Mr. John Kousinioris reports

TRANSALTA TO ACQUIRE HEARTLAND GENERATION FROM ENERGY CAPITAL PARTNERS FOR $658 MILLION - EXPANDS CAPABILITIES TO MEET DEMANDS OF ENERGY TRANSITION

TransAlta Corp. has entered into a definitive share purchase agreement with an affiliate of Energy Capital Partners (ECP), the parent of Heartland Generation Ltd. and Alberta Power (2000) Ltd. (collectively, Heartland), pursuant to which TransAlta will acquire Heartland and its entire business operations in Alberta and British Columbia. Heartland owns and operates generation assets consisting of 507 megawatts (MW) of cogeneration, 387 MW of contracted and merchant peaking generation, 950 MW of gas-fired thermal generation, transmission capacity, and a development pipeline that includes the 400 MW Battle River carbon hub. The purchase price for the acquisition is $390-million, subject to working capital and other adjustments, as well as the assumption of $268-million of low-cost debt. The company will finance the transaction using cash on hand and draws on its credit facilities. The agreement provides that economic benefits arising after Oct. 31, 2023, will be to the account of TransAlta.

"With this acquisition, we are pleased to announce the addition of highly flexible and complementary assets to our Alberta portfolio. As the energy transition continues to drive new investment in renewables in the province, our assessment is that the market will require low-cost, highly flexible and fast-responding generation, which will be supportive to grid reliability over the coming years. This transaction will support us in maintaining our competitive positioning, and ensure we have a robust and diversified portfolio, which, together with our marketing capabilities, can complement and support a cleaner grid," said John Kousinioris, president and chief executive officer of TransAlta.

"The Heartland portfolio is low cost and will contribute meaningful cash flows with significant value from synergies. It will also support the energy transition until other zero-emitting solutions are developed. We remain committed to our clean electricity growth plan and net-zero targets. The acquisition of this set of assets represents a strategic investment in our home market with a strong return profile which continues to be aligned with our longer-term decarbonization goals," added Mr. Kousinioris.

"ECP is proud of the transition progress that Heartland has made since its acquisition in 2019, through our early coal conversions and the advancements of the Battle River carbon hub, all the while consistently delivering reliable electricity to the province. We are excited for TransAlta to continue advancing the energy transition, and meeting the reliability and electricity needs of Alberta," said Andrew Gilbert, ECP partner.

Investment highlights

The transaction is strategically attractive to TransAlta and provides the following benefits:

• Expands flexible generation capabilities: Augments and diversifies TransAlta's portfolio in Alberta's energy-only market by expanding its flexible and fast-ramping capacity, and marketing capabilities to be able to better respond to changes in market conditions stemming from the intermittency of increasing renewable generation.
• Enhances TransAlta's competitive positioning: The acquisition will competitively position TransAlta in response to the changing dynamics in Alberta, given the expected significant increase in renewables and other large baseload generation coming on-line in the next several years in the highly dynamic and shifting electricity landscape in the province.
• Aligned with TransAlta's Alberta strategy: The portfolio delivers a highly responsive, flexible and fast-ramping fleet (peaking units) which will be supportive to responsible energy transition and deliver reliability in the Alberta electricity market for the next 10 years to 15 years.
• Attractive transaction metrics: The acquisition is highly accretive to free cash flow, with an attractive multiple and strong cash yield. The transaction acquires a portfolio of assets at approximately $357 per kW (kilowatt), which is well below replacement cost of current and other forms of reliable generation, providing a low-cost expansion of the company's ability to deliver reliable generation to the market demands of Alberta.
• Highly contracted cash flow: Postclosing, the assets are expected to add approximately $115-million of average annual EBITDA (earnings before interest, taxes, depreciation and amortization), including synergies. Approximately 55 per cent of revenues are under contract with high-creditworthy counterparties, which have a weighted-average remaining contract life of 16 years.
• Near-term synergies: TransAlta will have the opportunity to leverage corporate costs within its existing business, which will provide estimated corporate pretax synergies of $20-million annually. In addition, the combined portfolio will enable the company to further optimize operations and supply chains through scale to achieve additional synergies in the future.
• Retains ownership presence in Alberta and builds on regional expertise: The company is well positioned to deliver significant value through its deep technical gas and cogeneration local operational experience which, together with its 112-year history in Alberta, will ensure continuing safe and reliable generation in a dynamic and evolving landscape.
• Battle River carbon hub project: This project is a first-of-its-kind 400 MW integrated clean energy project, combining clean hydrogen, production and carbon sequestration, to create a zero-carbon baseload electricity solution. The project would retrofit the existing generation facility at Battle River and utilize the existing transmission infrastructure, which will minimize development costs for a zero-carbon power solution.
• Maintains leadership in decarbonization: TransAlta remains among Canada's largest producers of wind power and Alberta's largest producer of hydroelectric power. The clean electricity growth plan continues to be at the heart of the company's strategy and is dedicated to meeting the future needs of TransAlta's customers with clean electricity solutions. TransAlta's ability to meet its 2026 GHG (greenhouse gas) emissions reduction target and carbon net zero by 2045 remain on target. This acquisition adds to TransAlta's 4.6 GW (gigawatt) development pipeline with the addition of a 400 MW hydrogen carbon hub opportunity.

Additional information on the agreement

The agreement is subject to customary closing conditions, including receipt of regulatory approvals. The transaction is expected to close in the first half of 2024.

Investor call

A conference call with the investment community will take place on Nov. 2 at 9 a.m. MT (11 a.m. ET). The call will begin with a short address by Mr. Kousinioris, president and chief executive officer, followed by a question-and-answer period for analysts and media.

Dial-in number -- TransAlta to acquire Heartland Generation

Toll-free North American participants call:  1-888-664-6392

A link to the live webcast will be available on the investor centre section of TransAlta's website. If you are unable to participate in the call, the instant replay is accessible at 1-888-390-0541 (Canada and U.S. toll-free) with TransAlta passcode 522257 followed by the pound sign. A transcript of the broadcast will be posted on TransAlta's website once it becomes available.

About TransAlta Corp.

TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in Canada, the United States and Australia, with a focus on long-term shareholder value. TransAlta provides municipalities, medium and large industries, businesses, and utility customers with clean, affordable, energy-efficient and reliable power. Today, TransAlta is one of Canada's largest producers of wind power, and Alberta's largest producer of hydro-electric power. For over 112 years, TransAlta has been a responsible operator and a proud member of the communities where it operates and where its employees work and live. TransAlta aligns its corporate goals with the United Nations Sustainable Development Goals and its climate change strategy with CDP (formerly Climate Disclosure Project) and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 68-per-cent reduction in GHG (greenhouse gas) emissions, or 22 million tonnes, since 2015 and has received scores of A- from CDP and AA from MSCI.

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