TransAlta's (TAC) recent deal to develop a data center in Alberta with the Canada Pension Plan Investment Board and Brookfield is a healthy first step in the company's multi-year growth strategy, RBC Capital Markets said.

Management assumes Alberta spot power prices of $40 to $60 per megawatt-hour and AECO gas prices of $2.65 to $3.15 per gigajoule.

The firm cut its 2026 adjusted EBITDA forecast to $990 million from $1.01 billion and free cash flow estimate to $390 million from $430 million. It said that weaker Alberta power prices and asset retirements drove the revision. Far North acquisition, however, partly offset the impact.

The company's 2026 guidance range includes adjusted EBITDA of $950 million to $1.05 billion and free cash flow of $350 million to $450 million.

RBC said in a Sunday note that the upcoming investor day could provide updates on gas-fired projects and funding plans. The Keephills deal and other growth initiatives could support a stronger long-term valuation for TransAlta, according to the note.

The firm has an outperform rating on the stock and a price target of CA$24.

Shares of TransAlta were up 1.2% in recent Monday trading.

Price: 13.91, Change: +0.16, Percent Change: +1.20