TransAlta Corporation TAC recently announced that its board of directors approved a 6% increase in its quarterly dividend rate. The new quarterly dividend rate will be 4.5 cents per share resulting in an annualized dividend of 18 cents. The new dividend will be payable on Apr 1, 2021 to shareholders on record on Mar 1, 2021.
The company also announced that it has entered in a definite agreement with TranAlta Renewables to sell its 303 MW interest in some clean power generation assets for $439 million. The divestiture will include a 100% direct interest in the 207 MW Windrise wind project located in the Municipal District of Willow Creek, Alberta, 49% economic interest in the 137 MW Skookumchuck wind facility and 100% economic interest in the 29 MW Ada cogeneration facility. The aforesaid portfolio has an average weighted contract life of approximately 19 years.
The funds generated from the above deal will assist TransAlta in attaining its goal in its Clean Energy Investment Plan.
Clean Energy Investment Plan
In Sep 16, 2019, TransAlta announced its $2 billion Clean Energy Investment Plan, which includes plan of converting its existing Alberta coal assets to natural gas and strengthening its renewable energy generation. This plan will be funded from the cash raised earlier this year through the strategic investment with an affiliate of Brookfield Renewable Partners, cash generated from operations, and through TransAlta Renewables Inc.
Transition in Energy Space
Utility operators in the United States are now focused on generating more electricity from clean sources and gradually become a net zero emission company over the next decade. Per the latest release from the U.S. Energy Information Administration (“EIA”), electricity generation from renewable energy sources have risen from 18% in 2019 to 20% in 2020, and is anticipated to reach 21% in 2021.
With the utilization of new technology and consistent research and development work, the cost of settling up utility scale renewable energy based power units has come down drastically over the past few years. Thereby, we expect utilities in the United States to focus on generating electricity from emission less sources. Utilities like Xcel Energy XEL, Duke Energy DUK and DTE Energy DTE among others have already announced to supply 100% clean electricity to customers by 2050.
Price Performance and Zacks Rank
In the past six months the company returned 28.1% compared with the industry’s rally of 7.8%.
TransAlta currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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