Auxly Closes Transformational Debt Reduction Transactions, Strengthens Financial Position and Unlocks Growth Potential
These transactions represent an important milestone in the execution of Auxly's strategy, delivering a materially stronger balance sheet and providing the financial flexibility to invest in future growth. They reflect the culmination of a focused effort to streamline Auxly's capital structure and reinforce the long-term sustainability of our business.
With these transactions now complete, Auxly has achieved the following:
Eliminated approximately $21 million in debt from the balance sheet;
Reduced debt service obligations by approximately $700,000 per annum;
Access to a new $10 million revolving facility, providing financial flexibility to support continued growth; and
Removal of the going concern uncertainty disclosure from the Company's financial statements, a clear signal of renewed financial strength and stability.
"The closing of these transaction marks a turning point for Auxly," said Hugo Alves, CEO of Auxly. "We emerge from these transactions with a transformed balance sheet and the financial strength to fuel future growth. It is an exciting time to be an Auxly stakeholder. We are profitable, we are growing, we have brands and products that people trust and love, and now, with the continuing support of our capital and strategic partners, we have the financial fortitude to continue building on our success in the Canadian cannabis market and beyond."
"This is a significant milestone in Auxly's financial evolution," said Travis Wong, CFO of Auxly. "We've reduced debt, extended the term of our senior facility, and secured a new working capital facility. These improvements provide us with the financial flexibility to execute our strategy with confidence."
The following provides an overview of the finalized terms and structure of the amended credit facility and the Imperial Brands debt settlement.
Amended Credit Facility
The Company has amended and restated Auxly Leamington's existing credit facility agreement with a syndicate of lenders led by BMO (the " Amended Credit Facility"). The key modifications under the Amended Credit Facility include the following:
Borrower: The Company replaced Auxly Leamington as the borrower.
Facility Structure: Credit facility of $50.7 million consisting of:
Term loan of $36.2 million
Revolving facility of $10.0 million to be used for working capital and corporate requirements
Existing equipment leases of $4.5 million
Term: Two years with an option to extend for an additional year for $100,000.
Updated Financial Covenants: Revised covenants which provide the Company with the flexibility to support its long-term growth strategy.
Security: The Amended Credit Facility will be secured by all, or substantially all, of the assets of the Company and its subsidiaries (rather than primarily the assets and equity of Auxly Leamington as is the case under Auxly Leamington's existing credit facility).
Imperial Brands Convertible Debenture Settlement
Pursuant to the Company's exchange agreement with Imperial Brands dated June 19, 2025 (the " Exchange Agreement"), the following occurred:
(a)
Imperial Brands converted the remaining $1.0 million principal amount owed under the outstanding convertible debenture held by Imperial Brands (the " Debenture") into 1,234,568 common shares of Auxly (" Shares") at a conversion price of $0.81 per share in accordance with the terms of the Debenture (the " Principal Conversion");
(b)
Imperial Brands converted approximately $1.39 million of accrued interest under the Debenture into 17,101,921 Shares at a per-share conversion price of $0.0811, equal to the trailing 5-day volume-weighted average trading price of the Shares on the Toronto Stock Exchange (the " TSX") as of the date hereof (the " Interest Conversion"); and
(c)
the Company issued to Imperial Brands pre-funded warrants to acquire up to 90,883,618 Shares (the " Warrants") in exchange for approximately $7.37 million of additional interest, with the remaining accrued interest owed under the Debenture in the amount of approximately $11.79 million forgiven. Each Warrant entitles an affiliate of Imperial Brands to purchase one Share for a nominal exercise price at any time prior to December 31, 2028 (the " Expiry Date"), provided that the number of Warrants exercisable for Shares (the " Underlying Shares") that may be exercised at any time prior to the Expiry Date will be limited to such number of Warrants for which the issuance of corresponding Underlying Shares would not result in Imperial Brands owning more than 19.9% of all the then outstanding Shares.
The 18,336,489 Shares issued under the Principal Conversion and the Interest Conversion is the only immediate dilution to shareholders. Imperial Brands now owns approximately 19.9% of all issued and outstanding Shares and there are no further amounts owing by the Company to Imperial Brands.
ON BEHALF OF THE BOARD
"Hugo Alves" CEO
About Auxly Cannabis Group Inc. (TSX: XLY)
Auxly is a leading Canadian consumer packaged goods company in the cannabis products market, headquartered in Toronto, Canada. Our mission is to help consumers live happier lives through quality cannabis products that they trust and love.
Our vision is to be a global leader in quality cannabis products.
Learn more at www.auxly.com and stay up to date at Twitter: @AuxlyGroup; Instagram: @auxlygroup; Facebook: @auxlygroup; LinkedIn: company/auxlygroup/.
Notice Regarding Forward Looking Information:
This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities law. Forward-looking information is frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or information that certain events or conditions "may" or "will" occur. This information is only a prediction. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking information throughout this news release. Forward-looking information includes, but is not limited to: the anticipated benefits of the Amended Credit Facility and the timing thereof; the issuance of Underlying Shares in connection with the potential future exercise of Warrants; the anticipated benefits of the transaction contemplated by the Exchange Agreement and the timing thereof; the Company's execution of its product development and commercialization strategy; consumer preferences; political change; future legislative and regulatory developments involving cannabis and cannabis products; and competition and other risks affecting the Company in particular and the cannabis industry generally.
A number of factors could cause actual results to differ materially from a conclusion, forecast or projection contained in the forward-looking information included in this release including, but not limited to, whether: the expected benefits of the execution of the Amended Credit Facility and/or the Settlement (or any portion thereof) materialize in the manner expected, or at all; there is acceptance and demand for current and future Company products by consumers and provincial purchasers; and general economic, financial market, legislative, regulatory, competitive and political conditions in which the Company operates will remain the same. Additional risk factors are disclosed in the annual information form of the Company for the financial year ended December 31, 2024 dated March 20, 2025 and other documents that the Company files with Canadian securities regulatory authorities from time to time.
New factors emerge from time to time, and it is not possible for management to predict all of those factors or to assess in advance the impact of each such factor on the Company's business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information. The forward-looking information in this news release is based on information currently available and what management believes are reasonable assumptions. Forward-looking information speaks only to such assumptions as of the date of this release. Readers should not place undue reliance on forward-looking information contained in this news release.
The forward-looking information contained in this release is expressly qualified by the foregoing cautionary statements and is made as of the date of this release. Except as may be required by applicable securities laws, the Company does not undertake any obligation to publicly update or revise any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results, or otherwise.
SOURCE Auxly Cannabis Group Inc.
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Adjusted net earnings (loss) attributable per common share is a non-IFRS ratio and the most directly comparable IFRS measure is net income (loss) per common share attributable to common shareholders. Refer to the reconciliation of earnings (loss) before income taxes to adjusted net earnings (loss) attributable to common shareholders in the Reconciliation of Non-IFRS Measures on a Consolidated Basis by Segment section of the MD&A. Funds From Operations (FFO) Represents a proxy for cash generated from operating activities before changes in working capital and provides the ability to evaluate cash flow trends in comparison with results from prior periods. FFO is calculated as cash flow from operating activities before changes in working capital and is adjusted for transactions and amounts that the Company believes are not representative of ongoing cash flows from operations. Free Cash Flow (FCF) Represents the amount of cash that is available to invest in growth initiatives, make scheduled principal debt repayments, repay maturing debt, pay common share dividends or repurchase common shares and provides the ability to evaluate cash flow trends in comparison with the results from prior periods. Changes in working capital are excluded so that FFO and FCF are not distorted by changes that we consider temporary in nature, reflecting, among other things, the impact of seasonal factors and timing of receipts and payments. Non-IFRS Ratios FFO per share, FCF per share and adjusted net debt to adjusted EBITDA are non-IFRS ratios that are presented in the MD&A. Refer to the Reconciliation of Cash Flow from Operations to FFO and FCF and Key Non-IFRS Financial Ratios sections of the MD&A for additional information. Net Interest Expense Net interest expense is calculated as total interest expense less total interest income and non-cash items. For detailed calculation refer to the table in the Reconciliation of Adjusted EBITDA to FFO and FCF section of this MD&A. Net Interest expense is a proxy for the actual cash interest paid that approximates the cash outflow in the FFO and FCF calculation. The most directly comparable IFRS measure is total interest expense. FFO per share and FCF per share FFO per share and FCF per share are calculated using the weighted average number of common shares outstanding during the period. FFO per share and FCF per share are non-IFRS ratios. Supplementary financial measures include available liquidity, carbon compliance per MWh, fuel cost per MWh, hedged power price average per MWh, realized foreign exchange loss, sustaining capital expenditures, the Alberta electricity portfolio metrics and unrealized foreign exchange loss (gain). Reconciliation of these non-IFRS financial measures to the most comparable IFRS measure are provided below. The following table reflects adjusted EBITDA and adjusted earnings (loss) before income taxes by segment and provides reconciliation to earnings (loss) before income taxes for the three months ended June 30, 2025: Reclassifications and adjustments: Unrealized mark-to-market (gain) loss 18 68 71 15 (2) — 170 — (170) — Decrease in finance lease receivable — — 7 — — — 7 — (7) — Finance lease income — 2 3 — — — 5 — (5) — Revenues from Planned Divestitures — — (3) — — — (3) — 3 — Unrealized foreign exchange gain on commodity — — — — (2) — (2) — 2 — Adjusted revenue 147 129 282 88 34 (67) 613 (3) (177) 433 Fuel and purchased power 7 9 106 51 — — 173 — — 173 Reclassifications and adjustments: Fuel and purchased power related to Planned Divestitures — — (1) — — — (1) — 1 — Adjusted fuel and purchased power 7 9 105 51 — — 172 — 1 173 Carbon compliance costs (recovery) — 1 (8) — — (67) (74) — — (74) Adjusted gross margin 140 119 185 37 34 — 515 (3) (178) 334 OM&A 13 25 65 18 8 45 174 (1) — 173 Reclassifications and adjustments: OM&A related to Planned Divestitures — — (1) — — — (1) — 1 — ERP integration costs — — — — — (6) (6) — 6 — Acquisition-related transaction and restructuring costs — — — — — (1) (1) — 1 — Adjusted OM&A 13 25 64 18 8 38 166 (1) 8 173 Taxes, other than income taxes 1 5 5 — — 1 12 — — 12 Net other operating income — — (12) — — — (12) — — (12) Adjusted EBITDA (2) 126 89 128 19 26 (39) 349 Depreciation and amortization (8) (52) (74) (13) — (4) (151) 1 — (150) Equity income — — — — — — — — 1 1 Interest income — — — — — 7 7 (1) — 6 Interest expense — — — — — (89) (89) 1 — (88) Realized foreign exchange gain — — — — — 6 6 — — 6 Adjusted earnings (loss) before income taxes (2) 118 37 54 6 26 (119) 122 Reclassifications and adjustments above (18) (70) (80) (15) 4 (7) (186) Finance lease income — 2 3 — — — 5 — — 5 Skookumchuk earnings reclass to Equity income (1) — (1) — — — 1 — — — — Asset impairment charges — — — (11) — (2) (13) — — (13) Unrealized foreign exchange loss — — — — — (23) (23) — — (23) Earnings (loss) before income taxes 100 (32) (23) (20) 30 (150) (95) — — (95) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. Adjusted EBITDA, adjusted earnings (loss) before income taxes are non-IFRS measures, are not defined, have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this earnings release. The following table reflects adjusted EBITDA and adjusted earnings (loss) before income taxes by segment and provides reconciliation to earnings (loss) before income taxes for the three months ended June 30, 2024: Hydro Wind & Solar (1) Gas Energy Transition Energy Marketing Corporate Total Equity- accounted investments (1) Reclass adjustments IFRS financials Revenues 99 112 284 79 47 (34) 587 (5) — 582 Reclassifications and adjustments: Unrealized mark-to-market (gain) loss 1 8 10 (14) 1 — 6 — (6) — Decrease in finance lease receivable — — 5 — — — 5 — (5) — Finance lease income — 2 2 — — — 4 — (4) — Unrealized foreign exchange gain on commodity — — (1) — — — (1) — 1 — Adjusted revenue 100 122 300 65 48 (34) 601 (5) (14) 582 Fuel and purchased power 3 8 97 46 — — 154 — — 154 Carbon compliance costs (recovery) — — 26 — — (34) (8) — — (8) Adjusted gross margin 97 114 177 19 48 — 455 (5) (14) 436 OM&A 13 24 42 15 9 42 145 (1) — 144 Reclassifications and adjustments: Acquisition-related transaction and restructuring costs — — — — — (4) (4) — 4 — Adjusted OM&A 13 24 42 15 9 38 141 (1) 4 144 Taxes, other than income taxes 1 4 3 2 — — 10 (1) — 9 Net other operating income — (2) (10) — — — (12) — — (12) Adjusted EBITDA (2)(3) 83 88 142 2 39 (38) 316 — — — Depreciation and amortization (8) (47) (56) (15) (1) (5) (132) 1 — (131) Equity income — — — — — 1 1 — 2 3 Interest income — — — — — 8 8 — — 8 Interest expense — — — — — (80) (80) — — (80) Realized foreign exchange loss (3) — — — — — (1) (1) — — (1) Adjusted earnings (loss) before income taxes (2) 75 41 86 (13) 38 (115) 112 — — — Reclassifications and adjustments above (1) (10) (16) 14 (1) (4) (18) — — — Finance lease income — 2 2 — — — 4 — — 4 Skookumchuk earnings reclass to Equity income (1) — (2) — — — 2 — — — — Asset impairment (charges) reversals — (1) — 1 — (5) (5) — — (5) Gain on sale of assets and other (3) — — — 1 — — 1 — — 1 Unrealized foreign exchange loss (3) — — — — — (1) (1) — — (1) Earnings (loss) before income taxes 74 30 72 3 37 (122) 94 — — 94 The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. Adjusted EBITDA, adjusted earnings (loss) before income taxes are non-IFRS measures, are not defined, have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this earnings release. During the first quarter of 2025, our Adjusted EBITDA composition was amended to exclude the impact of realized gain (loss) on closed exchange positions and Australian interest income. Therefore, the Company has applied this composition to all previously reported periods. The following table reflects adjusted EBITDA and adjusted earnings (loss) before income taxes by segment and provides reconciliation to earnings (loss) before income taxes for the six months ended June 30, 2025: Hydro Wind & Solar (1) Gas Energy Transition Energy Marketing Corporate Total Equity- accounted investments (1) Reclass adjustments IFRS financials Revenues 215 166 594 227 65 (66) 1,201 (10) — 1,191 Reclassifications and adjustments: Unrealized mark-to-market (gain) loss (3) 104 39 14 (1) — 153 — (153) — Decrease in finance lease receivable — 1 14 — — — 15 — (15) — Finance lease income — 3 8 — — — 11 — (11) — Revenues from Planned Divestitures — — (7) — — — (7) — 7 — Unrealized foreign exchange gain on commodity — — — — (2) — (2) — 2 — Adjusted revenue 212 274 648 241 62 (66) 1,371 (10) (170) 1,191 Fuel and purchased power 11 19 269 149 — 2 450 — — 450 Reclassifications and adjustments: Fuel and purchased power related to Planned Divestitures — — (3) — — — (3) — 3 — Adjusted fuel and purchased power 11 19 266 149 — 2 447 — 3 450 Carbon compliance costs (recovery) — 2 41 — — (68) (25) — — (25) Adjusted gross margin 201 253 341 92 62 — 949 (10) (173) 766 OM&A 26 54 124 35 15 94 348 (2) — 346 Reclassifications and adjustments: OM&A related to Planned Divestitures — — (3) — — — (3) — 3 — ERP integration costs — — — — — (10) (10) — 10 — Acquisition-related transaction and restructuring costs — — — — — (5) (5) — 5 — Adjusted OM&A 26 54 121 35 15 79 330 (2) 18 346 Taxes, other than income taxes 2 10 10 1 — 1 24 — — 24 Net other operating income — (4) (22) — — — (26) — — (26) Reclassifications and adjustments: Insurance recovery — 2 — — — — 2 — (2) — Adjusted net other operating income — (2) (22) — — — (24) — (2) (26) Adjusted EBITDA (2) 173 191 232 56 47 (80) 619 Depreciation and amortization (17) (105) (138) (28) (2) (9) (299) 3 — (296) Equity income — — — — — (1) (1) — 4 3 Interest income — — — — — 12 12 (1) — 11 Interest expense — — — — — (183) (183) 2 — (181) Realized foreign exchange gain — — — — — 2 2 — — 2 Adjusted earnings (loss) before income taxes (2) 156 86 94 28 45 (259) 150 Reclassifications and adjustments above 3 (106) (60) (14) 3 (15) (189) Finance lease income — 3 8 — — — 11 — — 11 Skookumchuk earnings reclass to Equity income (1) — (4) — — — 4 — — — — Fair value change in contingent consideration payable — — 34 — — — 34 — — 34 Asset impairment (charges) reversals — — (34) 13 — (7) (28) — — (28) Loss on sale of assets and other — — — — — (1) (1) — — (1) Unrealized foreign exchange loss — — — — — (23) (23) — — (23) Earnings (loss) before income taxes 159 (21) 42 27 48 (301) (46) — — (46) The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. Adjusted EBITDA, adjusted earnings (loss) before income taxes are non-IFRS measures, are not defined, have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this earnings release. The following table reflects adjusted EBITDA and adjusted earnings (loss) before income taxes by segment and provides reconciliation to earnings (loss) before income taxes for the six months ended June 30, 2024: Hydro Wind & Solar (1) Gas Energy Transition Energy Marketing Corporate Total Equity- accounted investments (1) Reclass adjustments IFRS financials Revenues 211 251 717 296 99 (34) 1,540 (11) — 1,529 Reclassifications and adjustments: Unrealized mark-to-market (gain) loss (4) (13) (81) (20) (2) — (120) — 120 — Decrease in finance lease receivable — 1 9 — — — 10 — (10) — Finance lease income — 3 3 — — — 6 — (6) — Unrealized foreign exchange gain on commodity — — (2) — — — (2) — 2 — Adjusted revenue 207 242 646 276 97 (34) 1,434 (11) 106 1,529 Fuel and purchased power 9 17 239 212 — — 477 — — 477 Carbon compliance costs (recovery) — — 66 — — (34) 32 — — 32 Adjusted gross margin 198 225 341 64 97 — 925 (11) 106 1,020 OM&A 26 44 88 33 19 70 280 (2) — 278 Reclassifications and adjustments: Acquisition-related transaction and restructuring costs — — — — — (7) (7) — 7 — Adjusted OM&A 26 44 88 33 19 63 273 (2) 7 278 Taxes, other than income taxes 2 8 6 2 — — 18 (1) — 17 Net other operating income — (4) (20) — — — (24) — — (24) Adjusted EBITDA (2)(3) 170 177 267 29 78 (63) 658 Depreciation and amortization (15) (90) (111) (31) (2) (9) (258) 3 — (255) Equity income — — — — — (1) (1) — 5 4 Interest income — — — — — 15 15 — — 15 Interest expense — — — — — (149) (149) — — (149) Realized foreign exchange loss (4) — — — — — (9) (9) — — (9) Adjusted earnings (loss) before income taxes (2) 155 87 156 (2) 76 (216) 256 Reclassifications and adjustments above 4 9 71 20 2 (7) 99 Finance lease income — 3 3 — — — 6 — — 6 Skookumchuk earnings reclass to Equity income (1) — (5) — — — 5 — — — — Asset impairment (charges) reversals — (5) — 4 — (5) (6) — — (6) Gain on sale of assets and other (4) — — — 1 — 2 3 — — 3 Unrealized foreign exchange gain (4) — — — — — 3 3 — — 3 Earnings (loss) before income taxes 159 89 230 23 78 (218) 361 — — 361 The Skookumchuck wind facility has been included on a proportionate basis in the Wind and Solar segment. Adjusted EBITDA, adjusted earnings (loss) before income taxes are non-IFRS measures, are not defined, have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this earnings release. During the first quarter of 2025, our Adjusted EBITDA composition was amended to exclude the impact of realized gain (loss) on closed exchange positions and Australian interest income. Therefore, the Company has applied this composition to all previously reported periods. Reconciliation of Earnings Before Income Taxes to Adjusted Net Earnings attributable to common shareholders The following table reflects reconciliation of (loss) earnings before income taxes to adjusted net earnings attributable to common shareholders for the three and six months ended June 30, 2025 and June 30, 2024: Three months ended June 30 Six months ended June 30 2025 2024 2025 2024 (Loss) earnings before income taxes (95) 94 (46) 361 Income tax expense 11 28 18 57 Net (loss) earnings (106) 66 (64) 304 Net (loss) earnings attributable to non-controlling interests (7) (3) (11) 13 Preferred share dividends 13 13 13 13 Net (loss) earnings attributable to common shareholders (112) 56 (66) 278 Adjustments and reclassifications (pre-tax): Adjustments and reclassifications to Revenues 177 14 170 (106) Adjustments and reclassifications to Fuel and purchased power 1 — 3 — Adjustments and reclassifications to OM&A 8 4 18 7 Adjustments and reclassifications to Net other operating income — — (2) — Fair value change in contingent consideration payable (gain) — — (34) — Finance lease income (5) (4) (11) (6) Asset impairment charges 13 5 28 6 Loss (gain) on sale of assets and other — (1) 1 (3) Unrealized foreign exchange loss (gain) (1) 23 — 23 (3) Calculated tax (expense) recovery on adjustments and reclassifications (2) (51) (4) (46) 24 Adjusted net earnings attributable to common shareholders (3) 54 70 84 197 Weighted average number of common shares outstanding in the period 297 303 297 306 Net (loss) income per common share attributable to common shareholders (0.38) 0.18 (0.22) 0.91 Adjustments and reclassifications (net of tax) 0.56 0.05 0.50 (0.26) Adjusted net earnings per common share attributable to common shareholders (3) 0.18 0.23 0.28 0.64 Unrealized foreign exchange (loss) gain is a supplementary financial measure. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this MD&A for more details. Represents a theoretical tax calculated by applying the Company's consolidated effective tax rate of 23.3 per cent for the three and six months ended June 30, 2025 (three and six months ended June 30, 2024 — 23.3 per cent). The amount does not take into account the impact of different tax jurisdictions the Company's operations are domiciled and does not include the impact of deferred taxes. Adjusted net earnings attributable to common shareholders and Adjusted net earnings per common share attributable to common shareholders are non-IFRS measures, are not defined, have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. The most directly comparable IFRS measures are net earnings attributable to common shareholders and net earnings per share attributable to common shareholders, basic and diluted. Refer to the Non-IFRS financial measures section in this earnings release for more details. Reconciliation of cash flow from operations to FFO and FCF The table below reconciles our cash flow from operating activities to our FFO and FCF: Three months ended June 30 Six months ended June 30 2025 2024 2025 2024 Cash flow from operating activities (1) 157 108 164 352 Change in non-cash operating working capital balances 81 114 198 107 Cash flow from operations before changes in working capital 238 222 362 459 Adjustments Share of adjusted FFO from joint venture (1) 1 2 3 4 Decrease in finance lease receivable 7 5 15 10 Clean energy transition provisions and adjustments — 2 — 2 Brazeau penalties payment — — 33 — Acquisition-related transaction and restructuring costs 2 4 8 7 Other (2) 4 1 10 8 FFO (3) 252 236 431 490 Deduct: Sustaining capital expenditures (1) (57) (40) (80) (40) Dividends paid on preferred shares (13) (13) (26) (26) Distributions paid to subsidiaries' non-controlling interests (2) (5) (2) (24) Principal payments on lease liabilities — (1) (1) (2) Other (3) — (6) — FCF (3) 177 177 316 398 Weighted average number of common shares outstanding in the period 297 303 297 306 Cash flow from operating activities per share 0.53 0.36 0.55 1.15 FFO per share (3) 0.85 0.78 1.45 1.60 FCF per share (3) 0.60 0.58 1.06 1.30 Includes our share of amounts for the Skookumchuck wind facility, an equity-accounted joint venture. Other consists of production tax credits, which is a reduction to tax equity debt, less distributions from an equity-accounted joint venture. These items are not defined and have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. During the first quarter of 2025, our Adjusted EBITDA composition was amended to exclude the impact of realized gain (loss) on closed exchange positions and Australian interest income. Therefore, the Company has applied this composition to all previously reported periods. Refer to the Non-IFRS financial measures and other specified financial measures section in this earnings release. The table below provides a reconciliation of our adjusted EBITDA to our FFO and FCF: Three months ended June 30 Six months ended June 30 $ millions, unless otherwise stated 2025 2024 2025 2024 Adjusted EBITDA (1)(5) 349 316 619 658 Provisions (2) 6 6 6 Net interest expense (2) (66) (57) (138) (105) Current income tax expense (46) (33) (59) (60) Realized foreign exchange gain (loss) (3) 4 (1) 2 (9) Decommissioning and restoration costs settled (11) (12) (20) (19) Other non-cash items 24 17 21 19 FFO (4)(5) 252 236 431 490 Deduct: Sustaining capital expenditures (3)(5) (57) (40) (80) (40) Dividends paid on preferred shares (13) (13) (26) (26) Distributions paid to subsidiaries' non-controlling interests (2) (5) (2) (24) Principal payments on lease liabilities — (1) (1) (2) Other (3) — (6) — FCF (4)(5) 177 177 316 398 Adjusted EBITDA is defined in the Additional IFRS Measures and Non-IFRS Measures of this earnings release and reconciled to earnings (loss) before income taxes above. During the first quarter of 2025, our Adjusted EBITDA composition was amended to exclude the impact of realized gain (loss) on closed exchange positions and Australian interest income. Therefore, the Company has applied this composition to all previously reported periods. Net interest expense is a non-IFRS measure, is not defined and has no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. Refer to the table below for detailed calculation. Supplementary financial measure. Refer to the Additional Non-IFRS and Supplementary Financial Measures section of this earnings release. These items are not defined and have no standardized meaning under IFRS and may not be comparable to similar measures presented by other issuers. FFO and FCF are defined in the Non-IFRS financial measures and other specified financial measures section in this earnings release and reconciled to cash flow from operating activities above. Includes our share of amounts for Skookumchuck wind facility, an equity-accounted joint venture. Net interest expense in the reconciliation of our adjusted EBITDA to our FFO and FCF is calculated as follows: Three months ended June 30 Six months ended June 30 2025 2024 2025 2024 Interest expense 88 80 181 149 Less: Interest Income (6) (8) (11) (15) Less: non-cash items (1) (16) (15) (32) (29) Net Interest Expense 66 57 138 105 Non-cash items include accretion of provisions, financing cost amortization and other non-cash items. TransAlta is in the process of filing its unaudited interim Consolidated Financial Statements and accompanying notes, as well as the associated Management's Discussion & Analysis (MD&A). These documents will be available today on the Investors section of TransAlta's website at or through SEDAR at About TransAlta Corporation: TransAlta owns, operates and develops a diverse fleet of electrical power generation assets in Canada, the United States and Australia with a focus on long-term shareholder value. TransAlta provides municipalities, medium and large industries, businesses and utility customers with affordable, energy efficient and reliable power. Today, TransAlta is one of Canada's largest producers of wind power and Alberta's largest producer of thermal generation and hydro-electric power. For over 114 years, TransAlta has been a responsible operator and a proud member of the communities where we operate and where our employees work and live. TransAlta aligns its corporate goals with the UN Sustainable Development Goals and the Future-Fit Business Benchmark, which also defines sustainable goals for businesses. Our reporting on climate change management has been guided by the International Financial Reporting Standards (IFRS) S2 Climate-related Disclosures Standard and the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. TransAlta has achieved a 70 per cent reduction in GHG emissions or 22.7 million tonnes CO2e since 2015 and received an upgraded MSCI ESG rating of AA. For more information about TransAlta, visit our web site at Cautionary Statement Regarding Forward-Looking Information This news release includes "forward-looking information," within the meaning of applicable Canadian securities laws, and "forward-looking statements," within the meaning of applicable United States securities laws, including the Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements that include phrases such as "may", "will", "can", "could", "would", "shall", "believe", "expect", "estimate", "anticipate", "intend", "plan", "forecast", "foresee", "potential", "enable", "continue" or other comparable terminology. These statements are not guarantees of our future performance, events or results and are subject to risks, uncertainties and other important factors that could cause our actual performance, events or results to be materially different from those set out in or implied by the forward-looking statements. In particular, this news release contains forward-looking statements about the following, among other things: the strategic objectives of the Company and that the execution of the Company's strategy will realize value for shareholders; our capital allocation and financing strategy; our sustainability goals and targets, including those in our 2024 Sustainability Report; our 2025 Outlook; our financial and operational performance, including our hedge position; optimizing and diversifying our existing assets; the increasingly contracted nature of our fleet; expectations about strategies for growth and expansion; data centre opportunities, including the AESO's expectation around the timing of execution of Demand Transmission Service contracts and entering into a data centre memorandum of understanding; opportunities for Centralia redevelopment, including the execution of a definitive agreement with our customer for the full capacity of Centralia Unit 2; expectations regarding ongoing and future transactions, including the sale of Poplar Hill; expected costs and schedules for planned projects; expected regulatory processes and outcomes, including in relation to the Alberta restructured energy market; the completion and closing of acquisition and divestiture transactions which are subject to customary closing terms and conditions, the power generation industry and the supply and demand of electricity; the cyclicality of our business; expected outcomes with respect to legal proceedings; the expected impact of future tax and accounting changes; and expected industry, market and economic conditions. The forward-looking statements contained in this news release are based on many assumptions including, but not limited to, the following: no significant changes to applicable laws and regulations; no unexpected delays in obtaining required regulatory approvals; no material adverse impacts to investment and credit markets; no significant changes to power price and hedging assumptions; no significant changes to gas commodity price assumptions and transport costs; no significant changes to interest rates; no significant changes to the demand and growth of renewables generation; no significant changes to the integrity and reliability of our facilities; no significant changes to the Company's debt and credit ratings; no unforeseen changes to economic and market conditions; no significant event occurring outside the ordinary course of business; and realization of expected impacts from ongoing and future transactions. These assumptions are based on information currently available to TransAlta, including information obtained from third-party sources. Actual results may differ materially from those predicted. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this news release include, but are not limited to: fluctuations in power prices; changes in supply and demand for electricity; our ability to contract our electricity generation for prices that will provide expected returns; our ability to replace contracts as they expire; risks associated with development projects and acquisitions; failure to complete divestitures on the terms and conditions specified or at all; any difficulty raising needed capital in the future on reasonable terms or at all; our ability to achieve our targets relating to ESG; long-term commitments on gas transportation capacity that may not be fully utilized over time; changes to the legislative, regulatory and political environments; environmental requirements and changes in, or liabilities under, these requirements; operational risks involving our facilities, including unplanned outages and equipment failure; disruptions in the transmission and distribution of electricity; reductions in production; impairments and/or writedowns of assets; adverse impacts on our information technology systems and our internal control systems, including increased cybersecurity threats; commodity risk management and energy trading risks; reduced labour availability and ability to continue to staff our operations and facilities; disruptions to our supply chains; climate-change related risks; reductions to our generating units' relative efficiency or capacity factors; general economic risks, including deterioration of equity and debt markets, increasing interest rates or rising inflation; general domestic and international economic and political developments, including potential trade tariffs; industry risk and competition; counterparty credit risk; inadequacy or unavailability of insurance coverage; increases in the Company's income taxes and any risk of reassessments; legal, regulatory and contractual disputes and proceedings involving the Company; reliance on key personnel; and labour relations matters. The foregoing risk factors, among others, are described in further detail under the heading "Governance and Risk Management" in the MD&A, which section is incorporated by reference herein. Readers are urged to consider these factors carefully when evaluating the forward-looking statements and are cautioned not to place undue reliance on them. The forward-looking statements included in this news release are made only as of the date hereof and we do not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise, except as required by applicable laws. The purpose of the financial outlooks contained herein is to give the reader information about management's current expectations and plans and readers are cautioned that such information may not be appropriate for other purposes. Note: All financial figures are in Canadian dollars unless otherwise indicated.
