TransAlta Power, L.P. acquires interest in Calgary, AB, power plant

CALGARY, ALBERTA, June 16, 2003 — TransAlta Power L.P. announced that it will acquire a 25 percent interest in the two-unit, 756-MW coal-fired Sheerness Generating Station located 200 kilometres northeast of Calgary, Alberta for $315 million through its 49.99 percent interest in TransAlta Cogeneration, L.P.

TransAlta Cogeneration, L.P. will purchase TransAlta Corporation’s 50 percent interest in the plant. Canadian Utilities Limited will continue to own the remaining 50 percent interest and operate the plant. The electricity produced by the plant is sold to the Balancing Pool of Alberta under an Alberta Power Purchase Arrangement that expires at the end of 2020.

TransAlta Power, L.P. today also filed a preliminary short-form prospectus with the securities regulators in Canada for an offering of subscription receipts. The offering will be led by CIBC World Markets and RBC Capital Markets.

Each subscription receipt will be exchangeable for one limited partnership unit and one purchase warrant of TransAlta Power, L.P. Each warrant will entitle the holder to purchase a unit for the offering price any time prior to 12 months after closing of the acquisition. The initial proceeds of approximately $150 million ($165 million assuming full exercise of the over-allotment option) are intended to primarily finance the acquisition. Funds will be released from escrow after the closing of the acquisition.

“We expect the addition of the Sheerness facility to TransAlta Power, L.P. to increase cash distributions to unitholders by approximately 4.6 percent,” said Ian Bourne, president and director. “In addition, we will now have a more diversified fuel and geographic base, as well as improved liquidity and access to capital as a result of the larger market capitalization.”

TransAlta Power, L.P. declared, subject to closing of the acquisition, an increase in cash distributions to $0.0654 per unit for payment to unitholders of record at the close of business July 31, 2003.

Concurrent with the closing of the offering, TransAlta Power, L.P. will issue, and TransAlta Corporation will subscribe for, private subscription receipts, which will be exchangeable for one unit upon closing of the acquisition. As warrants are exercised, the private units will be purchased from TransAlta Corporation. TransAlta Corporation will own approximately 25 percent of TransAlta Power, L.P. until the warrants are exercised.

In approving the acquisition, the independent committee of the board of directors of TransAlta Power, L.P. obtained independent financial advice, including a formal valuation, independent legal advice and independent technical advice respecting the Sheerness Generating Station. The transaction is conditional upon the approval of existing TransAlta Power, L.P. unitholders. A special meeting of the unitholders of TransAlta Power, L.P. will be held on July 18, 2003 to vote on this issue. Closing of the acquisition is expected to be on or before July 31, 2003.

As well, subject to TransAlta Cogeneration, L.P. owning an aggregate of 650 MW of generating capacity, the independent committee, in conjunction with TransAlta Corporation, have agreed to remove the management fee deferral mechanism and the obligation to pay future fees for a payment of $6 million. TransAlta Corporation will continue to provide services under the existing management services agreements.

The independent committee will also terminate the buy-back provision for TransAlta Power, L.P. in order to allow the partnership to continue its growth strategy. In addition, TransAlta Cogeneration, L.P. intends to increase the maximum amount of borrowing permitted under its existing credit facility with TransAlta Corporation from $20 million to $50 million in order to finance the planned major maintenance expenditures on TransAlta Cogeneration, L.P.’s assets, including Sheerness, fund fluctuations in working capital and for other capital expenditures.

TransAlta Power, L.P. has been advised on a preliminary basis that Standard & Poor’s Rating Services will affirm its “SR-1” Canadian stability rating following the announced transfer of the 50 percent interest in Sheerness and that S&P will revise its outlook to negative. Additionally, it has also been advised on a preliminary basis that Dominion Bond Rating Service will affirm its stability rating at “STA-2 (middle)”. TransAlta Power, L.P. encourages review of the rating services’ respective press releases.

For more information, visit http://www.transalta.com.

TransAlta Power, L.P. owns a 49.99 percent interest in TransAlta Cogeneration, L.P., which owns three Ontario cogeneration facilities and a 60 percent interest in the Fort Saskatchewan, Alberta cogeneration facility. TransAlta Corporation, through two wholly owned subsidiaries, owns the remaining 50.01 percent interest in TransAlta Cogeneration, L.P. and is responsible for the operation and maintenance of the plants.

The Ontario plants have a total generating capacity of 244 megawatts of electric power. Electricity from the plants is sold to Ontario Electricity Financial Corporation under long-term contracts; steam and other thermal energy produced is supplied to manufacturing plants and other facilities. The Fort Saskatchewan plant has a total generating capacity of 118 megawatts. Electricity and steam from this plant are sold to Dow Chemical Canada Inc. under a long-term contract.

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