Good morning. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to TransAlta Corporation Fourth Quarter 2025 and Full Year Results Conference Call. [Operator Instructions] Thank you. Ms. Paris, you may begin your conference.

Thank you, Josh. Good morning, everyone. My name is Stephanie Paris, and I am the Vice President of Investor Relations and Corporate Strategy of TransAlta. Welcome to TransAlta's Fourth Quarter and Full Year 2025 Conference Call. With me today are John Kousinioris, President and Chief Executive Officer; Joel Hunter, EVP, Finance and Chief Financial Officer; 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 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 2, 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 otherwise noted. 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, John and 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 John.

Thank you, Stephanie. Good morning, everyone, and thank you for joining our fourth quarter and full year conference call for 2025. TransAlta delivered strong performance during 2025 while meaningfully advancing our business and strategic priorities. During 2025, we delivered adjusted EBITDA of $1.1 billion, free cash flow of $415 million or $1.73 per share and average fleet availability of 92.3%. Lower power pricing in Alberta, subdued market volatility and lower wind resources impacted our operating environment during the year. As a result, adjusted EBITDA came in at the lower end of the range of our expectations, while free cash flow came in slightly above the midpoint of our 2025 guidance. In 2025, we had record safety performance with a total recordable injury frequency rate of 0.12 compared to 0.56 in 2024 and our target of 0.37. We entered into a tolling agreement with Puget Sound Energy for the redevelopment of our Centralia facility. We amended and extended our committed credit facilities totaling $2.1 billion with our syndicate of lenders, significantly improving our financial flexibility and ability to execute project financing, which was a strategic priority. We acquired Far North Power, adding 315 megawatts of dispatchable generation in our core market of Ontario. We optimized our Alberta portfolio with a strategic decision to mothball Sundance 6 and Sheerness 1, thereby maintaining the long-term optionality of the units while minimizing costs in the near term. We fully integrated Heartland, which we acquired late in 2024 into our company, providing additional contracted cash flows and realized synergies. We successfully completed our ERP system. on time and on budget, and we significantly advanced three natural gas generation projects in Alberta to provide us with optionality to support data centers and grid reliability in the province for decades to come, which we will speak to…

Thanks, John, and good morning, everyone. I'd like to start by offering congratulations to John on his upcoming retirement and thank him for his leadership, guidance and strategic vision for TransAlta as well as his active support of my appointment. I look forward to working with the team to continue executing our strategic priorities, and I will announce the CFO successor in coming months. As John mentioned, today, we are pleased to announce that we've entered into an MOU with CPP Investments and Brookfield to advance the data center development in Alberta for which TransAlta will be the exclusive site and power provider. The MOU establishes a framework for phase development at our Keephills site in Parkland County, including initial long-term power purchase agreement for approximately 230 megawatts and the evaluation of additional phases aggregating up to 1 gigawatt of demand. Our Keephills site provides a strategic platform that leverages its large zone land position, existing transmission, natural gas and water infrastructure and on-site generation to support long-term project scale. We are pleased to be working with CPP Investments in Brookfield and to serve as the exclusive site and power provider for the project. As experienced global infrastructure investors, they have the capability to deliver projects of this size and complexity. We look forward to advancing digital infrastructure capacity and unlocking future investments in Alberta. In December, we announced the signing of a long-term tolling agreement with Puget Sound Energy, or PSC, to convert Centralia Unit 2 from coal to natural gas-fired generation. The agreement provides a fixed price capacity payment, giving PSC the exclusive right to the capacity, energy and ancillary service attributes and dispatch rights to the 700-megawatt facility. Once converted, the unit will be fully contracted until 2044, providing continued reliable power to the region long beyond…

Thank you, John and Joel. Josh, would you please open the call for questions from the analysts?

[Operator Instructions] And our first question comes from Mark Jarvi with CIBC.

I wanted to see if you could share some more details around the data center opportunity, just does say, 2027 plus. Just is the expectation that the load will start to ramp in 2027, how long before the 230 megawatts would reach full capacity?

Mark. Look, it's difficult for us to give you a lot more detail on the MOU just because based on the terms of that, we're really quite restricted on what we can actually say. What I can say is that speed to power does remain a priority for our two customers there. We're excited about the partnership that we have with them. Our focus right now, and I know their focus is to get our definitive documents done. And as soon as those documents are completed, which we expect to happen in the year, I think they'll proceed to start making the kinds of investments that they need to up at our Keephills site and get us moving forward. And it will be a gradual ramping up.

Can you mention anything about terms of risk sharing, like who takes the gas price risk and carbon pricing risk and sort of like the structure net back to TransAlta if it's kind of like more capacity or tolling structure for you?

Yes. I wish -- again, I don't think I can give you those kind of terms based on the arrangements that we have. What I can tell you, though, is that we think the commercial framework that we've developed with CPPIB and also Brookfield is an appropriate one. And I think it is reflective of the value of the Keephills unit that we have there. So we're pleased with the overall arrangement that we have and think it's a really sound one from a commercial perspective.

And I would just add to that, too, that the arrangement does include a long-term PPA, which really contracts merchant cash flows as well.

And is that the rough terms of the PPA been settled at this point, even if you can't disclose anything about it?

I would say that the key elements of the PPA are laid out in the MOU.

Okay. And then it talks about ramping up over time. And just curious where you are in discussions. We've seen some of the engagement feedback on the Phase 2 with the AESO. Just bridging opportunities there to use your coal-to-gas assets as you go beyond 230 megawatts before you'd be able to kind of facilitate a large repowering potentially?

Yes. Look, the AESO and the provincial government continue to do their deliberations on Phase 2. As you can imagine, we're actively involved in that process. I can tell you that our view is that it will be critically important for the province to be able to rely on underutilized generation in essence, as a form of bring your own power, which has been one of the hallmarks of what the government has been talking about to permit a data center industry to develop in a meaningful way in the province of Alberta. I think we've been heard on that. And I think we're in a unique position to be able to ramp up given the sort of breadth of generation that we have in the province of Alberta to actually meet that need. And candidly, with both Sundance 6 and Sheerness I being mothballed, just those two units alone provide a pretty clear path where we could certainly be able to ramp up and meet the up to 1 gigawatt that we're contemplating under the terms of the MOU that we've done with our two partners.

And any sense of when you might get some clarity from the AESO on that?

Yes, we do expect to get it I would expect in the first half of this year. I'm not sure that we're going to get it by the end of this quarter, but I do think they're very mindful about giving clarity to the marketplace. They've got a lot going on, as you can imagine, with the REM and the work that is being done between Alberta and the federal government on the MOU that the two have signed. So there is a lot going on, but I know there is work being done, and we're fully engaged in that.

Our next question comes from Robert Hope with Scotiabank.

I want to go back to the MOU. So, along with Q3, you had kind of highlighted that you wanted a bunch of the key items to be largely ironed out, which could accelerate the path from an MOU to the contractual signing. As we look forward, is it just ironing out the details that is the key gating factor on the -- moving the MOU to a firm contract? Or are there a number of parallel paths with your customers on the data center side, which kind of will also weigh into the time line and the process there?

What I can tell you is that the MOU is an extensive one. There was a lot of discussion and a lot of settlement of terms around essential commercial elements of the arrangement that we have both for the first phase on the 230 megawatts that we've been allocated and the pathways that we could get to an aggregate of gigawatt going forward. As you can imagine, there are a number of definitive agreements that need to be finalized and settled in order for us to be able to move forward and they arrange everything from a definitive PPA with all of the terms to even just lease arrangements related to the actual land that is there. That takes time to be able to do. We're motivated to move that quickly, and our team is ready. They are too. And I think we'll move that, I think, in a very orderly way going forward. The two proponents also have work that they're doing behind the scenes in terms of who their offtakers are and just finalizing their offtake strategy, which continues to proceed. And our view is that given their capabilities and the scope of reach that they have, that they're going to be really successful around that, too. So there's a lot of work that we need to do and they need to do as well, but I think it will all be executable in a normal sort of way. We remain really confident. I can't tell you how pleased we are that we were able to announce it today.

Excellent. And I'll ask you a non-data center question. Can you give us an update on the M&A market and your views on gas assets as well as renewable assets and M&A as a potential form of growth?

Sure, Robert. Joel, why don't you start?

Yes, I'll start. Robert, it's -- the M&A market, I would say, remains very active. We're looking at a lot of various opportunities in various scale, if you will. I'd say that we see both a complement of renewable assets that are coming to market, both wind and solar. And similarly, we're seeing a lot of opportunities in thermal generation as well. So again, we remain very active and very focused with the eye on adding shareholder value. It has to be obviously aligned with our strategic priorities going forward here. A good example, again, is the Far North acquisition that we just closed here earlier in the month that we are very happy with, but we continue to see a lot of opportunities both in Canada and the United States and even some opportunities in Western Australia as well.

And the only other I would add to that would be it is -- and you know this, it is significantly cheaper to buy than it is to build right now, particularly if you factor in sort of the time frames for being able to get a project up and running.

Congrats on the MOU and the pending retirement.

Our next question comes from John Mould with TD Cowen.

Just to apologies, go back to the data center MOU quickly. I just want to see if there's anything you can share in terms of like key gating items to get from MOU to binding agreement? And could you give potential timing for when we might see a binding agreement? Apologies if I missed it. And if not, can you give us a sense of what you're targeting broadly for a mining agreement in terms of time line?

So we can't actually give you specific dates, John. But what I can tell you is that we do expect definitive agreements to be completed in year and frankly, to begin pretty immediately in terms of our engagement. Our team is ready to do that. And we're hopeful that in the coming few months, we'll be able to get those put in place and then be in a position to be able to share with the market more detailed terms once those definitive agreements are in place.

Okay. No, that's helpful. And then I'd just like to ask about on the development side for gas or I should say, brownfield development, you've brought back the Keephills 1 and Sundance 6 repowerings, at least from a regulatory perspective. You've also got the Flipi project. And you made the comment earlier around the buy versus build cost differential. Can you maybe just prioritize some of those repowering opportunities in terms of attractiveness versus what you're seeing in the M&A market? And under what conditions we could potentially see you make an FID on one or more of those repowering opportunities?

Yes. Why don't I start and then Joel, you can jump in. So you're right. We have advanced both Keephills 1 and a Sundance 6 repowering and also the Flipi project. And it was critical from our perspective to do that certainly from a regulatory and permitting perspective before the end of last year because our goal was to be able to qualify all three projects under the existing framework for new gas-fired generation that would be able to run in an unabated way before the end of the year. And from our perspective, we've achieved that objective. So uniquely, I think, certainly in the context of Alberta, we have options now to be able to actually build flexible gas-fired generation in the province to meet the needs of the province going forward in the 2030s and beyond. Candidly, right to 2050 before the terms of the CER would impact that new build generation. It may be that we're successful under the terms of the federal and provincial MOU and the CER goes away, but we certainly didn't want to take that chance and we work through to make sure that regardless of the regulatory regime, we had those options ready. I think to answer your question in terms of new build, it is really hard given the existing suite of generation that we have in the province to utilize or acquire kind of legacy assets to meet incremental load growth. So it is our view that the 2030s will require new build to meet the needs and frankly, to replace some of the retiring generation. our preference as a company, I would say, Joel, would be to see contracted generation. We're not certainly building merchant gas-fired generation is much tougher for our company to get its head around here in the province of Alberta. But we think we can make the math work on those projects. We're beginning to ramp up our supply chain arrangements in respect of executing them. And there is development and design work that goes on to meet kind of the maximum optionality that we can get under those. So hopefully, that gives you a sense. Joel, I don't know if you want to add anything to that.

The only thing I would add is that we use our existing generation as a bridge to new generation, whether it's for Phase 2 of a data center or some other opportunities that we might see here in the province. Just given the time it takes for new build, the cost of new build in this environment. And to the extent that we do, do new build later this decade, early next decade, it would have to be underpinned by long-term contracts to ensure that we earn a full return of and on capital within the contract.

And the reality, John, is, I mean, the supply chain is such that you wouldn't be able to get turbines, the power island and the like for probably five years out. So you kind of need to begin doing the work to be able to get something that would be in place and get to a COD in the early 2030s.

Our next question comes from Maurice Choy with RBC Capital Markets.

Just picking up on these three natural gas generation projects that you're working on. If I'm not mistaken, the total capacities of these are obviously greater than the 1 gig Phase 2 and MOU, not to mention that two other sites are probably not even at Keephills. So is the idea here for you to help deliver solutions for the two counterparties beyond just Keephills? Or are there other data center customers that you may be looking to serve and secure?

Yes. Maurice, I think the answer to your question is all of the above, to be honest. Look, we're looking at our partners at Keephills are looking at making a significant investment in that part of the world that's going to require us to provide them with reliable generation for a long, long time. It's not just 2030s. It's something that's going to require us to help them into the 2040s and beyond. So we need to think about how do we get newer efficient generation given the time frame for our existing generation to actually meet those particular needs. Our discussions on other potential opportunities have not stopped. So we continue to receive inbounds and we continue to do other work to bring other opportunities for load growth in the province, other data center opportunities as well. And that's something that we're mindful of. And in advancing the three projects, we're just trying to maximize our flexibility. And remember, with K1 and we would be utilizing existing infrastructure with the idea to kind of get a build cost for that new generation to be lower than it would be if we would be doing a pure greenfield site.

And maybe just as a quick follow-up to all this discussion about MOU. I recognize that MOUs are generally not legally binding. Is there a termination fee if the project doesn't proceed?

Yes. We're -- again, I can't get into what the terms are. But I would say this. We view this MOU as a real expression of the intentions, very definitive intentions of the parties to move forward. We have absolute confidence in CPP Investments and Brookfield to be able to move it forward. I mean they're incredibly experienced global infrastructure players. They have proven capabilities to be able to move this forward. And frankly, I think they, too, like we are excited about developing a nascent Canadian data center industry in the country. So although the terms of the MOU were critically important and they took weeks and weeks and months of discussion to get done, we have absolute confidence and faith in the parties that we're dealing with to be able to move forward.

That makes sense. If I could just finish off with a question on funding. Given that you do have a number of funding needs for Centralia, Keephills, Phase 1 and perhaps Phase 2 as well. Can you speak to what you see as being your remaining investment capacity, say, through the end of the decade after you factor in some of these projects on an equity self-funded basis?

Sure. What I would say, Maurice, look, I'm going to turn it over to Joel, but we have a lot of levers that we can pull as a company to meet the funding requirements of our growth going forward. But Joel, maybe you can give your perspective.

Yes. And I would just say, Maurice, that, first of all, with Phase 1, there isn't really a big funding requirement for us for Phase Certainly, as we look to Phase 2, there could be. But again, there thinking about using our existing generation as a bridge to new generation shouldn't require a lot of significant capital spending for that as well. As it relates to Centralia, it's smoothed out over a couple of years based on us getting to an FID sometime early next year. So think of that as spend in '27 and '28 with an in-service kind of later in 2028 that would be very manageable with our existing free cash flow generation along with kind of incremental debt capacity that we have today. So we remain very kind of confident in our ability to fund these opportunities, whether it's data centers here in Alberta, along with Centralia. And we do have a number of levers available to us, including asset rotation and the like here to the extent that we see additional opportunities come our way. So again, we remain very confident in our ability to fund this growth going forward.

I remember in the past, Joel, you mentioned your expectation that the Brookfield debt and hybrids will convert to hydro equity. Is that still your existing assumption?

Yes. So the way it works, Maurice, just for everybody's benefit is that, that option is convertible up until the end of 2028. And so again, it's at the discretion of Brookfield to exercise that option. To the extent that they want to increase the ownership in the hydro assets, they can go up to 49%. But there are certain things that are required for that to occur. And if that were to happen, then certainly, there would be additional cash injection into the company as a result of that. So it's an option that remains open to the end of '28, as I mentioned, but it's the option of Brookfield.

Congrats to both of you, Joe and Joel from RBC.

Our next question comes from Benjamin Pham with BMO.

A lot of questions asked so far. Maybe just to continue the topic on Keephills. You mentioned Phase 1, you don't expect the funding need for that. But can you confirm, do you potentially need to spend capital on that as part of the MOU?

We can't really -- so first of all, Ben, sorry, I should have started with that. We can't really get into the -- what I would say is the capital investment required to sort of execute Phase 1 from a TransAlta perspective is negligible, I think, is the right way to kind of describe it. Remember, it will be grid connected. So there is a little bit of capital that is required to ensure that the data center will be connected to the grid. So there is a substation and some transmission that needs to be built out. But it's very proximate to the site that we have and the interconnection already that we have with the transmission line. So I would say it's very, very modest. When we think of the opportunity, we tend to think of K3 as effectively being the facility that is sort of tied to the opportunity. And K3 itself is in very good shape from an operational perspective. We maintained that facility very well. We're very pleased with its reliability and have very manageable sort of sustaining capital requirements for that going forward. So it's not at all a burdensome requirement. And I would say, even when we think of bridging generation, Joel, to the point in time where we get to potentially having new generation build, which is really in the 2030s, relatively modest capital expenditures from a TransAlta perspective going forward.

Okay. I got it. And I'm wondering to provide -- I know you've been advancing negotiations with customers in the last two years. You arrived at Brookfield CPP ultimately, which are well-established customers and counterparties. Can you maybe just walk through maybe, I don't know, qualitatively, the process, the level of demand in the last couple of years you experienced, the puts and takes you're facing ultimately by choosing the counterparty? And then do you also consider just going direct with the hyperscaler as part of those negotiations?

Yes. So we did run actually a pretty comprehensive process with respect to the data center opportunities. And one of the things that always, I would say, shaped our approach or our strategy on the data center was sort of the realization that at least initially, there would be a limited amount of new data center capacity that would come into the province, whether that would be a gigawatt or 2, like somewhere in that kind of space. And as you saw with Phase 1, the AESO and the province landed at 1.2 gigawatts kind of a gradual, I think, feathering in is it to use sort of a TransAlta kind of mindset of the data centers going forward. So that actually kind of colored our approach in terms of what was the scale that was available to be able to meet the demands of the individuals that we were speaking to. So our view was that it would be great to get to have hyperscalers, and we certainly do expect and hope that they end up coming into the jurisdiction. When we began our conversations, it was great to enter into discussions with CPP Investments and Brookfield. They had the kind of ramping profile and sort of load expectations that we thought were reasonable and kind of met the envelope that we thought that we were going to get. So it really aligned. And look, you've alluded to it. They're both outstanding infrastructure investors, not just in Canada, but globally. They both have a very good understanding of the Alberta market. They have extensive experience, not just experience, but relationships from a digital infrastructure perspective globally. And we absolutely knew that they had both the expertise and capital depth and execution capability to be able to get this done. So although we cast our net, I would say, fairly wide, initially, we were very pleased that we were able to be -- to have them as partners because their expectations kind of aligned with sort of the reality of what we thought the pathway was going to be to development in the province. So we consider ourselves quite fortunate to be working with them for them.

That's really a good context. See you in about a month or so.

Our next question comes from Julien Dumoulin-Smith with Jefferies.

It's Tanner on for Julien. Congrats on the announcements and congratulations to you, John. A lot of my questions have been asked and answered here, but I did want to see if maybe you would frame expectations for what's in play on the long-term financial plan to be provided next month. Are you going to be looking to provide guidance assuming base business as currently integrated in the portfolio? Or is baseline guidance likely to presume some execution of the MOU or other items? And also, how would you expect to handle or caveat AESO process uncertainties?

Yes. So it's Joel here. Yes, our intention here is to have probably a bit of an outlook out to 2029 that's reflective of kind of our assumptions around power prices in Alberta, the impact that will have, obviously, on our merchant portfolio, obviously, also factoring in some of the -- what we see from Phase 1 along with Centralia coming into service sometime later in 2028. So our intention is to provide some building blocks for you to see what that could look like here going forward at our Investor Day on March 23.

And expectations just around pricing generally and how we see the market evolving in the province for sure.

Our next question comes from Patrick Kenny with NBCM.

We're hearing more and more about Alberta's desire to beef up its interties with neighboring power markets. I was just curious your thoughts on how that might influence your outlook for the Alberta power market over time and also how TransAlta might be able to participate either directly or indirectly in those changing dynamics?

I would say that we are fairly optimistic about it, to be honest. I think we're still at an early stage of having some of those discussions, but we actually think it creates a considerable amount of opportunity for certainly our company and candidly, for the province as a whole. What we are seeing -- and when I think of the opportunity, I'm thinking of it, to be honest, less east-west, more north-south, to be candid. We think that load growth requirements in the Pacific Northwest into the Rocky Mountain states, frankly, all the way down to the Desert Southwest and even California will remain high. We think that reliability will continue to be a real priority in that part of the world. I think the ability to build new firming generation kind of in the western part of the continent will remain challenged, I think, at times, as will transmission generally to move it around. So we actually see an opportunity in Alberta, not just to kind of meet the ongoing needs for data center demand, certainly from a Canadian perspective, but also to be a bit of a reliability agent, if I can use that term, for kind of the WEC ideally as kind of an opportunity set that we're seeing. So look, it's going to take work and investment to be able to see that come through. But I know I'm excited about it. And I think, Joel, that it weighs heavily on the three new plants even that we're working to develop. So maybe your thoughts.

Yes. No, Pat, I agree with John. It's an exciting opportunity for us here that we can use existing generation in interim and then a real possibility here for new generation going forward, whether it's east-west or North-South, what we see in our neighboring jurisdictions, again, is a need for firming power. a growing one, actually. growing one. And what I really like here, too, is that you've got strong policy support here within the province to be kind of an energy superpower where we could see additional gas generation being developed in the province for export to neighboring markets. So we see it as a very exciting opportunity. I'd say as a bridge though, again, using our existing generation will be very important to that to the extent that we see opportunities in the future.

Yes, it's an important thrust, I think, Patrick.

Okay. That's great color, guys. I appreciate that. And then maybe just a follow-up on Centralia. I know it's a fluid situation, but just wanted to confirm if you had any more clarity on the 90-day order or if you had any recourse if things are extended and perhaps push back your FID decision on the conversion?

Yes. Why don't I start and then maybe I'll turn it over to Nancy to see if there was anything I didn't really cover off. So, look, the initial 90-day order expires mid-March. And we are fully in compliance with the order in the sense of being available should we be asked to run. We don't expect that given kind of how flush the hydro situation is in Washington state right now. I think our primary focus is more on getting clarity on the existing order, and we do have the ability to recoup our expenses, which is why we're not particularly concerned about that from a 2026 perspective. But certainly, Nancy and her team and our commercial team are focused on getting clarity around the mechanics of that going forward. With respect to the coal-to-gas conversion at Centralia, we continue to work that through in a very uninterrupted sort of way. Our general sense is that the conversion -- not our general sense, but the reality is the conversion is supported by Washington State. They need it. They're accepting of that facility being converted, and they see that the need for that facility to provide reliability into the mid-2040s is critically important. And in tandem, so does the U.S. Department of Energy, the federal government in the United States is also supportive of what we're trying to do there and understands it. So I don't regardless of kind of the trajectory of 202(c) on the facility, it is our expectation that it won't impede the work that we're trying to do from a coal to gas conversion. And like I can tell you, it's full steam ahead from a regulatory and planning perspective for us and for Puget candidly, as they look to get the rate base. Nancy, I don't know if you have any additional perspectives on that.

Thanks, John. I think John has covered it well. I think the only thing I would add to maybe sort of bit of a fine point on some of his comments is we've had very good communication and collaboration, both at the state and federal levels. And I think in respect of -- we can't predict whether or not we will receive another order. But at the same time, should that occur, sort of the building blocks, I think, are in place in respect of the work we're doing now to continue to progress through and to continue to proceed with the conversion. And again, as we stated at the outset, working very, very closely with our customer, PSC also. So I don't think at this time, we foresee any obstacles should that occur.

There are no further questions at this time. I would now like to turn the call back over to Stephanie Paris for any closing remarks.

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

Thank you. This concludes today's conference. You may now disconnect.