Investor Presentation January 2015 1 1
Forward Looking Statements This presentation may contain forward looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation in 2014, 2015 and subsequent years. All forward looking statements are based on our beliefs and assumptions based on information available at the time the assumptions were made and on management’s experience and perception of historical trends, current conditions and expected future developments, and other factors deemed appropriate in the circumstances. 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. In particular, this presentation contains forward looking statements pertaining to, among other things: expectations relating to the timing of the completion and commissioning of projects under development and their attendant costs; our estimated spend on growth and sustaining capital and productivity projects; expectations in terms of the cost of operations, capital spend and maintenance; expectations in respect of future electricity prices and the impact of natural gas prices on electricity prices; the impact of certain hedges on future reported earnings and cash flows; expectations related to future earnings, cash flow, gross margin and funds from operations; expectations for demand for electricity in both the short-term and the long-term and the resulting impact on electricity prices; expected impacts of load growth on electricity supply and the development of additional generation; expectations in respect of generation availability, capacity and production; expected financing of our capital expenditures; expected governmental regulatory regimes and legislation and their anticipated impact on us; our trading strategy and the expected results from our trading activities; expectations in respect of the contractedness of our portfolio; and expectations in respect to the global economic environment. Factors that may adversely impact our forward looking statements include risks relating to, among other things: fluctuations in market prices and availability of fuel supplies required to generate electricity and in the price of electricity; the regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; changes in general economic conditions including interest rates; operational risks involving our facilities, including unplanned outages at such facilities; disruptions in the transmission and distribution of electricity; effects of weather; disruptions in the source of fuels, water, or wind required to operate our facilities; natural disasters; the threat of domestic terrorism and cyber-attacks; equipment failure; energy trading risks; industry risk and competition; fluctuations in the value of foreign currencies and foreign political risks; the need for additional financing and fluctuations in interest rates; counterparty credit risk; insurance coverage; reliance on key personnel; labour relations matters; and risks associated with development projects (including TransAlta’s South Hedland project, natural gas pipeline project in Western Australia, and Sundance 7) and acquisitions. The foregoing risk factors, among others, are described in further detail in the Risk Management section of our 2013 annual MD&A and under the heading “Risk Factors” in our 2014 Annual Information Form. Except to the extent required by law, we assume no obligation to publicly update or revise any forward looking statements, whether as a result of new information, future events or otherwise. All forward looking statements in this presentation are expressly qualified in their entirety by these cautionary statements. For information on our risks please refer to our 2014 Annual Information Form which has been filed on SEDAR and can be accessed at www.sedar.com. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. This presentation may contain references to comparable earnings, comparable earnings per share, comparable EBITDA, funds from operations, and funds from operations per share which are not defined under IFRS. Refer to the Non-IFRS financial measures section of TransAlta’s 2013 annual MD&A for an explanation and, where applicable, reconciliations to net earnings attributable to common shareholders and cash flow from operating activities. The presentation may also contain references to gross margin and operating income, which are Additional IFRS measures. Please refer to the Funds from Operations and Free Cash Flow, and Earnings and Other Measures on a Comparable Basis, sections of the MD&A. 2 2
Strategic & Financial Objectives 3 3
TransAlta – Key Messages • Over 8,500 MW spanning multiple fuels Leading Diversified Power and markets • 64 facilities Generation Company • ~2,200 MW of renewable energy • 100 years of operating history Proven Track Record • Disciplined approach to capital allocation • Highly contracted asset base Sound Financial and • Investment grade credit ratings • Robust access to capital Business Profile • Significant cash flow upside post-PPA • ~1,800 MWs added over past 5 years • Located in markets with strong Disciplined Growth fundamentals • TransAlta Renewables and strategic partnerships to fund growth 4 4
Our Platform • Coal • Canada’s largest publicly traded power 4,930 MW generator & marketer with over 100 years of operating experience • Gas • 1,447 MW Diversified asset base with 64 facilities strategically positioned in Canada, Western U.S. and Western Australia • Wind 1,271 MW 1 • Total fleet capacity of over 8,500 MWs • • Hydro Sponsor and 70% owner of TransAlta 914 MW 1 Renewables • Listed on Toronto and New York stock • Gas Pipeline 270 km exchanges • Investment grade credit ratings • Energy Marketing Customer Business 700 MW 5 5 1 Includes 100% of TransAlta Renewables’ assets.
Positioned For Growth & Value Creation Objectives for driving long-term value for shareholders Optimize base business Invest in profitable growth • • Re-contract to stabilize cash flows Growth through acquisitions and and extend asset life greenfield • • Continuously manage operating and Disciplined returns and leverage fuel costs • Target markets with strong • Maintain strong availability across the fundamentals and growth opportunities Integrated fleet • Focus on gas and renewable Approach • generation – targeting primarily Prudently and rigorously manage sustaining capital expenditures contracted opportunities • Position the Canadian coal fleet to capture significant upside post PPA Deliver Sustainable Dividend and Maintain Financial Strength • Attractive and sustainable dividend • Competitive payout ratio with excess cash flow for growth • Strong balance sheet and investment grade credit ratings • Access to multiple sources of capital 6 6
Recent Strategic Initiatives • Created TransAlta Renewables Inc. as a competitive growth vehicle • Acquired 144 MW Wind project in Wyoming • Sale of CEGen for US$193.5 million, enhancing the balance sheet for growth • Aligned dividend to the Company’s growth and financial objectives • Reduced debt by ~$500 million since year end 2013 • Expanding in Western Australia • Construction of a natural gas pipeline with expected COD date of December 31 st 2014 • Reached agreement to build, own and operate a 150 MW combined gas power station in South Hedland. 7 7
TransAlta’s 5 -Year Growth Track Record Disciplined growth with a focus on contracted assets 2008 2009 2010 2010 2011 80 MW 694 MW 123 MW 132 MW 19 MW Kent Hills Canadian Hydro Ardenville / Kent Hills 2 Summerview 2 / Blue Trail Bone Creek 2011 2012 2013 2013 2014 225 MW 125 MW 68 MW 144 MW 150 MW Wyoming Wind Keephills 3 Solomon New Richmond Western Australia Gas Plant and Pipeline ~ 1,800 MW added in our core markets over 5 years 1 $400 Incremental EBITDA $ millions (1) $0 2008 2009 2010 2011 2012 2013 ¹Indicative illustration based on annualized EBITDA contributions. 2013 includes recent acquisition of 144 MW Wyoming Wind assuming full year pro-forma. Does not include natural gas pipeline in Western Australia which will contribute EBITDA beginning in 2015. EBITDA does not include Port Hedland which will commission in early 2017. 8 8
TransAlta Renewables One of the Largest Publicly-Traded Renewable Companies in Canada $ 1.3 $ 2.0 29 1,255 $ 1.3 $ 2.0 29 1,255 $ 1.3 $ 2.0 29 1,255 megawatts installed billion total billion assets renewable power megawatts installed billion total billion assets renewable power generation generating capacity market capitalization megawatts installed billion total billion assets generation facilities renewable power generation generating capacity market capitalization facilities generating capacity market capitalization facilities Wolfe Island, ON Upper Mamquam, BC Pingston, BC New Richmond, QC Summerview 2, AB Blue Trail, AB Bone Creek, BC Kent Hills, NB 9 9
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