CALGARY, April 1, 2019 /CNW/ - TransAlta Corporation
("TransAlta" or the "Company") (TSX:TA) (NYSE:TAC) today
issued a letter to shareholders and filed its management
information circular (the "Circular") for its annual and
special meeting of shareholders (the "Meeting") to be held on
April 26, 2019.
TransAlta encourages shareholders to read the Circular to gain
insight into the extensive efforts undertaken to seek and reflect
shareholder input, assess a wide range of strategic alternatives,
engage constructively with shareholders, and secure an outstanding
transaction with a leading global renewable energy investor and
operator to advance its strategy. The Circular also addresses
TransAlta's recent engagement with Mangrove Partners ("Mangrove")
and Bluescape Energy Partners ("Bluescape"), which have notified
the Company that they intend to nominate director candidates.
TransAlta urges shareholders to vote the Blue proxy
FOR TransAlta's director nominees in order to: (i) secure a
strategic $750 million investment
from Brookfield Renewable Partners, a world-class renewable energy
investor and operator; (ii) strengthen TransAlta's ability to
advance its strategy, invest in growth and accelerate the return of
capital to shareholders; and (iii) add world-class renewable energy
and capacity market expertise to its Board of Directors. A copy of
the Circular can be downloaded from the Company's SEDAR profile at
www.sedar.com and the Company's EDGAR profile at
www.sec.gov/edgar.shtml. The Circular is also available at
TransAlta's website.
TransAlta Is Positioned to Advance Its Strategy, Return
Capital To Shareholders And Achieve Its Goal Of 100% Clean Energy
By 2025
"Over the past several years, TransAlta has successfully
developed and implemented a strategy designed to navigate
fundamental regulatory changes and a weak economy in our primary
market, all while delivering record free cash flow, reducing debt,
and continuing to grow the Company," said Ambassador Gordon Giffin, Chair of the TransAlta Board.
"Securing Brookfield's investment
and expertise is a continuation of that work. It responds to the
feedback we have received from our shareholders and gives us
everything we need to accelerate our strategy to create significant
and sustainable shareholder value."
"The market has reacted very favourably to our deal with
Brookfield. It has the full
support of RBC Global Asset Management, TransAlta's largest
shareholder with a 12.4% stake in the Company, as well as the
equity research analyst community," Ambassador Giffin continued.
"We believe shareholders should vote the Blue proxy in favour of
TransAlta's Board nominees to protect these gains and all of the
strategic benefits this investment provides."
"TransAlta's shareholders have been patient and supportive as
we've transformed the Company. Now they deserve to reap the
rewards. We urge shareholders to move forward rather than
backwards. We are poised to deliver compelling value, whereas
Mangrove and Bluescape represent risk and uncertainty, at best,"
said Ambassador Giffin.
TransAlta has successfully navigated challenging external market
conditions since 2015, when the Alberta Government introduced
policies to shut down coal by 2030, impose a significant carbon
tax, and targeted 5,000 MW of additional renewables into an already
oversupplied market. This coincided with a period of historically
low power prices in Alberta, a
weak Alberta economy, significant
competition for new assets and weak capital market
conditions.
In the face of these challenges, TransAlta developed a long-term
strategy to create value by achieving 100% clean energy by 2025,
converting 100% of its Alberta
coal fleet to natural gas, unlocking the value of the Company's
hydro assets, investing in long-term contracted gas and renewable
projects, reducing its operating costs and maintaining a strong
balance sheet. TransAlta has made progress towards each of these
goals and has significantly outperformed the TSX Capped Utility
index when measured on a three- and one-year basis.
A Strong Slate with Deep Market Expertise, Experience and
Fresh Perspective
TransAlta is nominating three exceptional new candidates for
election to the Board of Directors at the upcoming Meeting:
- Harry Goldgut is a Vice Chair in
Brookfield's Renewable Power and
Infrastructure Groups. Mr. Goldgut has been responsible for the
acquisition of the majority of Brookfield's renewable power assets and has
played a role in the restructuring of the electricity market in
Ontario as a member of the
Electricity Market Design Committee and the Clean Energy Task
Force.
- Richard Legault is a Vice Chair
in Brookfield's Renewable Group,
Vice Chair in Brookfield Asset Management and served as the CEO of
Brookfield Renewable Partners until August
2015. During his 28 years at Brookfield, Mr. Legault led the development
and expansion of Brookfield's
renewable business in North and South
America, as well as in Europe. He also served as CFO at Brookfield
Asset Management from 2000 to 2001.
- Robert C. Flexon was the
President and Chief Executive Officer of Dynegy Inc. from 2011
until its acquisition by Vistra Energy Corp. in April 2018. Dynegy Inc. was a U.S. independent
power producer engaged in the operation of power generating
facilities and listed on the NYSE. Mr. Flexon brings a wealth of
skills and experience with independent power producers, thermal
generation, capital markets, accounting, finance, tax and risk
management.
Each of the nominees brings exceptional and highly relevant
expertise to TransAlta. The fact that Mr. Goldgut and Mr. Legault
have been nominated by Brookfield
as part of its cornerstone investment in the Company is a
significant benefit of the transaction. TransAlta would add these
two directors under any scenario, simply for their expertise and
enormous knowledge of renewable energy assets and the Canadian
market. The addition of Mr. Flexon further enhances our Board's
strength, particularly as we execute our coal-to-gas conversion
strategy.
These nominations continue a pattern of Board renewal at
TransAlta. Including the three new nominee directors, the Board
will have added eight new directors in the past five years.
TransAlta notes and appreciates the positive endorsement that
Bluescape Executive Chairman C. John
Wilder gave in recent correspondence about the quality of
the new TransAlta Board nominees.
Together with the three new director nominees described above,
TransAlta's Board has the right mix of skills, capabilities,
experience and market knowledge to provide effective oversight and
direction to the Company's strategy and ongoing successful efforts
to drive shareholder value creation. The Board nominees' expertise
includes renewable and thermal operational capability, as well as
public markets, environmental, technology, legal, regulatory,
governmental affairs, engineering and technical expertise. The
exceptional qualifications of our Board members have been proven
through the significant leadership positions they have held as
officers and/or directors at very sizable, publicly-traded
companies with complex operations.
Background to the Brookfield Transaction
TransAlta's Circular details the Board's extensive engagement
program over the past three years with many of the Company's
largest institutional shareholders. The purpose of these
discussions was to gauge Shareholders' support for, and input into,
our strategies and to discuss possible strategic investments,
financings or other transactions or events to unlock TransAlta's
value. The sum and substance of this feedback was that investors
are supportive of the Company's strategy, but wanted to see more
action taken to accelerate the implementation of the Company's
plan. The insight gained from this engagement is one of the factors
that compelled the Board to seize the opportunity to secure the
Brookfield transaction when it
did.
The Circular also describes TransAlta's relationship with
Brookfield, which has been an
operating partner on a BC hydro facility since 2009 and a
meaningful shareholder of TransAlta for over four years. As with
all of the Company's major shareholders, TransAlta has had
discussions with Brookfield
throughout this period on a variety of topics. Of particular note,
Brookfield's recent investment was
informed by extensive prior discussions and due diligence over the
past three years with Brookfield
(and other potential investors) aimed at a wide range of strategies
for enhancing the long-term value potential of the Company's hydro
and coal assets, as well as the value of the Company as a whole,
including through potential sale transactions. As a result,
Brookfield was very familiar with
TransAlta and its hydro assets, and TransAlta knew Brookfield could be an outstanding partner to
help fund and implement the Company's value creation strategy.
Mangrove Partners and Bluescape Energy Threaten to Disrupt
TransAlta's Progress
TransAlta welcomes constructive shareholder engagement and has
had numerous discussions with Mangrove and Bluescape since they
emerged as TransAlta shareholders in recent months. In the course
of these discussions, as detailed in the Circular, Mangrove and
Bluescape supported Mr. Flexon as a candidate for election to the
Board, and rejected an offer to also have Bluescape Executive
Chairman C. John Wilder join the
TransAlta Board. Mangrove and Bluescape subsequently submitted a
term sheet demanding, among other things, that the Company issue to
Mr. Wilder C$150 million in common
shares at a 6% discount to the market price, based on a 21-day
volume weighted average. This was a demand that no board could
reasonably accept.
Ambassador Giffin added, "Had the dissidents accepted our offer,
Mr. Wilder would have a seat at the Board table. Instead, they
notified the Company of their intention to nominate five new
directors, which suggests they are seeking the ability to terminate
the Brookfield investment and
implement the playbook they have used at other companies of selling
renewable energy assets and doubling down on coal-fired generation,
which is a dead-end strategy and something we will not do."
TransAlta cautions shareholders that a potential slate of
dissident nominees from Mangrove and Bluescape threatens to disrupt
TransAlta's strategic direction by: (i) terminating Brookfield's investment, and all the value and
expertise that comes with it; (ii) abandoning TransAlta's move
towards clean energy by retrenching to coal, or to go in search of
potential alternative transactions, a process that could take
months or years with no assurance of producing anything of greater
– or even similar – value; and (iii) adding further risk and delay
to returning meaningful value to TransAlta shareholders who have
supported the Company throughout its strategic transformation.
The Answer is "Yes"
In a March 29, 2019 press release,
Mangrove and Bluescape ask: "Is the Brookfield Investment in the
best interests of all TransAlta shareholders?" The answer is a
resounding "yes" – and all evidence indicates that the market
agrees. In the four trading days following the announcement of the
deal, TransAlta's share price increased by more than 9% and equity
research analysts have published favourable commentaries and
increased their consensus 12-month price target for TransAlta's
stock by 24%.
In addition to the benefits outlined above, the investment is
structured to enable TransAlta shareholders to participate in the
future value of the Company's hydro assets through both the
deferred sale arrangement (i.e., post 2024) and through the
retention of at least 51% of the Hydro portfolio. The structure is
significantly more accretive than potential alternatives, such as
issuing equity at the current share price (which would dilute
existing shareholders at sub-optimal value), selling an interest in
the Company's coal-to-gas assets which are central to the Company's
long-term strategy, or weakening the balance sheet through excess
borrowing, which would inhibit the execution of TransAlta's
value-creation strategy and not be in the best long-term interests
of the Company or its shareholders. Furthermore, Brookfield is aligned with shareholder
interests through its position as a long-standing significant
investor in the Company, as well as through Board nominations and
the associated fiduciary duties of its nominees to TransAlta and
its shareholders. Brookfield
has committed to purchase TransAlta common shares in the open
market to increase its share ownership in TransAlta to 9% subject
to certain conditions, and TransAlta and Brookfield will form a joint operating
committee to focus on optimizing the operations and maximizing the
value of the Company's hydro assets.
As it relates to the value of TransAlta's Hydro assets, the 13x
EBITDA multiple used in the transaction to value the future cash
flows from TransAlta's Hydro assets is in line with analyst
estimates and is consistent with the 10x – 16.3x multiples for
precedent merchant hydro transactions that involve selling 100% of
the assets (whereas Brookfield
will only have rights to acquire a minority interest). Higher
multiples may be observed in control transactions in markets that
are more liquid, more contracted based on higher capacity or power
prices or more interconnected with neighbouring markets than
Alberta, but that is not where
TransAlta's hydro assets are located. In addition, Brookfield is paying 13x the future EBITDA in
the future, after the PPA expires, when TransAlta expects the
assets to generate significantly more EBITDA than they do
currently. All other precedent transactions are based on current
EBITDA.
Finally, the Brookfield
investment will be highly accretive for TransAlta shareholders as
it will permit TransAlta to repurchase up to $250 million of shares through a substantial
issuer bid and its normal course issuer bid program.
Major Shareholder Support
TransAlta's single largest shareholder, RBC Global Asset
Management, is supportive of our strategic partnership with, and
the investment by, Brookfield. RBC
has committed to vote all of the common shares under its direction
or control, representing 12.4% of TransAlta's outstanding common
shares, FOR the election of all of TransAlta's director nominees at
the Meeting, as well as in favour of the other items of annual and
special business that shareholders are being asked to consider at
the upcoming Meeting.
Brookfield, which currently
owns approximately 4.9% of TransAlta's outstanding common
shares, also plans to vote FOR the election of all of TransAlta's
director nominees at the Meeting, as well as in favour of the other
items of annual and special business that shareholders are being
asked to consider at the Meeting.
Vote the BLUE Proxy to Protect TransAlta's Future
TransAlta asks shareholders to read the Circular carefully and
to vote the BLUE proxy FOR all 12 TransAlta director nominees at
our upcoming Meeting on April 26,
2019. Shareholder support is critical as we work to build a
foundation for long-term, sustainable value creation as a leading
clean energy company.
A vote FOR TransAlta's director nominees will be a vote to
realize the value of TransAlta's diverse and quality assets for
decades to come, a vote for an experienced and engaged Board and a
vote to share in the upside of TransAlta. Becoming a voter is
fast and easy. To support TransAlta's Board, vote only your
BLUE proxy or voting instruction form today.
If you have any questions about the Meeting, please contact
Kingsdale Advisors, TransAlta's strategic shareholder advisor and
proxy solicitation agent, by telephone at 1-877-659-1820 (toll-free
in North America) or
1-416-867-2272 (collect outside North
America) or by email
at contactus@kingsdaleadvisors.com.
About TransAlta Corporation
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. We provide municipalities,
medium and large industries, businesses and utility customers
clean, affordable, energy efficient, and reliable power. Today, we
are one of Canada's largest
producers of wind power and Alberta's largest producer of hydro-electric
power. For over 100 years, TransAlta has been a responsible
operator and a proud community-member where its employees work and
live. TransAlta aligns its corporate goals with the UN Sustainable
Development Goals and we have been recognized by CDP (formerly
Climate Disclosure Project) as an industry leader on Climate Change
Management. We are also proud to have achieved the Silver level PAR
(Progressive Aboriginal Relations) designation by the Canadian
Council for Aboriginal Business.
For more information about TransAlta, visit our web site at
transalta.com.
Forward-Looking Statements
This news release
contains forward-looking statements and forward-looking information
within the meaning of applicable securities laws. The use of any of
the words "expect", "anticipate", "continue", "estimate", "may",
"will", "project", "should", "propose", "plans", "intends" and
similar expressions are intended to identify forward-looking
information or statements. More particularly, and without
limitation, this news release contains forward-looking statements
and information relating to: the Meeting; the investment by
Brookfield; ability of the
investment to enhance the Company's financial position and ability
to execute the strategy; the transition to 100% clean energy by
2025; Brookfield increasing its
share ownership in TransAlta to 9% and other commitments;
the Company's future ownership levels in or control over the
Alberta hydro assets; the
anticipated timing, costs and benefits of TransAlta's coal-to-gas
conversion strategy; the timing, terms and probability of returning
capital to shareholders; the appointment of three new nominees to
the Board; the expected higher cash flow and anticipated adjusted
EBITDA in respect of the hydro assets in the Brookfield investment; the Company's
relationship with Brookfield Renewable Partners or its affiliates
and other shareholders; the expected timing, costs and benefits of
the strategic investment by and partnership with Brookfield
Renewable or its affiliates; the formation of a
joint operating committee; continued operational improvements; and
advancements in the Company's strategy relating to clean energy and
growth. These statements are based on TransAlta's belief and
assumptions based on information available at the time the
assumptions were made, including assumptions pertaining to: the
election of the Company's proposed director nominees at the
Meeting, the closing of the Brookfield investment; no significant changes
to regulatory, securities, credit or market environments;
the anticipated Alberta
capacity market framework in the future; our ownership of or
relationship with TransAlta Renewables Inc. not materially
changing; the Alberta hydro assets
achieving their anticipated value, cash flows and adjusted EBITDA;
the expected life extension of the coal fleet and anticipated
benefits and financial results generated on the coal-to-gas
conversion and the Company's other strategies; the Company's and
Mangrove's/Bluescape's strategies and plans; the ability to
successfully compete in the expected Alberta capacity market; and no significant
changes in laws. The forward-looking statements are
subject to a number of risks and uncertainties that may cause
actual performance, events or results to differ materially from
those contemplated by the forward-looking statements. Some of the
factors that could cause such differences include: the failure of
the Company's nominees to be elected at the Meeting; the failure of
the Brookfield investment to
close; legal actions or proceedings, including those pertaining to
the Brookfield investment; the
appointment of any slate of directors proposed by
Mangrove/Bluescape and the subsequent termination of the
Brookfield investment by the
Company; our Alberta hydro assets
not achieving their anticipated value, cash flows or adjusted
EBITDA once the applicable power purchase arrangement has expired;
changes to the expected life extension of our coal fleet and
anticipated financial results generated on conversion; and other
risks and uncertainties contained in the Company's Circular dated
March 26, 2019 and its annual
information form and management's discussion and analysis for the
year ended December 31, 2018. Readers
are cautioned not to place undue reliance on these forward-looking
statements or forward-looking information, which reflect
TransAlta's expectations only as of the date of this news release.
In light of these risks, uncertainties and assumptions, the
forward-looking statements might occur to a different extent or at
a different time than we have described, or might not occur at all.
TransAlta disclaims any intention or obligation to update or revise
these forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by
law. Certain financial information contained in
this news release, including adjusted EBITDA in respect of the
Brookfield investment, may not be
standard measures defined under International Financial Reporting
Standards ("IFRS") and may not be comparable to similar measures
presented by other entities. These measures should not be
considered in isolation or as a substitute for measures prepared in
accordance with IFRS. For further information on the calculation of
adjusted EBITDA in respect of the Brookfield investment and how it is calculated
with regard to the exchangeable securities to be issued, see the
Company's material change report dated March
26, 2019 and a complete copy of the investment agreement
with Brookfield, filed under the
Company's profile with the Canadian securities regulators on
www.sedar.com and the Securities and Exchange Commission on
www.sec.gov.
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SOURCE TransAlta Corporation