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

1 May 2011 Investor Presentation.

Forward looking statements 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. 2

Outline � Value proposition and strategy � Markets and contracting � Growth � Q1 2011 Financial and operational results � 2011 Outlook 3

Value proposition and strategy Canada’s largest publicly traded wholesale power generator & marketer Quick Facts Yield, upside potential, and steady disciplined growth TSX: TA; TA.Pr.D NYSE: TAC CANADA Market Cap: $5.0 billion Low-to-moderate risk profile Enterprise Value: $9.5 billion Credit rating: BBB/Baa2 UNITED STATES Financial strength Generation Facilities : Coal-fired plants 4,092 MW Gas-fired plants 1,788 MW 893 MW Disciplined investment decisions Hydro plants 1,064 MW Wind-powered plants AUSTRALIA Geothermal 164 MW Biomass 25 MW Net generation in operation 8,026 MW Coal-fired under construction 286 MW 19 MW Hydro under development 66 MW Wind under development 4

Competitive strengths We have strong competitive advantages and are not dependent on a single fuel source or a single region Financial Multiple Diversification Technology Strength Geographies + + + = Opportunity & Increased Shareholder Value 5

Strategy: The last 10 years We have diversified our fuel mix and more than doubled our renewable portfolio Total Portfolio Fuel Mix Renewable Portfolio Capacity 2,121 MW Canada’s largest investor owned renewable energy provider 2011 2000 1,117 MW 800 MW 15% 26% 52% 12% 73% 22% 8,270 MW 6,870 MW 2000 2005 2010 Coal Gas Renewables Hydro Wind Geothermal 6

Strategy: The last 10 years Diversified growth & optimization have driven increased gross margins Acquired Canadian Retired Constructed Transitioned Divested Renegotiated Acquired Acquired Constructed Acquired Hydro Wabamun Keephills 3 to PRB coal Mexico Sarnia Centralia Vision Quest Genesee 3 CE Gen 2010 2003 2006 2000 2008 2009 2009 2011 2000 2005 $31.53 Generation gross margin per MWh produced $20.96 26% 12% 15% 22% 73% 52% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e 6,870 MW 8,270 MW Renewables Gas Coal 7

Diversification and contracting drives growth Funds from operations have grown despite volatility in market prices Funds From Operations vs. Weighted Average Price / Merchant MWh Produced $MM $/MWh � Average dividend coverage of 2.1x 8

Strategy: Next 10 years Long Term Near Term 2014 - 2020 2011 - 2014 Information technology & strategic Continue to drive productivity and � � suppliers drive productivity lower costs Drive the Drive the Prepare transition from PPAs Sustain improved operational Base � Base � performance Deliver on 371 MW of announced Continue to build multiple options � � growth for the future Green & Diversify Green & Diversify Execute on development pipeline Gas & hydro baseload � � Our Portfolio Our Portfolio Targeting 200 – 300 MW growth per Secure natural gas supply � � year Strong acquisition potential � Maintain options around coal sites Implement capital stock transition � � Reposition Reposition Contract Centralia under new legislation “Green Coal” � � Coal Coal Participate in CCS technology � development 9

Alberta market Recent strength in Alberta power prices due to supply constraints; long-term fundamentals remain strong driven by oil sands recovery $100 Alberta Power Prices 1 $/MWh $90 Positives Actuals $80 Current Market � +$1 / GJ = ~$8 - $10 / MWh � Tightening reserve margins $70 � Oil sands recovery driving load growth $60 $50 � 2.5% demand growth per year for the next three years $40 $30 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 25% Reserve Margins 1 2 Challenges Actual Forecast 20% � Over 800 MW of new supply in 2011 1% load growth � Weak natural gas prices expected to continue 15% throughout 2011 2% load growth 10% 3% load growth 1 Figures as of May 4, 2011 5% 2 Includes transmission; does not include assumptions around announced facilities, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 only facilities under construction 10

PacNW market Improvements in demand; forward price recovery driven by natural gas PacNW Power Prices 1 US$/MWh Positives $70 Actuals Current Market $60 � Strong demand growth of 6.5% in Q1 2011 � +$1 / MMBtu = ~$7 - $9 / MWh $50 vs. Q1 2010 $40 � 1.9% demand growth per year for the next $30 three years due to expectations of a modest $20 economic recovery $10 Challenges $0 2007 2008 2009 2010 2011 2012 2013 2014 Reserve Margins 1 � Pace of economic recovery is still uncertain 60% due to a weak housing market and job growth 55% in the region 50% 1% load growth Actual Forecast 45% 2% load growth � Weak natural gas prices expected to continue 40% throughout 2011 3% load growth 35% � Continued growth in renewables expected 30% over the next few years 25% 20% 2007 2008 2009 2010 2011 2012 2013 2014 1 Figures as of May 4, 2011 11

Centralia Washington State’s bill regarding Centralia poses many benefits to TransAlta 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 optimize operation and capex � Expedited permitting for a replacement gas plant � Future gas plant exempt from future State GHG regulations 12

Significant upside to price plus growth in medium-term Hedging strategy provides leverage to power price recovery Avg. Incremental EBITDA From Merchant Portfolio Contractedness Higher Prices (2011 – 2014) 1 $MM Merchant MWs $250 At a 10% ROCE, 200 MW 3,500 2014 2013 growth can add another 2012 3,000 $40 - $80 million in 2011 $200 additional EBITDA 2 2,500 $150 2,000 1,500 $100 1,000 $50 500 0 $0 1 2 3 4 5 Alberta: $55 $60 $65 $70 $75 2011 2012 2013 2014 Alberta: $60 - $65 $60 - $65 $60 - $65 $55 - $60 PacNW: $40 $45 $50 $55 $60 PacNW: $50 - $55 $50 - $55 $45 - $50 $45 - $50 Contracted Open To be contracted 1 Relative to a base of $50/MWh in Alberta and $35/MWh in the PacNW 90% target Capacity adjustments 2 Based on a 10% ROCE, $1,500 – $3,000 per KW and a 30 year depreciation 13

Executing on our growth strategy TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth Bone Creek Keephills 3 Keephills 1 & Sundance 3 New 2 Uprates Uprate Richmond Location British Columbia Alberta Alberta Alberta Quebec Type Hydro Supercritical Coal Efficiency Efficiency Uprate Wind Uprates Size 19 MW 225 MW 1 46 MW 15 MW 66 MW (23 MW each) Total Project Cost $48 MM 2 ~$1,015 MM 3 $68 MM $27 MM $205 MM Unlevered after tax IRR 10%+ 10%+ 15%+ 15%+ 2 – 4% above Cost of Capital Commercial Operations Q2 2011 Q3 2011 Q4 2012 4 Q4 2012 Q4 2012 Date Contract Status LTC Merchant Merchant Merchant Quebec PPA On time / On budget Tracking Tracking Tracking Tracking Tracking 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 14