TAC

Core Operational and Financial Performance

• Delivered solid overall results amid challenging market conditions: adjusted EBITDA of $291 million, free cash flow of $143 million ($0.47 per share), and average fleet availability of 90.2%.
• Active hedging and asset optimization delivered realized prices well above spot prices in the Alberta merchant portfolio during the quarter of low spot pricing. Hydro and wind assets provided significant environmental offsets for the 2025 gas fleet carbon compliance obligation.
• Full integration of the four gas-fired facilities from the 4North acquisition was completed during the quarter.

Alberta Data Center Strategy Progress

• The Alberta government published new data center regulations in June 2026, granting the Alberta System Operator (ASO) authority to proceed with the next phase of the large load integration plan for AI infrastructure.
• TransAlta believes its underutilized gas-fired steam units (20% average capacity factor in 2025, 90%+ capability) are well-positioned to support new data center load while maintaining grid reliability, and is actively engaged with the ASO on capacity determination.
• The joint development agreement with Brookfield and CPP Investments continues to advance, with the possibility of sequencing final investment decision (FID) for the 230 megawatt phase one before full underutilized capacity clarity is received.

Key Projects and Acquisitions

• The U.S. Department of Energy extended a 90-day temporary operation order for Centralia Unit 2; TransAlta is adhering to the order and will seek FERC reimbursement for related costs. The timeline for a 1Q 2027 FID for the coal-to-gas conversion remains on schedule, with commercial operation targeted for 4Q 2028.
• TransAlta announced an agreement to acquire two fully contracted natural gas peaking facilities in Colorado for US $1 billion, paired with a $350 million common share offering. The assets have long-term tolling agreements with full cost pass-through, and are expected to deliver $110 million in annual low-risk adjusted EBITDA, immediately accretive to free cash flow per share. Closing is expected in 4Q 2026 pending regulatory approvals.

Organizational Update

• TransAlta realigned its executive management team: Mike Politeski as EVP Finance and CFO, Grant Arnold as EVP Growth and Chief Commercial Officer, Nancy Brennan in an expanded role as Chief Legal, People and Corporate Affairs Officer, and Chris Fralick as EVP Generation and COO to support execution of the company's strategy.

• Management reaffirmed its full-year 2026 adjusted EBITDA and free cash flow guidance range, and remains confident in meeting these targets despite current challenging market conditions.
• The Colorado acquisition is not included in the 2026 guidance reaffirmation, and will contribute to results after closing in the fourth quarter of 2026.
• 2026 full-year sustaining capital expenditures are still expected to fall in the range of $140 million to $160 million. The year-over-year drop in Q2 sustaining capex was attributed to timing, not a structural change.
• TransAlta maintains hedges to support Alberta cash flows: 4,500 gigawatt hours of 2026 generation hedged at an average price of $64 per megawatt hour, and 6,600 gigawatt hours of 2027 generation hedged at the same $64 per megawatt hour, both well above current forward pricing.

TransAlta reported total adjusted EBITDA of $291 million for Q2 2026, broken down by segment as follows:

• Hydro: adjusted EBITDA of $87 million, representing 30% of total adjusted EBITDA. This is a $39 million decrease year-over-year, driven by lower Alberta spot and hedge prices and lower intercompany emissions credit sales.
• Wind and Solar: adjusted EBITDA of $90 million, representing 31% of total adjusted EBITDA. This was flat year-over-year, as higher U.S. wind output offset lower Alberta pricing and reduced wind resource in eastern Canada.
• Gas: adjusted EBITDA was $14 million higher than the prior year, supported by strong Alberta fleet optimization and positive contributions from the Far North acquisition.
• Energy Marketing: adjusted EBITDA decreased by $16 million year-over-year, 100% due to low Western power market volatility and lower quarterly realized gains, with additional gains expected to settle by year-end.
• Corporate: segment costs were 8% lower than the prior year, driven by company-wide cost control initiatives.
• Energy Transition: adjusted EBITDA was lower than the prior year, following the expiration of the Centralia contract at the end of 2025.

• Current soft Alberta merchant power prices (Q2 2026 average spot price of $29 per megawatt hour, down from $40 per megawatt hour in Q2 2025) driven by seasonally lower demand and continued excess market supply, which pressure near-term segment profitability.
• S&P reaffirmed TransAlta's BB+ credit rating but revised its outlook to negative, which creates near-term balance sheet constraints for large new investments, though management does not believe it materially limits current operational flexibility.
• Uncertainty around the timing and scope of the ASO's determination of underutilized generation capacity for Alberta data center development, which could delay scaling of the company's repurposing strategy.
• Gas supply constraints currently limit the potential expansion of the Centralia project to include Unit 1, with near-term execution of this opportunity seen as low probability.
• Legacy gas-fired steam units available for data center power support are not expected to operate permanently, requiring future repowering or new build to support long-term load growth.

Q: When will TransAlta get clarity on ASO underutilized capacity rules for data centers, and will the project be sequenced if decisions are delayed? / A: TransAlta is in ongoing collaborative discussions with the ASO, and is encouraged by the recent enabling regulatory change. Management cannot commit to a firm timeline from the ASO, but hopes for clarity within the next quarter. Sequencing FID for the initial 230 megawatt phase one before full capacity clarity is a very possible path that management is prepared to pursue alongside partners Brookfield and CPP Investments. Any additional scale would be added after ASO guidance is received.

Q: What is the current status of TransAlta's asset recycling program, and how does the Brookfield hydro conversion option factor into balance sheet strengthening? / A: TransAlta has multiple asset sales processes actively underway, and expects portfolio rotation to become more active as the company pursues new growth opportunities. The Brookfield conversion option (which would bring an equity cash infusion and remove $750 million of debt from the balance sheet) is one lever for strengthening the balance sheet, but it is paired with additional asset sales. The company has many high-value uses for capital, including the Centralia conversion, Alberta data center development, and strategic M&A, so multiple levers are being used to shore up the balance sheet.

Q: Will S&P's negative credit rating outlook constrain M&A capacity over the next 12 months? / A: Management views the negative outlook as a temporary hurdle driven by current soft Alberta pricing and the pre-FID status of Centralia, and sees a clear path to balance sheet improvement. The existing hedge book (6,600 GWh hedged at $64/MWh for 2027), capital-light nature of the Alberta data center opportunity, upcoming cash flow from Centralia after conversion, and proceeds from the active asset recycling program are all expected to improve leverage over time. Management does not believe the outlook materially impairs current balance sheet flexibility for ongoing strategic activities.

Q: What is the M&A strategy and target profile for TransAlta going forward after the Colorado acquisition? / A: TransAlta's M&A strategy remains unchanged: focused on the company's four core North American geographies, with technology and fuel agnosticism. All deals are evaluated based on risk-adjusted returns, free cash flow accretion on a per-share basis, and overall portfolio fit. The Colorado acquisition, while acquired at a higher EBITDA multiple than some previous deals, is justified by its 27-year long-term contracted profile, full cost pass-through structure, and 13% free cash flow yield (which is accretive to TransAlta's overall 7% free cash flow yield).