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Amazon and Meta have an 'insatiable' appetite for clean power

Big U.S. tech firms have led the way among private companies in contracting power from wind, solar

TransAlta has power purchase deals in place for Meta and Amazon to buy all of the electricity from wind farms in Oklahoma set to begin operating later this year. (REUTERS/Chris Wattie)
TransAlta has power purchase deals in place for Meta and Amazon to buy all of the electricity from wind farms in Oklahoma set to begin operating later this year. (REUTERS/Chris Wattie)

A top TransAlta (TA.TO)(TAC) executive says household name tech giants including Amazon (AMZN) and Facebook parent Meta Platforms (META) have an "insatiable" appetite for renewable power, even as the biggest names in the sector resort to mass layoffs to cut costs amid an uncertain economy.

For years, big U.S. tech firms, including Google parent Alphabet (GOOG) and Apple (AAPL), have led the way among private companies in contracting power from wind and solar sources in a bid to please increasingly emissions-conscious investors.

Calgary-based TransAlta has struck deals with Meta and Amazon to sell the tech companies all of the electricity from two wind projects in Oklahoma set to begin operating later this year.

Todd Stack is TransAlta's chief financial officer, executive vice-president, and head of majority-owned TransAlta Renewables (RNW.TO). He says it's been a struggle to keep up with rising clean energy demand from big tech and beyond, following a "banner year" for inking new off-take contracts in 2021.

"We cannot develop sites fast enough to meet the demand out there," he told Yahoo Finance Canada in an interview. "We're running out of product."

A report released this month by BloombergNEF shows Amazon, Meta, and Google led corporate clean energy buying in 2022, continuing Big Tech's dominance in the market.

"In all, Amazon has announced 24.8GW of PPA's to date, giving it the seventh-largest clean energy portfolio globally, including utilities," the authors wrote. "Technology companies specifically will need to continue buying clean energy to satisfy their rapidly growing electricity demand."

TransAlta says it aims to generate 70 per cent of its earnings before interest, taxes, depreciation, and amortization from renewables by 2025, up from 35 per cent in 2020.

Its current roster of renewable energy partners also includes Microsoft (MSFT), BHP Group (BHP), the world's largest miner, Calgary-based Pembina Pipeline (PPL.TO), and Duke Energy (DUK) in North Carolina.

"The Canadian banks are looking to procure power," Stack said. "We see it in industrial companies, and consumer products. It's not just big tech companies anymore. It's much more mainstream now."

Will TransAlta buy TransAlta Renewables?

TransAlta reported fourth-quarter and full-year 2022 financial results on Thursday, booking a $163 million loss, compared with a loss of $78 million in the same quarter last year. Revenue for the three months ended Dec. 31 climbed 40 per cent year-over-year to $854 million.

Toronto-listed shares have fallen 11 per cent over the past 12 months. Shares of TransAlta Renewables have lagged the parent company, tumbling more than 30 per cent over the same period.

TransAlta owns a 60.1 per cent stake in TransAlta Renewables, which the company spun out in 2013 to give investors more direct exposure to its wind and hydroelectric assets.

Stack says buying back the business is in the cards, with TransAlta now flush with cash, and increasingly focused on renewable energy after abandoning coal in Canada in 2021. However, selling the portion owned by the parent company is also an option, he says.

"It's something we quite frankly get criticized a lot about, the complexity of the company with two entities," he said.

"What I've told investors is there is no urgency to make a decision."

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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