October 30, 2008 / 2:03 PM / 10 years ago

UPDATE 2-TransAlta halts buyback, costs temper profit

*EPS of C$0.32 lags estimates

*Shares rise 0.7 pct

(Adds details and comments, updates shares)

By Scott Haggett and Jeffrey Jones

CALGARY, Alberta, Oct 30 (Reuters) - TransAlta Corp (TA.TO) said on Thursday it has suspended a promised C$200 million ($164 million) share buyback program, deciding to instead maintain its cash and flexibility while it rides out the current financial turmoil.

The company said it will revisit the decision in January. On Thursday, TransAlta reported its third-quarter profit slipped 7.5 percent as maintenance costs rose due to a series of planned and unplanned outages at its electricity plants.

“We view (the suspension) as a temporary, prudent thing to do under today’s market conditions,” Steve Snyder, TransAlta’s chief executive, said on a conference call.

The company said it had decided to be cautious with its cash because of the financial crisis that spread globally from the U.S. credit crunch.

The proposed share repurchase program, using proceeds from the recent sale of TransAlta’s plants in Mexico, was a key plank in the company’s successful fight against a proposed takeover.

In early October, LS Power and Global Infrastructure Partners, which own about 9 percent of the stock, scrapped plans for a C$7.8 billion takeover as TransAlta’s stock price languished well below the C$39 a share bid price.

Bob Hastings, an analyst at Canaccord Capital, called TransAlta’s decision to suspend its normal course issuer bid one of the disappointments in the company’s quarterly report along with the company’s failure to reach analysts’ consensus estimates for its profit.

“They don’t have enough confidence to continue on with the buyback,” he said. EARNINGS FALL

TransAlta, Canada’s biggest publicly traded power generator, earned C$61 million, or 31 Canadian cents a share, down from a year-earlier C$66 million, or 33 Canadian cents a share.

On a comparable basis, it earned C$62 million, or 32 Canadian cents a share, in the latest quarter, it said.

The company had been expected to earn 34 Canadian cents a share, according to a Reuters Estimates survey of analysts’ forecasts.

Revenue rose 11 percent to C$791 million from C$711 million.

TransAlta is known for coal and gas-fired power plants as well as wind and geothermal facilities in Canada and the United States.

TransAlta said its third-quarter results were driven by a drop in the number of planned outages in Alberta and strong contract pricing. The gains were offset by a jump in the number of unplanned outages and higher maintenance costs.

The company is still on track to generate a low double-digit earnings per share increase this year, it said.

TransAlta’s stock was up 16 Canadian cents at C$23.96 on the Toronto Stock Exchange on Thursday afternoon. The shares had fallen 28 percent over the past 12 months. ($1=$1.21 Canadian) (Editing by Peter Galloway; Editing by Peter Galloway)

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