Investor Presentation August 2008 We’re ready for a changing world ▀ 1
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 2007 Annual Report to shareholders and other disclosure documents filed with securities regulators. Unless otherwise specified, all dollar amounts are expressed in Canadian dollars. ▀ 2
Sustainable shareholder returns in a long-cycle, capital intensive, commodity power industry VALUE PROPOSITION Consistent Returns CANADA Yield & Growth Dividend + earnings growth UNITED STATES GENERATION CAPACITY FACILITIES OWNED Exposure to Growing Coal-fired Power Markets plants 4,942 MW Coal-fired plant 278 MW Low to Moderate Risk (IN DEVELOPMENT) Business Model Hydro plants 807 MW Diversified fleet MEXICO Gas-fired plants 1 2,423 MW AUSTRALIA Mix of contracts Wind-powered plants 154 MW Operational excellence Wind-powered Environmental leadership plant 228 MW (IN DEVELOPMENT) Financial Strength Geothermal plants 164 MW Strong balance sheet Corporate Good liquidity offices 1. On February 20, 2008, TransAlta announced the sale of its Mexican business (511 MW). The sale is subject to regulatory approval and is Balanced capital allocation Energy Marketing expected to close by the end of the third quarter. offices ▀ 3
Unique in the power industry TransAlta Low to moderate risk, investment grade, wholesale power generator and marketer TA Risk Full Commodity Player •High Risk/High Return •Volatile Merchant IPP •BBB - A ratings •Med-High Risk/Med Return Regulated Utility •Volatile •B - BB ratings •Low Risk/Low Return •No Volatility •BBB - A ratings Return Market Intelligence & Regulated Security through Contract Diversity in Commodity Exposure Government Mandated Balance of Portfolio through Trading Operations Power Purchase Arrangements � 25 - 30% Long Term � 45% of asset base � Commodity Trading � 10 - 20% Medium Term � Risk Management � 5 - 10% Short Term � Proprietary Trading � 5 - 15% Spot � Price Discovery Sustainable dividend growth and capital appreciation ▀ 4
Diversified, highly contracted portfolio Our diversification supports stable, steady income and cash flow FUEL TYPE CONTRACT FLEET AGE DIVERSIFICATION COVER (MW) Coal 0-5 6-15 AB PPA Gas 16-30 31-40 Contracted Hydro & Renewables >40 Spot Sales 1. Calculation based on MW ownership at Dec. 31, 2007. Net capacity equals ~8,500 MW ▀ 5
Competitive advantages Unique Model + Resource Combination + Proven Strengths Commodity Market � Brownfield � Operational Intelligence via sites excellence Trading � Wind options � Technical expertise � Coal reserves � Market intelligence + � Water storage � Trading and hedging Merchant Asset � Solid fuel storage � Environmental Contract Diversity leadership � Access to + natural gas � Regulatory Regulated Security experience � Transmission access ▀ 6
Increasing economic value COMPARABLE RETURN ON CAPITAL EMPLOYED 11% >10% 9% 7% 5% 3% 1% 2004 2005 2006 2007 2008-2010 -1% ▀ 7
EPS and cash flow growth 2008 – 2010 Expect low double digit EPS growth and strong cash flow from operations COMPARABLE EPS CASH FLOW FROM OPERATIONS $2.20 Comparable EPS Cash Flow from Operations MM $2.00 $2.00 $1,000 $1.80 $950 $1.60 $900 $850 $800 $1.40 $777 $1.31 $1.44 $1.20 $1.16 $700 $675 $620 $600 $1.00 $591 $0.82 $500 $0.80 $0.66 $400 $0.60 2 2 1 2004 2005 2006 2007 2008 - 2010e 2004 2005 2006 2007 2008-2010e 1. Range based on low double digit growth estimate 2. Cash flow adjusted for timing of PPA and contracted revenue payments ▀ 8
TransAlta outlook: Positive fundamentals Diversified, Low-cost Business Model + Operating Excellence + Financial Strength = Short and Long-term Success CHALLENGES POSITIVES � Re-regulation momentum; � Rising prices in western markets even Alberta � Supply shortages � Canada legislation requires � Replacement costs higher significant emissions reductions; � Positioned for capacity growth U.S. to be determined � Fuel and geographic diversity � Technology race to find best CO2 provides opportunities capture and sequestration solutions � Disciplined allocation process � Equipment shortages and � Protected on near-term cost escalation environmental compliance costs � Future natural gas prices uncertain for AB PPA and Centralia � Accelerated credit cycles; risk of thermal assets demand destruction ▀ 9
Western market fundamentals support financial expectations AVERAGE FORWARD WESTERN MARKET RESERVE MARGIN 1&2 EXPOSURE TRADING PRICES 1&3 7,000 30% 6,000 $90 25% $80 5,000 $70 20% 4,000 $60 15% 3,000 $50 10% 2,000 $40 5% 1,000 $30 $20 0% 0 2007 2008 2009 2010 2007 2008 2009 2010 2011 2012 AB PPA & LTC AB Merchant Alberta PacNW Centralia CE Gen Desert South West California BC 1. Based on data from PIRA and CERA 2. Assumes normal hydro 3. Average forward trading prices as of Aug. 1, 2008, AB $C, US $US ▀ 10
Balanced capital allocation plan creates consistent value over time Increasing capital efficiency is the focus of management and the Board ALTERNATIVES DIRECTION ACTION Divest or improve under- Mexico - PSA signed for USD $303.5 MM Portfolio performing assets Sarnia - pursuing improved long-term contract Optimization Centralia Gas - assessing contracting options Divest non-core assets Australia - no action at this time Provide shareholders sustainable 2008 annual dividend increased 8% to $1.08; Dividend dividend growth Board policy is to target a payout of 60 - 70% of comparable EPS Provide shareholders incremental NCIB expanded to full 10%; 4.3 million shares Share return of capital repurchased to-date = $135 million Buyback 2008 plan is to renew and utilize significant portion of NCIB Projects must deliver unlevered, Announced ~$1.3 billion to date Asset free cash, after tax IRR >10%: � 225 MW Keephills 3 $815 MM Investment Greenfield � 96 MW Kent Hills $170 MM � 66 MW Blue Trail $115 MM Acquisitions � 53 MW Sun 5 Uprate $ 75 MM Targeting W. U.S. and W. Canada � 66 MW Summerview II $123 MM ▀ 11
Leveraging resources and strengths to create a super regional western wholesale power company FOCUS Long- term EPS growth Short-term: 2008 - 2010 driven by western � Plant uprates portfolio expansion � Greenfield priorities CANADA � Renewable � Wind � Geothermal � Co-generation � Clean Coal (AB) UNITED STATES � Portfolio optimization 1 � CO 2 offsets Medium-term: 2011 - 2015 MEXICO � AB Thermal investments AUSTRALIA � Small hydro � Clean coal investment � CO 2 offsets Geographic focus, contract and asset mix, and fuel selection dominate strategic choices Longer-term: 2016+ � Transmission options 1. On February 20, 2008, TransAlta announced the sale of its Mexican business (511 MW). The sale is subject to regulatory approval and is expected to close by the end of the third quarter. ▀ 12
Investment will be in low variable cost assets 2015 ALBERTA SUPPLY STACK 300 Gas Peakers AECO ($C/Gj): $9.00 250 Average Lowest variable costs 200 Off-Peak On-Peak ($CAN / MWh) 150 Cogen & Gas 100 50 Coal Wind & Hydro 0 - 2,000 4,000 6,000 8,000 10,000 12,000 Demand (MW) ▀ 13
5-yr development plan leverages expertise and focuses on renewables and co-generation HYDRO GEOTHL THERMAL CO-GEN WIND Wind Cogen Hydro Geother mal TOTAL @ 07 / 08 1,270 MW 120 MW 300 MW Storage rights AB 850 MW optimization NB 260 MW 260 MW SASK 150 MW 150 MW 80 MW 80 MW CA Total 1,260 300 MW 80 MW 120 MW 1,760 MW MW: MW Total $3.0 – 4.0 B Est: ▀ 14
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