TransAlta Signs Long-Term Agreement for 700 MW at Centralia Facility Enabling Coal to Natural Gas Conversion

Executive Summary

• TransAlta signed a 16‑year fixed‑price tolling agreement with Puget Sound Energy for the conversion of its Centralia Unit 2 plant from coal to natural‑gas generation (700 MW).
• The conversion will require approximately US$600 million in capital expenditures and is projected to deliver a build multiple of roughly 5.5×, generating long‑term contracted cash flow for TransAlta.
• Commercial operation is targeted for late‑2028, with the plant operating under the agreement until 31 Dec 2044; a final investment decision is expected in early 2027 pending regulatory approvals.

Key Details

• Agreement Scope: 700 MW capacity, energy and ancillary service rights transferred to PSE; fixed‑price capacity payments for the full 16‑year term.
• Capital Expenditure: Approximately US$600 million required to convert Centralia Unit 2 from coal to natural gas.
• Build Multiple: Projected at ~5.5×, calculated using capital expenditures and adjusted EBITDA (non‑IFRS).
• Emission Impact: Conversion expected to reduce the plant’s emission intensity by ≈50 %.
• Timeline:
• Coal‑fired generation to cease end of 2025.
• Final Investment Decision (FID) anticipated early 2027 after regulatory approvals.
• Target Commercial Operation Date (COD): late‑2028.
• Contract runs through 31 Dec 2044.
• Regulatory Conditions: Subject to approval by Washington Utilities and Transportation Commission and other state/local regulators.
• Strategic Rationale: Extends the life of a legacy asset, reinforces TransAlta’s presence in the Pacific Northwest, and provides a stable, long‑term revenue stream.

Notable Quotes

“When the facility re‑enters operations, it will generate long‑term contracted cash flow for TransAlta, earning a full return on and of capital within the contract term.” – John Kousinioris, President & CEO, TransAlta.