Do TransAlta’s (TSX:TA) Coal Shifts Hint At A Deeper Generation Strategy Reset?

• In December 2025, TransAlta announced several asset changes as regulators ordered its Centralia Unit 2 coal plant in Washington State to remain available for operation for 90 days beyond its planned retirement, while its Alberta subsidiary Alberta Power (2000) Ltd. disclosed plans to temporarily mothball Sheerness Unit 1 from April 1, 2026, for up to two years.
• Together, these moves highlight how reliability concerns and shifting market conditions are reshaping TransAlta’s generation mix, influencing where capital and operational focus may be directed across its North American fleet.
• We’ll now examine how Centralia’s mandated extension, alongside the planned Sheerness mothballing, could influence TransAlta’s longer-term investment narrative.

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TransAlta Investment Narrative Recap

To own TransAlta, you need to believe in its ability to reposition a legacy-heavy fleet toward contracted, lower-carbon power while stabilizing earnings after a tough run of losses. The Centralia extension and Sheerness mothballing both speak to reliability and market shifts, but they do not materially change the key near term swing factor, which is whether TransAlta can secure and execute large, capital intensive transition and data center related projects without further earnings volatility.

In that context, the long term tolling agreement with Puget Sound Energy for a gas conversion of Centralia Unit 2 stands out. It ties a sizable US$600 million capital program to contracted capacity payments, which directly relates to the core catalyst of replacing merchant coal exposure with more predictable cash flows, while still leaving investors exposed to execution, regulatory and cost overrun risks during the multi year build and approval period.

Yet even with these transition projects, investors should be aware that concentrated bets on aging thermal assets and large capex plans could...

Read the full narrative on TransAlta (it's free!)

TransAlta’s narrative projects CA$2.0 billion revenue and CA$188.9 million earnings by 2028. This implies a 6.6% yearly revenue decline and an earnings increase of about CA$355.9 million from CA$-167.0 million today.

Uncover how TransAlta's forecasts yield a CA$23.59 fair value, a 37% upside to its current price.

Exploring Other Perspectives

Two Simply Wall St Community fair value estimates for TransAlta span from C$23.59 to C$88.93, highlighting very different views on upside. You will want to weigh those opinions against the risk that aging gas and coal units could need higher sustaining capital at the same time as power prices and contracting momentum come under pressure.

Explore 2 other fair value estimates on TransAlta - why the stock might be worth just CA$23.59!

Build Your Own TransAlta Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your TransAlta research is our analysis highlighting 2 key rewards that could impact your investment decision.
• Our free TransAlta research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate TransAlta's overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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