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TA: Long Term Centralia Conversion Will Support Margin Expansion And Upside

Share Buybacks and Expanding Demand Will Shape Renewable Outlook

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TA
AnalystConsensusTarget
Not Invested
Published 28 Dec 2024

Update shared on 22 Dec 2025

Fair value Increased 1.73%
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Analysts have raised their price target on TransAlta modestly from 23.59 dollars to 24.00 dollars, citing expectations for stronger profit margins that more than offset slightly lower projected revenue growth and a modestly higher discount rate.

What's in the News

  • Signed a long term tolling agreement with Puget Sound Energy to convert the 700 MW Centralia Unit 2 plant from coal to natural gas. The project requires about USD 600 million in capex and targets commercial operation in late 2028, with operations running through 2044 (company announcement)
  • Plans to declare a final investment decision on the Centralia Unit 2 conversion after receiving required approvals. This is expected in early 2027, and the agreement is subject to Washington Utilities and Transportation Commission review (company announcement)
  • Announced CEO succession. Current President and CEO John Kousinioris will retire on April 30, 2026, and EVP Finance and CFO Joel Hunter will become President, CEO, and Board member on the same date, followed by a six month advisory period for Kousinioris (executive change filing)
  • Reported higher power production for the third quarter of 2025 at 6,151 GWh, up from 5,712 GWh a year earlier, and nine month production of 17,796 GWh versus 16,612 GWh in the prior year period (operating results announcement)
  • Confirmed no share repurchases between July 1 and September 30, 2025, effectively completing its previously announced buyback program without deploying capital (buyback update)

Valuation Changes

  • The fair value estimate has risen slightly to 24.00 dollars from 23.59 dollars, reflecting higher expected profitability.
  • The discount rate has increased modestly to about 7.86 percent from approximately 7.64 percent, indicating a slightly higher required return.
  • Revenue growth has been revised down meaningfully to around 55.0 percent from roughly 65.5 percent, signaling more conservative top line expectations.
  • The net profit margin has risen significantly to about 8.78 percent from approximately 7.66 percent, driven by anticipated operating efficiency improvements.
  • The future P/E has declined moderately to about 40.0 times from roughly 44.6 times, suggesting a somewhat less aggressive valuation multiple.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.