025 (CAD millions) | % | Dec. 31, 2024 (CAD millions) | % | | :-------------------------------------------- | :--------------------------- | :--- | :--------------------------- | :--- | | Net senior unsecured debt | 1,625 | 27 | 1,453 | 24 | | Exchangeable debentures | 350 | 6 | 350 | 6 | | Non-recourse debt | 1,460 | 25 | 1,508 | 25 | | Recourse debt (TransAlta OCP LP bond) | 180 | 3 | 192 | 3 | | Tax equity financing | 85 | 1 | 101 | 1 | | Lease liabilities | 147 | 2 | 151 | 2 | | **Total consolidated net debt** | **3,892** | **64** | **3,798** | **62** | | Exchangeable preferred shares | 400 | 7 | 400 | 7 | | Equity attributable to shareholders | 1,579 | 26 | 1,746 | 29 | | Non-controlling interests | 84 | 1 | 97 | 2 | | **Total capital** | **5,955** | **100** | **6,041** | **100** | - Total consolidated net debt increased to **$3,892 million (64% of total capital)** as of June 30, 2025, from **$3,798 million (62%)** at Dec. 31, 2024[220](index=220&type=chunk) - The company has

Core Viewpoint - TransAlta (TAC) has been upgraded to a Zacks Rank 2 (Buy), indicating a positive outlook on its earnings estimates, which are a significant factor influencing stock prices [1][2]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with stock price movements, particularly due to institutional investors adjusting their valuations based on these estimates [3][5]. - An increase in earnings estimates typically leads to higher fair value for a stock, prompting institutional investors to buy or sell, which in turn affects stock prices [3]. TransAlta's Earnings Outlook - For the fiscal year ending December 2025, TransAlta is expected to earn $0.39 per share, unchanged from the previous year, but the Zacks Consensus Estimate has increased by 8.1% over the past three months, reflecting a positive trend in earnings estimates [7]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 (Strong Buy) stocks historically generating an average annual return of +25% since 1988 [6]. - The upgrade of TransAlta to a Zacks Rank 2 places it in the top 20% of Zacks-covered stocks, indicating strong potential for market-beating returns in the near term [9].

Group 1 - TransAlta Corporation (TAC) has reached a key level of support, indicated by a "golden cross" where its 50-day simple moving average has crossed above its 200-day simple moving average [1][2] - A golden cross is a bullish technical chart pattern that suggests a potential breakout, typically formed when a short-term moving average surpasses a long-term moving average [2] - The successful golden cross event consists of three stages: a price bottom, the crossover of moving averages, and the maintenance of upward momentum [3] Group 2 - Over the past four weeks, TAC's stock has increased by 13.4%, and it currently holds a 2 (Buy) rating on the Zacks Rank, indicating potential for further breakout [4] - The positive earnings outlook for TAC is supported by no downward revisions in earnings estimates over the past two months, with one revision higher and an increase in the Zacks Consensus Estimate [4] - Investors are encouraged to monitor TAC for potential gains due to its key technical level and favorable earnings estimate revisions [6]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Group 1: Company Overview - TransAlta (TAC) currently holds a Momentum Style Score of B, indicating a favorable momentum characteristic [2] - The company has a Zacks Rank of 2 (Buy), suggesting strong potential for outperformance in the market [3] Group 2: Performance Metrics - Over the past week, TAC shares have increased by 8.33%, significantly outperforming the Zacks Utility - Electric Power industry, which rose by only 0.22% [5] - In a longer timeframe, TAC's shares have appreciated by 14.57% over the past month, compared to the industry's 2.42% [5] - Over the last quarter, TAC shares have surged by 35.58%, and over the past year, they have gained 67.17%, while the S&P 500 has only increased by 16.04% and 19.71%, respectively [6] Group 3: Trading Volume - TAC's average 20-day trading volume is 985,375 shares, which serves as a bullish indicator when combined with rising stock prices [7] Group 4: Earnings Outlook - In the past two months, one earnings estimate for TAC has increased, while none have decreased, raising the consensus estimate from $0.35 to $0.39 [9] - For the next fiscal year, one estimate has also moved upwards with no downward revisions during the same period [9] Group 5: Conclusion - Considering all the discussed elements, TAC is positioned as a 2 (Buy) stock with a Momentum Score of B, making it a strong candidate for near-term investment [11]

Core Viewpoint - TransAlta (TAC) is positioned as a leader in clean electricity, focusing on sustainable energy projects and customer-centered power solutions, making it a solid investment option in the utility sector [1] Growth Projections - The Zacks Consensus Estimate for 2025 earnings per share (EPS) remains unchanged at 35 cents, while the estimate for 2026 EPS has increased by 12% to 28 cents [2] Solvency - The times interest earned (TIE) ratio at the end of Q1 2025 is 1.3, indicating that TransAlta is well-positioned to meet its interest obligations [3] Dividend History - TransAlta has raised dividends 12 times in the past five years, with a current dividend yield of 1.65%, surpassing the Zacks S&P 500 Composite's average of 1.19% [4] Share Repurchase Program - The company has repurchased 1.9 million shares year to date at an average cost of $12.42 per share as part of its capital allocation strategy to enhance shareholder value [5] Growth Strategy - TransAlta aims to develop 1.75 gigawatts (GW) of incremental renewables capacity by the end of 2028, with a targeted investment of $3.5 billion, and plans to expand its development pipeline to 10 GW by 2028 [6] Stock Price Performance - Over the past three months, TransAlta's shares have increased by 32.5%, outperforming the industry's decline of 0.6% [7][8]

Core Viewpoint - TransAlta Corporation is set to release its second quarter 2025 results on August 1, 2025, with a conference call scheduled for the same day to discuss the results with investors and analysts [1][2]. Group 1: Conference Call Details - The conference call will begin at 9:00 a.m. Mountain Time (11:00 a.m. ET) [1]. - Participants can access the call via a personalized PIN or receive an automated call directly to their phone after registering [2]. - A replay of the call will be available on TransAlta's website following the event [3]. Group 2: Company Overview - TransAlta operates a diverse fleet of electrical power generation assets across Canada, the U.S., and Australia, focusing on long-term shareholder value [4]. - The company is one of Canada's largest producers of wind power and the largest producer of thermal generation and hydro-electric power in Alberta [4]. - TransAlta has achieved a 70% reduction in GHG emissions, equating to 22.7 million tonnes CO2e since 2015, and has received an upgraded MSCI ESG rating of AA [4].

Core Insights - The article emphasizes the author's extensive experience in investment banking, particularly in equity research, corporate finance, and M&A within the Canadian electric utilities and infrastructure sectors [1] Group 1: Experience and Expertise - The author has over twenty years of experience in sell-side equity research, corporate and project finance, M&A, and valuations [1] - A decade was spent as an equity research analyst at global banks, including UniCredit Securities and HSBC Global Markets, achieving top ratings in surveys [1] - Prior to investment banking, the author worked for ten years in a Canadian corporate environment focusing on power projects and M&A [1] Group 2: Investment Philosophy - The author believes in actionable investment ideas and the importance of compelling narratives and clear arguments [1] - There is a focus on sharing insights and stories to contribute to a smarter and richer world [1]

Core Viewpoint - TransAlta Corporation reported strong operational performance in Q1 2025 despite facing challenges from softer power prices in Alberta, maintaining confidence in its 2025 outlook [2][3][21]. Financial Performance - Adjusted EBITDA for Q1 2025 was $270 million, down from $342 million in Q1 2024, a decrease of 21% [8][22]. - Free Cash Flow (FCF) was $139 million, or $0.47 per share, compared to $221 million, or $0.72 per share in the same period last year, a decrease of 37% [8][24]. - Net earnings attributable to common shareholders were $46 million, or $0.15 per share, down from $222 million, or $0.72 per share in Q1 2024, an 79% decrease [8][25]. Operational Highlights - Operational availability improved to 94.9% in Q1 2025 from 92.3% in Q1 2024 [8][22]. - Total production increased by 654 GWh, or 11%, compared to the same period in 2024 [22][30]. Strategic Initiatives - The company secured a strategic partnership with Nova Clean Energy, LLC, allowing exclusive options to purchase late-stage development projects in the western U.S. [4][6]. - TransAlta issued $450 million in medium-term notes and repaid a $400 million term loan, maintaining financial strength [4][11][12]. Shareholder Engagement - At the Annual Shareholder Meeting on April 24, 2025, all director nominees were elected, and the company received strong support for its business items [7][9]. Market Conditions - The average spot power price in Alberta for Q1 2025 was $40 per MWh, significantly lower than $99 per MWh in the same period of 2024, influenced by milder weather and increased supply [27][30]. - Hedged volumes for Q1 2025 were 2,273 GWh at an average price of $71 per MWh, compared to 1,908 GWh at an average price of $88 per MWh in 2024 [27][30]. 2025 Outlook - The company targets adjusted EBITDA between $1,150 million and $1,250 million and FCF between $450 million and $550 million for 2025 [29][32].

[Introduction and Overview](index=2&type=section&id=Introduction%20and%20Overview) [Forward-Looking Statements](index=2&type=section&id=Forward-Looking%20Statements) The MD&A includes forward-looking statements based on current estimates and assumptions, subject to risks and uncertainties that could cause actual results to differ materially - Forward-looking statements encompass the **2025 Outlook**, financial and operational performance, growth strategies, project costs, and regulatory outcomes[7](index=7&type=chunk) - Key assumptions include stable laws, regulations, power and gas prices, interest rates, market conditions, and no unexpected delays or adverse credit market impacts[6](index=6&type=chunk)[8](index=8&type=chunk) - Significant risk factors include power price fluctuations, generation contractability, development project risks, legislative changes, operational risks, and cybersecurity threats[8](index=8&type=chunk)[11](index=11&type=chunk) [Description of the Business](index=4&type=section&id=Description%20of%20the%20Business) TransAlta is a major Canadian power generator with a diverse 9,014 MW portfolio across Canada, the U.S., and Australia, with 52% contracted capacity Consolidated Ownership by Segment (as of March 31, 2025) | | Hydro | Wind & Solar | Gas | Energy Transition | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Gross Installed Capacity (MW)** | 922 | 2,587 | 4,834 | 671 | **9,014** | | **Number of facilities** | 24 | 36 | 26 | 2 | **88** | - The company's portfolio is diversified across Canada, the U.S., and Western Australia, with **5,248 MW** (largest capacity) located in Alberta[17](index=17&type=chunk) - Approximately **52%** of total installed capacity is contracted with a 5-year weighted average life, while Wind & Solar is **83%** contracted with a 10-year average[19](index=19&type=chunk)[20](index=20&type=chunk) [Highlights](index=6&type=section&id=Highlights) Q1 2025 saw strong operational availability at **94.9%**, but financial results declined due to softer Alberta power prices, with Adjusted EBITDA falling to **$270 million** Q1 2025 vs Q1 2024 Financial Highlights | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | 758 | 947 | | Adjusted EBITDA | 270 | 342 | | Net earnings attributable to common shareholders | 46 | 222 | | Funds from operations (FFO) | 179 | 254 | | Free cash flow (FCF) | 139 | 221 | Q1 2025 vs Q1 2024 Per Share Highlights | (in dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted net earnings per share | 0.10 | 0.41 | | Net earnings per share | 0.15 | 0.72 | | FFO per share | 0.60 | 0.82 | | FCF per share | 0.47 | 0.72 | - Overall availability increased to **94.9%** from **92.3%** YoY, driven by new facilities and reduced outages in Centralia and Hydro fleet[31](index=31&type=chunk)[32](index=32&type=chunk)[34](index=34&type=chunk) - Alberta spot power prices dropped **59%** to **$40/MWh** in Q1 2025 from **$99/MWh** in Q1 2024, due to mild winter and increased supply[37](index=37&type=chunk) - Adjusted EBITDA decreased by **$72 million (21%)** YoY, primarily due to lower Alberta power prices and muted market volatility impacting Hydro, Gas, and Energy Marketing segments[50](index=50&type=chunk) - Free Cash Flow (FCF) decreased by **$82 million (37%)** YoY, impacted by lower Adjusted EBITDA, higher sustaining capital, and increased net interest expense[53](index=53&type=chunk) [Corporate Developments](index=14&type=section&id=Corporate%20Developments) [Capital Expenditures](index=14&type=section&id=Capital%20Expenditures) Q1 2025 capital expenditures decreased significantly, with sustaining capital rising to **$23 million** due to gas fleet maintenance, while growth spend fell to **$11 million** as projects completed Capital Expenditures (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Sustaining capital expenditures | 23 | (1) | | Growth and development expenditures | 11 | 55 | - Sustaining capital spend increased by **$24 million** YoY, driven by higher Canadian gas fleet maintenance and the absence of a 2024 head office lease incentive[58](index=58&type=chunk)[59](index=59&type=chunk) - Growth and development capital expenditures decreased as numerous development projects achieved commercial operation during 2024[60](index=60&type=chunk) [Significant and Subsequent Events](index=15&type=section&id=Significant%20and%20Subsequent%20Events) TransAlta issued **$450 million** in senior notes, invested in Nova Clean Energy, mothballed Sundance Unit 6, increased dividends by **8%**, and repurchased **$4 million** in shares - Issued **$450 million** of 5.625% senior notes due 2032, using proceeds to repay a **$400 million** variable rate term loan[63](index=63&type=chunk)[64](index=64&type=chunk) - Made a strategic investment in Nova Clean Energy, LLC, including a **US$75 million** term loan and **US$100 million** revolving facility, securing exclusive rights to purchase late-stage U.S. development projects[65](index=65&type=chunk) - Increased the annualized common share dividend by **8%** to **$0.26 per share**, effective July 1, 2025[67](index=67&type=chunk) - Purchased and cancelled **294,200** common shares for a total cost of **$4 million** under its Normal Course Issuer Bid (NCIB)[71](index=71&type=chunk) - Mothballed the Sundance Unit 6 facility on April 1, 2025, for up to two years, with flexibility to return to service if market conditions improve[66](index=66&type=chunk) [Segmented Financial Performance and Operating Results](index=16&type=section&id=Segmented%20Financial%20Performance%20and%20Operating%20Results) [Segment Performance Overview](index=16&type=section&id=Segment%20Performance%20Overview) Q1 2025 Adjusted EBITDA decreased to **$270 million** due to weaker Alberta power prices impacting Hydro, Gas, and Energy Marketing, despite improvements in Wind, Solar, and Energy Transition Adjusted EBITDA by Segment (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Hydro | 47 | 87 | | Wind and Solar | 102 | 89 | | Gas | 104 | 125 | | Energy Transition | 37 | 27 | | Energy Marketing | 21 | 39 | | Corporate | (41) | (25) | | **Total adjusted EBITDA** | **270** | **342** | - Adjusted earnings before income taxes decreased by **$116 million (81%)** YoY, due to lower Adjusted EBITDA, higher depreciation, and increased interest expense from lower capitalized interest[75](index=75&type=chunk)[77](index=77&type=chunk) - Net earnings attributable to common shareholders fell by **$176 million (79%)** YoY, driven by lower pre-tax earnings, partially offset by lower income tax and non-controlling interest loss[78](index=78&type=chunk) [Hydro](index=18&type=section&id=Hydro) Hydro segment Adjusted EBITDA fell **46%** to **$47 million** due to lower Alberta spot power and ancillary services prices, partially offset by higher volumes and hedging Hydro Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted revenues | 65 | 107 | | Adjusted EBITDA | 47 | 87 | | Earnings before income taxes | 59 | 85 | - Adjusted revenues decreased by **39%** due to lower spot power and ancillary services prices in Alberta[83](index=83&type=chunk)[86](index=86&type=chunk) - Total energy production increased by **9%** to **383 GWh**, and ancillary service volumes rose by **8%** to **713 GWh** due to higher water reserves[79](index=79&type=chunk) [Wind and Solar](index=20&type=section&id=Wind%20and%20Solar) Wind and Solar Adjusted EBITDA increased **15%** to **$102 million**, driven by new facilities and stronger wind resources, despite lower Alberta power prices and higher OM&A Wind and Solar Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted revenues | 145 | 120 | | Adjusted EBITDA | 102 | 89 | | Earnings before income taxes | 11 | 59 | - Total production increased by **27%** to **1,905 GWh**, reflecting contributions from new facilities and higher wind resources[87](index=87&type=chunk) - Earnings before income taxes decreased significantly despite higher Adjusted EBITDA, due to higher unrealized mark-to-market losses on Oklahoma wind energy sales contracts[93](index=93&type=chunk) [Gas](index=22&type=section&id=Gas) Gas segment Adjusted EBITDA decreased **17%** to **$104 million**, primarily due to higher OM&A, increased natural gas and carbon prices, and lower Alberta merchant volumes Gas Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted revenues | 366 | 346 | | Adjusted EBITDA | 104 | 125 | | Earnings before income taxes | 65 | 158 | - Gross installed capacity increased by **57%** to **4,834 MW** due to the Heartland acquisition[95](index=95&type=chunk) - Adjusted EBITDA decreased due to higher OM&A, increased natural gas prices, and a higher carbon price (**$95/tonne** vs **$80/tonne**), impacting gross margin[100](index=100&type=chunk)[101](index=101&type=chunk) [Energy Transition](index=24&type=section&id=Energy%20Transition) Energy Transition Adjusted EBITDA increased **37%** to **$37 million**, driven by lower purchased power costs and significantly improved facility availability (**97.1%**) Energy Transition Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted revenues | 153 | 211 | | Adjusted EBITDA | 37 | 27 | | Earnings before income taxes | 47 | 20 | - Availability dramatically improved to **97.1%** from **79.0%** in Q1 2024, resulting in a **30%** increase in total production[103](index=103&type=chunk) - Adjusted EBITDA increased due to lower purchased power costs, offsetting the negative impact of weaker Mid-Columbia prices on revenues[107](index=107&type=chunk) [Energy Marketing](index=25&type=section&id=Energy%20Marketing) Energy Marketing Adjusted EBITDA decreased **46%** to **$21 million** due to muted market volatility and fewer realized settled trades compared to Q1 2024 Energy Marketing Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted revenues | 28 | 49 | | Adjusted EBITDA | 21 | 39 | | Earnings before income taxes | 18 | 41 | - The performance decrease was primarily due to lower market volatility and fewer realized settled trades in Q1 2025 compared to Q1 2024[112](index=112&type=chunk) [Corporate](index=26&type=section&id=Corporate) Corporate Adjusted EBITDA loss increased to **$41 million** due to higher strategic spending and Heartland acquisition costs, widening the adjusted loss before income taxes Corporate Segment Performance (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Adjusted OM&A | 41 | 25 | | Adjusted EBITDA | (41) | (25) | | Loss before income taxes | (151) | (96) | - Adjusted EBITDA loss increased by **$16 million** due to higher spending on strategic initiatives and corporate costs from the Heartland acquisition[118](index=118&type=chunk) - Adjusted loss before income taxes increased due to lower Adjusted EBITDA and higher interest expense from reduced construction activity and lower capitalized interest[119](index=119&type=chunk) [Performance by Segment with Supplemental Geographical Information](index=27&type=section&id=Performance%20by%20Segment%20with%20Supplemental%20Geographical%20Information) Q1 2025 Adjusted EBITDA showed geographic shifts: Alberta decreased to **$85 million** due to lower prices, while U.S. and non-Alberta Canada contributions increased Adjusted EBITDA by Geography (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Alberta | 85 | 197 | | Canada, excluding Alberta | 75 | 64 | | U.S. | 84 | 56 | | Western Australia | 26 | 25 | | **Total Adjusted EBITDA** | **270** | **342** | [Optimization of the Alberta Portfolio](index=27&type=section&id=Optimization%20of%20the%20Alberta%20Portfolio) Alberta portfolio's adjusted gross margin fell **27%** to **$162 million** due to a **59%** drop in spot prices, partially offset by increased hedging and favorable realized merchant prices - The Alberta portfolio's adjusted gross margin fell by **$61 million (27%)** YoY, driven by lower spot prices, higher fuel costs, and an increased carbon price (**$95/tonne** vs **$80/tonne**)[136](index=136&type=chunk) Alberta Portfolio Key Metrics (Q1 2025 vs Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Spot power price average ($/MWh) | 40 | 99 | | Realized merchant power price ($/MWh) | 122 | 119 | | Hedged production (GWh) | 2,273 | 1,908 | | Hedged power price average ($/MWh) | 71 | 88 | - Despite a **59%** drop in spot prices, the realized merchant price increased to **$122/MWh** from **$119/MWh** due to favorable hedge settlements[139](index=139&type=chunk)[141](index=141&type=chunk) - The company increased its hedged position in anticipation of lower prices, with hedged production rising to **2,273 GWh** from **1,908 GWh** YoY[135](index=135&type=chunk) [Selected Quarterly Information](index=31&type=section&id=Selected%20Quarterly%20Information) Quarterly results show seasonality and impact from the Heartland acquisition and new facility commissioning, with revenues affected by mark-to-market adjustments and rising OM&A costs Quarterly Financial Data (Q2 2024 - Q1 2025) | (in millions of Canadian dollars) | Q2 2024 | Q3 2024 | Q4 2024 | Q1 2025 | | :--- | :--- | :--- | :--- | :--- | | Revenues | 582 | 638 | 678 | 758 | | Earnings (loss) before income taxes | 94 | 9 | (51) | 49 | | Net earnings (loss) attributable to common shareholders | 56 | (36) | (65) | 46 | - Key events impacting recent quarters include the Heartland acquisition (Dec 2024) and commissioning of multiple wind and solar facilities in 2023-2024[144](index=144&type=chunk) - OM&A costs are elevated due to strategic initiatives, new facility costs (Heartland, White Rock, Horizon Hill), and ERP system upgrade planning[146](index=146&type=chunk) [Strategy and Growth](index=33&type=section&id=Strategy%20and%20Growth) [Strategic Priorities](index=33&type=section&id=Strategic%20Priorities) TransAlta's strategic priorities include optimizing its Alberta portfolio, disciplined growth in core markets, realizing value from legacy sites, maintaining financial strength, and leading market policy development - Optimize Alberta Portfolio: Proactively use hedging and flexible capacity from the Heartland acquisition to mitigate low merchant power prices[150](index=150&type=chunk) - Execute Growth Plan: A strategic investment in Nova Clean Energy accelerates greenfield growth in the U.S. market[153](index=153&type=chunk) - Maintain Financial Strength: Balance growth investments with shareholder returns, evidenced by an **8%** dividend increase and a **$100 million** share repurchase allocation[155](index=155&type=chunk) - Lead in Market Policy Development: Actively engage with Alberta government and AESO on restructured energy market design to ensure reliability and affordability[157](index=157&type=chunk) [Growth](index=34&type=section&id=Growth) TransAlta is advancing a significant growth pipeline with **4,288 MW** early-stage and **530 MW** mid-stage projects, including the Mount Keith transmission upgrade in Western Australia Growth Project Pipeline (MW) | Development Stage | Thermal Generation | Wind | Solar | Storage | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | **Early-Stage** | 1,445 | 1,213 | 230 | 1,400 | **4,288** | | **Mid-Stage** | — | 285 | 245 | — | **530** | - The Mount Keith transmission network upgrade in Western Australia is under construction, targeting completion by Q4 2025[165](index=165&type=chunk) [Financials and Capital](index=36&type=section&id=Financials%20and%20Capital) [Financial Position](index=36&type=section&id=Financial%20Position) As of March 31, 2025, TransAlta's working capital deficit improved to **$326 million** due to debt repayment, while non-current liabilities increased by **$485 million** from new senior notes - The working capital deficit decreased from **$796 million** to **$326 million**, primarily due to a **$394 million** decrease in current debt after repaying a **$400 million** term loan[167](index=167&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk) - Non-current assets remained stable, with PP&E depreciation offset by a new **$105 million** long-term financial asset from the Nova investment[171](index=171&type=chunk) - Non-current liabilities increased by **$485 million**, mainly due to the issuance of **$450 million** in senior notes due 2032[169](index=169&type=chunk)[171](index=171&type=chunk) [Financial Capital](index=38&type=section&id=Financial%20Capital) TransAlta's total capital is **$6.2 billion**, with consolidated net debt at **$3.98 billion** and **$1.5 billion** in available liquidity, supported by a recent **$450 million** senior notes issuance Capital Structure as of March 31, 2025 | Component | Amount (millions) | % of Total | | :--- | :--- | :--- | | Total consolidated net debt | $3,983 | 65% | | Exchangeable preferred shares | $400 | 6% | | Equity attributable to shareholders | $1,732 | 28% | | Non-controlling interests | $93 | 1% | | **Total capital** | **$6,208** | **100%** | - The company has access to **$2.5 billion** in committed credit facilities, with **$1.49 billion** available as of March 31, 2025[179](index=179&type=chunk) - Interest expense for Q1 2025 was **$93 million**, up from **$69 million** in Q1 2024, primarily due to lower capitalized interest from reduced construction activity[186](index=186&type=chunk) [Cash Flows](index=42&type=section&id=Cash%20Flows) Q1 2025 cash and cash equivalents decreased by **$181 million**, with operating cash flow significantly lower at **$7 million** due to reduced gross margin and unfavorable working capital Cash Flow Summary (Q1 2025 vs Q1 2024) | (in millions of Canadian dollars) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flow from operating activities | 7 | 244 | | Cash flow used in investing activities | (144) | (58) | | Cash flow from financing activities | 38 | (114) | - Operating cash flow decreased by **$237 million** YoY, primarily due to lower gross margin and a **$124 million** unfavorable change in non-cash operating working capital[196](index=196&type=chunk) - Investing cash outflow increased by **$86 million** YoY, mainly due to the issuance of a **$106 million** long-term financial asset (loan to Nova)[197](index=197&type=chunk) - Financing activities generated a **$38 million** inflow, driven by the net effect of issuing **$450 million** in senior notes and repaying a **$400 million** term loan[198](index=198&type=chunk) [Outlook, Risk & Governance](index=44&type=section&id=Outlook%2C%20Risk%20%26%20Governance) [Other Consolidated Analysis](index=44&type=section&id=Other%20Consolidated%20Analysis) Risk management practices remain unchanged; Level III financial instruments shifted to a **$150 million** net asset position, influenced by new long-term financial assets and contingent consideration fair value changes - The company holds long-term natural gas transportation contracts for Sundance and Keephills (2036-2038), with potential for onerous contract recognition if facilities are retired early[201](index=201&type=chunk)[202](index=202&type=chunk) - Level III financial instruments shifted from a **$234 million** net liability (YE 2024) to a **$150 million** net asset (Q1 2025), driven by a new long-term financial asset and contingent consideration fair value changes[206](index=206&type=chunk) [2025 Outlook](index=55&type=section&id=2025%20Outlook) TransAlta reaffirms its 2025 outlook, targeting Adjusted EBITDA of **$1,150-$1,250 million** and FCF of **$450-$550 million**, based on specific Alberta power and AECO gas price assumptions 2025 Financial Targets | Measure | 2025 Target | | :--- | :--- | | Adjusted EBITDA | $1,150 to $1,250 million | | FCF | $450 to $550 million | | FCF per share | $1.51 to $1.85 | Key 2025 Price Assumptions | Market | 2025 Assumption | | :--- | :--- | | Alberta spot ($/MWh) | $40 to $60 | | Mid-Columbia spot (US$/MWh) | US$50 to US$70 | | AECO gas price ($/GJ) | $1.60 to $2.10 | Alberta Hedging for Remainder of 2025 | Quarter | Hedged Production (GWh) | Hedge Price ($/MWh) | | :--- | :--- | :--- | | Q2 2025 | 1,809 | $69 | | Q3 2025 | 2,139 | $68 | | Q4 2025 | 1,848 | $71 | [Material Accounting Policies and Critical Accounting Estimates](index=56&type=section&id=Material%20Accounting%20Policies%20and%20Critical%20Accounting%20Estimates) Accounting policies are consistent with 2024, with Q1 2025 revisions to fair values of Assets Held for Sale and Contingent Consideration Payable; the company is evaluating future IFRS changes - Accounting policies are consistent with the 2024 annual report, with Q1 2025 revisions to fair values of Assets Held for Sale and Contingent Consideration Payable[272](index=272&type=chunk)[274](index=274&type=chunk) - The company is assessing future accounting standards, including IFRS 18 (effective Jan 1, 2027) and IFRS 9/7 amendments (effective Jan 1, 2026) related to electricity contracts and financial instruments[275](index=275&type=chunk)[276](index=276&type=chunk)[277](index=277&type=chunk) [Governance and Risk Management](index=57&type=section&id=Governance%20and%20Risk%20Management) TransAlta utilizes a multi-level risk management structure to navigate business, market, and political risks, with no material changes to its risk profile since year-end 2024 - The company employs a multi-level risk management structure to manage risks from business activities, markets, and political environments[279](index=279&type=chunk) - The risk management profile and practices have not materially changed from December 31, 2024[283](index=283&type=chunk) [Regulatory Updates](index=57&type=section&id=Regulatory%20Updates) TransAlta actively monitors and engages in regulatory developments across Canada, the U.S., and Australia, including federal clean electricity policies and Alberta's restructured energy market - **Canada:** TransAlta monitors federal Clean Electricity Regulations and carbon pricing, noting the removal of consumer carbon price as of April 1, 2025, while industrial pricing remains[280](index=280&type=chunk)[282](index=282&type=chunk) - **Alberta:** The AESO is consulting on a Restructured Energy Market (REM), with interim rules expected by late 2025 and full implementation in 2027 or 2028[285](index=285&type=chunk) - **United States:** Executive orders may ease fossil fuel regulations, potentially favoring natural gas plants while hindering wind development[286](index=286&type=chunk) - **Australia:** Re-election of Labor governments in Western Australia (March 2025) and federally (May 2025) is expected to provide continued policy stability[289](index=289&type=chunk) [Disclosure Controls and Procedures](index=59&type=section&id=Disclosure%20Controls%20and%20Procedures) Management concluded that Internal Control over Financial Reporting (ICFR) and Disclosure Controls and Procedures (DC&P) were effective as of March 31, 2025, excluding the recently acquired Heartland Generation - The CEO and CFO concluded that the company's ICFR and DC&P were effective as of March 31, 2025[297](index=297&type=chunk) - The internal controls evaluation excluded Heartland Generation, acquired December 4, 2024, whose assets represented approximately **7%** of total assets as of March 31, 2025[295](index=295&type=chunk)[296](index=296&type=chunk) [Appendix: Non-IFRS Measures and Reconciliations](index=45&type=section&id=Additional%20Non-IFRS%20and%20Supplementary%20Financial%20Measures) [Non-IFRS Measures Definitions](index=45&type=section&id=Non-IFRS%20Measures%20Definitions) This section defines TransAlta's non-IFRS measures like Adjusted EBITDA, FFO, and FCF, which are adjusted for non-recurring items to reflect core operational results and trends - Key non-IFRS measures include **Adjusted EBITDA**, **FFO**, and **FCF**, used to assess core operational results and cash generation[211](index=211&type=chunk)[212](index=212&type=chunk)[225](index=225&type=chunk)[229](index=229&type=chunk) - In Q1 2025, Adjusted EBITDA definition was amended to exclude realized gain/loss on closed exchange positions and Australian interest income for simplified reporting, with prior periods restated[213](index=213&type=chunk)[214](index=214&type=chunk) - Adjustments exclude items like unrealized gains/losses, finance lease impacts, acquisition costs, and asset impairments to better reflect ongoing business performance[217](index=217&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk) [Reconciliation of Non-IFRS Measures](index=49&type=section&id=Reconciliation%20of%20Non-IFRS%20Measures) This section provides detailed reconciliations of non-IFRS measures to IFRS counterparts, showing Adjusted EBITDA of **$270 million** and FCF of **$139 million** for Q1 2025 Reconciliation of Earnings to Adjusted Net Earnings (Q1 2025) | (in millions of Canadian dollars) | Amount | | :--- | :--- | | Net earnings attributable to common shareholders | 46 | | Pre-tax adjustments and reclassifications | (20) | | Calculated tax recovery on adjustments | 5 | | **Adjusted net earnings attributable to common shareholders** | **30** | Reconciliation of Cash Flow from Operations to FCF (Q1 2025) | (in millions of Canadian dollars) | Amount | | :--- | :--- | | Cash flow from operating activities | 7 | | Change in non-cash operating working capital | 117 | | Other adjustments | 55 | | **FFO** | **179** | | Deductions (sustaining capital, dividends, etc.) | (40) | | **FCF** | **139** | - The Adjusted Net Debt to Adjusted EBITDA ratio was **3.9x** at March 31, 2025, up from **3.6x** at Dec 31, 2024, remaining within the **3.0x to 4.0x** target range[258](index=258&type=chunk)[259](index=259&type=chunk)

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