Although 2011Q3/11 results seem decent, the numbers was driven by earnings from energy trading, rather than the company’s core business of electricity production. In addition, during a conference call TransAlta noted that maintenance costs are likely to increase in 2012E, as the company positions its fleet for the eventual retirement of its legacy coal fired assets. Continuing a trend that began at the 2010 Investor Day, TransAlta is now providing cash flow guidance rather than EPS guidanceand now also appear to be focused on cash flow as opposed to
earnings growth targets.
Also TransAlta did not provide an update on the pending arbitration regarding its decision to remove the Sundance 1 and 2 units from service. At current levels, the shares are fully valued and my rating is Underperform.
