TransAlta Corporation

Good morning. My name is Shannon, and I will be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation first quarter 2026 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 11 on your telephone keypad. If you would like to withdraw your question, please press the star followed by 11 again. Thank you. Ms. Parrish, you may begin your conference.

Thank you, Shannon. Good morning, everyone. My name is Stephanie Parrish, and I am the Vice President of Investor Relations and Corporate Strategy of TransAlta. Welcome to TransAlta's first quarter 2026 conference call. With me today are Joel Hunter, President and Chief Executive Officer, Mike Politesky, EVP Finance and Chief Financial Officer, Chris Freilich, EVP Generation, and Nancy Brennan, EVP Legal and External Affairs. Today's call is being webcast and I invite those listening on the phone lines to view the supporting slides that are posted on our website. A replay of the call will be made available later today and the transcript will be posted to our website shortly thereafter. All information provided during this conference call is subject to the forward-looking statement qualification set out here on slide two, detailed further in our MD&A and incorporated in full for the purposes of today's call. All amounts referenced are in Canadian dollars unless noted otherwise. The non-IFRS terminology used, including adjusted EBITDA and free cash flow, are reconciled in the MD&A for your reference. On today's call, Joel will provide an overview of TransAlta's quarterly results. After these remarks, we will open the call for questions. With that, I will turn the call over to Joel.

Thanks, Stephanie. Good morning, everyone, and thank you for joining our first quarter conference call. TransAlta delivered solid operational performance during the first quarter of 2026. During the quarter, we delivered adjusted EBITDA of $204 million, free cash flow of $102 million, or $0.34 per share, and average fleet availability of 93.8%. While our Alberta merchant portfolio was impacted by softer than expected prices, our hedging strategy and active asset optimization generated realized prices that were well above spot prices during the quarter. We remain confident in achieving our 2026 guidance range. In the quarter, we advanced our data center strategy in Alberta and coal-to-gas conversion at Centralia, hosted our investor day, providing an overview of our strategy and context on the current and future operating environment, and we closed the acquisition of Far North Power Corporation, adding contracted generation in our core market of Ontario. In connection with our fourth quarter and year-end 2025 results, we announced an MOU with CPP Investments in Brookfield for data center development in Alberta, with TransAlta as the exclusive power and site provider. We continue to be actively engaged with our counterparties. We're making progress towards definitive agreements. Last month, the ASO released an updated draft process for phase 2a of their large load integration. It is important to note that this is draft, which does not represent final outcomes and will continue to evolve as discussions progress. TransAlta continues to participate in the ASO's Large Load Integration Working Group, and we look forward to hearing additional details as they finalize their process in the coming months. In March, the U.S. Department of Energy issued another temporary order requiring Centrally Unit 2 to remain available for operation if needed for a 90-day period ending on June 14. TransAlta is adhering to the order and recently submitted its request for reimbursement to the FERC for costs related to the initial order. Progress continues with the conversion, and I'm pleased to report that our timeline for a final investment decision in the first quarter of 2027 remains on schedule. In the quarter, we achieved adjusted EBITDA of $204 million, a decrease of $66 million compared to the first quarter of 2025. This was primarily due to the reduction of generation at Centralia, lower Alberta power and hedge prices, as well as reduced market volatility, which affected energy marketing performance. Hydro segment adjusted EBITDA was $35 million, down $12 million compared to the first quarter of 2025, due to lower Alberta spot and hedge power prices, lower ancillary prices, reduced merchant volumes, and fewer emissions credit sales to third parties. The wind and solar segment reported adjusted EBITDA of $95 million, a 7% decrease compared to the first quarter of 2025, mainly due to lower wind resource and availability in eastern Canada. Within the gas segment, adjusted EBITDA was $93 million, $11 million lower than the first quarter of 2025, primarily due to lower Alberta spot and hedge power prices and the retirement of the Ada cogeneration facility. These impacts were partially mitigated by higher realized prices on Ontario and the acquisition of Far North Power. The energy transition segment experienced a year-over-year decrease in adjusted EBITDA of $36 million. Adjusted EBITDA is anticipated to remain neutral or slightly negative within the segment primarily due to ongoing expenses associated with retired units in both Alberta and Washington State. These costs are partially mitigated through revenues from byproduct sales. Energy marketing adjusted EBITDA decreased by $4 million to $17 million, primarily due to higher incentive costs and associated with higher unrealized mark-to-market gains. And corporate costs of $37 million were 10% lower when compared to the first quarter of 2025. In the first quarter, Free cash flow totaled $102 million driven by reduced net interest expense and increased realized foreign exchange gains from operating activities. Overall, despite low Alberta spot power prices, we are pleased with our first quarter operational performance across all of our business segments and remain confident in our ability to meet our 2026 guidance range. Turning to the Alberta portfolio, spot prices averaged $32 per megawatt hour in the first quarter, which was notably lower than the average price of $40 per megawatt hour in the first quarter of 2025. The decline year over year was primarily due to a mild winter in addition of new gas generation in the market. The gas fleet exceeded merchant market pricing by realizing an average price of $48 per megawatt hour, a 50% premium to the average spot price of $32 per megawatt hour. The hydro fleet also continued to capture merchant upside, delivering an average realized price of $46 per megawatt hour, a 44% premium to the average spot price. The merchant wind fleet realized an average price of $20 per megawatt hour, which was impacted by increased intermittent wind and solar generation in the overall Alberta merchant power market. Although weather conditions during the quarter were generally mild, contributing to lower average power prices, we enhanced our margins by meeting portions of our higher price hedge commitments through power purchases when market prices were below our variable production costs. We benefited from approximately 2,400 gigawatt hours of hedges, an average price of $66 per megawatt hour, $34 per megawatt hour higher than the average spot price. During the quarter, we delivered approximately 1,000 gigawatt hours of ancillary service volumes at a modest 9% discount to the average spot price. Through effective fleet optimization and meeting hedge obligations with purchase power, we consistently addressed the ASOS demand for reliability products. Looking at the balance of the year, we have approximately 6,900 gigawatt hours of Alberta generation hedged at an average price of $64 per megawatt hour, well above the current forward curve of $41 per megawatt hour. Going forward, we'll continue to optimize our fleet and reduce production in low price, high supply hours by fulfilling our financial hedges and customer requirements with open market purchases. For 2027, we currently have approximately 5,500 gigawatt hours hedged and an average price of $65 per megawatt hour. well above current forward pricing levels. As discussed at Investor Day on March 23rd, we continue to expect the anticipated increase in load will rebalance the current oversupply of Generation Alberta later this decade and drive opportunities for growth in the long term. Last month, we announced the addition of two new executives to our leadership team. I'm pleased to welcome Mike Politesky to TransAlta as he takes on the role of Executive Vice President and Chief Financial Officer. Mike brings over 25 years of experience in the energy sector. Over the course of his career, he has played a significant role in large-scale transactions and business transformation and brings deep experience in investor relations, governance, and capital allocation. His established reputation as a strong, collaborative leader will be important as we pursue our strategic objectives. I'm also pleased to welcome Grant Arnold as our Executive Vice President, Growth, and Chief Commercial Officer. Grant brings over 30 years of leadership, commercial, and technical experience in the power generation and energy sector. He has contributed and led prior companies through significant growth, expanding their operating and development portfolios across North America. I'm confident Mike and Grant will strengthen TransAlta's high-caliber leadership team, where together we will execute our strategy focused on discipline growth and operational excellence. I'll now turn the call over to Mike to offer a few words as he steps into the role.

Thanks, Joel. I've been impressed by what TransAlta has built, an operationally strong business with a clear strategy and meaningful opportunity set ahead. I'm grateful for the warm welcome I've received externally as well as inside the organization, and I'm looking forward to working with all of you as we deliver on our strategy. My focus will be straightforward. I plan to continue to strengthen our financial position and support the execution of our strategic priorities. We will operate with excellence, grow with discipline, and maximize value for our shareholders, all while ensuring we maintain our financial strength and flexibility through disciplined cost and capital management. I'll now turn the call back over to Joel.

Thanks, Mike. For 2026, we remain focused on the following priorities. Improving our leading and lagging safety performance indicators while achieving strong fleet availability. Delivering adjusted EBITDA and free cash flow within our 2026 guidance ranges. Maximizing the value of our legacy thermal sites by advancing our Alberta data center project. as well as advancing our coal to gas conversion at Centralia toward a final investment decision, pursuing strategic M&A opportunities, and enhancing our financial strength and flexibility through disciplined capital allocation and cost control. Stepping in as CEO, I believe TransAlta offers a compelling investment opportunity. We operate a safe and reliable fleet that generates strong and consistent cash flows. That strength is grounded in a diversified portfolio of hydro, wind, solar, and thermal assets across three countries, And that's enhanced by our industry-leading asset optimization and energy marketing capabilities. Our legacy thermal sites continue to represent considerable increasing value. We are proactively pursuing repurposing opportunities at these facilities to address the growing demand for dependable power in our operating markets. Concurrently, we maintain a leadership position across multiple technologies, consistently prioritizing responsible and reliable generation. We are disciplined in how we grow. Our priority is creating value for our shareholders as we diversify our portfolio within our core geographies and continue to increase the stability and contracted nature of our cash flows. This strategy is supported by a strong financial foundation. We have a flexible balance sheet and ample liquidity, giving us the ability to pursue and deliver multiple growth opportunities while continuing to return capital to shareholders. And finally, and most importantly, we have our people. Everything we achieve is powered by the dedication and expertise of our employees and contractors. I want to thank them for their commitment and for positioning TransAlta for continued success in 2026 and beyond. Thank you, and I'll now turn the call back over to Stephanie.

Thank you, Joel. Shannon, would you please open the call for questions from the analysts?

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Robert Hope with Scotiabank. Your line is now open.

Morning, everyone. Maybe to start off with, and I know it's early days, but can you give us any sense or color on how the Brookfield MOU for the data center in Alberta is progressing, whether that be for the initial or the subsequent phases?

Yeah, Robert, Joel here. You know, we made significant progress as we announced back at the end of February signing the MOU with Brookfield and CPPI. I would say to you that this wasn't your kind of boilerplate MOU. It's quite comprehensive, including reaching agreement on a lot of the commercial terms. We are now in the process of the definitive agreements, and that remains very active between ourselves, CPPI, and Brookfield. I can't give you a definitive timeline on that other than it is progressing as planned, and it is a very collaborative effort between both ourselves and Brookfield and CPPI.

All right, appreciate that. And then maybe moving over to the M&A market, it is highlighted as a strategic opportunity for 2026. Can you comment on how the market is progressing, whether you're seeing a good amount of deal flows and kind of what opportunities look the best at this moment?

Yeah, Rob, I would say that there is certainly a lot of deal flow. We are constantly looking at opportunities really within our core geographies. When we look at Canada, for example, most recently we just announced the acquisition of a Far North power corporation. We're seeing opportunities here and in the U.S., in particular in the WEC. And it's across all technologies, whether it's thermal, wind, solar. It is quite competitive, so we have to remain very disciplined in how we approach M&A. And, you know, we kind of look at it through the lens it has to be accretive to our, you know, cash flow per share. It can't harm the balance sheet. We have to, you know, preserve our balance sheet strength going forward. It has to be in strategy, and it has to be highly contracted. You know, one of our objectives here as we look at M&A or any capital allocation that we're doing, Rob, that we want to increase our contractiveness over time. So it's critically important that when we look at opportunities that it comes with a strong contract profile or at least a pathway to recontracting in the future. So I would say to you overall, it's a very robust market. It is very competitive, and we just remain very disciplined in how we approach these M&A opportunities.

That's great. Appreciate the color. Thank you.

Thanks, Rob.

Thank you. Our next question comes from the line of Mark Jarvie with CIBC. Your line is now open.

Yeah, thanks. Good morning, everyone. Joel, just with the additions to the management team, is there anything else you'd like to add to the team? And I guess below Mike and the additions there, is there sort of a filling out of the bench that is required over the next couple of quarters?

Yeah, Mark, I would say that we've really landed our management team here with the addition of Mike and Grant. We also have on our senior management team here, Chris Fralick and Nancy Brennan are here with me today, along with Jane Fedoretz, who's our head of our chief administrative officer and Mark Flickinger, who's our head of major construction projects. So we have the right team in place. And what we see below the team at our vice president level is very strong, a very deep bench. here that really kind of excites me as we look to execute on our strategy here going forward. So very comfortable where we're at, Mark, here with our executive team, along with the the rest of our employees, whether it's from VPs right down to people in the field, wherever. It's a very, very strong team of people that we have in our organization. And it goes to my closing remarks that if it wasn't for our people, we wouldn't be able to execute day-to-day safely and efficiently with our operations or execute on our strategy.

Okay. And then with them settling in their seats, does that potentially push out any sort of M&As Timelines, you know a few more quarters and then just curious on how Mike and grant coming in the fold in the midst of the data center definitive agreements come together whether or not they see something or terms or anything like that that could potentially Just push out the timeline before you get to definitive agreements for just given the fact they've just come on board with the company Yeah, mark.

So that's your first question with respect to M&A. No, it's actually very active Again, we have a strong team that actually reports into Grant with respect to M&A and kind of corporate development that they're very active right now. So that's certainly not going to slow down things at all as it relates to M&A. And similarly, with the data center file as well, that the teams are really responsible for delivering that report into Grant. So Grant, even though he starts today, is actively engaged with the team here, and we certainly don't see any slowdown here with that, given the progress that we have made to date, both with the MOU with CPPI and Brookfield. It certainly helps having two kind of executives like Mike and Grant to come in and offer their views and things and really support where we need to go with executing on these major initiatives, but it's certainly not slowing us down.

That's good to hear. And the last question for me is just, you brought up the draft of Phase 2a. Just curious in terms of your updated discussions around some bridging solutions. We heard one of your peers talk about the view that they think there's still excess supply from supply in the market with the existing generation and can avoid costly grid upgrade charges. Just where are you in the conversations around maybe being able to use your fleet a bit more in terms of going beyond the 1.2 gigawatts in Phase 1a?

Yeah, Mark, it's certainly there's active dialogue between ourselves, the ASO, and the government. And nothing has changed from what we highlighted in Investor Day on March 23rd. As we look at our, you know, coal gas units here in Alberta, which is roughly 2.7 gigawatts of installed capacity that last year ran at around a 20% capacity factor. So we point to those units to say there is surplus capacity there that can be used as, you know, I call it like almost like a bridge, if you will, for phase two to new generation in the future. I think that's acknowledged that, you know, all levels that there is the spare capacity. And I think, you know, what we're trying to get to here is a win-win situation where we can bring in a data center customer, meet their needs by using a portion of that surplus capacity that's there with our coal to gas units. At the same time, ensuring reliability and affordability for the grid here in Alberta. So very active dialogue. And we know that the ASO wants to get it right. We understand that. And, you know, there are concerned about reliability in the province, but they also are, you know, they see the real opportunity here for data centers to come to the province. So active dialogue, as you can well imagine here, and we remain optimistic, you know, using our coal to gas fleet here going forward beyond phase one.

Would there be an expectation that you'd make some other commitments if you're going to use the existing generation to facilitate incremental load, whether it's a commitment to bring on new generation down the road or dispatch conditions on the existing fleet? Would there be sort of something, I'm not saying concession per se, but some sort of measures you think they'd be required to facilitate the more usage of the existing assets?

I would just say to you, Mark, that, you know, those are things that we do when we do have discussions that we do bring up here. We're trying to find, you know, a solution here where we see that there's, again, this surplus capacity and how best to utilize it to ensure that we, you know, improve the reliability, if you will, of the grid. I think it's safe to say, though, that especially with the MOU between Alberta and the federal government and the CER going away, that when we think about data centers here in Alberta, this is a long-term investment opportunity for both the data centers and for ourselves. And so when I look at our existing fleet, they're not going to be around forever. So if we can get data centers here in Alberta, then in all likelihood, we would look to deploy more capital in the province to support the needs of that load longer term. So, again, we remain encouraged by, you know, again, what we're seeing from a policy standpoint. We remain encouraged with our discussions with our customers here that, you know, we're taking a very long-term view. And, you know, ultimately, if we get to a point where we are building, you know, new facilities here, it would be underpinned, obviously, by a long-term contract with our customers if we got to that point.

Okay. Makes sense. Thanks for the time this morning.

Our next question comes from the line of Benjamin Pham with BMO. Your line is now open.

Good morning. First off, congratulations to Mike and Grant on their appointments. I wanted to go back to the timing of the Alberta MOU. I wanted to clarify to you, is TransAlta still sticking with that expectation for definitive agreements by end of year?

Yes, Ben, that's what we're working toward. Again, things are well advanced, and as I mentioned earlier, Ben, the MOU was a large part of that. There was a lot of work behind that that really started last year and ended with us signing the MOU at the end of February. And we are now, again, working toward various definitive agreements. And, you know, our expectation is it's going to be within a year. Just can't give you a definitive time around that. But it's certainly something that is a top priority for us. And I believe for our counterparties as well.

Sounds good. And then I wanted to ask to next on your, uh, your MDNA package, you've broken up your development pipeline between mid stage and early stage. I can see the, the mid stage one includes most of the Centralia conversion. Uh, I think that's what's in there. Uh, can you unpack the, the thermal more for us? There's about 1.9 gigawatts. Is that, is that mostly the Alberta redevelopment sites in there?

There is that there, you know, we highlighted, you know, three sites in Alberta here with Key Pills 1, Sun 5 and Flippy. That's part of it. And we are, you know, exploring opportunities south of the border as well. In Wyoming and Arizona, again, early days on that, but our corporate development team is looking for thermal opportunities there that would be considered greenfield. So, you know, the key here is with the team, and we talked about this last year when we outsourced really our renewables development to NovaClean, that the focus internally here for our team at TransAlta has been more on thermal here in Alberta and south of the border. And we have some opportunities as well in Western Australia that we're looking at.

Okay, very good. Thank you.

Thanks, Ben.

As a reminder, to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Maurice Choi with RBC Capital Markets. Your line is now open.

Thank you, and good morning, everyone. If I could just start with something that, Joel, you mentioned on the press release, specifically about how near-term headwinds in Alberta are materializing. I wonder if you could just elaborate a little bit on that and what you meant on that.

Yeah, Maurice, and good morning. What we meant by that is if you look at, again, our first quarter results, that the average spot price being $32 per megawatt hour, what we experienced in the first quarter here in Alberta, and really in the West, if you will, taking into consideration even the mid-sea market, is there was really no weather. It was very mild, very benign, And as a result, we didn't really see really any spikes in pricing that we normally would experience kind of in the winter in those markets that really put pressure, obviously, on our results here in Alberta for the first quarter. So that's really the headwinds that we experienced. When you look for the balance of the years mentioned in my prepared remarks, Uh, you know, the forward rate now forwards are right around $41, kind of still within our range at the lower end of our range, if you will, in the guidance that we provided at 40 to $60 per megawatt hour for, for the year. Um, what gives us confidence though, Maurice, right now is a couple of things. One, obviously our hedges, uh, hedged at $64, uh, here, uh, for the balance of the year, which is very good. Uh, but also we just, you know, look forward that there, there could be a weather event and, you know, the important thing here, Maurice, is that our fleet is available. so that when that does happen, that we can flex up the portfolio very quickly to respond to those times in the market when it tightens up and pricing does spike. So, again, we're confident still in our outlook for the year, despite the challenges that we faced in the first quarter. I was very pleased, though, that we generated very strong free cash flow in the quarter of $102 million. And, again, we remain confident Commit stated that, you know, our guidance for the year is in line with the midpoint that we talked about at $1 billion of EBITDA and $400 million of free cash flow.

That's great. And maybe it's a quick follow up since you discussed four curves. I recall that in the past when we start thinking about 2028 and beyond, you know, this discussion about whether or not the four curves are truly representative of what you think is going to occur.

um could you just um you know share your thoughts of what you thought what you think about where the forwards are for those years um if you think that that's right or could go up yeah i i you know maurice i think it's very similar to what we discussed in investor day that uh the the forward curve today when you look out to 28 and 29 is is not reflected to what we we believe and i think what we pointed to in investor day is that between now and 2025 We see here in Alberta just over a gigawatt of net change in load and do a large part, obviously, to phase one, being 1.2 gigawatts of load in the province, along with just normal demand growth over this period of time of roughly 600 megawatts. There's some incremental supply that would come, as we highlighted yesterday. including potential unit upgrades at other facilities that obviously are not owned by TA, potentially a restoration of the inner tie, that when you can put it all together, we see that, again, as mentioned, this net load increase of about 1.1 gigawatts. And when you put that through the models, that would translate to power prices or forward prices in that kind of north of $85. And I think what we used in Investor Day was roughly $100 megawatt hour by 2029. So nothing has changed with that.

You know given that we do see the market, you know kind of tightening up here over the next four or five years With not a lot by way of new supply coming Thank you and and just to finish off On the carbon tax policy it feels like maybe we're approaching a point where we're going to hear something just curious whether or not you know what a what are you what you've been hearing on that but be a How much of the MOU that you have in front of you is highly dependent on this carbon tax outcome?

Yeah, I would say to you, again, you know as much as we do right now with respect to the MOU and kind of that glide path on the carbon tax, which recall in the MOU would be up to $130 per tonne. You know, I think the question is, you know, what's the time to get to there? You know, that's the discussion obviously between the Alberta government and the federal government there. You know, so nothing has really changed for us. I mean, it's, we kind of, we know, we look at the MOU, it's directly positive, I think, for the energy industry overall here in Alberta. and we're awaiting the final outcomes of that like everyone else, but nothing has changed with respect to how we're thinking about things here in Alberta or in Canada in general today versus where we were even a month ago.

Is that a gating item for MOU? No, I don't believe so. That's it. Thanks a lot. And congratulations again to both of you, Joel and Mike, on your new positions. Thank you.

Thanks, Ben.

Our next question comes from the line of John Mould with TD Cowan. Your line is now open.

Hey, good morning, everybody. I really just like to focus on your hedge updates. You've added a meaningful volume of hedges for 2027. relative to what you disclosed at the end of year? And I guess first part is how are you thinking about further firming those up as you're able to just given where forwards are sitting relative to you know, maybe where they might get to if there's a line of sight on, you know, material market tightening. And I realize that's a little inconsistent with, you know, when the load might arrive, but, you know, we've seen forwards move around pretty substantially on, you know, longer dated expected changes in load. And I guess, you know, as a follow-up to that, what are you seeing in terms of know appetite from customers to uh lock in prices at a level that that you know are maybe higher relative to where things are sitting this year but conversely you know could be pretty attractive relative to where uh you know pricing might move to if we get a more balanced and normalized uh environment uh driven by some of the low growth we've talked about on the call today

Yeah, John, you know, good morning. You know, I would say to you that as we look out to 2027 and beyond, but focusing more on 2027, yeah, we did add hedges throughout the quarter. Today, as I mentioned in my preferred remarks, we're around 5,500 gigawatt hours hedged, and an average price is $65, again, well above where we're at on the forwards today. If you look at the forward curve right now, it's around $46 today. Just to put it into context, we have, recall that with our hedging, it's not only financial, the large part of it actually is our C&I book. And these tend to be an average tenor of three years. And they tend to attract, you know, a premium over the forward, given they, you know, our customers want that certainty for their three-year period as relates to the amount of generation they require. So our team remains very active in that market. I think it is one of our core capabilities that we have here in Alberta to really manage that book, if you will. I would say to you that when we look to 28 and 29, there's really no liquidity out there at this point in time. Generally, what we see when we're looking at putting on any type of hedges is kind of about 18 months forward, if you will. But I would say also that if we saw forward pricing that is below where we expect it to be, so based on my prior comments and what we said at Investor Day, I think the team would hold back saying that the forward curve is reflective of where we think pricing will ultimately go to. And we've done this in the past where a number of years ago, where we looked at the forward curve and we really looked at it and said that forward curve isn't reflective of where we expect pricing to go. So think of this back in really 2021, 22 and 23. And we benefited from that, that we were a bit, I would call more open. And similarly, the team saw a tightening or loosening in the market, if you will, there was going to be more supply really in 24 and 25 and became very active in the hedging. And You know, and thankfully we did that. And again, as I remember, as I said earlier, you know, we are hedged at $64 for this year. And last year we were hedged at $71. And again, we have a strong team that is constantly looking at the markets and saying, okay, what's best here to either lock in at current forward pricing or remain open. So hopefully it gives you some context around it. You know, we are focused on 27 and really 28, 29 markets. remain open right now, given there's not a lot of liquidity out there and the forward curve is not reflective of where we think it will go.

Okay, that's great. All my other questions were answered, so I'll leave it there. Congrats to Mike and Grant.

Thank you. Our next question comes from the line of Patrick Kinney with National Bank Capital Markets. Your line is now open.

Hey, good morning, everybody. Just back on the MOU at Keep Hills, outside of your commercial discussions, just wondering if you could provide an update on where things are at with the site development plans and the permitting process. Maybe just comment on how things have progressed from an overall regulatory approval standpoint to build out the full gigawatt potential, just relative to your initial assumptions coming into the year.

Yeah, I would say to you, Pat, you know, first of all, this is one of the advantages of using Key Pills. It's an operating facility today. All its permits are in place. What was key last year was with Parkland County getting the rezoning approved by Parkland County, and we got that, which was a significant step forward for us as it relates to data center development there. And obviously we've got our allocation under phase one here at the ASO, as you well know. So everything is well in hand because it is an operating facility here that there's nothing meaningful here that we need by way of permits here to continue to advance the opportunity that we have in front of us at key bills today.

Okay, that's great. And then on Centralia, just wondering if you had an update or any clarity on You know, the mandate being potentially terminated or perhaps extended beyond mid-June. And I guess it's still online if your team sees any opportunity to start generating some positive cash flow from the facility through the summer.

Yeah, so yeah, you're referring obviously to the 202c order that we received that's out to kind of call it mid-June. You know, obviously TransAlta continues to comply with the order. We're also actively engaged both with the state of Washington and the DOE as it relates to the order. You know, it hasn't run thus far and our expectation is that it likely will not run here, you know, through the order. Given that when you look at pricing in the mid-sea market, which today is around $42 for the balance of the year, and looking at the variable cost of production from the facility, it's well in excess of that, so we don't expect that the facility will run. But we are again complying with the order. I think it's also important to note that we continue to advance the coal to gas conversion with the facility and working with PSE. We are encouraged by PSE filing for the rate filing here back in the first quarter. And we are doing the front end engineering design work right now at the facility, which is good. to get to a final investment decision sometime in Q1 of next year. What we do know is centrally it's critical to the reliability and needs in the market that everybody's in agreement that the coal-to-gas conversion is essential. And again, we have really good dialogue between the state of Washington and the DOE.

Okay, thanks for that. And then last one for me is, Joel, just from a balance sheet perspective, as you navigate this weaker period of free cash flow in Alberta, while at the same time still keen to look at M&A opportunities outside the province, just wondering how you might be thinking about asset divestitures across the portfolio, say over the near to medium term, just to ensure a strong financial position and have some dry powder ahead of any... you know, future opportunities that might come along.

Yeah, Pat, you know, it's a couple of things I've just observed. You know, first one, as we said at Investor Day, is that our metrics, our debt EBITDA being the key metric here, can drift, you know, above that four times. But it would be temporary that when you look at where we see our EBITDA going in Alberta with stronger prices in that kind of post-2027 time period, that there's certainly a glide path out along with having Centralia come online. It will generate about $150 million per year of EBITDA for us starting really in 2029. So again, there's a glide path here that we see. But to your point around to create additional, I call it dry powder, we are looking at the portfolio. We have a few things that we're looking at right now. that we're very actively engaged on where we may look to rotate some assets here within the portfolio to create some of that dry powder, given that we are seeing, you know, the question earlier around the M&A opportunities, it remains very robust so that we want to be in a position that, again, that if there's an opportunity out there that's, again, aligned with our strategy, a highly contracted asset, we want to, you know, and again, and the risk adjustment returns meet our hurdle rates and it's creative on a per share basis. that we would look to pursue that opportunity, but at the same time not overly stretching the balance sheet. And then on top of capital rotation, there was a transformative type opportunity. There's other levers that we can pull as well, including the Brookfield conversion here for the hydro assets that we have. That's one. And then you obviously have common equity for something that is transformational here, but again, Any opportunities we look at have to be accretive.

Okay, that's great. Thanks, Joel. I appreciate the comments. Thanks, Bob.

Thank you. There are no further questions at this time. I would now like to turn the conference back to Stephanie Paris for closing remarks.

Thank you, everyone. That concludes our call for today. If you have any further questions, please contact the TransAlta Investor Relations team.

This concludes today's conference call. You may now disconnect.