May 2011 Investor Presentation. Forward looking statements This - - PDF document

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May 2011 Investor Presentation.

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This presentation may contain forward looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. All forward looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These statements are not guarantees of our future performance and are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward looking statements. Some of the factors that could cause such differences include cost of fuels to produce electricity, legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels, unanticipated accounting or audit issues with respect to our financial statements or our internal control over financial reporting, plant availability, and general economic conditions in geographic areas where TransAlta Corporation operates. Given these uncertainties, the reader should not place undue reliance on this forward looking information, which is given as of this date. The material assumptions in making these forward looking statements are disclosed in our 2010 Annual Report to shareholders and other disclosure documents filed with securities regulators. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars.

Forward looking statements

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Value proposition and strategy Markets and contracting Growth Q1 2011 Financial and operational results 2011 Outlook

Outline

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66 MW

AUSTRALIA UNITED STATES CANADA

19 MW Hydro under development 286 MW

Generation Facilities:

Coal-fired under construction Coal-fired plants Gas-fired plants Hydro plants Wind-powered plants Geothermal 4,092 MW 1,788 MW 893 MW 1,064 MW 164 MW Biomass 25 MW Net generation in operation 8,026 MW

Canada’s largest publicly traded wholesale power generator & marketer

Yield, upside potential, and steady disciplined growth Low-to-moderate risk profile Financial strength Disciplined investment decisions

Value proposition and strategy

Wind under development

Quick Facts

TSX: TA; TA.Pr.D NYSE: TAC Market Cap: $5.0 billion Enterprise Value: $9.5 billion Credit rating: BBB/Baa2

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+

Financial Strength Multiple Geographies Diversification

Competitive strengths

We have strong competitive advantages and are not dependent

• n a single fuel source or a single region

Technology

+ +

= Opportunity & Increased Shareholder Value

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2000

6,870 MW

2011

8,270 MW

2000 2005 2010 Hydro Wind Geothermal 800 MW 1,117 MW 2,121 MW

Strategy: The last 10 years

We have diversified our fuel mix and more than doubled our renewable portfolio

Renewable Portfolio Capacity

73% 15% 12%

Total Portfolio Fuel Mix

26% 52% 22%

Gas Renewables Coal Canada’s largest investor owned renewable energy provider

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$31.53 $20.96

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Acquired Vision Quest Divested Mexico Renegotiated Sarnia Retired Wabamun 2008 2009 2010 2005 Constructed Genesee 3 2000 Transitioned to PRB coal 2006 Acquired CE Gen 2003 Acquired Canadian Hydro 2009 Acquired Centralia 2000 Constructed Keephills 3 2011 Coal Gas Renewables

8,270 MW 6,870 MW Generation gross margin per MWh produced

73% 15% 12% 52% 22% 26%

Diversified growth & optimization have driven increased gross margins

Strategy: The last 10 years

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Funds from operations have grown despite volatility in market prices

$MM $/MWh

Funds From Operations vs. Weighted Average Price / Merchant MWh Produced

Diversification and contracting drives growth

Average dividend coverage of 2.1x

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• Continue to drive productivity and

lower costs

• Sustain improved operational

performance

• Maintain options around coal sites
• Contract Centralia under new legislation
• Participate in CCS technology

development

• Information technology & strategic

suppliers drive productivity

• Prepare transition from PPAs
• Implement capital stock transition
• “Green Coal”

Drive the Base Drive the Base Reposition Coal Reposition Coal

Near Term 2011 - 2014 Long Term 2014 - 2020

Green & Diversify Our Portfolio Green & Diversify Our Portfolio

• Deliver on 371 MW of announced

growth

• Execute on development pipeline
• Targeting 200 – 300 MW growth per

year

• Continue to build multiple options

for the future

• Gas & hydro baseload
• Secure natural gas supply
• Strong acquisition potential

Strategy: Next 10 years

10 5% 10% 15% 20% 25% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 $30 $40 $50 $60 $70 $80 $90 $100 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Actual Forecast

Reserve Margins1 2

1% load growth 2% load growth 3% load growth

Positives

Tightening reserve margins Oil sands recovery driving load growth 2.5% demand growth per year for the next three

years Challenges

Over 800 MW of new supply in 2011 Weak natural gas prices expected to continue

throughout 2011

1 Figures as of May 4, 2011

Alberta Power Prices1

Actuals Current Market

+$1 / GJ = ~$8 - $10 / MWh

Recent strength in Alberta power prices due to supply constraints; long-term fundamentals remain strong driven by oil sands recovery

2 Includes transmission; does not include assumptions around announced facilities,

• nly facilities under construction

Alberta market

$/MWh

11 $0 $10 $20 $30 $40 $50 $60 $70 2007 2008 2009 2010 2011 2012 2013 2014 20% 25% 30% 35% 40% 45% 50% 55% 60% 2007 2008 2009 2010 2011 2012 2013 2014

Positives

Strong demand growth of 6.5% in Q1 2011

• vs. Q1 2010

1.9% demand growth per year for the next

three years due to expectations of a modest economic recovery Challenges

Pace of economic recovery is still uncertain

due to a weak housing market and job growth in the region

Weak natural gas prices expected to continue

throughout 2011

Continued growth in renewables expected

• ver the next few years

+$1 / MMBtu = ~$7 - $9 / MWh 1 Figures as of May 4, 2011

Improvements in demand; forward price recovery driven by natural gas

Reserve Margins1 PacNW Power Prices1

US$/MWh Actuals Current Market Actual Forecast

1% load growth 2% load growth 3% load growth

PacNW market

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Benefits to TransAlta:

Ability to enter into long-term contracts

• Utilities incented to enter into contracts
• Process for approving contracts streamlined
• Centralia is one of the lowest cost providers of

electricity in the region

Protected from any future State GHG

requirements and more stringent NOx/SOx requirements

Provides date certainty to allow TransAlta to

• ptimize operation and capex

Expedited permitting for a replacement gas plant Future gas plant exempt from future State GHG

regulations

Washington State’s bill regarding Centralia poses many benefits to TransAlta

Centralia

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500 1,000 1,500 2,000 2,500 3,000 3,500 2011 2012 2013 2014

$0 $50 $100 $150 $200 $250

1 2 3 4 5

Merchant Portfolio Contractedness

• Avg. Incremental EBITDA From

Higher Prices (2011 – 2014)1

$MM

1 Relative to a base of $50/MWh in Alberta and $35/MWh in the PacNW 2 Based on a 10% ROCE, $1,500 – $3,000 per KW and a 30 year depreciation

$75 $60 $70 $55 $65 $50 $60 $45 $55 $40 Alberta: PacNW: Merchant MWs

Hedging strategy provides leverage to power price recovery

Alberta: $60 - $65 $60 - $65 $60 - $65 $55 - $60 PacNW: $50 - $55 $50 - $55 $45 - $50 $45 - $50 2011 2012 2013 2014 90% target Capacity adjustments Contracted To be contracted Open

At a 10% ROCE, 200 MW growth can add another $40 - $80 million in additional EBITDA2

Significant upside to price plus growth in medium-term

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Tracking Merchant Q4 2012 15%+ $27 MM 15 MW Efficiency Uprate Alberta

Sundance 3 Uprate

Tracking Merchant Q4 2012 4 15%+ $68 MM 46 MW (23 MW each) Efficiency Uprates Alberta

Keephills 1 & 2 Uprates

Tracking Quebec PPA Q4 2012 2 – 4% above Cost of Capital $205 MM 66 MW Wind Quebec

New Richmond

10%+ 10%+ Unlevered after tax IRR Alberta British Columbia Location Tracking Merchant Q3 2011 ~$1,015 MM 3 225 MW 1 Supercritical Coal

Keephills 3

Tracking LTC Q2 2011 $48 MM 2 19 MW Hydro

Bone Creek

On time / On budget Contract Status Commercial Operations Date Total Project Cost Size Type

1 450 MW gross size 2 Bone Creek’s capital spend prior to the acquisition was $23 MM which does not form part of our total project cost 3 Keephills 3 capital spend increased from $988 MM to $1,015 MM and its COD was revised from Q2 2011 to Q3 2011 due to testing 4 Keephills unit 1 uprate has been moved to 2012

TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth

Executing on our growth strategy

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• 500

1,000 1,500 2,000 2,500 3,000 3,500

1

$- $250 $500 $750 $1,000 $1,250 $1,500 $1,750 $60 $70 $80 $90 $100 $110 $120

Est. EBIT $MM

Estimated Incremental EBITDA in 2021 $750 - $1,250 M1

$750 $1,000 $1,250 Alberta Power Prices 2021 ($/MWh)

1 Includes Sundance units 3 – 6, Keephills, Sheerness, and Alberta Hydro facilities

End of PPAs will provide significant EBITDA upside as production reverts back to TransAlta

2 Minimum power prices required for new NGCC facility 2

Significant long-term upside potential

Facility MWs under PPAs1

MW

2011 - 2020

Over 3,000 MWs under PPAs at ~$30 - $35 per MWh until 2020

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300 600 900

BC Alberta Saskatchewan Ontario Quebec California

Hydro Gas Fired Wind Geothermal

Total MW: 1,339 Total investment opportunity: $3.1 - $4.1 B

1 Based on TransAlta’s share

MW

Development Pipeline1

Over 1,300 MW of renewable energy in advanced development

Development pipeline

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CCS provides:

A mechanism for retrofitting and extending

economic life of existing coal units

Opportunities for new clean coal facilities Opportunity to utilize massive economic coal

reserves in Alberta; 1,000 years of coal reserves

A means for technology and regulatory

development

Strong competitive advantages 1,000 2,000 3,000 4,000 5,000 6,000 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031

Canada’s 45 year plan provides significant future investment

• pportunities in Alberta alone

Investment Opportunities (TransAlta Fleet Only)

TransAlta AB Portfolio Growth Replacement Opportunity TransAlta Coal MW

1 Based on 45 year coal-life and $1,800 - $2,800 per KW

• Growth and replacement opportunity provide 4,800 MW at

market prices and a $8.6 - $13.4 B Investment Opportunity1

We have significant opportunity with Carbon Capture and Storage (CCS) Reposition coal - Alberta

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75 150 225 300 375 450 Q1 2010 Q1 2011

92.7 91.4

86 88 90 92 94 Q1 2010 Q1 2011

Q1 2011 Operational performance and fuel mix

Availability (%) Comparable Generation Gross Margins by Fuel Type

Gas Renewables Coal

25% 21% 54% 25% 25% 50%

**

$M

*Excludes the impact of Sundance Units 1 and 2 * **Includes comparable gross margin from finance lease and equity investment assets

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$0.27 $0.34

Q1 2010 Q1 2011

$249 $287

Q1 2010 Q1 2011

$194 $226

Q1 2010 Q1 2011

Q1 2011 Financial performance

Comparable EBITDA Funds from Operations Comparable EPS

17% Increase 15% Increase 26% Increase

M M

M M

20 $- $0.5 $1.0 $1.5 $2.0 $2.5 Q1 2011 Credit Lines Utilized Credit Lines Available

Investment Grade Credit Ratios

Maintained investment grade credit ratios

$B

52.8% 4.7x 20.7%

• Mar. 31

2011 55 – 60% 4 – 5x 20 – 25% Target Range 19.6% Cash flow to debt 4.6x Cash flow to interest 53.1% Debt to capital

• Dec. 31

2010

Committed Credit Lines

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Sustaining Capex Dividends

2011 Outlook

$310 – $365 M $355 M Sustaining Capex (IFRS) $45 – $65 M $800 – $900 M 89 – 90% 2011 Outlook 88.9% Availability $805 M Funds from operations (IFRS) $41 M Energy Trading gross margin 2010 Actual $0 $250 $500 $750 $1,000 2011

$M

Sustaining Capex Dividends Free cash flow

$800 - $900M

Funds from Operations

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Disciplined and consistent strategy Strong and stable cash flow per share growth Highly contracted with leverage to power price recovery Excellent growth opportunities with multiple options for the future Significant upside as Alberta PPAs roll off Financial strength and stability

Near and long-term value driven by our unwavering commitment to provide strong yield and growth, maintain a disciplined strategy, and provide financial strength

Why invest?

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Appendix

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$0 $200 $400 $600 $800 $1,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter Perpetual Pref

CDN MTN's US MTN's (CDN $M)

1 Based on March 31, 2011 FX rate of $0.97 CAD/US

Minimal debt refinancing over the short-term provides ample financial flexibility

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Debt profile

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$85 - 110 $25 - 30 $40 - 50 $210 - 230 $80 - 95 $330 - 375 2012e $10 - 20 $25 - 30 $180 - 210 $95 - 105 $300 – 345 2011e Other $15 - 35 $20 - 30 Repowering / Life Extension Productivity $55 -65 Mine Capital $180 - 200 Major Maintenance $85 - 100 $320 - 365 2013e Routine Capital Sustaining ($M)

2011 - 2013 Sustaining capital plan1

1 Based on IFRS

Sustaining capital

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$0 - 5 $0 - 5

• Expensed

370 - 380 $75 - 80 Natural Gas and Renewables 1,770 - 1,790 $105 - 130 Coal 2,140 - 2,170 GWh lost $180 - 210 Total Capitalized ($M)

2011 Major maintenance plan1

1 Based on IFRS

Major maintenance

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Advanced development pipeline

LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & TURBINE CAPEX RANGE PPA / MW SITE CONTROL Applied Secured SECURED $ MM LTC Quebec

• St. Valentin

50 Wind

• $150 - $180

PPA/LTC Saskatchewan Mistahay Utin 175 Wind

• TBD

$400 - $500 PPA/LTC Saskatchewan Willow Bunch 175 Wind

• TBD

$400 - $500 PPA/LTC California Black Rock 1-3 87* Geothermal

• In Progress

$400 - $500 PPA/LTC Alberta Sundance 7 700 Gas-fired

• TBD

TBD $1,000 - $1,500 Merchant Alberta Dunvegan 100 Hydro

• TBD

$500 - $700 Merchant British Columbia Clemina Creek 11 Hydro

• TBD

$30 - $40 PPA/LTC British Columbia Serpentine Creek 10 Hydro

• TBD

$30 - $40 PPA/LTC British Columbia English Creek 5 Hydro

• TBD

$12 - $20 PPA/LTC Ontario Royal Road 18 Wind

• TBD

$35 - $45 PPA/LTC Ontario Yellow Falls 8* Hydro

• TBD

$30 - $45 PPA/LTC TOTAL MW : 1,339 TOTAL COST: $3.0 B - $4.1 B * TransAlta's share 2012 2013 2013

Projects in Advanced Development

ENVIRONMENTAL AND PERMITS TARGET COMMERCIAL OPERATION DATE 2013/14 2015 TBD TBD TBD TBD TBD TBD