Slide 1: TransAlta Corporation Preferred Share Exchange – Retail Call
TransAlta Corporation Preferred Share Exchange – Retail Call January 24, 2017 1
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation includes forward-looking statements or information (collectively referred to in this presentation as “forward-looking statements”) within the meaning of applicable securities legislation. All forward looking statements are based on TransAlta’s beliefs as
Slide 3: Outline
Outline Background to the Arrangement 4 Benefits for Preferred Shareholders 7 Arrangement Mechanics & Process 16 Contact Information 21 3
Slide 4: Background to the Arrangement
Background to the Arrangement 4
Slide 5: Background to the Arrangement
Background to the Arrangement TransAlta’s primary objectives for this transaction are: Strengthen TransAlta’s balance sheet Enhance TransAlta’s financial flexibility Fair to all Preferred Shareholders • Providing enhanced financial terms • New Series of Preferred Shares with beneficial feature
Slide 6: Fairness Opinion and Board Recommendation
Background to the Arrangement Fairness Opinion From PricewaterhouseCoopers LLP • “proposed exchange of Preferred Shares in accordance with the Arrangement is fair, from a financial point of view, to holders of each series of Preferred Shares” Unanimous Board of Directors Recommendation TransAlta’s B
Slide 7: Benefits for Preferred Shareholders
Benefits for Preferred Shareholders 7
Slide 8: Benefits for Preferred Shareholders
Benefits for Preferred Shareholders 1 Minimum Floor Feature Reduces Dividend Volatility 1. 2 Attractive 6.50% Dividend Rate 2. 3. 3 Reset Spread Substantially Increased For All Series of Preferred Shares 4. 4 Implied Offer Premia Ranges from 11% to 17% 5. 5 Consolidation of New Preferred Shares Bene
Slide 9: Minimum Floor Feature Reduces Dividend Volatility & Provides Downside Protection
Benefits for Preferred Shareholders 1 Minimum Floor Feature Reduces Dividend Volatility & Provides Downside Protection • Series 1 Preferred Shares issued near high for 5Yr GoC1 since March 2015; minimum floor mechanism ensures dividend on Series 1 always 6.50% per annum or higher • Existing Preferre
Slide 10: Attractive 6.50% Dividend Rate
Benefits for Preferred Shareholders 2 Attractive 6.50% Dividend Rate • The 6.50% dividend rate on the Series 1 Preferred Shares is higher than comparable recent issuances in the Canadian market Current Dividend Rate Dividend Reset Reset Rating At Issuer Price / Min. Floor Yield Spread Date Time of I
Slide 11: Attractive 6.50% Dividend Rate
Benefits for Preferred Shareholders 2 Attractive 6.50% Dividend Rate • The 6.50% dividend rate on the Series 1 Preferred Shares would result in an increased dividend for all series of Preferred Shares, assuming they would reset at current interest rate levels 2 3 Current Dividend1 5YR Avg.Annual Div
Slide 12: Reset Spread Substantially Increased For All Series of Preferred Shares
Benefits for Preferred Shareholders 3 Reset Spread Substantially Increased For All Series of Preferred Shares • Reset spread for the New Preferred Shares is 529 bps • Reset spread of the Preferred Shares ranges 369 to 463 bps (adjusted for the exchange) • Represents a 14% to 43% increase depending o
Slide 13: Implied Offer Premia Ranges from 11% to 17%
Benefits for Preferred Shareholders 4 Implied Offer Premia Ranges from 11% to 17% • Premium of 11% to 17% compares to December 16, 2016 trading price (pre-announcement), adjusting for the applicable exchange ratio Offer Premium Per Series Based on the Issue Price of the Series 1 Preferred Shares 1 1
Slide 14: Consolidation of New Preferred Shares Benefits Trading Liquidity
Benefits for Preferred Shareholders 5 Consolidation of New Preferred Shares Benefits Trading Liquidity • Arrangement will consolidate the Preferred Shares into one larger series of New Preferred Shares • Trading liquidity is expected to be enhanced, providing shareholders flexibility and depth to bu
Slide 15: Tax Flexibility For Preferred Shareholders
Benefits for Preferred Shareholders 6 Tax Flexibility For Preferred Shareholders • Arrangement provides an automatic tax deferred exchange for Canadian federal income tax purposes • Alternatively, shareholders may elect to have the exchange occur to realize a capital gain or capital loss for Canadia
Slide 16: Arrangement Mechanics and Process
Arrangement Mechanics and Process 16
Slide 17: Mechanics of the Arrangement
Mechanics of the Arrangement • Based on applicable exchange ratios for each series of Preferred Shares Series Number of Pre-Ann. Exchange Equivalent Series 1 Offer Shares Closing Ratio Exchanged Issue Premium3 Outstanding Price1 Price2 Price Series A 10,175,000 $11.95 0.530 $22.55 $25.00 10.9% Serie
Slide 18: Shareholder Meeting & Voting Process
Shareholder Meeting & Voting Process Preferred Shareholders can vote in one of two ways: 1 Through their intermediary via the voting instruction form or proxy form 1. 2. 2 Attend and vote in person at the meeting for the applicable series of Preferred Shares Meetings will be held on February 16, 201
Slide 19: Shareholder Meeting & Voting Process: Quorum and Voting Requirement
Shareholder Meeting & Voting Process Minimum Quorum Requirement • The quorum for each meeting of Preferred Shares is one or more persons present in person or represented by proxy holding, in the aggregate, not less than a majority of the Preferred Shares entitled to be voted at the meeting • If with
Slide 20: Solicitation Fees
Solicitation Fees • TransAlta has agreed to pay any Soliciting Dealer who has entered into an agreement with CIBC as the Dealer Manager, a fee of $0.13 per Preferred Share, for each Preferred Share that i. Is solicited in favour of the Arrangement, and ii. Is for a series of Preferred Shares that is
Slide 21: Contact Information
Contact Information 21
Slide 22: Contact Information
Contact Information Kingsdale Advisors Chris Otte North American Toll-Free Phone: (713) 210-4228 1-877-659-1820 chris.otte@cibc.com E-mail: Sandro Morassutti contactus@kingsdaleadvisors.com (416) 594-7665 Banks and Brokers Outside North America: sandro.morassutti@cibc.com 1-416-867-2272 22
Slide 23: Q&A
Q&A 23