TransAlta quarterly profit weakens

Price weakness will likely persist in TransAlta Corp.'s main markets well into this year, the chief executive officer of the electricity producer cautioned Wednesday.

“We are still facing some very trying economic times. Natural gas and power markets have yet to show any clear signs of recovery,” Steve Snyder said on a conference call with analysts and reporters.

Forward power prices for 2010 and 2011 are currently trading in the depressed $45- to $50-per-megawatt-hour range in Alberta and the Pacific Northwest, where TransAlta runs coal and natural gas-fired power plants.

“A full recovery will take some time,” Mr. Snyder said. “Strengthening in both these markets will depend on the recovery in natural gas prices as well as the economy. Our plans are based on that not occurring until 2011.”

Earlier Wednesday, Calgary-based TransAlta said its fourth-quarter profit slipped to $79-million as it booked extra charges during the period.

The results were worth 37 cents per share, a dip from profit of $94-million or 47 cents per share in same period of 2008.

The quarterly earnings were partly affected by a writedown of mining development costs at its Centralia coal plant in Washington state, as well as a $15-million tax recovery in 2008.

Comparable earnings, which exclude one-time charges, were $84-million, a rise from $79-million a year earlier, both worth 40 cents per share.

Analysts had predicted comparable earnings of 49 cents per share, according to a survey from Thomson Reuters.

The stronger comparable earnings were helped by fewer outages at its Alberta plants, though lower volumes and higher pricing in the province dampened the growth somewhat.

Revenue fell 5.6 per cent to $763-million from $808-million.

In an effort to add more renewable assets to its portfolio, TransAlta took over Calgary-based green power producer Canadian Hydro Developers Inc. for $755-million late last year. That company had wind, hydroelectric and biomass power plants in Alberta, British Columbia, Ontario and Quebec.

Canadian Hydro had resisted TransAlta's hostile bid until finally coming to an agreement in October. The top four or five executives with Canadian Hydro have not joined the TransAlta team, as had been expected.

TransAlta went after Canadian Hydro because it recognized environmental regulations were bound to become more stringent for carbon-heavy sources of energy, like coal. Most of TransAlta's power plants run on coal.

The economic downturn may delay the introduction of tougher CO{-2} rules, but Mr. Snyder said the changes are more or less inevitable in the long run.

“Our plans are built on the premise that the market will demand greater use of non-fossil and lower-emitting fossil fuels as well as the development and application of cost-effective technologies that substantially reduce carbon emissions,” Mr. Snyder said.

“TransAlta is very well positioned and prepared for this new era of generation.”

Mr. Snyder acknowledged that there is still a great deal of uncertainty around technologies like carbon capture and storage, emission targets and commodity prices.

“For these reasons our plans are multi-year in nature, incorporate multiple decision points and have multiple built-in off ramps that allow us to adapt to the changing landscape of environmental policies before committing any large capital outlays.”