* Q3 EPS C$0.34 vs C$0.31 a year earlier
* Comparable EPS C$0.34 vs analyst estimates of C$0.38
* Lowers 2009 cash flow forecast
* Keephills 3 costs rise (Recast with additional detail; changes dateline from TORONTO)
CALGARY, Alberta, Oct 27 (Reuters) - TransAlta Corp (TA.TO), Canada’s largest investor-owned power company, said on Tuesday improved power prices and cost cuts pushed third-quarter profit up 8.2 percent and even as it detailed cost overruns at a Alberta generation project.
The company, which is close to wrapping up its C$1.6 billion ($1.5 billion) acquisition of Canadian Hydro Developers Inc, sees an improvement in its fourth-quarter performance but expects 2009 earnings to be weaker than a year earlier. It also called for lower-than-expected annual cash flow.
TransAlta said its half share of the cost of building the 450-megawatt Keephills 3 coal-fired power plant had risen to C$988 million, from an earlier C$888 million estimate, because of higher-than-expected labor costs. It also pushed back the plant’s startup slightly to the end of the second quarter of 2011.
The revision “is due to lower productivity than initially planned and the need for additional man hours in order to complete the project,” Brian Burden, TransAlta’s chief financial officer, said on a conference call.
Burden said that TransAlta and partner Capital Power Corp (CPX.TO) have agreed to hire an independent auditor to see where productivity was lagging and lower the financial risk of the project.
TransAlta cut its cash flow forecast for the measure to a range of C$550 to C$650 million this year from the precious C$650 million to C$750 million forecast.
The company posted net income of C$66 million ($61.7 million), or 34 Canadian cents a share, for the third quarter, up from C$61 million, or 31 Canadian cents, in the year-before quarter.
Comparable earnings, which exclude most one-time items, rose 6.5 percent to C$66 million, or 34 Canadian cents a share, from C$62 million, or 32 Canadian cents.
The comparable result lagged the average analyst profit estimate of 38 Canadian cents as surveyed by Thomson Reuters I/B/E/S.
Revenue dropped 15.8 percent to C$666 million.
The company said gains made from increased gross margins from power generation in Canada and cost-cutting across the organization were offset by an increase in unplanned outages at its Centralia Thermal plant in Washington state and lower energy trading gross margins.
TransAlta is in the last stages of wrapping up its acquisition of Canadian Hydro, which specializes in renewable energy production, following a protracted takeover battle that began in July.
TransAlta wanted the wind and hydro producer in order to boost its renewable power operations and offset some of the emissions from its fleet of coal-powered generating stations.
“With the last of our major maintenance outages in 2009 nearing completion, we are turning our attention to the successful integration of Canadian Hydro Developers and its employees,” Steve Snyder, the company’s chief executive of TransAlta, said in a statement.
The company’s cash flow from operations in the quarter fell 4 percent to C$194 million from C$202 million.
TransAlta shares fell 9 Canadian cents at C$20.96 on the Toronto Stock Exchange early afternoon on the Toronto Stock Exchange. The stock has dropped 18 percent over the past 12 months. ($1=$1.07 Canadian) (Reporting by Scott Haggett and John McCrank; Editing by Frank McGurty)