Forward Looking Statements

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2 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 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 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; 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 counterparty credit risk; insurance coverage; reliance on key personnel; labour relations matters; and risks associated with development projects and acquisitions. The foregoing risk factors, among others, are described in further detail in the Risk Management section of our 2012 annual MD&A and under the heading Risk Factors in our 2013 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 2013 Annual Information Form which has been filed on SEDAR and can be accessed at 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 2012 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 Additional IFRS measures section of the MD&A. 2

3 Outline Summary of Results Financial Review 2013 Outlook Questions & Answers 3

4 Summary of Results. Dawn Farrell 4

5 2012 Accomplishments Completed 3-year investment in planned end-of-life major maintenance for coal fleet Finalized the Sundance Units1 and 2 and Sundance Unit 3 arbitrations Operating practices validated Re-build of Sundance 1 and 2 in progress; will add future cash Re-contracted Centralia and reduced operating and capital costs Received final Canadian GHG regulations providing significant value and reducing uncertainty for TransAlta Carbon-free coal Increased competitiveness Solomon acquisition Partnership with MidAmerican Realigned organization to better deliver on growth strategy 5

6 Energy Trading return to more normalized results $M Market intelligence gained through trading activities is needed to optimize hedging strategy Re-positioned our trade floor to reduce risk levels going forward Gross margin of $13M for Q4 and $3M for the year 6

7 Q4 and Full Year 2012 Financial Results ($M, except per share amounts) Comparable EBITDA 3 months ended Dec. 31 Year ended Dec ,014 1,045 Funds from Operations Comparable Earnings Per Share Funds from Operations Per Share

8 Financial Review. Brett Gellner 8

9 Solid financial performance from Generation Comparable Generation Gross Margin 1 $M 3 months ended Dec months ended Dec Does not include Solomon Comparable Generation Gross Margin increased $45 million for the year compared to 2011 Fewer planned outages Lower OM&A costs Capacity payments/penalties from Sundance 1&2, Sundance 3 and Sundance 6 9

10 Strong Availability Fleet Availability 1 Q Q Annual 2012 Annual % 90.3% 90.0% 88.2% Plant Availability Q Q Annual 2012 Annual 2011 Sundance 77.3% 85.0% 85.5% 83.3% Keephills 1 & % 91.3% 79.6% 92.3% Keephills % 97.8% 97.6% 98.3% Genesee % 43.9% 82.5% 85.0% Sheerness 99.3% 85.7% 93.4% 95.0% Centralia 92.2% 95.6% 81.8% 61.8% Gas 93.6% 92.5% 93.6% 92.4% Renewables 96.0% 97.8% 95.6% 95.7% 1 Fleet availability adjusted for economic dispatching at the Centralia Plant 10

11 Significant decrease in OM&A 10 per cent ($52 million) year over year decrease in OM&A compared to target of 5 per cent $M OM&A 10% decrease

12 Comparable EBITDA & Funds from Operations Comparable EBITDA $M Q4 YTD Increase in quarterly comparable EBITDA and FFO primarily due to: $M Comparable FFO Q4 YTD Strong gross margins from the Generation segment Lower OM&A costs Contributions from Solomon Offset by significantly lower Energy Trading results Lower full year comparable EBITDA and FFO primarily due to: Lower Energy Trading margins 12

13 Capital Spending Capital spend returning to normalized run rate in 2013 $M Growth capital in 2013 estimated to be in the range of $145 - $170 million 13

14 Financial strength & flexibility Committed to investment grade ratings and strong balance sheet Actions to strengthen credit ratios and balance sheet $2.04 B Committed Credit Facilities Strong liquidity Access to capital markets Premium dividend expected to add ~$210 million of equity on an annualized basis $1.29 B Utilized $755 M Available 14

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16 Update On Events Puget Sound Energy (PSE) The process is ongoing; estimate resolution by end of March 2013 Overall we view the ongoing discussions as part of the process to resolve the issues identified by PSE Realignment On track to achieve $25 - $30 million in savings by the end of

17 Alberta and Pac NW market update Markets remain challenging $ Alberta Price Outlook Alberta Lower power prices year over year in response to healthy supply Strong fourth quarter power prices due to strong demand growth and supportive weather Source: TransAlta $ Source: TransAlta Pac NW Price Outlook 2013 Outlook: Supply additions expected to outweigh relatively healthy power demand despite partial recovery in the natural gas price Pac NW Much weaker prices year over year in response to weak natural gas prices and the second consecutive year of strong hydro generation Relative strength seen in fourth quarter power prices as gas prices began to recover 2013 Outlook: Power prices expected to return to more normalized levels in response to higher natural gas prices and a return to more normal hydro production levels 17

18 2013 Outlook 85% hedged Hedge targets increased to support revenue certainty MW Total portfolio contractedness 1 85% 78% 74% 73% With the Puget Sound Energy contract our base portfolio is now 75% contracted Targeting higher contracting levels and longer-term contracts 2013 Contracted Prices AB $60 - $65 / MWh PACNW $40 - $45 / MWh 1 Capacity adjusted volumes 18

19 Update on Growth New Richmond On track to be fully commissioned in March of this year MidAmerican Partnership Exploring gas power generation opportunities in Western Canada Sundance Unit 7 The return of Sundance Units 1 and 2 to the market makes it prudent to delay our plans for Sundance Unit 7 Continue to work on this investment in 2013, continuing with permitting efforts Believe the supply will be needed to meet growth demands in the 2018 timeframe Australia Continue to see good opportunities in Australia Western US Considerable acquisition opportunities, especially in wind generation 19

20 2013 Plan Strategic objectives Financial objectives Deliver one greenfield project from MidAmerican partnership Add $40 - $60 million of EBITDA from growth Return Energy Trading to $40 - $60 million in gross margin Grow customer business to 500 MW in Alberta in 2013 and add long-term contracts to support Sun 7 Add new long-term contracts in Centralia Achieve $800 $900 million in FFO Maintain dividend Strengthen balance sheet and maintain investment grade ratings Continued access to multiple sources of capital Maintain strong liquidity Operational objectives People and culture Achieve availability of 89 90% Return sustaining capital to $350 million per year run rate on a 3 year cycle Offset inflation on OM&A costs Deliver Sundance A rebuild at $190 million Commission New Richmond Achieve safety IFR < 1 Complete realignment of organization Build Shared Services organization Implement new compensation structure 20

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