Fitch lowers TransAlta view to negative

Fitch Ratings said it affirmed TransAlta Corp.'s BBB- issuer default rating and BBB- senior unsecured debt rating.

The outlook was revised to negative from stable.

The negative outlook follows news that Brookfield Renewable Partners will invest C$750 million in TransAlta, Fitch said.

The negative view also considers uncertainty regarding TransAlta's commitment to reduce parent level debt consistent with previous expectations, the agency added.

Brookfield's investment is expected to be composed of convertible debentures and preferred shares resulting in higher leverage, Fitch explained.

The proceeds will be used to fund share buybacks, advance coal-to-gas conversion capital projects and repay corporate debt, the agency said.

A key credit concern remains the change in the Alberta electricity market construct as the market transitions to a capacity market by 2022, adding uncertainty to TransAlta's earnings profile and business risk as its exposure to the merchant market grows, Fitch said.

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