Slide 1: June 2011 Investor Presentation
June 2011 Investor Presentation. 1
Slide 2: Forward looking statements
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 t
Slide 3: TransAlta at a glance
TransAlta at a glance Canada’s largest publicly traded wholesale power generator & marketer with over 100 years of Coal: 4,317 MW operating experience Over 8,000 MW strategically positioned in Canada, Western U.S. and Australia Gas: 1,813 MW 2,100 MW of renewable energy 3,100 MW of new as
Slide 4: Why TransAlta
Why TransAlta Diversified generation portfolio located in growing markets Diversified portfolio with over 75 facilities spanning multiple fuels and geographies High quality resource base supporting low cost operations and future growth Well positioned in markets with strong market fundamentals
Slide 5: Diverse and broad footprint
Diverse and broad footprint Over 75 facilities generating more than $1.5B in gross margins WESTERN CANADA Coal 2,752 MW Natural gas 391 MW CANADA Hydro 873 MW Wind 442 MW Biomass 25 MW 4,483 MW EASTERN CANADA 2010 GROSS MARGIN: $789M Natural gas 628 MW Hydro 14 MW Wind 622 MW 1,264 MW UNITED STATES
Slide 6: Strategically well positioned for growth
Strategically well positioned for growth Alberta Western U.S. Growing at 2% - 4% per year; requiring 200 – 400 Well positioned with more than 1,500 MW of coal MW of new capacity each year and geothermal Tightening reserve margins driving higher power High quality geothermal resource supporti
Slide 7: Alberta: Strong market fundamentals
Alberta: Strong market fundamentals Incumbent generator in AB where demand is growing at 2 - 4% per year $100 Alberta Power Prices2 $/MWh Alberta Long-term Investment $90 Opportunities $80 Actuals Current Market (TransAlta Fleet Only) +$1 / GJ = ~$8 - $10 / MWh $70 Total growth opportunity: 4,800
Slide 8: Attractive yield and value
Attractive yield and value Strong cash flow and stable yield and has created significant shareholder value throughout market cycles Total Shareholder Return & Dividend Yield TSR1 Yield2 300% 2000 - 2010 20% 250% 155% cumulative TSR 9% compound annual growth rate 15% 200% 3.0% - 5.8% dividend y
Slide 9: Low-to-moderate risk profile
Low-to-moderate risk We maintain a low-to-moderate risk profile through fuel diversification, multiple geographies, and a solid contractual base Fuel Multiple Highly Diversification Geographies Contracted 4% 14% Merchant 24% 2011e + MW by region + Short & medium term Long-term & PPAs 70% 58% Eastern
Slide 10: Solid cash flow growth
Solid cash flow growth Base operations have generated strong cash flow and excellent dividend coverage Targeting $800 - 900 million of FFO in 2011 FFO Funds from Operations (FFO) $M $1,000 $800 - $900M Free cash $750 flow $500 Sustaining Capex $250 25 – 35% Payout $- Ratio 2002 2003 2004 2005 20
Slide 11: Highly contracted with upside potential
Highly contracted with upside potential Contracting strategy provides solid downside protection while maintaining leverage to power price recovery Total Portfolio Contractedness Avg. Incremental EBITDA From Higher Prices (2011 – 2014)1 $MM MWs 9,000 $250 At a 10% ROCE, 200 MW 8,000 growth can add an
Slide 12: Significant long-term upside potential post 2020
Significant long-term upside potential post 2020 End of PPAs will provide significant EBITDA upside as production reverts back to TransAlta Facility MWs Estimated Incremental EBITDA in 2021 under PPAs1 Est. $750 - $1,250 M1 EBIT MW $MM 3,500 $1,750 3,000 $1,500 2,500 $1,250 $1,250 2,000 $1,000 $1,00
Slide 13: Significant growth track record
Significant growth track record We have diversified our fuel mix and more than doubled our renewable portfolio; diversified growth & optimization have driven a 50% increase in gross margins Total Portfolio Fuel Mix (MW) $31.53 Generation gross margin per MWh produced $20.96 2000 2001 2002 2003 2004
Slide 14: Growth in renewables
Growth in renewables We have significantly diversified and increased our renewable portfolio Renewable Portfolio Capacity 2,121 MW High quality resource with significant development potential Canada’s largest generator of wind power 1,117 MW 800 MW Alberta’s largest generator of hydro power 2000 200
Slide 15: Current growth projects
Current growth projects TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth Bone Creek Keephills 3 Keephills 1 & Sundance 3 New 2 Uprates Uprate Richmond Location British Columbia Alberta Alberta Alberta Quebec Type Hydro Supercritical Coal Efficiency Efficienc
Slide 16: Significant future growth opportunity
Significant future growth opportunity Significant near, medium and long-term development opportunities MW 5,000 Development opportunities 4,000 Geothermal Wind Geothermal Gas Fired 3,000 Hydro Wind Gas fired 2,000 Hydro Replacement Opportunity 1,000 0 Alberta Australia United Canada States Other 16
Slide 17: We have many options for growth
We have many options for growth We are not dependent on a single fuel source or a single region Carbon Capture and Storage supports the future of coal and provides the opportunity to utilize massive economic coal reserves in Alberta 100 years experience in hydro, Canada Permitted generation 20+ year
Slide 18: Environmental leadership
Environmental leadership TransAlta is recognized for outstanding environmental stewardship; competitively positioned to mitigate emission costs Cost pass through Continuous under change-in-law improvement at provisions existing facilities Emissions Management Active acquisition of lower cost offsets
Slide 19: Financial strength to grow
Financial strength to grow Investment grade credit ratings and significant liquidity provided through $2B of committed credit lines Investment Grade Credit Ratios Committed Credit Lines $B $2.5 Dec. 31 Mar. 31 Target 2010 2011 Range $2.0 Cash flow to debt 19.6% 20.7% 20 – 25% $1.5 Cash flow to inter
Slide 20: Financial strength
Financial strength Balanced capital allocation and disciplined investment decisions supports value creation through market cycles Optimal balance between debt, dividends, and growth Dividends Provide shareholders with strong, sustainable dividend Balance sheet Remain disciplined in how we manage our
Slide 21: Why invest?
Why invest? Near and long-term value driven by our unwavering commitment to provide strong yield and growth Strategically positioned in markets with strong growth opportunities Strong and stable cash flow growth Highly contracted with leverage to power price recovery Significant upside when
Slide 22: Additional information
Additional information es ed ee
Slide 23: Sundance Units 1 and 2 facts
Sundance Units 1 and 2 facts Sundance Units 1 and 2, 560 MW of coal-fired generation, removed from TransAlta’s portfolio and the Alberta market Event: Late in 2010, TransAlta removed from service its Sundance units 1 & 2 due to boiler conditions and declared force majeure. Subsequently, in early 2
Slide 24: Centralia facts
Centralia facts Washington State’s bill regarding Centralia poses many benefits to TransAlta Benefits to TransAlta: Ability to enter into long-term contracts • Utilities incented to enter into contracts • Process for approving contracts streamlined • Centralia is one of the lowest cost providers o
Slide 25: 2010 Operational performance and fuel mix
2010 Operational performance and fuel mix Availability (%) Comparable Generation Gross $M Margins by Fuel Type 1,750 90 4% 1,500 88.9 24% Increase 18% 88 1,250 1,000 30% 28% 86 85.1 750 84 500 52% 48% 82 250 80 0 2009 2010 2009 2010 * Renewables Gas Coal *Excludes the impact of mark-to-market moveme
Slide 26: 2010 Financial performance
2010 Financial performance Comparable EBITDA Funds from Operations Comparable EPS $1.00 9% 800 7% $783 M 9% $0.98 $965M Increase Increase Increase $0.96 750 $888 M $729 M $0.92 $0.90 700 $0.88 650 $0.84 2009 2010 2009 2010 2009 2010 26
Slide 27: Q1 2011 Operational performance and fuel mix
Q1 2011 Operational performance and fuel mix Availability (%) Comparable Generation Gross Margins by Fuel Type ** $M 450 94 * 92.7 375 25% 21% 92 91.4 300 25% 25% 225 90 150 54% 50% 88 75 86 0 Q1 2010 Q1 2011 Q1 2010 Q1 2011 Renewables Gas Coal *Excludes the impact of Sundance Units 1 and 2 **Includ
Slide 28: Q1 2011 Financial performance
Q1 2011 Financial performance Comparable EBITDA Funds from Operations Comparable EPS 15% 17% 26% $0.34 Increase Increase Increase $287 M $226 M $249 M $194 M $0.27 Q1 2010 Q1 2011 Q1 2010 Q1 2011 Q1 2010 Q1 2011 28