TransAlta Corporation Enters into Automatic Share Purchase Plan

Rhea-AI Summary

TransAlta Corporation (TransAlta) (TSX: TA) (NYSE: TAC) has entered into an automatic share purchase plan (ASPP) to facilitate repurchases of its common shares under the previously announced normal course issuer bid (NCIB). The company has purchased 6,989,000 common shares since January 1, 2023, and 871,100 common shares since the beginning of the current NCIB on May 31, 2023. The prevailing price for the common shares may not reflect their underlying value, leading the company to believe that the purchase of common shares under the NCIB is an attractive and appropriate use of available funds. The ASPP will allow for purchases of common shares to be made at times when the company would ordinarily not be permitted to make purchases, enhancing shareholder returns through appropriate capital allocation such as a share buyback and quarterly dividend underpinned by the company's strong free cash flow position.

Insights

Financial Analyst

The initiation of an automatic share purchase plan (ASPP) by TransAlta Corporation to facilitate the repurchase of its common shares is a strategic financial maneuver that warrants scrutiny. Such repurchase programs are often indicative of a firm's confidence in its intrinsic value, especially when the management believes the market undervalues its stock.

From a financial perspective, the repurchase of shares can be accretive to earnings per share (EPS) by reducing the number of shares outstanding. This, in turn, may lead to a higher stock price if the market perceives the buyback as a sign of strength. It is also a method of returning capital to shareholders, akin to dividends, but with potential tax advantages for investors.

In assessing the impact, it is crucial to analyze the company's free cash flow position, as share repurchases should ideally be funded without compromising the firm's financial health or its ability to invest in growth opportunities. The cancellation of the purchased shares implies a commitment to enhancing shareholder value, but it also reduces the company's equity base, which could impact its leverage ratios and financial flexibility.

Industry Analyst

When evaluating the broader implications of such a strategy, it is essential to consider the industry context. For energy companies like TransAlta, capital allocation decisions are often influenced by commodity prices, regulatory changes and the shift towards renewable energy sources. The decision to allocate funds for an ASPP suggests that TransAlta is currently prioritizing shareholder returns over other potential investments, which could be seen as a positive signal to the market about its financial stability and future prospects.

However, the timing and scale of share repurchases can also reflect management's view on alternative investments within the industry. If the company foregoes investment in new technologies or expansion projects in favor of share buybacks, it could potentially miss out on growth opportunities or fall behind competitors in the long term.

CALGARY, AB, Dec. 19, 2023 /PRNewswire/ - TransAlta Corporation ("TransAlta" or the "Company") (TSX: TA) (NYSE: TAC) announced today that it has entered into an automatic share purchase plan ("ASPP") with its broker in order to facilitate repurchases of TransAlta's common shares ("Common Shares") under the Company's previously announced normal course issuer bid ("NCIB").   

The Company previously announced that it had received approval from the Toronto Stock Exchange ("TSX") to purchase up to 14,000,000 of its Common Shares during the 12-month period that commenced May 31, 2023 and terminates May 30, 2024. Purchases under the NCIB may be made through open market transactions on the TSX and any alternative Canadian trading systems on which the Common Shares are traded, based on the prevailing market price. Since January 1, 2023, the Company has purchased 6,989,000 Common Shares purchased at a weighted average price per Common Share of $11.53 for an aggregate value of approximately $81.0 million.  Since the beginning of the current NCIB on May 31, 2023, the Company has purchased 871,100 at a weighted average price per Common Share of $10.92 for an aggregate value of approximately $9.6 million.

The Company believes that the prevailing price for the Common Shares may not, from time to time, reflect the underlying value of the Common Shares and that the purchase of Common Shares pursuant to the NCIB may be an attractive and appropriate use of available funds relative to other alternatives.  The ASPP will facilitate purchases under the NCIB as it will allow for purchases of Common Shares to be made at times when the Company would ordinarily not be permitted to make purchases, whether due to regulatory restriction or customary self-imposed blackout periods. TransAlta is committed to enhancing shareholder returns through appropriate capital allocation such as a share buyback and its quarterly dividend, which are underpinned by the Company's strong free cash flow position.

Under the ASPP, the Company's broker may purchase Common Shares from the effective date of the ASPP until the end of the NCIB.  The ASPP will facilitate purchases of Common Shares under the NCIB by authorizing the Company's broker to make purchases at its sole discretion based on parameters set by the Company in accordance with TSX rules, applicable law and the terms of the ASPP.  Outside of periods that the Company is restricted from purchasing Common Shares pursuant to insider trading rules or its own internal trading blackout policies, Common Shares may also be purchased based on management's discretion, in compliance with TSX rules and applicable law. 

All purchases of Common Shares made under the ASPP will be included in determining the number of Common Shares purchased under the NCIB. Any Common Shares purchased by the Company pursuant to the NCIB will be cancelled.  The Company is not currently in possession of any material undisclosed information in relation to the Company.   The ASPP has been pre-cleared by the TSX and will be effective on January 1, 2024.  

The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (b) February 24, 2024; or (c) the Company terminates the ASPP in accordance with its terms.   

About TransAlta Corporation:

TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. TransAlta provides municipalities, medium and large industries, businesses and utility customers with clean, affordable, energy efficient and reliable power. Today, TransAlta is one of Canada's largest producers of wind power and Alberta's largest producer of hydro-electric power. For over 112 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68 per cent reduction in GHG emissions or 22 million tonnes since 2015 and has received scores of A- from CDP and AA from MSCI.

Note: All financial figures are in Canadian dollars unless otherwise indicated.

View original content:https://www.prnewswire.com/news-releases/transalta-corporation-enters-into-automatic-share-purchase-plan-302019127.html

SOURCE TransAlta Corporation

FAQ

What is the purpose of TransAlta Corporation's (TransAlta) (TSX: TA) (NYSE: TAC) automatic share purchase plan (ASPP)?

The purpose of the ASPP is to facilitate repurchases of TransAlta's common shares under the previously announced normal course issuer bid (NCIB).

How many common shares has TransAlta purchased since January 1, 2023?

TransAlta has purchased 6,989,000 common shares since January 1, 2023.

When did the current NCIB for TransAlta begin?

The current NCIB for TransAlta began on May 31, 2023.

What is the purpose of the share buyback and quarterly dividend for TransAlta?

The purpose of the share buyback and quarterly dividend is to enhance shareholder returns through appropriate capital allocation underpinned by the company's strong free cash flow position.