Alex Gates of Clayton Partners presented his investment thesis on TransAlta Corporation (Canada: TA) at Best Ideas 2025.

Thesis summary:

TransAlta (TAC) is one of the largest independent power producers in Alberta with a strong free-cash-flow profile and crown jewel assets in the province.

TAC will benefit from rapid data center demand growth in Alberta. Based on government goals and the current interconnection queue, this growth could increase power demand by 50-100%. TransAlta’s mix of renewable, hydro and thermal assets is well suited to take advantage of higher prices or provide power directly to data centers. Alex sees the potential for multiple new customer announcements this year that could materially increase EBITDA.

TransAlta could also realize value by partially monetizing their contracted facilities or hydro assets at very attractive valuations. Peers in the US trade for 30-50% premiums to TAC, and Alex sees this discount closing as the company lays out the path for growth.

Alex estimates fair value at $19 per share (+45% return) as the growth potential materializes. He sees upside to $32 per share (+150% return) if the company is successful in its pursuit of large data center customers.

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About the instructor:

Alex Gates is a Partner, Co-Portfolio Manager of CPDS and Chief Compliance Officer at Clayton Partners LLC. Founded in 2003, Clayton Partners is an opportunistic value investment firm.

Clayton manages a private investment partnership and individual separate accounts. The firm takes a private equity approach to investing in the public markets and looks to align itself with shareholder friendly management teams that focus on long-term value creation.

Alex leads the firm’s effort to find compelling public and private investment opportunities in sustainable businesses that have a positive impact on climate change. The current focus is on investments in renewable energy, utilities, bio-fuels, and recycling.

Alex holds a Masters Degree in Business Economics from the University of California at Santa Barbara. Prior to his graduate education, he completed a dual major BS in Economics and Statistics from Cal Poly State University. At both institutions, Alex concentrated in finance and economic modeling. He earned the Chartered Financial Analyst designation in 2015.