Slide 1: May 2011 Investor Presentation
May 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: Outline
Outline ] Value proposition and strategy ] Markets and contracting ] Growth ] Q1 2011 Financial and operational results ] 2011 Outlook 3
Slide 4: Value proposition and strategy
Value proposition and strategy Canada’s largest publicly traded wholesale power generator & marketer Yield, upside potential, and steady Quick Facts disciplined growth TSX: TA; TA.Pr.D NYSE: TAC CANADA Market Cap: $5.0 billion Low-to-moderate risk profile Enterprise Value: $9.5 billion Credit rating
Slide 5: Competitive strengths
Competitive strengths We have strong competitive advantages and are not dependent on a single fuel source or a single region Financial Multiple Diversification Technology Strength Geographies + + + = Opportunity & Increased Shareholder Value 5
Slide 6: Strategy: The last 10 years
Strategy: The last 10 years We have diversified our fuel mix and more than doubled our renewable portfolio Total Portfolio Fuel Mix Renewable Portfolio Capacity 2,121 MW Canada’s largest investor owned renewable energy provider 2000 2011 1,117 MW 15% 800 MW 26% 52% 12% 73% 22% 6,870 MW 8,270 MW 2000
Slide 7: Diversified growth & optimization have driven increased gross margins
Strategy: The last 10 years Diversified growth & optimization have driven increased gross margins Acquired Acquired Acquired Acquired Constructed Transitioned Divested Renegotiated Canadian Retired Constructed Centralia Vision Quest CE Gen Genesee 3 to PRB coal Mexico Sarnia Hydro Wabamun Keephills
Slide 8: Diversification and contracting drives growth
Diversification and contracting drives growth Funds from operations have grown despite volatility in market prices Funds From Operations vs. Weighted Average Price / Merchant MWh Produced $MM $/MWh ] Average dividend coverage of 2.1x 8
Slide 9: Strategy: Next 10 years
Strategy: Next 10 years Near Term Long Term 2011 - 2014 2014 - 2020 ] Continue to drive productivity and ] Information technology & strategic lower costs suppliers drive productivity Drive Drive the the Base Base ] Sustain improved operational ] Prepare transition from PPAs performance ] Deliver on
Slide 10: Alberta market
Alberta market Recent strength in Alberta power prices due to supply constraints; long-term fundamentals remain strong driven by oil sands recovery $100 $/MWh Alberta Power Prices1 $90 Positives $80 Actuals Current Market ] +$1 / GJ = ~$8 - $10 / MWh ] Tightening reserve margins $70 ] Oil sands reco
Slide 11: PacNW market
PacNW market Improvements in demand; forward price recovery driven by natural gas Positives US$/MWh PacNW Power Prices1 $70 Actuals Current Market $60 ] Strong demand growth of 6.5% in Q1 2011 $50 ] +$1 / MMBtu = ~$7 - $9 / MWh vs. Q1 2010 $40 ] 1.9% demand growth per year for the next $30 three yea
Slide 12: Centralia
Centralia 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 of elec
Slide 13: Hedging strategy provides leverage to power price recovery
Significant upside to price plus growth in medium-term Hedging strategy provides leverage to power price recovery Merchant Portfolio Contractedness Avg. Incremental EBITDA From $MM Higher Prices (2011 – 2014)1 Merchant MWs $250 At a 10% ROCE, 200 MW 3,500 2014 2013 growth can add another 2012 3,000
Slide 14: Executing on our growth strategy
Executing on our growth strategy 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
Slide 15: Significant long-term upside potential
Significant long-term upside potential 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 $1,000 1,500 $7
Slide 16: Development pipeline
Development pipeline Over 1,300 MW of renewable energy in advanced development MW Development Pipeline1 900 600 Total MW: 1,339 Total investment opportunity: $3.1 - $4.1 B 300 0 Alberta Saskatchewan Ontario California BC Quebec 1 Based on TransAlta’s share Hydro Gas Fired Wind Geothermal 16
Slide 17: Reposition coal - Alberta
Reposition coal - Alberta Canada’s 45 year plan provides We have significant opportunity significant future investment with Carbon Capture and opportunities in Alberta alone Storage (CCS) MW Investment Opportunities 6,000 (TransAlta Fleet Only) 5,000 4,000 TransAlta AB Portfolio Growth 3,000 Replace
Slide 18: 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 19: 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 $0.27 $249 M $194 M Q1 2010 Q1 2011 Q1 2010 Q1 2011 Q1 2010 Q1 2011 19
Slide 20: Maintained investment grade credit ratios
Maintained investment grade credit ratios 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 interest 4.6x 4.7x 4 – 5x $1.0 $0.5 Debt to capital 53.1% 52.8% 55 – 60% $- Q1 2011 Credit Line
Slide 21: 2011 Outlook
2011 Outlook Funds from Operations $M $800 - $900M $1,000 2010 Actual 2011 Outlook $750 Free cash flow Availability 88.9% 89 – 90% $500 Dividends Funds from operations (IFRS) $805 M $800 – $900 M Dividends Sustaining Energy Trading gross margin $41 M $45 – $65 M $250 Capex Sustaining Capex Sustainin
Slide 22: Why invest?
Why invest? Near and long-term value driven by our unwavering commitment to provide strong yield and growth, maintain a disciplined strategy, and provide financial strength ] Disciplined and consistent strategy ] Strong and stable cash flow per share growth ] Highly contracted with leverage to power
Slide 23: Appendix
Appendix TransAl ta
Slide 24: Debt profile
Debt profile Minimal debt refinancing over the short-term provides ample financial flexibility (CDN $M) $1,000 $800 $600 $400 $200 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter Perpetual Pref 1 CDN MTN's US MTN's 1 Based on March 31, 2011 FX rate of $0.97 CAD/US 24
Slide 25: Sustaining capital
Sustaining capital 2011 - 2013 Sustaining capital plan1 ($M) 2011e 2012e 2013e Sustaining $300 – 345 $330 - 375 $320 - 365 Routine Capital $95 - 105 $80 - 95 $85 - 100 Major Maintenance $180 - 210 $210 - 230 $180 - 200 Mine Capital $25 - 30 $40 - 50 $55 -65 Other Repowering / Life Extension $85 - 11
Slide 26: Major maintenance
Major maintenance 2011 Major maintenance plan1 Natural Gas and ($M) Coal Renewables Total Capitalized $105 - 130 $75 - 80 $180 - 210 Expensed - $0 - 5 $0 - 5 GWh lost 1,770 - 1,790 370 - 380 2,140 - 2,170 1 Based on IFRS 26
Slide 27: Advanced development pipeline
Advanced development pipeline Projects in Advanced Development ENVIRONMENTAL TARGET LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & AND PERMITS TURBINE CAPEX RANGE PPA / COMMERCIAL MW SITE CONTROL Applied Secured SECURED $ MM LTC OPERATION DATE Quebec St. Valentin 50 Wind 9 9 9 $150 - $180 PPA/LTC 20