TransAlta Renewables Inc., the clean-energy holding company majority owned by Canada’s largest publicly traded electricity producer, is seeking to acquire power plants in the U.S.
The company purchased its first U.S. asset in December, the 144-megawatt Wyoming Wind project, and President Brett Gellner said the region will help him diversify TransAlta Renewables’s portfolio, which also includes 28 wind and hydropower plants in Canada.
The expansion strategy reflects the growing importance of so-called yieldco businesses, which are designed to own and operate power plants developed by other companies. Expanding the portfolio will provide more revenue to buy more projects, both from TransAlta Corp. (TA) and other companies.
“You add diversification by adding assets,” Gellner said in an interview today. “The U.S is clearly an area where we think there may be more opportunity.” He’s also considering moving into solar power.
TransAlta, based in Calgary, raised C$136.2 million ($124.3 million) April 29 by selling about 12 million TransAlta Renewables (RNW) shares, reducing its stake to 70 percent. It created the yieldco in August through an initial public offering.
TransAlta has no plans to reduce its stake further, Gellner said. “That’s the sweet spot.”
TransAlta Renewables has gained more than 13 percent since the IPO. Expanding the portfolio also lets the company increase its dividend, to 6.4 Canadian cents a share from 4.7 cents.
Yieldcos have stable revenue streams from long-term deals to sell electricity. That gives them a lower risk profile and may lead to a lower cost of capital than developers, Gellner said.
Small companies seeking to get out of the business of owning energy projects are the most likely candidates for acquisitions, Gellner said. Ideally, a project will have long-term contracts to provide power to stable customers. “There are still lots of good assets that are out there.”
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