TransAlta Corporation Investor Presentation November 2018 1 - PowerPoint PPT Presentation

TransAlta Corporation Investor Presentation November 2018 1

Forward Looking Statements This presentation includes forward-looking statements or information (collectively referred to herein as “forward -looking statements”) within the meaning of applicable securities legislation. All forward-looking statements are based on our beliefs as well as assumptions based on available information and on management’s experience and perception of historical trends, current conditions, and expected future developments, as well as other factors deemed appropriate in the circumstances. 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”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “project”, “forecast”, “foresee”, “potential”, “enable”, “continue”, or other comparable terminology. These statements are not guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause actual results or outcomes to be materially different from those set forth in the forward-looking statements. In particular, this presentation contains, but is not limited to, forward-looking statements pertaining to: upside opportunities within the Alberta market, including as it pertains to the hydro assets; 2018 year-end EBITDA and CAFD of TransAlta Renewables; sources of free cash flow, including optimization of the coal portfolio between 2018 and 2020, the conversion of 2,360 MW to clean energy by 2022, and the receipt of $150 million annually in dividends from TransAlta Renewables; TransAlta obtaining full revenue of up to approximately $275 million from energy, ancillary and renewables credits following the expiry of the hydro power purchase arrangement (“PAA”) ; post-PPA power price in Alberta of approximately $55/MWh, capacity price of ~$6/kW-month and carbon price of $40/tonne; receipt of $100 to $200 million of free cash flow annually from Canadian coal post conversions; extent of emission intensity reduction and life extension from conversions; Tidewater Pipeline completion by late 2019, with Initial volumes of 130 MMcf/d with the potential to expand to 440 MMcf/d; benefits of fuel blending at Sundance and Keephills; the implementation of a capacity market in Alberta, the structure of the capacity market and the timing of implementation; the US wind development projects, including the capital cost and timing for construction and the closing of the Antrim wind project; growth opportunities from 2018 to beyond 2031, including behind the fence gas generation in Alberta, BC and Ontario, potential for growth in renewables, and greenfield development and acquisitions; and TransAlta having non-recourse debt of $1.2 billion in 2020. Factors that may adversely impact our forward-looking statements include risks relating to: legislative or regulatory developments, including as it pertains to the Alberta capacity market and Federal environmental legislation; high penetration of renewables and build out of gas; changes in economic and competitive conditions; inability to secure natural gas supply and the construction of a natural gas pipeline on terms satisfactory to the Company; the introduction of disruptive sources of energy or capacity; changes in the price for natural gas;; decreased demand for energy or capacity; availability of financing; fluctuations in market prices; the availability of fuel supplies required to generate electricity, including the availability and cost of natural gas within Alberta; legislative changes, including as it pertains to the capacity market in Alberta; changes to the relationship with, or ownership of, TransAlta Renewables; wind and hydro resources being less than long term average; reductions to our capacity factors; our ability to contract our generation for prices that will provide expected returns; risks associated with development projects and acquisitions, including permitting, labour and engineering risk associated with the coal to gas conversions; increased costs or delays in the construction or commissioning of pipelines to the converted units. The foregoing risk factors, among others, are described in further detail in the Risk Management section of our Management Discussion and Analysis and under the heading “Risk Factors” in our Annual Information Form. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this document 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. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect the Corporation's expectations only as of the date of this presentation. The purpose of the financial outlooks contained in this presentation 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. In light of these risks, uncertainties, and assumptions, the forward-looking events might occur to a different extent or at a different time than we have described, or might not occur at all. We cannot assure that projected results or events will be achieved. Certain financial information contained in this presentation, including EBITDA and CAFD, may not be standard measures defined under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities. These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. For further information on non-IFRS financial measures we use, see the section entitled “Reconciliation of Non-IFRS Measures” contained in our most recently filed Management's Discussion and Analysis, filed with Canadian securities regulators on www.sedar.com and the Securities and Exchange Commission on www.edgar.com . Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. 2

TransAlta Today 2017 SEGMENTED CASH FLOW FROM AUSTRALIA Coal / Future CTG Solar THE BUSINESS 1 Hydro Wind Gas Corporate Offices Wind / Solar Wind / Solar Hydro 25% Hydro 7% 0% 0% BC AB 0% 0% Coal Coal QC ON Gas 25% Gas NB WA 43% NH MN MA WY PA Significant generator with 8,000 MW of capacity Diversified operations with over 70 facilities in three countries Highly contracted (68%) with upside to Alberta market 1 Comparable EBITDA less sustaining capital productivity capital expenditures, reclamation costs, and provisions. It also excludes non-cash mark-to-market gains or losses as well as Energy Marketing and 3 Corporate Segments.

Sources of Free Cash Flow Hydro Coal-to-Gas Investment in RNW • Own and operate over 90% of 3,033 MW of owned capacity in Diversified long-term contracted   Alberta’s hydro Alberta assets • Significant upside potential post Will optimize the value of the coal Strong balance sheet with   PPA expiry (2021+) portfolio between 2018 to 2020 access to competitive capital • Critical back-up for renewables Convert 2,370 MW of the Alberta 61% ownership   build-out in Alberta coal fleet to clean energy by Receive ~$150 million annually in  2022 dividends from RNW Off-coal payment of ~$37 million  for the next 13 years. Targeting free cash flow of $500+ million with a strong balance sheet post 2021 4

Hydro Upside $225 - $275 Million Renewable Credits  Post PPA, TransAlta gets full revenue from energy, ancillary and renewables credits  Balancing Pool receives energy and a majority of ancillary revenue today Energy Revenue Capacity Payment $75 - $100 million Ancillary and Misc. Ancillary and Misc. PPA Payment Today Post PPA (2021+) Comparable hydro assets valued at 12x to 14x EBITDA Assumptions: Post PPA power price of ~$55/MWh, capacity price of ~$6/kW-month and carbon price of $40/tonne 5

Coal-to-Gas Conversions  Cumulative fleet life extended by approximately 75 years  Reduced fixed and sustaining costs (~15%) with simplified operations  Conversions will take 60 days at a cost of approximately $50 million per unit LIFE EXTENSION FROM CONVERSIONS (MW) EMISSIONS INTENSITY REDUCTION (%) 3,500 3,000 2,500 Conversion Timeframe 2,000 48% 1,500 60% 1,000 500 95% 98% 0 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 CO2 NOx SO2 Hg No Conversion Scenario Convert to Gas $100 to $200 million of free cash flow annually from Canadian coal post conversions 6