Why is TransAlta (RNW) stock dipping & what investors should do now?

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Why is TransAlta (RNW) stock dipping & what investors should do now?

RNW Stock
Image source: © Kadmy | Megapixl.com
Highlights:
  • The RNW stock declined nine per cent during the trading session on January 11 and closed at C$ 16.38 per share.
  • The stock price of TransAlta Renewables is declining as the company would have to replace all turbine foundations at the New Brunswick wind farm.
  • TransAlta Renewables estimates that the cost of replacing all foundations could vary between C$ 75 million to C$ 100 million.

Stocks of TransAlta Renewables Inc. (TSX:RNW) plunged nine per cent on Tuesday, January 11, and closed at C$ 16.38 per share.

The decline in share prices came as TransAlta Renewables announced that it would have to replace all turbine foundations at its wind farm in New Brunswick.

In 2021, a tower had collapsed at the wind farm, and now 50 turbine foundations require replacement.

Also Read: 3 Canadian dividend utility stocks to buy at a low cost

TransAlta Renewables said that analysis has revealed that cracks have appeared on the foundations and that is why replacing all the foundations is advisable.

What should investors do about TransAlta Renewables (TSX:RNW) stock?


Investors could wait and hold onto the RNW stock as stocks of renewable energy companies seem to have a high growth potential in future.

Canada is committed to fighting climate change and achieving net-zero emissions by 2050. This could mean that renewable energy companies could benefit from the government in the future.

TransAlta Renewables (TSX:RNW) Stock                                                                                                ©2022 Kalkine Media® 

The RNW stock performance could make investors sceptical. However, holding the stock could be beneficial for shareholders.

TransAlta Renewables estimates that replacing all foundations could vary between C$ 75 million to C$ 100 million, and the facility will start generating revenue as wind turbines return to service individually.

Bottom line

In the third quarter results of last year, TransAlta Renewables had shown an impressive performance compared to the same quarter of 2020.

In Q3 2021, TransAlta's revenue jumped to C$ 114 million from C$ 95 million in Q3 2020. Meanwhile, the net earnings catapulted to C$ 20 million compared to C$ 6 million in the third quarter of 2020.

Also Read: 5 best Canadian utility stocks of 2021 under $100

TransAlta displayed a solid balance sheet and revealed that its cash flow from operating activities was C$ 83 million in Q3 2021.

TransAlta Renewables also acquired a 122 MW portfolio of solar facilities in North Carolina. Meanwhile, it also completed construction activities at Windrise. 

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