TransAlta Renews Normal Course Issuer Bid

Rhea-AI Summary

TransAlta (NYSE: TAC) has announced a new normal course issuer bid (NCIB) approved by the Toronto Stock Exchange (TSX). The NCIB permits TransAlta to repurchase up to 14,000,000 common shares, representing about 4.6% of its outstanding shares, between May 31, 2024, and May 30, 2025. These transactions will depend on market conditions and be executed at the company's discretion. The move aims to enhance long-term shareholder value, as the company's board and management believe the market often undervalues their shares. During the previous NCIB, TransAlta repurchased and canceled 8,561,800 shares at an average price of $9.50 each. The company focuses on long-term shareholder value and operates various power generation assets in North America and Australia. It has also achieved significant reductions in greenhouse gas emissions and received an upgraded ESG rating.

Positive

• TransAlta can repurchase up to 14,000,000 common shares, representing 4.6% of outstanding shares.
• Share repurchases aim to enhance long-term shareholder value.
• The prior NCIB successfully repurchased and canceled 8,561,800 shares at an average price of $9.50 each.
• TransAlta focuses on clean, affordable power generation, enhancing its ESG profile.
• The company achieved a 66% reduction in GHG emissions since 2015.
• Received an upgraded MSCI ESG rating of AA.

Negative

• The NCIB’s effectiveness depends on future market conditions, adding uncertainty.
• The discretion retained by TransAlta on share repurchases could lead to inconsistent execution.
• Repurchasing shares might limit funds available for other investments or debt repayments.
• Previous share repurchase averaged at a relatively low price of $9.50 per share, indicating potential undervaluation.

Insights

Financial Analyst

TransAlta's announcement regarding the renewal of its normal course issuer bid (NCIB) is a noteworthy development for investors. A normal course issuer bid allows a company to repurchase its own shares from the open market, which can lead to several potential benefits for shareholders.

Firstly, share buybacks can signal to the market that the company believes its stock is undervalued. By repurchasing up to 4.6% of its outstanding shares, TransAlta is effectively indicating confidence in its own valuation. It's also a method of returning capital to shareholders, similar to dividends, but with the added benefit of potentially increasing the stock price by reducing the number of shares outstanding, thereby increasing earnings per share (EPS).

Secondly, the buyback could be seen as a positive move in terms of capital allocation. If the company has surplus cash and believes that its own shares are the best investment, it may choose to buy back shares rather than pursue other investments or pay down debt. Given that TransAlta's previous NCIB saw an average repurchase price of $9.50 per share, the decision to renew the NCIB suggests that the company continues to believe in the long-term value of its stock.

However, the effectiveness of an NCIB can depend on future market conditions and the company’s operational performance. It's important for investors to monitor these aspects closely. If market conditions deteriorate or the company's performance falters, the anticipated benefits of the buyback could fail to materialize.

From a financial perspective, while the NCIB can provide a short-term boost to the stock price, it’s essential to consider the company's long-term strategic goals and whether the buyback aligns with its overall financial health and growth prospects.

Market Research Analyst

The decision to implement a normal course issuer bid (NCIB) by TransAlta can be interpreted through the lens of market dynamics and investor sentiment. Share buybacks generally create a positive sentiment among investors, as they are often viewed as a sign that the company's management believes the stock is undervalued. This, in turn, can help support the stock price.

Analyzing the context, TransAlta’s move comes at a time when it has achieved a 66% reduction in greenhouse gas emissions since 2015 and received an upgraded MSCI ESG rating of AA. The timing of the NCIB suggests that the company is leveraging its improved ESG performance to bolster investor confidence further, potentially appealing to a broader base of socially responsible investors.

Furthermore, the maximum of 4.6% repurchase of outstanding shares represents a significant portion, which could considerably impact the supply-demand dynamics of the stock. This could create upward pressure on the stock price, particularly in the short-term as shares are bought back.

However, it’s also essential to consider the potential downsides. If the market perceives the buyback as a lack of better investment opportunities, it could raise concerns about the company’s growth prospects. Additionally, the discretionary nature of the buyback means it’s contingent on market conditions and other factors, adding an element of uncertainty.

Overall, the NCIB can be a positive signal, but investors should keep a close watch on how it fits within the broader market and industry trends, as well as any shifts in TransAlta’s strategic focus.

CALGARY, Alberta, May 27, 2024 (GLOBE NEWSWIRE) -- TransAlta Corporation (“TransAlta” or the “Company”) (TSX: TA) (NYSE: TAC) announced today that the Toronto Stock Exchange (“TSX”) has accepted the notice filed by the Company to implement a normal course issuer bid (“NCIB”) for a portion of its common shares (“Common Shares”).

Pursuant to the NCIB, TransAlta may repurchase up to a maximum of 14,000,000 Common Shares, representing approximately 4.6% of the 303,256,652 Common Shares issued and outstanding as at May 27, 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. Any Common Shares purchased under the NCIB will be cancelled.

Transactions under the NCIB will depend on future market conditions. TransAlta will initially retain discretion whether to make purchases under the NCIB, and to determine the timing, amount and acceptable price of any such purchases, subject at all times to applicable TSX and other regulatory requirements. The period during which TransAlta is authorized to make purchases under the NCIB commences on May 31, 2024, and ends on May 30, 2025, or such earlier date on which the maximum number of Common Shares are purchased under the NCIB or the NCIB is terminated at the Company’s election.

Under TSX rules, not more than 211,262 Common Shares (being 25% of the average daily trading volume on the TSX of 845,049 Common Shares for the six months ended April 30, 2024) can be purchased on the TSX on any single trading day under the NCIB, with the exception that one block purchase in excess of the daily maximum is permitted per calendar week.

TransAlta has repurchased and cancelled 8,561,800 Common Shares on the open market through the facilities of the TSX and/or alternative Canadian trading systems at an average price of $9.50 per share under its prior NCIB approved by the TSX on May 26, 2023, for the twelve-month period commencing May 31, 2023.

The NCIB provides the Company with a capital allocation alternative with a view to long-term shareholder value. TransAlta’s Board of Directors and Management believe that, from time to time, the market price of the Common Shares does not reflect their underlying value and purchases of Common Shares for cancellation under the NCIB may provide an opportunity to enhance shareholder value.

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 the Future-Fit Business Benchmark, which also defines sustainable goals for businesses. Our reporting on climate change management has been guided by the International Financial Reporting Standards (IFRS) S2 Climate-related Disclosures Standard and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 66 per cent reduction in GHG emissions or 21.3 million tonnes CO2e since 2015 and received an upgraded MSCI ESG rating of AA.

For more information about TransAlta, visit its website at transalta.com.

Cautionary Statement Regarding Forward-looking Information:
This news release contains forward-looking statements and forward-looking information within the meaning of applicable securities laws. The use of any of the words “may”, “will”, and similar expressions are intended to identify forward-looking information or statements. More particularly, and without limitation, this news release contains forward-looking statements and information relating to TransAlta’s intentions with respect to the NCIB, the effects of repurchases of Common Shares and purchases thereunder, including any enhancement to shareholder value. These statements are based on TransAlta’s belief and assumptions based on information available at the time the assumptions were made. These statements are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include: the entering into of an automatic securities purchase plan; legislative or regulatory developments; any significant changes to Common Share price or trading volume; continued availability of capital and financing; changes to general economic, market or business conditions; business opportunities that become available to, or are pursued by TransAlta; and other risk factors contained in the Company’s annual information form and management’s discussion and analysis. Readers are cautioned not to place undue reliance on these forward-looking statements or forward-looking information, which reflect TransAlta’s expectations only as of the date of this news release. TransAlta disclaims any intention or obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. 

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

For more information:

Investor Inquiries: Phone: 1-800-387-3598 in Canada and U.S. Email: investor_relations@transalta.com

Media Inquiries: Toll-free media number: 1-855-255-9184 Email: ta_media_relations@transalta.com

FAQ

What is TransAlta's NCIB?

TransAlta's NCIB allows the company to repurchase up to 14,000,000 common shares, which is about 4.6% of its outstanding shares.

When does TransAlta's NCIB start and end?

TransAlta's NCIB starts on May 31, 2024, and ends on May 30, 2025.

How many shares did TransAlta repurchase in its prior NCIB?

In its prior NCIB, TransAlta repurchased and canceled 8,561,800 common shares at an average price of $9.50 per share.

What is the goal of TransAlta's NCIB?

The goal is to enhance long-term shareholder value by repurchasing shares that may be undervalued by the market.

What is TransAlta's stock symbol?

TransAlta's stock symbol is TAC.