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TransAlta Corp. says it has emerged stronger from a painful, multiyear turnaround that raised questions about the company’s viability as a going concern.

Chief executive Dawn Farrell said the Calgary-based electricity generator has slashed debt and overhauled the business to take advantage of strengthening Alberta power prices and increasing demand for renewable and gas-fired electricity.

“We’re back,” she said in an interview. “The key message here is we have really moved dirt to get to where we wanted to go, and a lot of the question marks about whether or not the company could make it have really fallen away.”

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The company said last week it has now lopped $1.2-billion in debt from its balance sheet since 2015, easing leverage concerns that have weighed heavily on the shares.

Ms. Farrell, who has been in charge since 2012, pointed to share repurchases and the potential for dividend increases over time as signs of renewed confidence. The stock has climbed nearly 20 per cent since late June, although it remains well under historic levels. (TransAlta closed at $7.55 last week; a decade ago, it was around $36.)

The improving financial outlook shows TransAlta is finding its stride after stumbling through a sweeping policy overhaul in the Alberta power market, including the mandated shutdown of billions of dollars’ worth of coal plants for good by 2030.

Few companies were hit as hard by the change, introduced after the election of Alberta Premier Rachel Notley’s New Democratic Party government in 2015.

The upheaval also included a cap on regulated electricity rates and plans for a so-called capacity market to spur investment in wind and solar energy. The structure guarantees producers a return on power even if they are unable to sell it.

TransAlta secured $524-million in compensation for mothballing coal units years ahead of schedule and is accelerating plans to convert a portion of them to run on natural gas.

The company recently retired from service a 1970s-era unit at its 1,800-megawatt Sundance coal plant in Wabamun, Alta., freeing up capital to upgrade other generating units set to make the switch to gas in coming years, Ms. Farrell said.

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Last week, TransAlta said its second-quarter net loss swelled to $105-million, or 36 cents a share, from a year-ago loss of $18-million or six cents. However, cash flow available for reinvestment climbed to $96-million, from $30-million, putting the company on track to hit the higher end of its target of $300-million to $350-million for the year, it said.

“The story is they are getting on track in terms of improving the balance sheet,” said Eric Eng, a senior vice-president with credit rating agency DBRS Ltd., which maintains a triple-B low rating on TransAlta. Standard and Poor’s also rates the firm triple-B-minus, the lowest available investment-grade rating.

Such improvements have been buoyed by rising Alberta power prices that, while bolstering cash flow, stand to become a political issue in the lead up to next year’s provincial election.

United Conservative Party Leader Jason Kenney has pledged to scrap the province’s carbon tax and criticized the NDP coal phaseout as a “reckless rush” to shut down a vital Alberta industry.

Ms. Farrell said ditching the carbon levy would prolong the life of coal-fired units in the short term, but added the fossil fuel is less competitive with low-cost renewable and gas-fired power.

Customers are also demanding cleaner options.

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TransAlta, through majority-owned affiliate TransAlta Renewables Inc., is spending an estimated US$240-million to develop two wind-power projects in the northeast United States.

Each is supported by long-term power-purchase agreements with major corporate customers, who are increasingly keen to purchase renewable power, she said.

“They would rather see us figure out how to invest in batteries than build a gas plant, for example. So those are the kinds of things that when we look at the future, that’s where we think the investments are.”

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