Mr. John Kousinioris reports

TRANSALTA REPORTS FULL YEAR AND FOURTH QUARTER 2023 RESULTS AND ANNOUNCES ENHANCED SHARE REPURCHASE PROGRAM

TransAlta Corp. has released its financial results for the fourth quarter and year ended Dec. 31, 2023, which highlight another year of exceptional performance led by strong financial, operational and safety results.

Full-year 2023 financial highlights:

• Key financial guidance and targets increased twice during 2023;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1,632-million, compared with $1,634-million from the same period in 2022;
• Free cash flow (FCF) of $890-million, or $3.22 per share, compared with $3.55 per share from the same period in 2022;
• Cash flow from operating activities of $1,464-million, an increase of $587-million from the same period in 2022;
• Earnings before income taxes of $880-million, an improvement of $527-million from the same period in 2022;
• Net earnings attributable to common shareholders of $644-million, an increase of $640-million from the same period in 2022;
• Announced a 9-per-cent increase to the common share dividend, representing the fifth consecutive annual dividend increase;
• Returned $87-million of capital to common shareholders during the year through the buyback of 7.5 million common shares.

Fourth quarter 2023 financial highlights:

• Adjusted EBITDA of $289-million, compared with $541-million for the same period in 2022;
• FCF of $121-million, or 39 cents per share, compared with $315-million or $1.17 per share for the same period in 2022;
• Cash flow from operating activities of $310-million, compared with $351 for the same period in 2022;
• Net loss before income taxes of $35-million, a decrease of $42-million for the same period in 2022;
• Net loss attributable to common shareholders of $84-million, an increase of $79-million from the same period in 2022.

Other business highlights and updates:

• Announced an enhanced common share repurchase program for 2024 of up to $150-million toward the repurchase of common shares, representing up to 40 per cent of 2024 FCF guidance being returned to shareholders in the form of share repurchases and dividends;
• Achieved strong safety performance in 2023, including a record annual total recordable injury frequency of 0.30;
• Strong operational adjusted availability of 88.8 per cent;
• Maintained emissions intensity at 0.41 tonne carbon dioxide equivalent/megawatt-hour from 2022 levels;
• Entered into 10-year transfer agreements with an AA-rated customer for the sale of approximately 80 per cent of the expected production tax credits to be generated from the White Rock and Horizon Hill wind facilities;
• Completed the Kent Hills rehabilitation program in the first quarter of 2024. All 50 turbines have returned to commercial operation;
• Energization activities are under way at the Horizon Hill and White Rock wind facilities with commercial operations expected to be achieved in the first quarter of 2024;
• Completion of the Mount Keith 132-kilovolt expansion project is expected to be achieved in March, 2024. The expansion of the transmission system in Western Australia supports the Northern Goldfields-based operations of BHP Nickel West;
• Achieved commercial operation of the 48-megawatt Northern Goldfields solar and battery storage project in November, 2023. The facilities are fully contracted with BHP for a term of 15 years and are expected to reduce BHP's emissions by 12 per cent at its Mount Keith and Leinster operations;
• Announced updated strategic growth targets to 2028, including adding up to 1.75 gigawatts of new capacity to the company's fleet by investing approximately $3.5-billion to develop, construct or acquire new assets through to the end of 2028 to deliver annual EBITDA of approximately $350-million;
• Entered into a joint development agreement with Hancock Prospecting Pty. Ltd. to define, develop and operate clean energy solutions;
• Entered into a definitive share purchase agreement to acquire Heartland Generation and its entire business operations in Alberta and British Columbia for approximately $658-million, subject to closing adjustment;
• Completed the acquisition of TransAlta Renewables Inc. for total consideration paid of $1.3-billion, which consisted of $800-million of cash and approximately 46 million common shares;
• Acquired a 50-per-cent interest in the Tent Mountain 320 MW pumped hydro development project.

"Two thousand twenty-three was another year of exceptional performance for our company led by record financial and safety results. During the year, we generated strong free cash flow of $3.22 per share, driven by record revenues across our generating fleet. Our dynamic asset optimization and hedging strategies continue to perform well in managing the evolving markets of our operating portfolio, illustrating the value of our growing fleet and the capabilities of our employees," said John Kousinioris, president and chief executive officer of TransAlta.

"During the year, we deployed $87-million towards share repurchases which, together with our common share dividends, resulted in the return of $145-million or 53 cents per share in value to shareholders," added Mr. Kousinioris.

"We are focused on making balanced capital allocation decisions that enhance value for our shareholders and will remain disciplined in executing our ambitious clean electricity growth plan with a focus on securing appropriate risk-adjusted returns. We will not grow simply for the sake of growth and to meet targets. Given the current market price of our common shares, which we consider to be undervalued, we will look to enhance returns and shareholder value through our dividend and share repurchases in 2024 of up to $150-million.

"Our generating portfolio continues to perform well and is expected to generate between $1.47 and $1.96 per share of free cash flow in 2024. Our enhanced common share repurchase program and expected dividend payments in 2024 represent up to 40 per cent of our free cash flow guidance to our shareholders.

"Turning to growth, our Mount Keith transmission expansion, along with our Horizon Hill and White Rock wind facilities, are well into commissioning and we expect all projects to be completed in March, 2024. This milestone, coupled with the completion of our Garden Plain wind facility and Northern Goldfields solar and battery storage project, as well as the rehabilitation of Kent Hills, will contribute contracted adjusted EBITDA of approximately $175-million annually. I am also pleased we've been able to secure 10-year transfer agreements with an AA-rated customer for the sale of approximately 80 per cent of production tax credits from the White Rock and Horizon Hill wind facilities, providing another stream of contracted revenue from these assets.

"Strong free cash flow will, over time, continue to fund our transition to a higher proportion of contracted renewables and toward the path of higher share price valuation. As I look forward, there is every reason to believe that our success will continue in 2024 and beyond."

Key business developments

Change to board of directors

Rona Ambrose has decided that she will not stand for re-election and will retire from the board of directors following the annual shareholder meeting on April 25, 2024. The board extends its gratitude for her service to the company. She has been a valuable contributor to the board since 2017 and the company thanks her for her leadership and insights during her tenure, especially as chair of the governance, safety and sustainability committee of the board.

Production tax credit (PTC) sale agreements

On Feb. 22, 2024, the company entered into 10-year transfer agreements with an AA-rated customer for the sale of approximately 80 per cent of the expected PTCs to be generated from the White Rock and Horizon Hill wind projects. The expected annual average EBITDA from these contracts is approximately $57-million ($43-million (U.S.)).

Normal course issuer bid and automatic share purchase plan

On Dec. 19, 2023, the company entered into an automatic share purchase plan (ASPP) in order to facilitate repurchases of TransAlta's common shares under its normal course issuer bid (NCIB). Under the ASPP, the company's broker may purchase common shares from the effective date of the ASPP until the end of the ASPP. All purchases of common shares made under the ASPP will be included in determining the number of common shares purchased under the NCIB. The ASPP will terminate on the earliest of the date on which: (a) the maximum purchase limits under the ASPP are reached; (b) Feb. 24, 2024; or (c) the company terminates the ASPP in accordance with its terms.

During the year ended Dec. 31, 2023, the company purchased and cancelled a total of 7,537,500 common shares, at an average price of $11.49 per common share, for a total cost of $87-million.

The NCIB provides the company with a capital allocation alternative with a view to ensuring long-term shareholder value. The board and management believe that, from time to time, the market price of the common shares might not be reflective of the underlying value and purchases of common shares for cancellation under the NCIB may provide an opportunity to enhance shareholder value.

Northern Goldfields solar achieves commercial operation

On Nov. 22, 2023, the company announced that the 48 MW Northern Goldfields solar and battery storage facilities achieved commercial operation. The facilities consist of the 27 MW Mount Keith solar facility, the 11 MW Leinster solar facility, the 10 MW Leinster battery energy storage system and interconnecting transmission infrastructure, all of which are now integrated into TransAlta's existing 169 MW Southern Cross Energy North remote network in Western Australia. The facilities are fully contracted to BHP for a term of 15 years and are expected to reduce BHP's scope 2 emissions at Mount Keith and Leinster by 12 per cent annually.

TransAlta announces growth targets to 2028

On Nov. 21, 2023, the company held its 2023 investor day event and announced it had updated its strategic growth targets to 2028, which strengthens the company's commitment to being a leader in clean electricity by delivering customer-centred power solutions. The growth targets include: adding up to 1.75 GW of new capacity to the company's fleet by investing approximately $3.5-billion to develop, construct or acquire new assets through to the end of 2028, with a focus on customer-centred renewables and storage through the advancement of its 4.8 GW development pipeline, and expanding this development pipeline to 10 GW by 2028.

TransAlta declares 9-per-cent dividend increase

On Nov. 21, 2023, the board approved an annualized two-cent-per-share increase, or 9-per-cent increase to its common share dividend and declared a dividend of six cents per common share to be paid on April 1, 2024. The quarterly dividend of six cents per common share represents an annualized dividend of 24 cents per common share.

TransAlta enters joint development agreement with Hancock

On Nov. 21, 2023, the company entered into a joint development agreement with Hancock, Australia's fourth-largest iron ore producer. This arrangement will build on TransAlta's expertise in supplying power to remote mining operations in Western Australia. TransAlta will work collaboratively with Hancock to define and supply behind-the-fence generation solutions for Hancock in the Port Hedland area.

TransAlta to acquire Heartland Generation from Energy Capital Partners

On Nov. 2, 2023, the company announced that it had entered into a definitive share purchase agreement with an affiliate of Energy Capital Partners, the parent of Heartland Generation and Alberta Power (2000) Ltd. (collectively, Heartland), pursuant to which TransAlta will acquire Heartland and its entire business operations in Alberta and British Columbia. The acquisition will add 10 facilities to TransAlta's fleet, totalling 1,844 MW of new capacity. The transaction is expected to close in the first half of 2024, subject to customary closing conditions, including receipt of regulatory approvals.

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 drawing on its credit facilities.

The assets are expected to add approximately $115-million of average annual EBITDA, including synergies. Approximately 55 per cent of revenues are under contract with highly creditworthy counterparties, with a weighted-average remaining contract life of 16 years. Corporate pretax synergies are expected to exceed $20-million annually.

TransAlta completes acquisition of TransAlta Renewables to simplify structure and enhance strategic position

On Oct. 5, 2023, the company completed the acquisition of TransAlta Renewables pursuant to the terms of the previously announced arrangement agreement between the parties. TransAlta acquired all of the outstanding common shares of TransAlta Renewables (RNW shares) not already owned, directly or indirectly, by TransAlta and certain of its affiliates, resulting in TransAlta Renewables becoming a wholly owned subsidiary of the company. Prior to the arrangement, TransAlta and its affiliates collectively held 160,398,217 RNW shares, representing 60.1 per cent of the issued and outstanding RNW shares, with the remaining 106,510,884 RNW shares held by TransAlta Renewables shareholders other than TransAlta and its affiliates.

The arrangement was approved by RNW shareholders at a special meeting of shareholders held on Sept. 26, 2023, and by the Court of King's Bench of Alberta on Oct. 4, 2023. The consideration paid totalled $1.3-billion, which consisted of $800-million of cash and approximately 46 million common shares of the company.

TransAlta tops Newsweek's inaugural list of world's most trustworthy companies

On Sept. 14, 2023, the company announced that it ranked first on Newsweek's inaugural World's Most Trustworthy Companies 2023 list for the energy and utilities category. The list identifies the top 1,000 companies in 21 countries and across 23 industries. Newsweek's 2023 World's Most Trustworthy Companies were chosen based on a holistic approach to evaluating three pillars of public trust -- customers, investors and employees. The list was compiled based on an extensive survey of over 70,000 participants, gathering 269,000 evaluations of companies that people trust as a customer, as an investor or as an employee.

Garden Plain wind facility achieved commercial operation

In August, 2023, the Garden Plain wind facility was commissioned adding 130 MW to the company's gross installed capacity. The facility is fully contracted with Pembina Pipeline Corp. and PepsiCo Canada, with a weighted-average contract life of approximately 17 years.

Tent Mountain pumped hydro development project

On April 24, 2023, the company acquired a 50-per-cent interest in the Tent Mountain renewable energy complex, an early-stage 320 MW pumped storage hydro development project located in southwest Alberta, from Evolve Power Ltd., formerly known as Montem Resources Ltd. The acquisition includes land rights, fixed assets and intellectual property associated with Tent Mountain.

The company and Evolve own the Tent Mountain project within a special purpose partnership that is jointly managed, with the company acting as project developer. The partnership is actively seeking an offtake agreement for the energy and environmental attributes that will be generated by the facility.

Alberta electricity portfolio

For the three months and year ended Dec. 31, 2023, the Alberta electricity portfolio generated 2,988 gigawatt-hours and 11,759 GWh, respectively, compared with 3,353 GWh and 11,476 GWh of energy for 2022, respectively. The annual production increase of 283 GWh, or 2 per cent, was primarily due to:

• The commercial operation of the Garden Plain wind facility in the third quarter of 2023;
• Hedged production with higher power prices for the year ended Dec. 31, 2023, compared with 2022, primarily due to the opportunity to secure additional margins with strategic hedges for the hydro assets;
• Higher production from the company's gas assets due to strong market conditions in the first half of 2023, partially offset by lower water resources in the Alberta hydro assets.

Gross margin for the three months and year ended Dec. 31, 2023, was $215-million and $1,248-million, respectively, a decrease of $206-million and an increase of $71-million, respectively, compared with the same periods in 2022. The annual increase was primarily due to:

• Higher power price hedges, partially offsetting the impacts of lower Alberta spot prices and lower natural gas prices compared with 2022; partially offset by:
• Lower ancillary services revenues due to the Alberta Electric System Operator procuring lower volumes given its decision to reduce the cumulative volume of imports into Alberta.

Alberta power prices for 2023 were lower compared with 2022, as 2022 experienced exceptional pricing. The average spot power price per MWh for the three months and year ended Dec. 31, 2023, was $82 per MWh and $134 per MWh, respectively, compared with $214 per MWh and $162 per MWh in the same periods in 2022. This was primarily due to:

• Moderate temperatures in the last six months of the year compared with the prior year;
• Higher total renewable generation in the Alberta market from new wind and solar facilities and higher wind resources during the fourth quarter of 2023;
• Lower natural gas prices.

Hedged volumes for the three months and year ended Dec. 31, 2023, were 1,742 GWh and 7,550 GWh at an average price of $92 per MWh and $111 per MWh, respectively, compared with 1,907 GWh and 7,228 GWh at an average price of $106 per MWh and $86 per MWh, respectively, in 2022.

Liquidity and financial position

TransAlta expects to maintain adequate available liquidity under its committed credit facilities. As at Dec. 31, 2023, the company had access to $1.7-billion in liquidity, including $345-million in cash, net of bank overdraft, which significantly exceeds the funds required for committed growth, sustaining capital and productivity projects. Cash amount of $800-million was used for the acquisition of TransAlta Renewables.

2024 financial guidance

The attached table outlines the company's expectations on key financial targets and related assumptions for 2024 and should be read in conjunction with the narrative discussion that follows and the governance and risk management section of the management's discussion and analysis for additional information.

The company's outlook for 2024 may be impacted by a number of factors as detailed further herein.

Alberta spot price sensitivity: a plus/minus $1 per MWh change in spot price is expected to have a plus/minus $5-million impact on adjusted EBITDA for 2024.

Conference call

TransAlta will hold a conference call and webcast at 9 a.m. MST (11 a.m. EST) today, Feb. 23 2024, to discuss its fourth quarter and year-end 2023 results. The call will begin with a short address by Mr. Kousinioris, president and chief executive officer, and Todd Stack, executive vice-president, finance, and chief financial officer, followed by a question-and-answer period for investment analysts and investors. A question-and-answer period for the media will immediately follow.

Dial-in number -- full-year and fourth quarter 2023 conference call

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 United States toll-free) with TransAlta passcode 493975 followed by the pound sign. A transcript of the broadcast will be posted on TransAlta's website once it becomes available.

TransAlta is in the process of filing its annual information form, audited consolidated financial statements and accompanying notes, as well as the associated management's discussion and analysis (MD&A). These documents will be available today on the investors section of TransAlta's website or through SEDAR+.

TransAlta will also be filing its Form 40-F with the U.S. Securities and Exchange Commission. The form will be available through its website. Paper copies of all documents are available to shareholders free of charge upon request.

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 hydroelectric 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 UN Sustainable Development Goals and the Future-Fit Business Benchmark, which also defines sustainable goals for businesses. TransAlta's reporting on climate change management has been guided by the international financial reporting standards (IFRS) S2 Climate-related Disclosures Standard and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 66-per-cent reduction in greenhouse emissions or 21.3 million tonnes CO2e since 2015 and received an upgraded MSCI environmental, social, governance rating of AA.

We seek Safe Harbor.