TransAlta Inks Deal To Develop 40MW Cogeneration Facility

TransAlta Corporation (NYSE:TAC) announced that it has signed an agreement with SemGroup Corporation’s (NYSE:SEMG) subsidiary, SemCAMS, to develop, construct and operate a 40 megawatt (MW) new cogeneration facility at the Kaybob South No. 3 sour gas processing plant in the Western Canadian Sedimentary Basin.

After projected completion in late 2021, the facility with nearly $105 million value is expected to deliver approximately $18 million EBITDA annually. Moreover, SemCAMS will purchase 50% interest in the facility and will be undertaking the half of the generated electricity for 13-year fixed-price contract. Meanwhile, the remaining electricity will be sold into the Alberta Power market by TransAlta.

Solid Focus on Emission Reduction

TransAlta is playing a significant role to lower emission levels by gradually shifting toward clean energy. It aims to reduce emissions by 60% by 2030 from 2015 level. The cogeneration facility is strategically located in the Western Canadian Sedimentary Basin area so that it can accept natural gas production from the Montney and Duvernay formations. This facility will replace the need for traditional boilers and reduce annual carbon emissions in Alberta area.

As environmental awareness has led to a transition in the utility space, the companies are shifting focus from traditional generating sources to clean energy sources. Other Utilities like Xcel Energy (NASDAQ:XEL) and Ameren Corporation (NYSE:AEE) are also settings goals to reduce their carbon footprint from the present levels.

Investments in Clean Energy

In its Clean Energy Investment Plan, TransAlta expressed the desire to invest $2 billion, which includes the conversion of three of the company’s existing Alberta thermal units into gas burners by 2020 and 2021. This plan also consists of the four under-construction wind projects in the United States and Alberta. The plan will be funded by the cash raised from strategic investment deal with Brookfield Renewable Partners (BIP). In March 2019, TransAlta received $750 million aid to meet its clean energy goals.

The recent deal will add value to the company’s initiatives to achieve its clean goals and is expected to boost earnings.

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