Electricity demand has rediscovered its appetite, and apparently it skipped breakfast. The International Energy Agency expects global power consumption to grow by an average of 3.6% annually through 2030, considerably faster than during the previous decade.
Artificial intelligence (AI), data centres, manufacturing, electric vehicles (EV), and building electrification all need more power. Generating that electricity requires enormous investments, giving established producers opportunities to expand assets, secure contracts, and grow cash flow.
Still, utilities don’t travel upward in a perfectly tidy line. Projects cost billions, debt becomes painful when rates rise, and issuing shares can upset existing investors. That occasionally creates a buying opportunity, provided the company is adding profitable assets rather than simply collecting expensive problems.
Independent power producers deserve extra care. Unlike regulated utilities, they can face changing wholesale power prices alongside construction and commodity risks. Investors considering buying stocks in Canada should therefore examine contracts, free cash flow, debt, and project economics before becoming emotionally attached to a juicy dip.
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TA
This brings me to TransAlta (TSX:TA), down about 21% at writing from 52-week highs. The decline looks more interesting as the long-term demand story remains intact, even as several short-term developments have given investors indigestion.
TransAlta stock produces electricity through hydroelectric, wind, solar, battery-storage, and natural-gas assets across Canada, the United States, and Australia. Its diversified fleet gives the company several ways to earn, although results can still fluctuate with production and Alberta power prices.
First-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 24% to $204 million. Free cash flow declined 27% to $102 million as lower production and softer power prices weighed on results. That explains some caution, but the June share sale supplied the shove.
A buyable dip
TransAlta stock issued 18.23 million shares at $19.20 to raise roughly $350 million. Dilution rarely inspires a parade. However, the money will help fund two newly built natural-gas peaking facilities near Denver, Colorado, rather than disappearing into some mysterious corporate cupboard.
The facilities provide 318 megawatts (MW) of capacity and are fully covered by contracts with investment-grade customers lasting at least 25 years. TransAlta stock expects them to contribute approximately $110 million of annual adjusted EBITDA and $45 million of free cash flow, with the acquisition adding to free cash flow per share immediately after closing.
Looking ahead
Management also maintained its 2026 outlook for $950 million to $1.05 billion of adjusted EBITDA and $350 million to $450 million of free cash flow. Using the midpoint and the expanded share count, TransAlta stock trades near 15 times expected free cash flow. That looks reasonable for a company adding long-term contracted assets while advancing its Alberta data centre opportunity.
The company also signed an agreement with Brookfield and CPP Investments to develop a data centre site at Keephills, where TransAlta stock would become the exclusive site and power provider. It is not revenue in the bank yet, but it offers a direct route from rising computing demand to future electricity sales.
Foolish takeaway
Now, it’s not risk-free. The Colorado acquisition must still close, while its debt and integration requirements could disappoint. Lower Alberta power prices, outages, regulatory changes, or a delayed data centre project could also keep the shares under pressure.
That said, I would therefore build a position gradually and keep practicing disciplined stock selection. TransAlta stock’s dip comes with genuine risks, yet contracted growth, rising electricity demand, and a much friendlier valuation could give patient investors considerably more power than today’s share price suggests.
