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    TransAlta ordered to divest generating assets in Heartland deal

Summary

Alberta utility ordered to sell two generating stations to address competition concerns. [Image: Heartland Generation]

by: Dale Lunan

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TransAlta ordered to divest generating assets in Heartland deal

Alberta power utility TransAlta said November 14 it has entered into a consent agreement with Canada’s Competition Bureau to address competition concerns related to its proposed acquisition of Heartland Generation from Energy Capital Partners.

The original transaction, announced in November 2023, was reviewed by the Competition Bureau, which determined that it would “likely result in a substantial lessening of competition in the supply of wholesale electricity in Alberta.”

To resolve the bureau’s concerns, TransAlta has agreed to sell Heartland Generation’s 48 MW open cycle gas turbine facility at Poplar Hill and its 50% interest in a 97 MW open cycle gas turbine/cogeneration facility at Rainbow Lake.

In light of the consent agreement, TransAlta said it and Energy Capital Partners had agreed to reduce the purchase price under the transaction by C$80mn.

The revalued C$542mn transaction includes the assumption of C$232mn of low-cost debt and is subject to a further “favourable” economic adjustment of C$80mn “reflecting the economic benefit of the Heartland business arising since the effective date of the transaction of October 31, 2023, prior to working capital adjustments.”

TransAlta’s net cash payment under the new transaction is estimated at C$230mn, before working capital adjustments, which will be funded through a combination of cash on hand and draws on its credit facilities.

Energy Capital Partners will receive the proceeds of the Poplar Hill and Rainbow Lake divestitures, net of certain adjustments.

“We are pleased to be able to move forward with the Heartland acquisition in the coming weeks, and to incorporate Heartland’s complementary assets within our Alberta portfolio,” TransAlta CEO John Kousinioris said. “The transaction supports our competitive position in Alberta by ensuring we maintain a robust and diversified portfolio, which together with our energy marketing capabilities, complements and supports Alberta’s electricity grid.”

Heartland owns and operates generation assets consisting of 507 MW of cogeneration, 387 MW of contracted and merchant peaking generation, 950 MW of natural gas-fired thermal generation, transmission capacity and a development pipeline that includes the 400 MW Battle River Carbon Hub.

Closing of the renegotiated transaction is expected to occur on or before December 4, 2024.