News Release: TransAlta proposes an all-cash offer to acquire Canadian Hydro Developers, Inc.

Marketwire
July 20 2009

CALGARY, ALBERTA -- TransAlta Corporation (TSX: TA)(NYSE: TAC) announced today that it intends to make an all-cash offer, through an acquisition entity, to acquire Calgary-based Canadian Hydro Developers (TSX: KHD) at a price of $4.55 per share.

TransAlta's offer represents a premium of approximately 30 per cent to the volume weighted average trading price of Canadian Hydro Developers common shares on the TSX for the past 10 trading days and approximately 25 per cent to the closing price of Canadian Hydro Developers common shares on the TSX on July 17, 2009. The proposed transaction has an enterprise value of approximately $1. 5 billion.

"This offer provides Canadian Hydro Developers shareholders with significant, immediate and certain value for the company's existing assets, as well as its future growth potential," said Steve Snyder, TransAlta's Chief Executive Officer. "We have great respect for the company and its employees, and believe our respective shareholders and other stakeholders would be very well-served by the combination of these two great Alberta-based businesses."

"For TransAlta, this transaction accelerates our current strategy and extends our leadership position to become the largest publicly traded provider of renewable energy in Canada," said Mr. Snyder. "We believe the combination of Canadian Hydro Developers' portfolio and our operational and development capabilities and strong balance sheet, creates a company well-positioned to succeed in a world in which both capital and carbon are constrained."

TransAlta first approached Canadian Hydro Developers in December 2008 with the aim of reaching a negotiated transaction. In correspondence and meetings with Canadian Hydro Developers over the next seven months, TransAlta clearly articulated its interest in combining the two companies and outlined the potential benefits of the transaction. Despite TransAlta's efforts, it became clear that a negotiated transaction could not be achieved. As a result, TransAlta felt compelled to make this offer directly to Canadian Hydro Developers' shareholders.

Canadian Hydro Developers operates 694 megawatts (MW) of wind, hydro and biomass facilities in Alberta, Ontario, Quebec and British Columbia. It also has 252 MW of advanced-stage development projects in western and eastern Canada. Canadian Hydro Developers' assets are highly contracted with creditworthy counterparties.

On a combined basis, TransAlta and Canadian Hydro Developers would have net generation capacity of 8,657 MW in operation. The renewables portfolio would include 1,900 MW in operation, or 22 per cent of the combined portfolio. In addition, 572 MW under construction and over 600 MW in advanced-stage development.

The transaction will be funded initially with new committed bank facilities fully underwritten by Royal Bank of Canada, which, along with existing credit facilities and internally generated cash, will provide ample funding to take up and pay for all the outstanding Canadian Hydro Developers shares. This initial funding will be replaced with permanent long-term funding in the debt capital markets, underpinned by raising an additional $250 - $300 million of equity. Based on this approach we expect the rating agencies will confirm TransAlta's current investment grade credit ratings. The transaction will not impact TransAlta's dividend policy.

Goldman Sachs and RBC Capital Markets are TransAlta's financial advisors. Burnet, Duckworth & Palmer is TransAlta's legal advisor.

TransAlta expects to commence the offer on Wednesday, July 22, 2009. The offer will be open for acceptance for a period of 36 days and will expire on August 27, 2009 unless extended or withdrawn. Full details of the offer will be included in the formal offer and take-over bid circular to be publicly filed and subsequently mailed to Canadian Hydro Developers' shareholders.

The offer will be subject to certain conditions, including acceptance of the offer by holders of at least 66 2/3 per cent of Canadian Hydro Developers' common shares calculated on a fully-diluted basis, and receipt of all necessary regulatory approvals.