TransAlta Renewables stock plunges to lowest level since 2019

TransAlta Renewables' 2023 profit forecast fell short of an estimate from RBC Capital Markets. (GETTY)
TransAlta Renewables' 2023 profit forecast fell short of an estimate from RBC Capital Markets. (GETTY)

Shares of TransAlta Renewables (RNW.TO) sank on Thursday, after the company called for muted growth and a heftier tax bill, while announcing a 2023 profit forecast below one analyst’s estimate.

The Calgary-based utility firm operates a portfolio of hydro, natural gas, solar, and wind assets spanning Canada, the United States, and Australia. The company says its 50 facilities generate 3,214 megawatts of electricity.

In its 2023 outlook released on Thursday, the company forecast adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of between $495 million and $535 million. The range fell short of the $555 million estimate from Nelson Ng of RBC Capital Markets.

Toronto-listed shares had lost 15.05 per cent to $12.19 by 2:28 p.m. ET on Thursday, adding to a more than 23 per cent decline this year. The stock is currently trading at its lowest level since 2019.

TransAlta Renewables, a business spun off by TransAlta Corp. (TA.TO) in 2013, says it plans to focus on sustaining its dividend and organic growth in 2023 and beyond, with rising interest rates expected to hamper acquisitions.

At the same time, the utility expects its tax footprint to increase by about $55 million in 2024, compared to 2021, as the company becomes cash taxable in Canada and Australia due to projects under construction.

“We expect the announcement to have a negative impact on the shares of TransAlta Renewable due to the lower expected guidance and the focus on sustaining its dividend as it manages its tax horizon,” Ng wrote in a note to clients on Thursday.

The company is not the only Canadian renewables player facing challenges. Shares of Ontario-based Algonquin Power (AQN.TO)(AQN) have plunged since the company cut its 2023 guidance, citing risks from higher interest rates and inflation. Algonquin Power’s Toronto-listed stock has lost 47 per cent year-to-date.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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