Canadian electric utility TransAlta has signed a definitive agreement with renewable independent power producer (IPP) TransAlta Renewables (RNW) to take full ownership of the latter in a cash and stock deal worth around C$1.38bn ($1.04bn).
TransAlta Renewables holds stakes in 26 wind facilities, eight natural gas generation facilities, 11 hydroelectric facilities, two solar power plants, one natural gas pipeline, and a battery storage project. These represent an ownership stake of nearly 3GW of owned generating capacity with assets located in Canada, the US, and Australia.
Under the terms of the agreement, each of the shares of TransAlta Renewables will be exchanged for C$13 ($9.84) in cash or 1.0337 common shares of TransAlta.
TransAlta will pay a maximum of C$800m ($605.83m) in cash to the renewable IPP out of the total consideration of the deal.
The total consideration represents a premium of 18.3% based on the closing price of TransAlta Renewables’ shares listed on the Toronto Stock Exchange as of 10 July 2023.
Through the takeover, TransAlta aims to create a single, publicly traded entity with one strategy and a streamlined governance structure that aids growth.
The combined company will also provide greater clarity around the implementation of the clean electricity growth plan, said the electric utility.
TransAlta president and CEO John Kousinioris said: “With the execution of our Clean Electricity Growth Plan well underway, it is clear that the strategies of both TransAlta and RNW have converged. Now is the right time to bring these two companies together to create a single clean electricity leader.
“The combined company’s greater scale and enhanced positioning will drive benefits and unlock value for all of our shareholders. The combination of the two companies will be underpinned by a single strategy that provides greater clarity to investors and will support future growth.”
Under a single entity, the two Canada-based companies hope to benefit from greater efficiencies and corporate synergies.
Following the closing of the deal, the merged business will have unified and direct ownership stakes in a diversified portfolio of wind, hydro, natural gas generation, solar, and storage assets.
TransAlta Renewables board of directors chair David Drinkwater said: “We are pleased to announce that this transaction provides RNW shareholders with an immediate premium and greater growth and cash flow certainty going forward.
“It resolves significant risks associated with maintaining RNW’s current dividend level given challenges with RNW’s cash available for distribution due to near-term contract expiries, significant increases to cash taxes and other factors.”
Subject to TransAlta Renewables shareholders’ approvals as well as regulatory approvals and other customary conditions, the transaction is anticipated to be closed early in Q4 2023.
In February 2023, TransAlta signed a definitive agreement with Montem Resources to acquire a 50% stake in the Tent Mountain renewable energy complex. Tent Mountain is an early-stage 320MW pumped hydro-energy storage development project in southwest Alberta, Canada.
