TransAlta Corporation Investor Presentation May 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:anticipated industry trends, including decarbonization, growth in renewables and natural gas renewables and shift to fast-ramping technologies; 2018 goals and priorities, including delivering free cash flow growth of 5% to 10% and advancing work on coal to gas conversions; extension of contracts beyond original contract term; ability to leverage our knowledge and customer relationships to develop new sites; life extension and growth of the hydro facilities, including the green credits expected under the new regulation and development of Brazeau pumped storage and Bighorn facility expansion; converting 2,600 MW of the Alberta coal fleet to clean energy by 2022; monetization of Off-Coal Payment; carbon tax climbing to $50/tCO2 by 2022; implementation of the capacity market in Alberta with the first auction in 2019 for capacity in 2021; fleet life extended by approximately 75 years adding over $1 billion of FCF; new green credits and terms, including application of credits to offset the carbon costs for coal and converted gas units; increase in wind revenue from Alberta of over 90% going forward; post-PPA upside for Alberta hydro; benefits of Alberta capacity market and capacity requirements to 2030; Alberta capacity and energy price forecasts to 2032; reduction in emissions; the characteristics of the coal-to-gas conversions, key actions to support TransAlta’s growth strategy, including leveraging existing sites, merchant including timing, reduction in costs, impact on free cash flow and heat rate; exposures and expanding into new regions; growth opportunities from 2018 to beyond 2031, including acquisitions, coal-to-gas and solar development; Alberta pipeline strategy and benefits of Tidewater pipeline; the Brazeau pumped storage project and Bighorn hydro expansion, including construction and costs, contracting and timing; growth to be realized, including the Garden Plains and Cowley Ridge wind farms in Alberta and the Antelope Coulee Wind farm in Saskatchewan, including the capacity, in-service date and cost of each project; capital allocation in 2018 and 2020; future capital structure, including adjusted FFO to net debt in 2020; FCF outlook in 2018; the 2018 outlook, including comparable EBITDA, FFO and FCF ranges; the 2018 to post-2021 FCF outlook; and the relationship with TransAlta Renewables, including TransAlta’s continued sponsorship of TransAlta Renewables and the ability of TransAlta renewables to compete for third party acquisitions and new opportunities. 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; 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, including deviations of Alberta spot and Mid-C spot prices relative to stated assumptions; the availability of fuel supplies required to generate electricity, including the costs of natural gas within Alberta; changes to the relationship with, or ownership of, TransAlta Renewables; wind and hydro resources being less than long term average; reduction to the Canadian coal capacity factor; 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 Comparable EBITDA, FFO and FCF, 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
Emerging Industry Trends De-carbonization Move away from coal Growth in renewables as a source of low carbon generation Significant Cost of renewables is declining Growth in Intermittent nature of renewables is shifting value from Renewables baseload to peaking resources Natural Gas Abundant supply of low cost natural gas will support Generation dispatchable natural gas generation and coal to gas Growth conversions Growing need for flexible, responsive generation Shift to Fast- Ramping Value of hydro-based power storage will increase Technologies Increasing recognition of the importance of reliability TransAlta well positioned to capitalize on emerging trends 3
2018 Goals and Priorities 1 Support the development of a fair and equitable capacity market 2 Advance ongoing work on coal to gas conversions 3 Continue to improve our safety and environmental metrics 4 Deliver free cash flow growth between 5% and 10% 5 Continue to pursue our Greenlight initiatives and accretive growth projects Meeting Customer Needs With Low Cost, Reliable, Clean and Firm Power 4
PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM TransAlta’s Global Generation Portfolio 5
TransAlta Today 2017 SEGMENTED CASH FLOW FROM AUSTRALIA Coal / Future CTG Solar THE BUSINESS (1) Hydro Wind Gas Corporate Offices Wind / Solar 25% Hydro 7% BC AB Coal QC ON 25% NB Gas WA 43% MN MA WY Significant generator with 8,266 MW of capacity Diversified operations with over 65 facilities in three countries Highly contracted (70%) with upside to Alberta market 6 1 Comparable EBITDA less sustaining capital and other adjustments and excludes Energy Marketing and Corporate Segments
Natural Gas OVERVIEW WESTERN 100% of generation contracted CANADA 9 year weighted average contract life EASTERN CANADA Total net capacity of 1,348MW AUSTRALIA 67% Canada and 33% Australia CUSTOMER FOCUS Sites designed and built to supply a customer need Gas-fired Generation Assets Excellent track record of extensions beyond original contract term $400 $372 $334 $300 - $330 $315 2014 2015 2016 2017 2021E EBITDA ($ millions) Long-term stable cash flows 7
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