TransAlta (TA) M&A announcement summary

Deal rationale and strategic fit

• Acquisition of two fully contracted natural gas peaking facilities in Colorado totaling 318 MW expands presence in a core Western U.S. region and aligns with growth strategy.

• Facilities are 100% contracted under 25+ year tolling agreements with investment-grade counterparties, enhancing contractedness and stability.

• Strategic location near Denver leverages existing energy marketing and trading operations and establishes a foothold in a region with strong growth prospects.

• Acquisition builds on a track record of value-enhancing, accretive deals and supports redeployment of cash flows into priority growth initiatives.

• Strengthens business risk profile and provides a pathway to improved credit metrics.

Financial terms and conditions

• Transaction valued at US$1.0 billion, including US$750 million in senior secured asset-level debt and US$250 million to be raised via a CAD 350 million ($350 million) equity offering.

• Bought deal offering consists of 18.2 million shares at $19.20 per share, with a 15% over-allotment option for underwriters, exercisable for 30 days post-closing and up to $53 million in additional proceeds.

• Facilities expected to generate CAD 110 million adjusted EBITDA and CAD 45 million annual free cash flow, yielding 13%.

• Project financing for each facility is $365 million and $385 million, both at 6.2% interest, fully amortizing over contract life.

• If the acquisition does not close, proceeds will be used to reduce debt or fund other growth opportunities.

Synergies and expected cost savings

• Integration expected to unlock operational, insurance, and tax synergies, including in-house asset management and leveraging U.S. tax pools.

• Immediate low- to mid-single digit accretion to free cash flow per share anticipated in the first full year.

• Upside potential from operational incentive payments for high availability.