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Investor group says TransAlta must maintain option to terminate Brookfield deal

A group of activist investors holding approximately 10% of TransAlta Corp. stock believe the company should preserve its ability to terminate Brookfield Renewable Partners LP's C$750 million strategic investment should a potentially superior offer arise.

Mangrove Partners, Bluescape Energy Partners LLC and Cove Key Bluescape Holdings LP said in a March 26 news release the group has "had insufficient time to fully evaluate the Brookfield Investment Agreement. However, they believe that transactions superior to the Brookfield Investment Agreement may be available."

As a result, Mangrove notified TransAlta of its intent to nominate five candidates for election to the company's board at the annual meeting scheduled for April 26. Under the deal agreement between TransAlta and Brookfield, if two or more people are elected to the board who are not among those recommended in TransAlta's management proxy circular, then TransAlta has the right to decline the Brookfield investment deal.

TransAlta said it will consider the suitability of the director nominees and communicate with shareholders "in due course."

On March 25, TransAlta announced a deal for Brookfield to make a C$750 million strategic investment in the company that would allow Brookfield to gain an equity stake in TransAlta's Alberta hydro portfolio in 2025, and also entail Brookfield acquiring a 9% equity stake in the company, up from 4.9%. The investment would allow TransAlta to transition to 100% clean energy by 2025.

Also as part of the deal, two Brookfield nominees, Harry Goldgut and Richard Legault, will stand for election to the board at TransAlta's annual meeting, along with former Dynegy CEO Robert Flexon.

The announcement of the Brookfield deal follows the disclosure March 15 that Mangrove, Charles John Wilder Jr.'s Bluescape and Cove Key Bluescape had acquired an approximately 10% stake in TransAlta and were in talks with representatives of the company's board to boost shareholder value and seek board representation.

Shareholders have the option to announce a nomination up to 5:00 p.m. Calgary, Alberta, time on March 27.

RBC Global Asset Management Inc., TransAlta's largest shareholder at 12.4%, supported the Brookfield investment and has agreed to endorse TransAlta's director nominees.

Brookfield Renewable Partners is a renewable power company of Brookfield Asset Management Inc.