Seneca Capital Urges TransAlta Board to Immediately Explore Strategic Options to...

Seneca Capital Urges TransAlta Board to Immediately Explore Strategic Options
to Maximize Shareholder Value
Recommends Pursuing Plan of Action in Response to Acquisition Proposal and
Under-Valued Stock

NEW YORK, July 22 /PRNewswire/ -- Seneca Capital today sent the following
letter to the Special Committee of the Board of Directors of TransAlta
Corporation (TSX: TA; NYSE: TAC), urging them to immediately review
alternatives to maximize shareholder value, including but not limited to an
auction for sale of the company, a strategic partnership or a restructuring of
the company's long-term power contracts, to unlock the company's substantial
unrealized value for all shareholders. Seneca also urges the Board to pursue
better alignment of the company's management compensation with its North
American peers. The letter in part states:
Dear Special Committee:
Following the July 21, 2008 public proposal by LS Power Equity Partners
and Global Infrastructure Partners to acquire the company for Cdn $39/share,
we are writing as a substantial shareholder of the company to urge you to
begin an immediate and expedited review of strategic alternatives available to
the company to maximize value for all shareholders. We envision that such
alternatives may include but are not limited to an auction for sale of the
company, a strategic partnership or a restructuring of the company's long-term
power contracts. We believe that the July 21st proposal and the continued
disconnect between the company's share price and intrinsic value, clearly
demonstrate that the status quo is not a viable option.
Over the past several years, Seneca has monitored closely the activities
of TransAlta and its peers and we have been a holder of the company's shares
for a substantial period of time. Based upon our investment experience,
particularly within the energy sector, we believe that a gap currently exists
between the fundamental value of TransAlta's assets and its stock price. In
our opinion, the stock market does not properly account for the fact that over
40% of the company's generation output is currently committed under long-term
contracts in Alberta at prices (estimated to be $30/mwh) that are
substantially below market price (estimated to be $80/mwh). As those contracts
roll off, the future cash flows of the company could be expected to increase
dramatically. We also believe the market does not appreciate the current cash
generating capability of the business due to a mismatch between earnings and
recurring free cash flow per share.
Following on the impetus of the LS Power/Global Infrastructure proposal,
the Special Committee should -- consistent with the Board's fiduciary duties
to shareholders -- act immediately to review alternatives to maximize
shareholder value and unlock the company's substantial unrealized value for
all of the company's shareholders. As part of its strategic review, the
Special Committee should engage a globally recognized independent financial
advisor with the mandate to explore a range of strategic alternatives and then
act expeditiously to execute the optimal strategic path.
We also urge the Board to immediately pursue better aligning the company's
management compensation with the interests of shareholders by employing a
compensation scheme that is more comparable to those of the company's North
American independent power producer peers, including but not limited to the
addition of stock option grants. We believe it is crucial for shareholders,
particularly at a time such as this, that management be appropriately and
adequately incented to create shareholder value.
About Seneca Capital
Seneca Capital is an investment fund headquartered in New York. The fund,
founded in 1996, maintains a broad array of value-focused investments across
industries, geographies and capital structures. Seneca maintains a team of
professionals that focus primarily on energy and commodity related industries.
Seneca has a successful track record making concentrated, longer-term
investments in companies such as TransAlta.
SOURCE Seneca Capital

Allyson Morris of The Abernathy MacGregor Group for Seneca Capital,
+1-212-371-5999