Electricity in Alberta sold for an average of $29 a megawatt-hour in the second quarter, against $40 a year earlier. TransAlta, the Calgary company that has generated power since 1909 and today runs hydro, wind, solar and gas plants across Canada, the United States and Australia, earns the bulk of its money at that price.

What kept the quarter intact was hedging, not the market. TransAlta realized $63 a megawatt-hour on 2.4 terawatt-hours of Alberta output — roughly double the spot price — and has 4.5 terawatt-hours of the 2026 balance and 6.6 terawatt-hours of 2027 locked at about $64. Adjusted EBITDA still came to $291m for the quarter and free cash flow to $143m. Across the first half, adjusted EBITDA fell 20% to $495m and free cash flow 22% to $245m, with full-year guidance of $950m-1,050m reaffirmed on the strength of those hedges.

The collapse underneath them is structural rather than weather. Alberta's average pool price fell 30.4% in 2025 to $43.68 a megawatt-hour, the lowest in eight years, as efficient combined-cycle gas plants commissioned in late 2024 came online alongside new wind and solar. The first quarter of 2026 averaged $32.15; February printed $22.39. Supply arrived faster than load.

The deal that hasn't been signed

TransAlta's answer is the same one every generator is giving: data centers. The company expects Alberta prices to average about $100 a megawatt-hour by 2029 on data-center load. But its Alberta project is a memorandum of understanding with Canada Pension Plan Investments and Brookfield covering a first-phase allocation of 230 megawatts, contingent on the Alberta Electric System Operator identifying underutilized grid capacity under rules written in June 2026. Greenfield builds at Keephills and Sundance, roughly 2 gigawatts, are aimed at the next decade. None of it is contracted load today.

The contracted growth TransAlta does own is unglamorous: 318 megawatts of Colorado gas peakers bought from Blackstone subsidiaries at a US$1.0bn enterprise value, tolled for 25 to 30 years to investment-grade cooperatives and funded partly with a C$350m equity issue. Useful, contracted, and nothing to do with artificial intelligence.

The dates matter. TransAlta's shares fell 12.3% between 23 and 29 July, the week S&P Global Ratings affirmed its BB+ rating but moved the outlook to negative and the first-half numbers landed. On 18 August, when the 30-year Treasury yield touched a 19-year high above 5.33% and rate-sensitive power names were hit, TransAlta lost 2.8%. This is a pool-price and credit story wearing an AI label.

The control case

Talen Energy, a Houston merchant generator with about 10.7 gigawatts of nuclear, gas, coal and solar, is what the contracted version looks like. Its expanded agreement with Amazon covers up to 1,920 megawatts of Susquehanna nuclear output through 2042, roughly $18bn of expected lifetime revenue. Second-quarter revenue grew 64.5% to $747m, and gross margin reached 49.3% against 20.7% a year earlier. Management raised 2026 guidance on 5 August to $1.20-1.35bn of adjusted free cash flow, with 2027 generation about 70% hedged and the diluted share count down 14% in two years.

The shares fell anyway — 16.4% over 30 days, 17.5% over six months — while trailing gross profit rose 57% to $1.57bn. Talen now costs 9.07x trailing gross profit, down from 16.49x in early May and roughly 18x six months ago, with forward earnings at 14.9x. Constellation, the largest nuclear merchant, trades near 23.6x gross profit. The offsets are real: a $984m shelf covering shares issued for the Cornerstone acquisition, and price-target cuts from Raymond James and Oppenheimer. So is the ceiling on the upside — PJM's 2028/29 capacity auction cleared at the $325 per megawatt-day cap while coming 6,831 megawatts short of the reliability requirement, so the scarcity is real but its price is administratively capped.

TransAlta, meanwhile, trades at 38.0x forward earnings — a number sitting on trough profits, with consensus 2026 revenue down 17.8% — against 11.25x trailing EV/EBITDA and an 8.5% trailing free-cash-flow yield. The cash is not dear; the earnings are simply at the bottom of the cycle. Competition for the megawatts is also intensifying: NRG has aligned on terms for a 1.2-gigawatt Texas hyperscaler deal with more than 95% of cash flow from capacity payments, while the cloud buyers move upstream themselves — Google's $4.75bn purchase of Intersect Power being the clearest case of a hyperscaler developing its own generation rather than buying from a merchant.

The setup

Where it stands — TransAlta's decline traces to Alberta pool prices and a credit outlook cut; Talen's traces to nothing in its own numbers. Would confirm — TransAlta converting the 230-megawatt Alberta allocation from memorandum to signed, contracted offtake with a disclosed term. Would invalidate — Alberta spot prices recovering toward $60 a megawatt-hour, making the hedge book a drag rather than the earnings. Watch next — TransAlta's third-quarter results, due late October, and the Alberta Electric System Operator's capacity allocation decision. Valuation — TransAlta at 38.0x forward earnings on trough profits and 11.25x trailing EV/EBITDA; Talen at 9.07x trailing gross profit against 16.49x in May.