TransAlta Shareholders - Frequently Asked Questions

In August 2013, RNW completed its initial public offering providing investors with the opportunity to invest directly in a highly contracted portfolio of clean and renewable power generation facilities. TransAlta initially sold to RNW assets consisting of 28 wind and hydroelectric power generation facilities having an aggregate installed generating capacity of 1,234 MW. Following the initial public offering, TransAlta held approximately 80% of the issued and outstanding common shares of RNW and TransAlta provided management, administrative and operational services to RNW. Since 2013, the strategies of both companies have converged with RNW acquiring natural gas generating facilities, while TransAlta converted certain coal plants to natural gas generating facilities because it was required to shut down its coal units prior to their assumed end of life. Further, in the fall of 2021, TransAlta announced a Clean Electricity Growth Plan that focused on growing TransAlta's contracted and renewable generation assets. As a result, the strategies of both companies have converged. Combining the companies will strengthen TransAlta's portfolio of clean generation assets and enable more focused execution on TransAlta's clean electricity goals. The combined company's greater scale and enhanced positioning are expected to drive benefits and unlock value for all shareholders.

The proposed transaction, which will be affected by way of an arrangement under the Canada Business Corporations Act (the "Arrangement") is expected to provide shareholders of the combined company with a single strategy and a clear and compelling opportunity for long-term growth:

• Alignment and Execution of a Single Strategy: The combined company will share a common strategic path to achieve its clean electricity growth objectives and be more competitive as a single, streamlined, publicly listed entity. It will align, clarify and enhance management's strategic focus and efforts in the marketing, development, construction, operation and maintenance of generation assets to serve customers with clean and reliable electricity.
• Accretive Transaction and Attractive Dividend, while Supporting Future Growth: Following the transaction, shareholders of the combined company will benefit from an accretive transaction and receive a sustainable quarterly dividend while ensuring the combined company retains sufficient cash flow for reinvestment in future growth projects.
• Direct Ownership in One of Canada's Largest Independent Power Producers: The combined company will have unified and direct ownership interests in a diversified portfolio of wind, hydro, solar, storage and natural gas generation assets, all backed by an aligned strategy that allows shareholders of the combined company to benefit from future growth.
• Increased Scale, Public Float and Liquidity: The combined company will have a larger market capitalization and is expected to provide stronger access to capital markets while providing increased trading liquidity. The reduced corporate complexity will provide greater transparency and understanding of the combined company's business, which is expected to enable investment in TransAlta's growing clean electricity portfolio.
• Synergies: The combined company will benefit from greater efficiencies and corporate synergies under a single entity. The combined company is expected to have greater capital efficiency to fund growth in a single simplified entity, having a higher retention of cash flows, and ower corporate and administration costs.

The transaction is strategically and economically attractive to holders of TransAlta Shares and provides the following benefits:

• Enhanced Strategic Position: The combined company will leverage scale, assets and capabilities in all markets, while retaining greater exposure to the growth in clean electricity opportunities. The Arrangement will provide economic contribution from an incremental 1,187 MW of generating capacity, being 39.9% of the generating capacity at RNW not currently owned by TransAlta (directly or indirectly). The Arrangement also increases the proportion of TransAlta's contractedness and diversifies the impact of TransAlta's merchant market exposure.
• Sustainable, Attractive Transaction Metrics: The Arrangement is accretive to free cash flow and provides greater financial flexibility by increasing the retention of cash, which will support the combined company's growth plan.
• Execution of a Single Strategy: The Arrangement provides clarity and will result in the execution of a single strategy. All future growth will be pursued in the combined company and funded with greater capital efficiency, while the combined company retains access to future growth in contracted opportunities.
• Increased Liquidity and Synergies: The combined company will have an increased public float and trading liquidity, and have access to more efficient capital, along with corporate synergies.
• Maintains Financial Strength: The simplified structure and funding of the Arrangement is expected to have a neutral impact to the credit rating of TransAlta.

TransAlta will acquire all of the RNW Shares not already owned, directly or indirectly, by TransAlta. Each RNW Share will be exchanged for $13.00 in cash or 1.0337 TransAlta Shares, at the election of the RNW Shareholders and subject to pro-rationing based on a maximum aggregate number of TransAlta Shares to be issued to RNW Shareholders of 46,441,779 and a maximum aggregate amount of cash of $800 million.

• This transaction is a part of TransAlta's ongoing strategy of value creation, our vision to become a leader in clean electricity, and our commitment to a sustainable future.
• Over the past few years, TransAlta's strategy has largely aligned with that of RNW's strategy, and this alignment means there is no longer a need or value for separate companies.
• When RNW was launched in 2013, renewable electricity assets represented approximately one quarter of TransAlta's portfolio. Since then, the world energy outlook has undergone a fundamental change - and it continues to rapidly evolve. Global efforts to decarbonize are accelerating. Energy transition and the prevention of climate change have become a priority. Corporations are delivering leadership by committing to net zero goals and investors are ramping up clean investments towards a push to net zero.
• Both companies' investment focus and strategies have converged and are competing for similar growth opportunities, in the same capital markets and for similar investors. The reasons for TransAlta and RNW to have independent strategies and separate structures are no longer present.
• Increasingly shareholders and potential investors alike are observing the merging of these objectives and are seeking clarity.
• Given this shift, TransAlta and RNW will be able to better satisfy customers, shareholders and potential investors, as well as more easily achieve ESG targets, as a combined company. The simplified structure offered by the transaction is expected to provide the vehicle needed for both companies to pursue growth and value for the benefit of all shareholders.

• RBC Dominion Securities Inc. ("RBC Capital Markets"), acting as financial advisor to TransAlta, provided a verbal opinion, as of July 10, 2023, to the TransAlta Board (subject to certain assumptions and qualifications) that the consideration to be paid by TransAlta pursuant to the Arrangement is fair, from a financial point of view, to TransAlta (the "TransAlta Fairness Opinion"). After considering, among other things, the TransAlta Fairness Opinion, the TransAlta Board determined that the Arrangement is in the best interests of TransAlta and approved the execution and delivery of the Arrangement Agreement.
• A special committee of independent directors of RNW (the "RNW Special Committee") conducted an independent and comprehensive review process and unanimously concluded that the proposed transaction is fair to RNW Shareholders (without consideration to TransAlta and any affiliate thereof) and recommends that the RNW Shareholders vote in favour of the transaction. The RNW Special Committee received verbal fairness opinions from National Bank Financial Inc. ("NBF") and TD Securities ("TD"). Both advisors (subject to certain assumptions and qualifications) concluded that the Arrangement is fair, from a financial point of view, to the RNW Shareholders, without consideration to TransAlta or any affiliate thereof (the "RNW Opinions"). NBF also provided a formal valuation of the RNW Shares (the "Formal Valuation") that concluded that the fair value of an RNW Share as of July 10, 2023 was in the range of $12.25 and $13.60. After considering, among other things, the recommendation of the RNW Special Committee and its receipt of the RNW Opinions and the Formal Valuation, the Board of Directors of RNW (the "RNW Board")(with four directors who are not independent abstaining) unanimously determined that the Arrangement is in the best interests of RNW and is fair to the RNW Shareholders (without consideration to TransAlta and any affiliate thereof), approved the execution and delivery of the Arrangement Agreement between TransAlta and RNW dated July 10, 2023 (the "Arrangement Agreement") and unanimously recommends that RNW Shareholders vote in favour of the Arrangement.

Following the Arrangement, the pro forma ownership of the combined company will be approximately:

• 85% TransAlta shareholders, and
• 15% RNW shareholders.

• The Arrangement Agreement provides for, among other things, a non-solicitation covenant of RNW, subject to a customary "fiduciary out" provision that entitles RNW to consider and accept a superior proposal if TransAlta does not match the superior proposal within a five-business day period.
• If the Arrangement Agreement is terminated in certain circumstances, including if RNW enters into an agreement with respect to a superior proposal, TransAlta is entitled to a termination payment of $95.4 million.

• The Arrangement is subject to the approval of:
  • 66 2/3% of the votes cast by TransAlta Renewables shareholders present in person or by proxy at the special meeting of shareholders, which includes TransAlta, and
  • A majority of the votes cast by RNW Shareholders present in person or by proxy at the special meeting of shareholders that excludes shares that are beneficially owned or controlled by TransAlta or insiders of TransAlta.
• All of the directors of RNW have entered into support agreements with TransAlta pursuant to which they have agreed to vote their respective RNW Shares in favour of the Arrangement at the RNW Meeting. Additionally, TransAlta, holding approximately 60.1% of the RNW Shares, intends to vote its RNW Shares in favour of the Arrangement at the RNW Meeting.

Closing of the Arrangement is subject to obtaining required regulatory approvals, including approval of the Alberta Utilities Commission, interim and final orders of the Court of King’s Bench of Alberta, stock exchange approval and the satisfaction of other customary closing conditions.

If not approved, TransAlta Renewables will remain a stand-alone company.

The vote will be held on September 26, 2023.

If all approvals are received and other closing conditions satisfied, the Arrangement is expected to be completed in early October.

Please reach out to TransAlta Investor Relations at:

• Email: Investor_Relations@transalta.com
• Telephone: 1-800-387-3598 Within North America

No action is required by holders of TransAlta Shares ("TransAlta Shareholders"). The RNW Shareholder vote will occur at the RNW Meeting, which will be held on September 26, 2023.

The Arrangement is strategically and economically attractive to TransAlta Shareholders and provides the following benefits:

• Enhanced Strategic Position: The combined company will leverage scale, assets and capabilities in all markets, while retaining greater exposure to the growth in clean energy opportunities. The Arrangement will provide economic contribution from an incremental 1,187 MW of generating capacity, being 39.9% of the generating capacity at RNW not currently owned by TransAlta. The Arrangement also increases the proportion of TAC's contractedness and diversifies the impact of TransAlta's merchant market exposure.
• Sustainable, Attractive Transaction Metrics: The Arrangement is expected to be accretive to free cash flow and provides greater financial flexibility by increasing the retention of cash, which will support the combined company's clean energy growth plan.
• Execution of a Single Strategy: The Arrangement provides clarity and the execution of a single strategy. All future growth will be pursued in the combined company and funded with greater capital efficiency, while retaining access to future growth in contracted clean energy opportunities.
• Increased Liquidity and Synergies: The combined company will have an increased public float and trading liquidity and is expected to have access to more efficient capital, along with corporate synergies.
• Maintain Financial Strength: The simplified structure and funding of the Arrangement is expected to have a neutral impact to the credit rating of TransAlta.

No, TransAlta Shareholders are not required to vote in respect to the Arrangement.

The maximum number of TransAlta Shares to be issued pursuant to the Arrangement is below the threshold in which a TransAlta Shareholder vote would be required pursuant to the rules of the TSX.

Yes, TransAlta structured the Arrangement so that it would not have an adverse effect on its Clean Electricity Growth Plan.

The dividend for TransAlta is at the discretion of the TransAlta Board and is reassessed on a regular basis. There has been no announcement made that the common share dividend will increase as a result of the transaction.

This is an accretive transaction for TransAlta on a free cash flow per share basis and, following the transaction, shareholders of the combined company are expected to receive a sustainable quarterly dividend. The transaction creates a larger combined shareholder base, increasing trading liquidity and provides greater transparency and ease of investing in the growing renewable energy portfolio. The combined company will maintain a higher retention of cash flows for reinvestment in future growth projects.