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11
On Track to be Canada’s Clean Energy Leader
Investor Day
December 6th, 2017
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 forward-looking statements pertaining to: our business strategy and goals, including those specific to becoming Canada’s leading clean
energy company; our expectation of transitioning to 100% clean energy by 2025; anticipated government actions, including a regulatory environment that will incent clean and renewable power, carbon pricing,
green credit and coal to gas life extension; expected provincial credits for existing wind and hydro in Alberta; expected federal regulations supporting coal to gas conversions; initial carbon tax of $30/tCO2
effective January 1, 2018, potentially climbing to $50/tCO2 by 2022; expected $30 million to $50 million to be received annually in credits for TransAlta’s existing renewable generation; the structure of the
Alberta capacity market, including the expectation that the first auction will occur in 2021; TransAlta’s position to compete in the Alberta capacity market; the forecasted capacity price and medium term price
forecast; the extension of plant life following coal to gas conversion and the impact on free cash flow (“FCF”); expected capacity requirements in Alberta; forecasted Alberta prices for both capacity and energy;
ability to realize Gas and Renewables’ strategic objectives, including realizing more than $150 million annually in potential upside from the Hydro assets starting in 2021 and gaining capacity payments for wind
and hydro in the capacity market; average free cash flow (“FCF”) for the remainder of 2017 and the period from 2018 to 2020; industry trends, including the continued reduction in the cost of renewables, the
abundant supply of low cost natural gas and value of hydro-based power storage; ability to realize life extension and growth opportunities, including the Brazeau Pumped Storage Facility and the Bighorn
Facility expansion and the timing and costs associated therewith; increase in cash flows and EBITDA from the Alberta hydro assets following the expiry of the applicable Alberta power purchase arrangement;
increase in wind revenue going forward; Ontario’s long-term energy needs, including the anticipated supply gap in the mid-2020s; the mothballing of Sundance Units 3, 4 and 5; the conversion to gas-fired
generation of Sundance Units 3 to 6 and Keephills Units 1 to 2, including the associated timing and expected benefits to be realized; the expected gas supply required for converted units; the construction by
Tidewater of a pipeline to TransAlta’s Sundance and Keephills facilities with a capacity of 130 million cubic feet of gas per day by 2020 and expansion capability to 340 million cubic feet of gas per day; the
terms of any definitive agreement with Tidewater in regard to the pipeline expected to be constructed from the Brazeau River Complex to TransAlta’s Sundance and Keephills facilities; the anticipated benefits
of converting units to gas; the incremental FCF from the extended fleet life; ability to reduce operating and maintenance costs; improving operating flexibility; potential 70% reduction in carbon costs;
construction of two or more pipelines to minimize risk of supply disruptions at the converted units; cumulative life extension and incremental cash flow associated therewith; expected portfolio benefit to be
realized from price volatility attributable to active portfolio management; expected $50 million to $60 million of EBITDA from energy marketing; he anticipated benefits from Project Greenlight; key aspects of
TransAlta growth strategy, including potentially partnering with financial players; system benefits attributable to the Brazeau Pumped Storage Facility; the continued relationship with TransAlta Renewables,
including the potential drop down of assets to TransAlta Renewables; capital allocation from 2018 to 2020; 2018 outlook, including Comparable EBITDA, FCF and dividend payout ratio; increase in FCF
through lower sustaining capital, reduction in interest expense and stable EBITDA; and steady improvement of credit metrics by 2020.
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; the Federal and/or
Provincial governments not implementing legislation or regulations facilitating the conversion from coal generation to gas generation; the Federal and/or Provincial governments adopting different carbon prices
rules; 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; 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
TransAlta Investor Day Agenda
9:30 am Dawn Farrell, President and Chief Executive Officer
Introduction and Strategic Overview
John Kousinioris, Chief Legal & Compliance Officer
Regulatory & Market Overview
Aron Willis, Senior Vice President, Gas & Renewables
Gas & Renewables
Wayne Collins, Executive Vice President, Coal & Mining
Transitioning our Coal Fleet
Jennifer Pierce, Senior Vice President, Trading and Marketing
Trading & Marketing
15 minutes Break
Nipa Chakravarti, Chief Transformation Officer
Corporate Transformation
Brett Gellner, Chief Investment Officer
Growth & Reinvestment in the Future
Donald Tremblay, Chief Financial Officer
Financial Summary
Dawn Farrell, President and Chief Executive Officer
Closing Remarks
Q&A
Ending at 1:30 pm Lunch
44
Executive Team
Dawn Farrell
President and Chief
Executive Officer
John Kousinioris
Chief Legal &
Compliance Officer
Aron Willis
Senior Vice
President, Gas
and Renewables
Wayne Collins
Executive Vice
President, Coal &
Mining
Jennifer Pierce
Senior Vice
President, Trading
& Marketing
Nipa Chakravarti
Chief
Transformation
Officer
Brett Gellner
Chief Investment
Officer
Donald Tremblay
Chief Financial
Officer
Dawn de Lima
Chief
Administrative
Officer
55
BC
WA
ON
WY
QC
NB
MN
AB
MA
TransAlta Today
Significant generator with 8,546 MW of capacity
Highly contracted (75%) with upside to Alberta market
1 Comparable EBITDA less sustaining capital and excludes Energy Marketing and Corporate Segments 2 Excludes the $80 million adjustment to provisions in the fourth quarter of 2016 relating to our
Keephills 1 outage in 2013
Diversified operations with over 65 facilities in three countries
AUSTRALIACoal / Future CTG
Hydro
Gas
Solar
Wind
Corporate Offices
30%
42%
22%
6%
$830 mm
Coal(2)
Gas
Wind / Solar
Hydro
2016 CASH FLOW FROM GENERATION(1)
66
Significant Achievements
Signed the Alberta MOU to advance:
▪ CTG conversions
▪ Credits for existing renewables
▪ Level playing field for incumbents from capacity market
Off-coal agreement with Alberta Government totaling $524 million
Development of a capacity market in Alberta
Proposed federal regulations support coal to gas conversions
Public Policy
Developments
Increased
Financial
Flexibility
Strategic
Contracted
Growth
Re-contracting
and Life
Extension
Reduced net debt by approximately $0.8 billion since December 2015
Increased liquidity to $1.7 billion
Raised $1.1 billion in project level debt
Raised $0.6 billion through asset sales and drop downs
Maintained investment grade credit rating with three rating agencies
Commissioned South Hedland in July 2017
Expanded Kent Hills Wind Farm
Australia gas pipeline
Mass Solar, Lakeswind and Kent Breeze acquisitions
Advancing CTG conversions which will extended the life and value of
these assets
Extended contracts on 408 MW of owned generation
77
$3.50
$4.50
$5.50
$6.50
$7.50
$8.50
$9.50
$10.50
$11.50
$12.50
$13.50
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17
TransAlta Corporation
Value is Beginning to be Recognized
Source: FactSet
Note: Pricing as at November 27, 2017.
~100% increase in share price
since January 2016
Policy uncertainty Improved clarity on policy
Off-coal policy
discussions
Off-coal agreement
and MOU
Climate
Leadership Plan
Announcement
Dividend
reduction
88
Canada’s Leading Clean Energy Company
100% clean energy by 2025
Customers want clean, low cost, reliable, firm generationCustomers
Governments are supporting clean power generation
Regulatory environment is incenting clean and renewable
power
Actions include coal phase out, carbon pricing, green credits,
CTG life extensions and long term contracts
Governments
Increasing interest in clean and renewable power generators
Creation and expansion of clean and renewable specific fundsInvestors
99
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
1010
TransAlta’s Priorities
Convert coal to gas
Leverage our operating platform for value creation
Build financial strength
Grow free cash flow
Continue to diversify and build customer relationships
1111
Recent Announcements Support Value Creation
Competitively positioned to become Canada’s leader in clean power
Mothball uneconomic coal units until the demand for capacity
grows or capacity market is implemented
Units available to restart when demand for capacity increases
Optimize
Merchant Coal
Portfolio
Signed letter of intent with Tidewater Midstream to construct
pipeline for service in 2020
Accelerates conversion timetable and lowers the cost of carbon
through fuel blending
Advance Gas
Pipeline Strategy
Expect provincial credits for existing wind and hydro in Alberta
Expect federal regulations supporting coal to gas conversions
Regulations
Support Clean
Energy
Brazeau and Bighorn are strong candidates for future
renewable generation and storage procurements
Alberta
Government
Renewables
Procurement
1212
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
1313
John Kousinioris
Chief Legal & Compliance Officer
Regulatory & Market Overview
1414
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
Expect credits for electricity generation with emissions below the
performance standard
Expect existing wind and hydro to be 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
1515
Alberta Carbon Rules Expected to be Positive for TransAlta
Expect $30 to $50 million annually in credits for existing renewables
EXISTING WIND AND HYDRO GENERATION
Expect to receive credits for generation up to the performance standard
Performance
Standard
Emissions
above standard
Emissions
below standard
Generators
charged based
on emissions
above the
performance
standard
Generators
credited based
on emissions
below the
performance
standard
1616
Development of Alberta’s Capacity Market Supports Our Fleet
TransAlta is well positioned to compete in a capacity market
Provides future revenue visibility and stabilityForward Auction
All capacity resources permitted to participate
TransAlta’s entire generation fleet will be able to participateEqual Treatment
Mitigates price volatility and supports capacity revenue during
periods of oversupply
Downward
Sloping Demand
Curve
REP Capacity
Excluded
Avoids negative impact on capacity price due to subsidized
renewables
1717
12,144 12,557 13,231
1,822 1,884 1,985
13,966 14,441
15,216
2021E 2025E 2030E
Peak Demand 15% Reserve
Adjusted Capacity: 13,700
TransAlta’s Units are Required
EXPECTED CAPACITY REQUIREMENTS (MW)
(3) (4)
1 Based on AESO’s 2017 reference case 2 Assumes AESO sets a 15% reserve margin above peak demand for determining capacity requirements 3 Adjusted for outages, de-rates and anticipated capacity
eligibility for thermal (95%), hydro (90%) and wind (15%) generation 4 Assumes interties are ineligible for capacity
(1) (2)
1818
Forecasted Alberta Prices in New Market Design
Capacity price will be an important driver of future revenue
CAPACITY PRICE FORECAST ($/KW-MONTH)
ENERGY PRICE FORECAST ($/MWH)
$5
$10
$15
$20
$25
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
LEI EDC
$30
$35
$40
$45
$50
$55
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E 2031E
LEI EDC
1919
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
$C
AD
($
/MW
h)
Alberta Spot Price Current Forward Price
Medium Term Alberta Price Forecast
Prices are expected to adjust in response to carbon pricing,
load growth and supply and demand
Potential
Price Range
2020
Gas & Renewables
Aron Willis
Senior Vice President, Gas & Renewables
2121
Gas & Renewables Strategy
Highly valued, clean energy portfolio
STRATEGIC OBJECTIVES
Leverage the competitive business model to support growth
Deliver safe, low cost and clean power to customers
Realize more than $150 million annually in potential upside from the Hydro assets starting
in 2021
Capture increased value as carbon costs impact market prices
Realize value of expected offset credits for existing wind and hydro
Gain capacity payments for wind and hydro in the capacity market
Leverage relationships with behind-the-fence large industrial customers
2222
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
Hydro Facilities
WESTERN CANADA EASTERN CANADA
2323
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
2424
$87 $73
$82
2014 2015 2016 2017E 2021+
EBITDA ($ millions)
$65 - $75
$225 - $275
Significant Growth in Hydro EBITDA
4 year CAGR of over 30%
2525
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
Wind / Solar Assets
UNITED STATES
WESTERN CANADA EASTERN CANADA
UNITED STATES
2626
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
Expecting $15 to $20 million annually in
green credits
Expected to 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)
2727
Wind and Solar EBITDA
Highly contracted asset base with upside in Alberta
$179 $176
$195
2014 2015 2016 2017E 2021+
Contracted EBITDA ($ millions) Merchant EBITDA ($ millions)
$195 - $215
$220 - $240
2828
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
2929
Natural Gas Re-contracting
Extended contracts for a total of 65 cumulative years
Windsor
Southern Cross
Fort Saskatchewan
Ottawa
Extension Years
15
10
10
20
Owned Capacity (MW)
36
245
35
37
Parkeston 10 55
3030
World class facility
150 MW COMBINED CYCLE GAS POWER STATION IN WESTERN AUSTRALIA
Achieved commercial operation in July 2017
75% contracted with Horizon Power (AA+ rating) until 2042
South Hedland Power Station
3131
Ontario’s Long-term Energy Needs
ONTARIO SUPPLY AND DEMAND OUTLOOK
Ontario IESO is projecting a supply gap in the mid-2020s
TransAlta’s Sarnia plant is well positioned to play an important role in the market and with
our steam customers well into the future
3232
$315
$334
$372
2014 2015 2016 2017E 2021E
EBITDA ($ millions)
$390 - $410
$290 - $330
Natural Gas EBITDA
Contract expiry and price reductions not fully offset by South Hedland
3333
Gas and Renewables Summary
Significant upside in Alberta renewable assets
Long-term contracted assets provide consistent cash flows
Opportunities for repowering and brownfield expansion across the fleet
Significant scale provides opportunities to add new assets at low cost
Assets in Ontario well positioned for improving market fundamentals
3434
Wayne Collins
Executive Vice President, Coal & Marketing
Transitioning our Coal Fleet
3535
Canadian Coal Strategy
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 3, and
Sheerness
CONVERSION BENEFITS
Cumulative fleet life extended by approximately 75 years, adding over $1 billion of
incremental cash flow between 2021 to 2039
Significantly reduces emissions
Improved operating reliability, flexibility and costs
Low risk investment
Well positioned for the capacity market
Converted assets are required to meet the generation demand in Alberta
3636
Key Actions
Mothball two additional units and adjust cost structure to create value with portfolio of
850MW of merchant generation
April 2018: Mothball Sun 3 and Sun 5
April 2019: Mothball Sun 4 and bring Sun 5 back online
Extract full value from the sustaining capital already invested in Sun 4 and Sun 5
In service Sundance units operate at approximately 20% higher capacity factor
Prepare mothballed assets to participate in capacity market
Adjust the cost structure of the business to align with a smaller less complex operation
Secure pipeline access to a diverse supply of gas
Complete engineering work and obtain required permits for conversions
Convert Sundance Units 3-6 and Keephills Units 1 and 2 by 2022 – a year earlier than
originally planned
3737
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)
3838
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
3939
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
4040
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
4141
$-
$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
4242
-
$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)
4343
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
4444
$451 $456$434
2014 2015 2016 2017E 2021+
EBITDA ($ millions)
$395 - $415
$300 - $350
CA and US Coal EBITDA
Approximately $200 million in FCF annually for an additional
fifteen years beyond 2021
Reduction in EBITDA is offset by lower sustaining capital for converted units
Assumes $9/kw-month post 2021+
4545
Canadian Coal Summary
Alberta coal fleet will transition to clean energy
Size of fleet allows significant flexibility
Costs can be consolidated by running fewer plants at higher utilization
Plants can be prepared for conversions
Units can re-enter the market quickly as the demand for capacity grows
Under new federal legislation cumulative fleet life extended by approximately 75 years
Over $1 billion in incremental value
4646
Trading & Marketing
Jennifer Pierce
Senior Vice President, Trading & Marketing
4747
Role of Trading & Marketing
In-house Trading & Marketing provides unique optimization and customer
opportunities
Optimize Centralia, Ontario and Alberta merchant portfolio
including environmental products, hydro, wind, natural gas and
coal
Asset
Optimization
Standard and customized products for large wholesale,
commercial and industrial customers
Connect customer needs with growth opportunities
Customer
Solutions
Balanced portfolio of real time, day ahead and term trading in
gas and power to assist in price discovery and asset
optimization
Proprietary
Trading
Forecast pricing changes due to changing regulatory rules,
technology trends and supply / demand fundamentals
Market Pricing
& Trends
4848
Portfolio Management Strategy - Alberta
For each $1/MWh move in prices the change in value of the portfolio
is ~$8 million in 2018 and ~$11 million in each of 2019 and 2020
POSITION (MW)
PPA
Long-term
contract
Hedges
Potential
open
positionsStrategic shift from being
highly hedged to active
portfolio management -
position the portfolio to
benefit from price volatility
0
500
1,000
1,500
2,000
2,500
3,000
2018E 2019E 2020E
4949
$75
$37
$52
2014 2015 2016 2017E 2021+
EBITDA ($ millions)
$50 - $60
$40 - $50
Energy Marketing EBITDA
Generating $50 to $60 million of EBITDA while providing
expertise and advice to the business
Expected to be in
line with historical
levels
5050
Break
5151
Corporate Transformation
Nipa Chakravarti
Chief Transformation Officer
5252
Creating the Environment for Change
Continuously driving value
1,800 Initiatives in the pipeline, >12,000 Milestones; with 875
Initiatives completed in 2017
Managing weekly cadence with a focus on execution
Bottom Up
Innovation
Structuring costs to align with a simpler, more flexible operationFlexible
Operations
Using technology innovation to drive sustainable outcomes
Driving value from all aspects of the business
Focus
on Value
Creation
5353
Project Greenlight
BREAKDOWN BY METRIC
$50 to $70 million in incremental free
cash flow
2-3 year payback on initiatives
KPI and financial impact tracking at
the Initiative level
Gross Margin
OM&A
Capital
Financing
Working Capital
5454
Project Greenlight Video
5555
Brett Gellner
Chief Investment Officer
Growth & Reinvestment in the Future
5656
TransAlta’s Growth Objectives & Strategic Boundaries
Invest in highly contracted clean energy assets
Continue to diversify by geography, asset, contract life, and technologies
Create value by leveraging TransAlta’s competitive strengths
Focus primarily on core markets of Canada, United States, and Australia
Remain disciplined in terms of returns and leverage
Utilize TransAlta Renewables for lower risk opportunities
5757
0
500
1,000
1,500
2,000
2,500
2000 Today
MW
Proven Track Record in Investing in Renewables
Significant growth through combination of acquisitions
and greenfield development
TRANSALTA’S GROWTH IN RENEWABLE ENERGY (MW)
One region
14 facilities
Primarily hydro
Eight regions
51 facilities
Hydro/Wind/Solar
175% Growth
5858
Changing Landscape
Coal phasing out
Challenging to permit large scale greenfield
projects
Renewables cost effective and proven
Need for fast-ramping gas/hydro/storage
Significant carbon regulations
Customers want clean, low cost, reliable
generation
Low cost baseload provided by
Coal, Nuclear, Combined Cycle
Limited carbon regulations
Wind higher cost than thermal
Solar unproven and costly
Customers indifferent to power
source
Battery storage untested
FUTUREPAST
5959
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
6060
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
6161
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+
6262
Leveraging our Existing Platform
SIGNIFICANT OPPORTUNITIES BY LEVERAGING OUR EXISTING ASSET BASE
Kent Hills wind farm expansion
Natural gas pipeline to support coal to gas conversions
Brazeau pumped hydro storage project
Bighorn hydro expansion
Solar opportunities at mine sites
Repowering of wind
New combined cycle or simple cycle gas at Sundance/Keephills
Coal to gas conversions, or new gas plants at Centralia
Repowering of gas plants in Australia
6363
Significant Opportunities Being Evaluated
Over 9,000 MW currently being evaluated
CURRENT OPPORTUNITY SET (MW)
-
500
1,000
1,500
2,000
2,500
3,000
Wind Hydro Solar Gas-fired Coal to Gas Conversions
Operating Greenfield/Brownfield
6464
EXPANSION OF THE EXISTING KENT
HILLS WIND FARM IN NEW BRUNSWICK
Five additional turbines adding 17 MW of
capacity, bringing total capacity to 167
MW
All three Kent Hills wind farms now fully
contracted until 2035 with New Brunswick
Power
Financing completed
Value of existing sites – Kent Hills 3
6565
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 once converted
Existing pipelines can provide only limited
amount of gas today
Two or more pipelines will be secured in
order to minimize the risk of any supply
disruptions and to provide diversified
access to natural gas in Western Canada
TIDEWATER NATURAL GAS PIPELINE
Entered into Letter of Intent with
Tidewater to construct a 120 km pipeline
from their Brazeau River Complex to
TransAlta’s generating facilities
Initial volumes of 130 MMcf/d with the
potential to expand to 340 MMcf/d
Cost of ~$150 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
6666
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 a 900 MW/5,000 MWh
Investment of $2.5 billion
Significant economic and employment
benefits
Targeting 2025/2026 operating date
Requires long-term contract
6767
Brazeau Pumped Hydro Storage Video
6868
Pumped Hydro Dominates Global Energy Storage
Pumped Hydro Represents ~95% of Global Energy Storage
Pumped
Hydro
Other Storage
Technologies
Pumped hydro
GLOBAL ENERGY STORAGE CAPACITY (GW)
Source: Department of Energy Global Energy Storage Database
0
20
40
60
80
100
120
140
160
180
19
05
19
51
19
57
19
63
19
68
19
73
19
78
19
83
19
88
19
94
19
99
20
04
20
09
20
14
20
20
Pumped Hydro Storage Other Storage
6969
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
7070
TransAlta’s Brazeau Pumped Hydro Opportunity
Leverages existing infrastructure
Existing power house
Proposed pumped hydro
7171
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
7272
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
7373
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
7474
Donald Tremblay
Chief Financial Officer
Financial Summary
7575
TransAlta’s Financial Key Priorities
Deliver $1.2 billion in FCF over the next three years - $400 million per year
Fund growth through TransAlta Renewables, financial partners, project level debt and
post 2020 excess cash flows
Target corporate debt to decline from $2.6 to $1.2 billion by 2020
Achieve 25% FFO / Debt for the overall business
Increase the share price to fully recognize the long-term value of the portfolio
Solid financial footing underpinned by strong long-term cash flows
7676
$0.3
$1.2
$0.1
$0.3
$0.3
$1.4
$0.2
$0.4
Uses Sources
Growth
Capital Allocation - 2018 to 2020
Capital plan supports the transition to clean energy
Bond Repayment
Amortizing Debt
Dividend
FCF including payment for
Alberta PPA termination
Off-Coal Monetization
Drop down to RNW
Existing Liquidity
SOURCES & USES ($ BILLION)
7777
15%17%
20%
0%
5%
10%
15%
20%
25%
30%
2015 2016 2017E 2020E
Capital Structure – On Solid Ground
Flexibility to fund additional growth over the next three years
ADJUSTED FFO TO NET DEBT
Debt metrics above target range post 2021 allow for excess FCF to be allocated to
growth
Current capital plan would
result in FFO / Net Debt of ~30%
Target
range of
20 - 25%
7878
$256
$0
$100
$200
$300
$400
$500
$600
2016 2018E
Free Cash Flow Outlook
FREE CASH FLOW BUILD-UP ($ MILLION)
Int. Exp. Reduction
Off-Coal Pmt / MSA
Optimization
Greenlight & Other
South Hedland
$275 - $350
Solomon
Sundance A
Sundance B/C
Coal Cost
Sundance B/C
Termination Payment
7979
2018 Outlook
2018 Outlook Ranges ($ million) Low High
Comparable EBITDA $950 $1,050
Funds from Operations $725 $800
Sustaining Capital (215) (235)
Free Cash Flow $275 $350
Free Cash Flow Including PPA Termination Payment $475 $550
Free Cash Flow Per Share $0.96 $1.22
Annual Dividend $0.16 $0.16
Dividend Payout Ratio 17% 13%
Range of Key AssumptionsAlberta Spot ($/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
8080
$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)
$375 - $425
$525 - $575
$275 - $350
Sundance B/C
Termination Payment
8181
Enhancing Growth Through Sponsored Vehicle
COMMENTARY ADVANTAGE FOR TRANSALTA
Attractive portfolio of highly
contracted renewables and
gas-fired assets
Current dividend yield 7%
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 – 10.4x EV/EBITDA
Access to competitive cost of
capital – 10%% 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
8282
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 (3)
Coal Monetization
Renewables and gas not held at RNW
PPA Termination payment
Value
attributable to
existing coal
plants in current
share price
TA RNW TA-Excluding
RNW
Priced as of November 27, 2018. Balance sheet items reflect Q3 2017 values.1 TA Debt, net of cash includes termination proceeds from Solomon. 2 includes the market value of TransAlta Renewables and BV of TA Cogen. 3 Hydro valued at $2.6 million per MW
(1) (2)
TA Upside
Implies
Coal at
6x to 8x
EBITDA
$2.2
$3.3
$0.9
$1.5
$3.4
$0.9
$2.2
$0.4
$0.6
$0.2$0.2
TA Equity TA Debt,net of cash
Preferred Shares NCI RNW Equity RNW Debt Remaining Value Coal Plant
8383
Dawn Farrell
President and Chief Executive Officer
Closing Remarks, Q&A
8484
What You Have Heard Today
Low cost, clean, reliable and firm electricity for customers
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
8585
Question and Answer