11

TransAlta Corporation

Investor Presentation

May 2018

22

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,

including timing, reduction in costs, impact on free cash flow and heat rate; key actions to support TransAlta’s growth strategy, including leveraging existing sites, merchant

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.

Forward Looking Statements

33

Emerging Industry Trends

TransAlta well positioned to capitalize on emerging trends

Move away from coalDe-carbonization

Growth in renewables as a source of low carbon generation

Cost of renewables is declining

Intermittent nature of renewables is shifting value from

baseload to peaking resources

Significant

Growth in

Renewables

Abundant supply of low cost natural gas will support

dispatchable natural gas generation and coal to gas

conversions

Natural Gas

Generation

Growth

Growing need for flexible, responsive generation

Value of hydro-based power storage will increase

Increasing recognition of the importance of reliability

Shift to Fast-

Ramping

Technologies

44

2018 Goals and Priorities

Meeting Customer Needs With Low Cost, Reliable, Clean and Firm Power

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

PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM

55

TransAlta’s Global Generation Portfolio

66

BC

WA

ON

WY

QC

NB

MN

AB

MA

TransAlta Today

Significant generator with 8,266 MW of capacity

Highly contracted (70%) with upside to Alberta market

1 Comparable EBITDA less sustaining capital and other adjustments and excludes Energy Marketing and Corporate Segments

Diversified operations with over 65 facilities in three countries

AUSTRALIACoal / Future CTG

Hydro

Gas

Solar

Wind

Corporate Offices

2017 SEGMENTED CASH FLOW FROM

THE BUSINESS(1)

25%

43%

25%

7%

Wind / Solar

Hydro

Gas

Coal

77

$315

$334

$372

2014 2015 2016 2017 2021E

EBITDA ($ millions)

$400

$300 - $330

Natural Gas

Long-term stable cash flows

OVERVIEW

100% of generation contracted

9 year weighted average contract life

Total net capacity of 1,348MW

67% Canada and 33% Australia

CUSTOMER FOCUS

Sites designed and built to supply a

customer need

Excellent track record of extensions

beyond original contract term

WESTERN

CANADA

EASTERN

CANADA

AUSTRALIA

Gas-fired Generation Assets

88

$179 $176

$195

2014 2015 2016 2017 2021+

Contracted EBITDA ($ millions) Merchant EBITDA ($ millions)

$214

$220 - $240

Wind and Solar

OVERVIEW

71% of generation contracted with an

average capacity weighted contract life of

13 years

Total net capacity of 1,339MW

Canada’s largest generator of wind power

Experienced developer and operator of

wind in Alberta

OPERATING MODEL

Remote monitoring and operation of all

sites optimizes site performance

Extensive data enables optimization of

operations

Able to leverage our knowledge and

customer relationships to develop new

sites

WESTERN

CANADA

EASTERN

CANADA

WESTERN

U.S.

Wind / Solar Assets

Highly contracted asset base with upside in Alberta

99

Hydro

Unique, reliable and perpetual

OVERVIEW

Own and operate over 90% of Alberta’s

hydro

Expecting approximately $25 million

annually in green credits under new

regulation

Critical back-up for wind and solar

Essential for market stability

Immediate ramping

LIFE EXTENSION AND GROWTH

Re-contracted Akolkolex for 30 years

Optionality for extensions and upgrades

New opportunities:

Brazeau Pumped Storage

Bighorn facility expansion

WESTERN

CANADA

EASTERN

CANADA

CANADA

Hydro Facilities

$87 $73

$82

2014 2015 2016 2017 2021+

EBITDA ($ millions)

$75

$225 - $275

1010

CA and US Coal / Future CTG

OVERVIEW

Total net capacity of 4,653MW

3,313MW in Alberta and 1,340MW in US

PPAs on Keephills 1 and 2 and Sheerness expire

at end of 2020 in advance of the transition to the

new capacity market

STRATEGIC OBJECTIVES

Optimize the value of the coal portfolio between

2018 to 2020

Convert 2,600 MW of the Alberta coal fleet to

clean energy by 2022

Evaluate timing of conversions of jointly owned

facilities – Keephills 3, Genesee, and Sheerness

OFF-COAL AGREEMENT

Government of Alberta annual off-coal payments

of $37.4 million totaling $524 million

First payment received in Q3/17

Opportunity to monetize ($300-350 million)

Coal / Future CTG

Facilities

Approximately $200 million in FCF annually for an additional

fifteen years beyond 2021

$451 $456$434

2014 2015 2016 2017 2021+

EBITDA ($ millions)

$413

$300 - $350

PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM

1111

Clarity in Alberta’s Power Market

Transition

1212

Regulatory Clarity Achieved

Regulatory clarity supports investment strategy

Off-coal agreement and federal rules mean coal is phased out by 2029 in

CanadaCoal Phase Out

Initial carbon tax of $30/tCO2 effective January 1, 2018, potentially

climbing to $50/tCO2 by 2022

Credits for electricity generation with emissions below 0.37 tCO2 per

MWh

Existing wind and hydro eligible

Environmental

Policies

Supports incumbent and new generation by providing value for capacity

Capacity market design well advanced

First auction in 2019 for capacity in 2021

Capacity Market

Plant life extended by 5 to 10 years past coal end of life

TransAlta’s cumulative fleet life extended by approximately 75 years

adding over $1 billion of FCF

Coal to Gas

1313

Alberta Carbon Rules are a Positive Outcome for TransAlta

$30 to $50 million annually in credits for existing renewables

EXISTING WIND AND HYDRO

GENERATION

Will receive credits for generation up to

the performance standard under the

OBA

NEW GREEN CREDITS

Eligible to use credits for up to 40% of

carbon price obligations starting in 2018

Escalating by 5% per year to 60% by

2022

Credits will be used to offset the carbon

costs for coal and converted gas units

0.37 tCO2e/MWh

Emissions

above standard

Emissions

below standard

Generators

charged based

on emissions

above the

performance

standard

Generators

credited based

on emissions

below the

performance

standard

OBA SYSTEM

1414

Upside Potential for Alberta Wind Assets

Revenue from Alberta expected to increase over 90% going forward

Alberta market supports higher value

Benefit from higher expected power

price due to carbon costs and higher

stronger fundamentals

$15 to $20 million annually in green

credits

Will qualify for capacity payments in

2021

ALBERTA WIND REVENUE(1)

1) Energy price in 2018 to 2020 assumed to be $65/MWh. Energy and capacity prices post 2021 assumed to be $40/MWh and $10/KW-month, respectively. Credits based on a $30 carbon tax in 2018 to 2020 and a $50

carbon tax post 2022. Generation assumed to be 1,000 GWh

$0

$10

$20

$30

$40

$50

$60

Today 2018 to 2020 Post 2021

Power Revenue ($ mm) Capacity Revenue ($ mm)

Credits ($ mm)

1515

Significant Upside Post-PPA for Alberta Hydro

Comparable hydro assets valued at 12x to 14x EBITDA

1Balancing Pool

$0

$50

$100

$150

$200

$250

$300

Historical EBITDA(5-yr average)

Capacity PaymentReceived from BP¹

Obligations Paid tothe BP¹

Future CapacityPayments

Emissions Credits Future ProformaEBITDA

$ m

illio

ns

$225 - $275

1616

Development of Alberta’s Capacity Market Supports Our Fleet

TransAlta is well positioned to compete in a capacity market

Provides future revenue visibility and stabilityForward Auction

All capacity resources permitted to participate

TransAlta’s entire generation fleet will be able to participateEqual Treatment

Mitigates price volatility and supports capacity revenue during

periods of oversupply

Downward

Sloping Demand

Curve

REP Capacity

Excluded

Avoids negative impact on capacity price due to subsidized

renewables

1717

12,144 12,557 13,231

1,822 1,884 1,985

13,966 14,441

15,216

2021E 2025E 2030E

Peak Demand 15% Reserve

Adjusted Capacity: 13,700

TransAlta’s Units are Required

EXPECTED CAPACITY REQUIREMENTS (MW)

(3) (4)

1 Based on AESO’s 2017 reference case 2 Assumes AESO sets a 15% reserve margin above peak demand for determining capacity requirements 3 Adjusted for outages, de-rates and anticipated capacity

eligibility for thermal (95%), hydro (90%) and wind (15%) generation 4 Assumes interties are ineligible for capacity

(1) (2)

PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM

1818

Transitioning our Coal Fleet

1919

Timeframe

“Fuel switching is an attractive and

economical option for utilities that must

maintain a certain generating capacity in

their fleet […]”

– Power Engineering

“A number of coal plants nationwide have

converted to natural gas, a move that

uses much of the same infrastructure but

involves different economics, less

pollution […]”

– Midwest Energy News

NORTH AMERICAN

CTG CONVERSIONS

MW

Converted

Not a new concept - many North American examples of CTG conversion

CTG Conversions: Proven Technology

Harding Street

Unit 72016450MW

Joliet

Unit 7/820161,326MW(1)

Shawville

Unit 3/4 2015/2016376MW

2 2 510

2618

-

1,000

2,000

3,000

4,000

5,000

2011 2012 2013 2014 2015 2016M

W C

on

vert

ed

Conversions

(# Completed)

1Capacity for Unit 6 (290MW), Unit 7 (518MW), and Unit 8 (518MW). Units 7 and 8 are most similar to TransAlta’s planned conversions

2020

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039

No Conversion Scenario Convert to Gas

Key Driver of Conversion – Life Extension

Cumulative fleet life extended

by approximately 75 years

TRANSALTA’S COAL & CTG GENERATION CAPACITY (MW)

2121

Key Outcomes of Conversion – Emissions Reduction

1NOx reduction ranges from 10% to 70% depending on unit specification. Certain units already generate low NOx emissions.

Carbon emissions are

almost halved and

particulate emissions

are effectively

eliminated for

converted generation

EMISSIONS INTENSITY REDUCTION (%)

(1)

48%

60%

98%95%

CO2 NOx SO2 Hg

2222

Key Outcomes of Conversions – Reduced Fixed Costs

Fixed OM&A and sustaining capital costs are reduced

by approximately 15%1Average annual fixed costs for a 400 MW unit

Less complex

operations lead to

significant cost

reductions

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

Convertible Coal Converted Gas

$ m

illio

ns

Fixed OM&A Sustaining Capital Pipeline Tolls

2323

Key Outcomes of Conversion – Competitive Variable Costs

Cost of carbon drives competitive advantage

Note: Converted unit based on natural gas price of $2.50/GJ. “Other” category includes costs associated with the removal of mercury, and costs associated with reducing NOX, SOx, and particulates. Transmission costs

are excluded in all scenarios.

$30 PER TONNE CARBON COSTS

($/MWh)

$50 PER TONNE CARBON COSTS

($/MWh)

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

Coal Converted Coal Converted

Fuel Carbon Other

2424

$-

$500

$1,000

$1,500

$2,000

$2,500

$3,000

Key Outcomes of Conversions – FCF Generation

Assumes $30 carbon tax and $8/KW-month capacity price

CUMULATIVE FCF OVER LIFE OF ASSETS ($ MILLION)

Expected FCF growth of over $1 billion with conversion

Conversion expected to

generate over $1 billion in

additional FCF given

expected federal

regulations

Stay on Coal

Convert to

Gas

2525

-

$50

$100

$150

$200

$250

$300

$350

$400

$7.00 $8.00 $9.00 $10.00 $11.00 $12.00 $13.00

FC

F @

$3

0/to

nne

Capacity Price ($/KW-month)

FCF of converted units is expected to be in-line with historical

Sensitivity of FCF to Capacity Prices

2014 - 2016

Average

EST. AVERAGE ANNUAL FCF UNDER CAPACITY MARKET ($ MM)

2626

Substantial Economic Advantages Compared to New Build

• Conversions will be able to enter the market faster, at lower capital cost and

with substantially less risk than new CCGT

Build Cost (2,700 MW)

Carbon Tax

Ramping

Time to Build

CTG Conversion

$300 million

Higher

Slower

60 days

New Combined Cycle Facility

$4.5 billion

Lower

Faster

4 – 5 years

Conversions will supply customers with low priced, reliable power

Illustrative Heat Rate 9.5x - 11x 7x

PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM

2727

Strongly Positioned For The Future

2828

TransAlta’s Growth Strategy

De-carbonizeLeverage

Existing Sites

Leverage

Scale and

Operational

Expertise for

Acquisitions

Focus on

Greenfield &

Brownfield

Take Some

Merchant

Risk

Expand into

New Regions

Expand Direct

Customer

Business

Partner

2929

TransAlta’s Growth Strategy – Key Actions

De-carbonize Fleet

Leverage Existing Sites

Leverage Scale and

Operational Expertise

Focus on Greenfield &

Brownfield

Take Some Merchant

Risk

Expand into New

Regions

Expand Direct Customer

Business

Partner

• Convert coal to gas

• Expand in hydro/wind/solar/efficient gas

• Expand existing Alberta hydro sites (e.g. Brazeau)

• Future repowering of existing wind sites

• Add new natural gas at existing coal sites

• Integrate new assets without adding significant overhead/admin costs

• In-sourcing of operations and maintenance

• Leverage experience and competitive advantage in new builds

• Less competitive - higher returns

• Leverage Energy Trading & Marketing expertise and knowledge

• Opportunities with some merchant risk attract fewer competitors and generate

higher returns

• Expand into other regions of U.S. and Eastern Australia

• Behind-the-fence generation

• PPAs with non-traditional counterparties (e.g. technology/telecom companies)

• Create value by combining strengths of other parties

• Potential to partner with financial players, OEMs, and customers

Strategy Actions

3030

Growth Opportunity Set

TransAlta/TransAlta Renewables well positioned to continue to grow

Alberta natural gas pipeline

Potential for 500+ MW of renewables in Alberta and Sask.

Behind the fence gas generation in Alberta, BC and Ontario

Solar development in Australia and U.S.

Significant acquisition opportunities in U.S., Canada, Australia

Conversion of 2,500 - 3,000 MW of coal to gas

Potential for 4,000 MW of renewable in Alberta

Brazeau energy storage project, Bighorn expansion, Dunvegan

Repowering of existing wind sites in U.S. and Canada

Acquisitions

Replacement of 3,000 MW of converted CTG in Alberta with

greenfield natural gas fired generation and storage

Greenfield solar and wind in U.S.

Acquisitions

2018 - 2020

2021 - 2030

2031+

3131

PROVIDES ACCESS TO TIDEWATER

STORAGE FACILITIES

Alberta Pipeline Strategy

NATURAL GAS PIPELINE

REQUIREMENTS

Sundance and Keephills can consume up

to 175 MMcf/d through fuel blending; up

to 700 MMcf/d when running at full

capacity once converted

Existing pipelines can provide only limited

amount of gas today

TIDEWATER NATURAL GAS PIPELINE

Entered into an agreement with Tidewater

to construct a pipeline from their Brazeau

River Complex to TransAlta’s generating

facilities

Initial volumes of 130 MMcf/d with the

potential to expand to 440 MMcf/d

Cost of $150 to $170 million, and

expected COD in early 2020

TransAlta has the option to invest in up to

50% of the pipeline

Aligns both companies interests;

provides low cost access to natural gas

transportation and future flexibility

Ownership builds on TransAlta’s

ownership of natural gas pipeline

infrastructure in Australia

PROPOSED PIPELINE MAP

3232

Edmonton

Bonnyville

Grande Prairie

Hinton

Camrose

Wetaskiwin

Red Deer

Drumheller

Calgary

Lethbridge

Medicine Hat

Ft. McMurray

100 km

60 mi

Big Horn 1&2 – 120MW

Abraham

Lake

Rocky

Mountain House

Brazeau Dam

355MW

Brazeau Gorge

Brazeau

Canal

Brazeau

Reservoir

Edmonton

Water Flow

Water Flow

Water Flow

Brazeau Energy Storage

SIGNIFICANT VALUE

Unique one-of-a-kind pumped storage

hydro project

Up to 900 MW

Investment of $1.5 to $2.7 billion

Significant economic and employment

benefits

Targeting 2025/2026 operating date

Requires long-term contract

3333

Brazeau Pumped Hydro – Significant System Benefits

Brazeau Pumped Hydro

Storage

Fast Ramping

Load Following

Wind Firming

Avoided Curtailment

Voltage and Inertia Support

Supports Transition to Clean Energy and a Low Cost, Reliable Electricity

System

3434

TransAlta’s Brazeau Pumped Hydro Opportunity

Leverages existing infrastructure

Existing power house

Proposed pumped hydro

3535

Brazeau: Significant Work Completed and Underway

Engaged Owner’s Engineer, providing Class 5 Estimate

Conducted initial geotechnical work

Started engagement with First Nations

Started environmental field studies

Engaged with Governments, Communities, Unions, Regulators and NGOs

3636

Bighorn 1&2 – 120MW

Abraham

Lake

Rocky

Mountain House

Brazeau Dam

355MW

Brazeau Gorge

Brazeau

Canal

Brazeau

Reservoir

Edmonton

Water Flow

Water Flow

Water Flow

Bighorn Hydro Expansion

Expand existing Bighorn from 120 MW to

240 MW

Two additional turbines and intake

structure

Preliminary engineering work completed,

identifying no significant issues

Utilizes existing infrastructure

Capable of providing energy, capacity

and ancillary services

Preliminary cost estimate of $360 million

3737

Alberta wind projects remain candidates for future REP procurements

or third party contracting

Canadian Wind Projects

Edmonton

Calgary

Saskatoon

Regina

Hanna

Pincher Creek

Swift Current

Garden Plains Wind

Location30 km north of Hanna, Alberta

Capacity 130MW

Proposed

In-Service Date

Future Alberta REP calls or third

party contracting

Capital Costs $260 mm

Other Details Wind resource data dating back

to 2009

Partnerships with landowners

since 2011

Antelope Coulee Wind

Location 35 km southwest of Swift

Current, Saskatchewan

Capacity Up to 200MW

Proposed

In-Service DateApril 2021

Capital Costs $400 mm

Other Details Wind resource data dating back

to 2008

Cowley Ridge Wind Repower

Location Northwest of Pincher Creek,

Alberta

Capacity 20MW

Proposed

In-Service Date

Future Alberta REP calls or

third party contracting

Capital Costs $40 mm

Other Details Site of original Cowley Ridge

Wind Farm which was built in

1993 and dismantled in 2016

Long-term understanding of

wind resource

3838

Well Positioned to Grow

Proven track record with significant opportunities being evaluated

Competitive advantages beyond cost of capital

Brownfield expansions leveraging existing infrastructure provide unique growth

opportunity

Continue to utilize TransAlta Renewables for long-term contracted opportunities

Remain Focused and Disciplined

PRELIMINARY DRAFT – FOR DISCUSSION PURPOSES ONLY, 2018-05-11 9:32 AM

3939

Outlook and Financial Summary

4040

$0.3

$1.2

$0.1

$0.3

$0.3

$1.4

$0.2

$0.4

Uses Sources

Growth

Capital Allocation - 2018 to 2020

Prudent allocation of capital – excess cash could be allocated

to growth or be returned to shareholders

Bond Repayment

Amortizing Debt

Dividend

FCF including payment for

Alberta PPA termination

Off-Coal Monetization

RNW tax equity

Existing Liquidity

SOURCES & USES ($ BILLION)

4141

Capital Structure – On Solid Ground

Flexibility to fund additional growth or to return cash to shareholders over

the next three years

ADJUSTED FFO TO NET DEBT

Adjusted FFO/Net Debt expected to be at the high end of our 25 – 30% range in 2021

2018 to 2020 Target (20 – 25%)

Post 2020 Target (25 – 30%)

16.5% 17.6% 17.0% 18.2% 18.2% 19.2% 20.4% 20.9%

0%

5%

10%

15%

20%

25%

30%

Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018

4242

$328

$0

$100

$200

$300

$400

$500

$600

2017 2018E

Free Cash Flow Outlook

FREE CASH FLOW BUILD-UP ($ MILLION)

Int. Exp. Reduction

Alberta Market

Optimization

Greenlight & Other

South Hedland$300 - $350

Solomon

Sundance A

Sundance B/C

Coal Cost

Sundance B/C

Termination Payment

More upside through additional productivity gains, cost and capital

reductions and higher prices

4343

2018 Outlook

2018 Outlook Ranges(1) ($ million) Low High

Comparable EBITDA $1,000 $1,050

Funds from Operations $750 $800

Sustaining and Productivity Capital (215) (235)

Free Cash Flow $300 $350

Free Cash Flow Per Share $1.04 $1.22

Annual Dividend $0.16 $0.16

Dividend Payout Ratio 15% 13%

Range of Key AssumptionsAlberta Spot ($/MWh) $50 - $60

Alberta Contracted ($/MWh) $35 - $40

Mid-C Spot (US$/MWh) $20 - $25

Mid-C Contracted (US$/MWh) $47 - $53

Canadian Coal Capacity Factor 65% - 75%

Hydro / Wind Resource Long term average

(1) Outlook excludes $157 million received in the first quarter related to the Sundance B and C termination payment.

4444

$0

$100

$200

$300

$400

$500

$600

2018E 2019 to 2020 Post 2021

Free Cash Flow Outlook

Full Year of Greenlight

Interest Reductions

Optimization

Full Coal Cost Reductions

Mississauga

Poplar Creek

Hydro Upside

FREE CASH FLOW BUILD-UP ($ MILLION)

$300 - $350

Sundance B/C

Termination Payment$375 - $425

$525 - $575

4545

Enhancing Growth Through Sponsored Vehicle

COMMENTARY ADVANTAGE FOR TRANSALTA

Attractive portfolio of highly

contracted renewables and

gas-fired assets

Current dividend yield 8%

Majority shareholder - 64%

Provides stable and predictable

dividends to TransAlta

Low leverage offers strong

potential for growth

Significant acquisition capacity

(both third-party acquisitions

and drop-downs)

Market premium multiple for

assets with strong, stable cash

flows – 9.4x EV/EBITDA

Access to competitive cost of

capital – 11% AFFO Yield

Ability to compete for third party

acquisitions and new

opportunities

Ability to align risk/return profile

with appropriate entity

Provides natural home for new

renewables investments

Significant

Source of Value

Strong Balance

Sheet

Premium for

Strong, Stable

Cash Flows

4646

Why Invest in TransAlta

Diversified portfolio in Alberta creates short-term value

Significant value creation from coal to gas conversions

Strong long term cash flows from diversified portfolio

Improving balance sheet

Growth opportunities unique to TransAlta

4747

$1.9

$3.1

$0.9

$1.3

$2.9

$1.0

$2.2

$0.4

$0.6

$0.2

TA Equity TA Debt,net of cash

Preferred Shares NCI RNW Equity RNW Debt Remaining Value Coal Plant

Value of Coal Not Being Recognized

Correct valuation for the coal and CTG would

increase the share price by $5 to $8 per share

Hydro (2)

Coal Monetization

Renewables and gas not held at RNW

PPA Termination payment

Market is currently

assigning no value

to coal assets

TA RNW TA-Excluding

RNW

Priced as of April 30, 2018. Balance sheet items reflect Q1 2018 values.1 includes the market value of TransAlta Renewables and BV of TA Cogen. 2 Hydro valued at $2.6 million per MW

(1)

TA Upside

Implies

Coal at

6x to 8x

EBITDA