TransAlta Corp. Q1 FY2025 earnings call

• Acknowledged operating on traditional territories of indigenous peoples. - Strategic direction: growing electricity demand, challenges like political/regulatory uncertainty, focus on diversifying portfolio, technology agnostic approach, maximizing legacy thermal assets, evaluating M&A, maintaining balance sheet, returning capital to shareholders. - Operational highlights: exceptional fleet availability 94.9%, mothballed Sundance Unit 6, integrated Heartland Generation, engaged with Alberta government on REM, strategic partnership with Nova Clean Energy, progress on Centralia redevelopment and Alberta data center opportunities, successful $450M green note offering, over $1.5B available liquidity.

In the first quarter, the hydro segment had adjusted EBITDA of $47 million, declining due to lower spot power and auxiliary prices in Alberta but partially offset by higher merchant and ancillary services volumes and hedging. The wind and solar segment had adjusted EBITDA of $102 million, a 15% increase due to the addition of Oklahoma wind facilities and higher production. The gas segment's adjusted EBITDA decreased 17% to $104 million, mostly due to lower realized power prices in Alberta and higher carbon pricing, partially offset by the addition of Heartland and fleet optimization. The energy transition segment delivered $37 million of adjusted EBITDA, an increase year-over-year due to lower purchased power costs from the Centralia facility. Energy marketing adjusted EBITDA decreased by $18 million to $21 million, primarily due to muted market volatility. Corporate costs increased to $41 million due to support for strategic initiatives and Heartland acquisition.

• Confident in achieving 2025 guidance range for adjusted EBITDA and free cash flow. - 75% of 2025 expected generation revenue underpinned by contracted assets and hedging. - Plan to renew annual normal course issuer bid, retain option for up to $100M share buybacks.

• Political and regulatory uncertainty. - Long interconnection queues, tariffs, supply chain challenges, rising costs. - Weather impact on power prices.

Q: About Nova Clean Energy investment and 7% return relative to existing U.S. renewable development pipeline A: John Kousinioris explained the investment is about leveraging Nova's expertise for exclusive project acquisition and preferential returns Q: Sticking with strategy discussion, asking about diversifying portfolio and contracted vs merchant A: John Kousinioris and Joel Hunter discussed increasing contracted EBITDA to over 70% for stability, and how this relates to credit ratings Q: About new federal government in Canada amending standards, etc.

A: John Kousinioris said early days, status quo expected, focus on carbon pricing competitiveness Q: On data centers, size and scaling A: John Kousinioris and Blain van Melle discussed base 400MW offering with ability to expand, advanced commercial discussions for Centralia Q: On hedging in outer years, quarter-by-quarter cash dynamics A: John Kousinioris talked about hedging strategy, C&I business, and confidence in hitting free cash flow targets Q: On Centralia customer type and hurdle rates A: John Kousinioris discussed strong returns from Centralia and data centers, repurposing legacy assets Q: On Alberta data centers, AESO methodology, market dynamics A: John Kousinioris and Blain van Melle talked about waiting for AESO clarity, expected impact on data centers Q: On broader market interest, growth capital allocation A: John Kousinioris discussed focus on U.S. markets, particularly Western U.S., based on market dynamics, operational expertise, and customer relationships Q: On hedging gas side, LNG Canada dynamics A: John Kousinioris and Blain van Melle discussed hedging strategies for gas, tracking prices monthly Q: On Nova structure, equity stake, funding capacity A: John Kousinioris and Joel Hunter explained the structure of the Nova investment, potential equity stake, and funding for future projects Q: On asset sales, capital rotation A: John Kousinioris and Joel Hunter discussed testing asset sales, potential to rotate capital for accretive M&A