Transalta Corporation 2019 Investor Day Monday, September 16, 2019

TransAlta Corporation 2019 Investor Day Monday, September 16, 2019

1 Forward Looking Statements This presentation includes "forward-looking information", within the meaning of applicable Canadian securities laws, and "forward-looking statements", within the meaning of applicable United States securities laws, including the United States Private Securities Litigation Reform Act of 1995 (collectively referred to herein as "forward-looking statements"). All forward-looking statements are based on our beliefs as well as assumptions based on information available at the time the assumption was made and on management's experience and perception of historical trends, current conditions, results 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"; "could", "would", "shall", "believe", "expect", "estimate", "anticipate", "intend", "plan", "forecast" "foresee", "potential", "enable", "continue" or other comparable terminology. These statements are not guarantees of our future performance, events or results and are subject to a number of significant risks, uncertainties and other important factors that could cause our actual performance, events or results to be materially different from that set out in the forward-looking statements. In particular, this presentation contains forward-looking statements including, but not limited to, statements relating to: the Company’s strategies, ongoing objectives and outlook for 2019 and subsequent periods, including being a low-cost generator and ability to participate in growth; relationship with TransAlta Renewables, including the annual receipt of approximately $150 million in dividends and either reinvesting such dividends in high returning projects or returning capital to shareholders; decreases in emissions and the extent thereof; forecasted Alberta energy and AECO natural gas pricing; Alberta’s expected market fundamentals, including load growth and capacity requirements; future Alberta energy pricing; expected reductions to TransAlta’s marginal cost; market

design and carbon policy in the various jurisdictions, including the Technology Innovation and Emissions Reduction program in Alberta, the $30/tonne of CO2E pricing, and receipt of credits for renewable generation; the continuation and realization of future benefits from Project Greenlight; the brownfield investments in the Alberta fleet and expected returns; increase in cash flows from Alberta Hydro following 2020; contract extensions; benefits and returns expected to be realized from the coal-to-gas conversion strategy, including significant reduction in emissions costs, operating costs and outage times; execution of the base conversion plan, including the timing of conversions, ability to secure gas supply, the anticipated capital costs and receipt of regulatory approvals; extension of asset lives as a result of conversions; returns from repowering units and EBITDA potential; U.S. market trends in installed generation; existing growth projects, including the timing of commercial operation, capital invested and expected unlevered returns; acquisition of the 49% interest in the Skookumchuck wind farm; EBITDA from the Company’s growth projects; dividend levels and the payment of dividends equal to 10% to 15% of deconsolidated funds from operations; capital allocation, including as it pertains to dividends, sustaining and productivity capital, growth, conversions, debt reduction and share buybacks; expected reduction in senior recourse debt; post-Hydro PPA debt/EBITDA metrics; sources and uses and funding requirements in 2020 to 2023, including ability to refinance 2022 debt; funding plan of TransAlta Renewables; and any uplift to be realized in Company’s current share price. The forward-looking statements contained in this presentation are based on many assumptions including, but not limited to, the following material assumptions: no significant changes to applicable laws in the markets in which we operate; assumptions referenced in our 2019 guidance; our Alberta hydro assets achieving their anticipated value, cash flows and EBITDA once the applicable power purchase arrangements have expired; no material decline in the dividends expected to be received from TransAlta Renewables Inc.; the expected life extension of the coal fleet and anticipated financial results generated on conversion; the construction by Suncor of approximately 800 MW of cogeneration in Alberta; assumptions regarding the ability of the converted units to successfully compete in the expected Alberta energy-only market; and assumptions regarding our current strategy and priorities, including as it pertains to our coal-to-gas conversions. The material assumptions used in the preparation of the forward-looking statements contained herein, which may prove to be incorrect, include, but are not limited to, the assumptions set forth herein and in management's discussion and analysis (“MD&A”) and the Company's Annual Information Form dated as of February 26, 2019.

By their nature, forward-looking statements are not guarantees of future performance, events, results or actions and are subject to a number of significant risks, uncertainties, assumptions and factors that could cause our actual plans, performance, results or outcomes to differ materially from the forward-looking statement. Factors that may adversely impact what is expressed or implied by forward-looking statements contained in this presentation include, but are not limited to, risks relating to: the failure of the second tranche of the Brookfield investment to close; the outcomes of existing or potential legal actions or regulatory proceedings not being as anticipated, including those pertaining to the Brookfield investment and the South Hedland power station; changes in our relationships with Brookfield and its affiliated entities or our other shareholders; our Alberta hydro assets not achieving their anticipated value, cash flows or adjusted EBITDA; the inability to complete share buy-backs within the timeline or on the terms anticipated or at all; fluctuations in demand, market prices and the availability of fuel supplies required to generate electricity; changes in the current or anticipated legislative, regulatory and political environments in the jurisdictions in which we operate; environmental requirements and changes in, or liabilities under, these requirements; operational risks involving our facilities; changes in market prices where we operate; unplanned outages at generating facilities and the capital investments required; equipment failure and our ability to carry out repairs in a cost effective and timely manner; delays in construction and/or cost overruns; the effects of weather; disruptions in the source of fuels, water or wind required to operate our facilities; energy trading risks; failure to obtain necessary regulatory approvals in a timely fashion; negative impact to our credit ratings; legislative or regulatory developments and their impacts; increasingly stringent environmental requirements and their impacts; increased competition; global capital markets activity (including our ability to access financing at a reasonable cost); changes in prevailing interest rates; currency exchange rates; inflation levels and commodity prices; general economic conditions in the geographic areas where TransAlta operates; and other risks and uncertainties discussed in the Company's materials filed with the Canadian securities regulatory authorities from time to time and as also set forth in the Company's MD&A and Annual Information Form for the year ended December 31, 2018. Readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on them, which reflect the Company's expectations only as of the date hereof. The forward-looking statements included in this presentation 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. In light of these risks, uncertainties and assumptions, the forward-looking statements 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 EBITDA, FFO and FCF, on a consolidated or deconsolidated basis, are not standard measures defined under International Financial Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities. TransAlta’s deconsolidated FFO is a non-IFRS measure and can be reconciled to TransAlta’s reported 2018 cash flow from operating activities ($820 million) by: (A) adding back changes in non-operating working capital balances ($44 million), adding back decreases in finance lease receivables and other ($59 million and $4 million), and subtracting $157 million for the Sundance B and C PPA termination (for funds from operations of $770 million); (B) subtracting distributions paid to Canadian Power Holdings ($86 million); (C) removing TransAlta Renewables’ 2018 FFO, calculated as TransAlta Renewables’ cash flow from operating activities ($385 million) plus changes in non-operating working capital balances ($5 million), less finance and interest income ($171 million), plus AFFO from economic interests ($162 million) (for TransAlta Renewables’ FFO of $381 million); and (D) plus the dividends received from TransAlta Renewables in 2018 ($151 million). These measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS. Presenting these items from period to period provides management and investors with the ability to evaluate earnings and cash flow trends more readily in comparison with prior periods’ results and, in the case of the deconsolidated FFO and Debt/EBITDA, it allows shareholders to understand how the dividend at TransAlta Renewables is being either returned or invested for TransAlta shareholders. For further information on non-IFRS financial measures we use, see our most recently filed MD&A, filed with Canadian securities regulators on www.sedar.com and the Securities and Exchange Commission on www.edgar.com. 2 Presenters

Dawn Farrell John Kousinioris Brett Gellner President and Chief Chief Operating Chief Development Executive Officer Officer Officer

Wayne Collins Aron Willis Todd Stack Executive Vice- Senior Vice-President, Chief Financial Officer President, Generation Growth

3 Agenda

Strategic Overview Dawn Farrell 9:30 am

Market Fundamentals John Kousinioris

Operations Review John Kousinioris

Wayne Collins Conversion to Gas and Brett Gellner

Break 10:45 am

Renewable and On-site Aron Willis Generation Growth

Financial Plan Todd Stack

Concluding Remarks Dawn Farrell

Q&A 11:30 am

4 Why Invest in TransAlta • Strategy of 100% Clean Energy unchanged – execution well underway • Strong cash flows with significant upside potential • TransAlta’s fleet will be a competitive low-cost generator in the Alberta energy-only market • TransAlta Renewables well positioned to fund and participate in growing demand for renewables and on-site generation • Balance sheet, cash flow and capital available to fund current growth plans • Strong culture focused on safety, operational and financial excellence • Attractive equity entry point PORTFOLIO TRANSFORMATION WELL UNDERWAY

Clean Energy 100% Gas and Renewables Clean Energy Coal Generation

Today Post-2025 5 Vision, Mission and Values

Powering Economies and Communities Vision A leader in clean energy – committed to a sustainable future Mission Provide safe, low-cost and reliable clean energy Values Safety Innovation Sustainability Respect Integrity

6 TransAlta Summary Corporate Snapshot Enterprise Value1 $8.1 Billion Market Capitalization1 $2.4 Billion Dividend Yield1 1.9% 2019E EBITDA (guidance) $875M - $975M 2019E FCF2 (guidance) $270M - $330M 71 generating facilities with 7,939 MW of capacity spanning multiple technologies and regions

TECHNOLOGY DIVERSITY IN 20213 GEOGRAPHIC DIVERSITY IN 20213

Hydro US Coal 9% 12% United States 14% Rest of Canada 18% Alberta Wind/Solar Coal Australia 6% /Battery 23% 23%

Alberta Gas Alberta Repowered 62% Gas 16% 17%

1) Price as at September 11, 2019. Non-Controlling Interest of TransAlta Renewables based on market value. 2) Free cash flow (FCF) is an important metric as it represents the amount of cash that is available to invest in growth initiatives, make scheduled principal repayments on debt, repay maturing debt, pay common share dividends, or repurchase common shares. 3) Based on MW of owned capacity. Includes projects under construction and excludes one of the Centralia coal units as it is retiring at the end of 2020. 7 Business Model Clarity

~$150 million in dividends

Converted Contracted Contracted Hydro Centralia & Energy Alberta Renewable On-site Assets Other Marketing Assets Assets Generation

Portfolio run by a single leadership team Provides operational and financial synergies driving competitive advantage 8 Key Accomplishments Since 2017 Investor Day

• Generated record Free Cash Flow of $367 million1 ($1.28 per share) in Strong Cash 2018 flow • Awarded $58 million of additional PPA proceeds from Balancing Pool • Greenlight delivered $70 million of value for the full year 2018

• Pioneer Pipeline transported first gas four months ahead of schedule Advanced • Significantly increased co-firing and advanced conversion program Conversion to • Acquired 100% ownership of Keephills 3, resulting in more streamlined Gas Strategy operations • Secured supportive regulatory policy

Continued to • Secured four new contracted wind farms which will generate stable, long- term cash flows Grow • Advanced discussions with numerous cogen customers

• Reduced TransAlta level debt by over $320 million since year-end 2017 Prudent • Secured $750 million strategic investment from Brookfield, surfacing Capital hydro value Allocation • Purchased and cancelled ~5.7 million TransAlta shares for a total of $44 million

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C PPA termination payment 9 Positioned for Future Alberta Energy-Only Market

• Scale, operational expertise and portfolio diversification provide unique advantages and position TransAlta well for the continued Alberta energy-only market

TOP FIVE GENERATORS IN ALBERTA (MW)

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - TransAlta Capital Power ATCO Suncor ENMAX Thermal Hydro Wind

Well positioned for the Alberta energy-only market

Source: Alberta Electric System Operator (AESO) 10 Positioned for Future in Renewables • TransAlta/TransAlta Renewables has more than doubled its renewable fleet since 2008 • Our existing presence and expertise position us well to participate in the growing demand for renewable energy

GROWTH IN RENEWABLE GENERATION (MW)

3,000

2,500

2,000

1,500

1,000

500

0 2008 Current Current+Under Construction Hydro Wind Solar+battery

Annual EBITDA Generated by 1 Renewable Assets $98M $322M $367M Percentage of EBITDA2 10% 33% 38%

Nearly tripled EBITDA from renewable assets since 2008

1) Current Annual EBITDA represents 2018 full year. 2) Percentage of EBITDA Adjusted to exclude the $157 million received during the first quarter of 2018 related to the 11 Sundance B and C PPA termination payment ESG Leadership at TransAlta

Four years of voluntary integrated reporting • Empirical evidence shows that Environmental, Social and Governance (ESG) performance is correlated with financial performance BOARD TENURE BOARD AND EXECUTIVE TEAM DIVERSITY Diversified Board and senior 3-5 yrs management team 25% Industry • Board average tenure of less than five TransAlta Average years <2 yrs Women on 42% 40% 25% • Board and Workplace Diversity Policy in executive team 5+ yrs place since 2015 33% Women on Board 33% 31%

Substantial decrease in GHG emissions GHG EMISSIONS (MILLION TONNES CO2E) • Reduced total GHG emissions by 14.2 40 million tonnes since 2014 30 • Targeting a 40% decrease in emissions by 20 2030 10 • No coal generation past end of 2025 0 2014 2015 2016 2017 2018 Targeted 2030 Safety performance • 37% reduction on Injury Frequency Rate1 INJURY FREQUENCY RATE (IFR) over five years (0.54 vs 0.86) 1.00 Target Zero – aspirational goal to have • 0.50 zero accidents 0.00 2014 2015 2016 2017 2018

1) The injury frequency rate (IFR) measures work-related medical aid and lost-time injuries per 200,000 hours worked. IFR is calculated using a combination of actual and estimated exposure hours. 12 ESG Rankings and Recognition

• Voluntary reporting since 2010 • Industry and North American leader on climate Carbon Disclosure change management, performance and disclosure Project Indices • Current Score: B (Management) • Industry and North American Average Score: C (Awareness)

Task Force on Climate-related • Voluntary aligned climate change disclosure since Financial 2016 Disclosures

• Silver level PAR (Progressive Aboriginal Community Relations) • United Way “Thanks a Million Award” recipient Engagement since 2001 • Supporter of Calgary Stampede since 1938

TransAlta has reported on sustainability for over 25 years

13 Strong Financial and Market Performance

AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN CONSOLIDATED FREE CASH FLOW1 ($ MILLIONS) FOR LAST THREE YEARS2

$400 25% $367

$350 $311 20% $300 $257 $250 15%

$200

10% $150

$100 5% $50

$0 0% 2016 2017 2018 TransAlta RNW S&P/TSX S&P TSX Capped Utilities FCF per share $0.89 $1.08 $1.28

Strong free cash flow performance delivering shareholder value

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C PPA termination payment and the $34 million OEFC settlement payment received in the first quarter of 2017. 2) Price as at September 11, 2019. Total shareholder return includes return from dividend and share appreciation. 14 Key Strategic Priorities

Successfully execute conversion strategy

Deliver $800 million of announced renewables growth

Advance and expand our on-site generation business

Increase our presence in the US renewables market

Maintain a strong financial position

15 Significant Growth Underway

Capital Expected Expected Projects Owned MW Invested Unlevered COD (CAD$ millions) Returns Big Level Wind 90 $225 - $240 High single digit Q4 2019 RNW Antrim Wind 29 $100 - $110 High single digit Q4 2019

Skookumchuck 67 $150 - $160 High single digit H1 2020 Wind1 Potential RNW Windrise Wind 207 $270 - $285 High single digit H1 2021 Drop- Down WindCharger 10 $7 - $8 Low/Mid teens H1 2020 Battery2 Boiler 1,260 to 2,430 $100 - $200 50+% Late 2020 – 3 TA Conversions 2023 Repowering 590 to 1,180 $500 – $1,000 Mid/High teens 2023/2024

Total $1,352 - $2,003

Expect to invest up to $2.0 billion in TransAlta and TransAlta Renewables in high returning projects

1) Represents TransAlta’s ownership of 49 per cent. 2) Capital investment represents TransAlta portion. 3) Boiler conversions include Sundance and Keephills units and excludes Sheerness units. 16 The Plan is Funded • TransAlta is well positioned to fund the gas repowering strategy, further strengthen the balance sheet and return capital to shareholders

Sources Uses • Free cash flow • Growth • Existing cash on hand • Debt repayment • Brookfield investment • Share buyback • Debt issuance/refinancing • Preferred dividend • RNW dividend • Common dividend

~$150 million of dividends from RNW are used to return capital to TransAlta shareholders and invest in high returning projects

17 Attractive Equity Entry Point • Market is assigning a very low multiple to TransAlta’s thermal fleet based on the current market prices for TransAlta Renewables and value of TransAlta’s Hydro assets • Merchant U.S. power companies trade closer to 6 – 8x EBITDA, implying a significant uplift in TransAlta’s current share price

TEV/2019E EBITDA MULTIPLES

12.0x

10.0x Trading multiples of U.S. merchant IPPs3 8.0x Implied 6.0x value lift of 10.1x $4 to $7 per share above 4.0x 8.7x 7.5x current share price 2.0x 2.9x

0.0x TA¹ RNW TA Excluding RNW TA Excluding RNW and Hydro

Annual EBITDA2 $925 $440 $485 $385 ($Millions)

Note: Priced as at September 11, 2019. Balance sheet numbers reflect Q2 2019 value. Hydro value assumed to be $2.5 billion. 1) Includes market value of TransAlta Renewables and book value of TA Cogen. 2) Annualized EBITDA represents mid-point of 2019 outlook for RNW and TA, and historical 5-year average hydro EBITDA of $100 million. 3) U.S. Merchant IPP peers include NRG Energy and Vistra Energy. 18 A Leader in Clean Energy

Growing renewables and on-site business

Solid funding Leader in plan in place sustainability

Attractive Investment

Competitive Disciplined Alberta capital business with allocation strong returns strategy

19 Strong Experienced Team of Leaders

Dawn Farrell Jane Fedoretz Brett Gellner John Kousinioris Dawn de Lima President and Chief Chief Talent & Chief Development Chief Operating Chief Shared Services Executive Officer Transformation Officer Officer Officer Officer

Kerry O’Reilly Wilks Todd Stack Wayne Collins Aron Willis Blaine van Melle Chief Legal Chief Financial Officer Executive Vice- Senior Vice-President, Senior Vice-President, Regulatory & External President, Generation Growth Trading & Commercial Affairs Officer 20 Market Fundamentals

John Kousinioris Chief Operating Officer

21 Key Messages

• Alberta market design certainty established • Supply and demand fundamentals support TransAlta’s gas conversion strategy • Steady load growth • Supportive natural gas prices • Constructive power prices • TransAlta’s gas repowered fleet critically important to Alberta's power system

TransAlta’s generating fleet is highly competitive and well positioned for Alberta’s evolving market 22 Alberta: Market Changes and TransAlta’s Assets

⚫ Energy-only market retained

⚫ Market outcomes dependent on supply and demand Market fundamentals - return on and of capital to be reflected in Design market price ⚫ Low marginal cost critical to competitiveness

⚫ TransAlta’s fleet well positioned to compete

⚫ Technology Innovation and Emission Reduction (TIER) program effective January 1, 2020 Carbon Policy ⚫ Similar to existing carbon policy

⚫ Expect $30/tonne of CO2E pricing ⚫ Expect credits for renewable generation

Regulatory framework and market design support TransAlta’s investment strategy 23 Historical and Future Alberta Energy Prices

ALBERTA ELECTRICITY PRICES – AVERAGE POOL PRICE ($/MWH)

$100 $90 $81 $76 $80 $80 $71 $70 2001 to 2018 $63 $67 $64 $50 $48 $51 $49 Average - $57/MWh $58 $56 $59 $60 $55 $44 $40 $33 $18 $22 $20

EDC ASSOCIATES LTD. FORECAST ($/MWH)

$100 $86 $87 $89 $81 $82 $84 $77 $80 $72 $67 $69 $62 $58 $58 $61 $60

$40

$20

$0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033

Source: AESO, NGX, EDC Associates Ltd. Forward price as at September 11, 2019. 24 Alberta Market Fundamentals

• Peak load has grown by 1.5% per year since 2009, an increase of 1,460 MW • Forecast projects peak load to increase by an additional ~1,700 MW by 2025

ALBERTA PEAK LOAD INCLUDING BEHIND THE FENCE (MW)

13,500 Historical Growth 13,000 Trend1 12,500

12,000

11,500

11,000

10,500

10,000

9,500

9,000 2009 2011 2013 2015 2017 2019 2021 2023 2025

Historical EDC Associates Ltd. Forecast

1) Historical Growth Trend assumes 1.5% growth rate over previous year. 25 Source: AESO, EDC Associates Ltd. Historical and Future Alberta Natural Gas Prices

• Low gas prices expected in the foreseeable future

AECO NATURAL GAS PRICES (CDN$/GJ)

$10 $9 $8.23 $8 $7.80

$7 $6.43 $6.16 $6.31 $6.19 $6 $5 $4.23 $3.95 $4.01 $3.90 $4 $3.47 $3.03 $2.63 $3 $2.31 $2.05 $2.25 $1.74 $1.75 $1.80 $2 $1.48 $1.71 $1 $0

Historical Forward

Low natural gas prices support gas conversion strategy

Source: NGX. Forward prices as at September 10, 2019. 26 Expected Marginal Cost Reductions

• Simplification, optimization of fuel and carbon costs, implementation of shared services model and gas conversions will reduce fixed and variable costs

ALBERTA ASSETS WEIGHTED AVG. MARGINAL FUEL AND EMISSION COSTS ($/MWH) $25.00

$20.00

$15.00

$10.00

$5.00

$- 100% Coal Future

TransAlta’s low marginal cost critical to competitiveness in Alberta

Chart includes all of TransAlta’s Alberta assets including wind and hydro, and assumes two repowered combined cycle units. Assumes gas price of $2.00/GJ, $30 per tonne carbon price, and 0.37 CO2 tonne/MWh performance standard. 27 Alberta Capacity Requirements • Energy prices in the energy-only market will need to reflect both capacity and energy values to ensure a highly reliable electricity grid

ALBERTA PEAK DEMAND AND SUPPLY EXCLUDING BEHIND THE FENCE (MW) SUPPLY CUSHION1

Important part of the Generation Mix

TransAlta’s thermal generation fleet critical to meeting Alberta’s electricity requirements

1) The Supply Cushion Metric provides visibility of the Alberta Interconnected Electric System’s ability to meet peak demand on a daily basis. The supply cushion is the difference between the daily available firm supply minus daily peak demand. The supply cushion excludes wind, solar and interties due to intermittent or uncertain nature of supply. Source: AESO - Long-term Adequacy Metrics as of August, 2019. 28 Ancillary Services Market

• TransAlta is an active participant in the ancillary services market • Hydro has historically serviced ~50% of the active market • Our coal units have been participating in the ancillary services market since the termination of their PPAs • Ancillary services sell, on average, for ~60% of flat energy prices

AVG. ANCILLARY SERVICES VOLUMES (GWH) AVG. ACTIVE ANCILLARY SERVICES VOLUMES 2013-2017 2013-2017 Other Coal 7% 7% Standby Regulating 2,225 1,401 Combined Cycle 10%

Spinning Hydro Cogen 2,106 47% 17%

Supplemental Simple 2,105 Cycle 12%

Source: AESO, Market Surveillance Administrator (MSA). 29 Ontario: Market Changes and TransAlta’s Assets Market Design ONTARIO ASSETS (OWNED MW) • Implementing a capacity market – details to be provided Gas in the future by the Ontario IESO. Uncontracted capacity Sarnia 499 eligible to bid Ottawa 37 Windsor 36 • TransAlta’s Ontario assets remain under contract and Wind will not participate at this time Melancthon 200 Wolfe Island 198 Carbon Pricing Kent Breeze 20 • Large emitters are currently subject to the federal Hydro Ragged Chute 7 Output Based Pricing System and are expected to Misema 3 remain under this program until 2022 Galetta 2 Appleton 1 • The impacts of this program are expected to be minimal Moose Rapids 1 as TransAlta’s contracts include change in law provisions that allow for cost passthrough to our customers

TransAlta’s Ontario assets insulated from regulatory changes

30 Operations Review

John Kousinioris Chief Operating Officer

31 Key Messages

• Diversified by fuel type and region • Balanced mix of stable contracted cash flows with upside to merchant • Continuous improvements in operations and financial performance; Greenlight success continues going forward • Simplified and consolidated business under a single leader

A leader in safe and low-cost generation

32 Operating Focus • Leadership consolidation • Continued reduction in OM&A as operations simplified through gas conversions and mine phase-out Simplification • Focus on multi-skilled and flexible workforce • Focus on remote operations • Standardized integration of new facilities • Fleet wide optimization of merchant portfolio Optimization • Focus on fuel and carbon cost reductions • Leverage data analytics to drive incremental value from fleet

Shared • Integrated and value-focused approach to provision of common Services essential supporting services (IT, Supply Chain, HR)

• Continued focus on bottom-up innovation and capture of external Greenlight ideas • Ongoing focus on improvements to organizational health

33 Asset Overview Coal and Wind and Solar Natural Gas Hydro Gas Repowering • 4,373 MW • 1,353 MW • 1,287 MW • 926 MW • 11 units, including two • 22 facilities • 11 facilities • 27 units in Washington State • Currently four projects • Operations across • Mix of run-of-river and • Continuous under construction Canada and in Western storage improvements in • Continued decrease in Australia • Expected upside in operations and financial construction costs • Highly contracted cash flows post PPA performance • One of the largest business expiry • Alberta platform platforms in North • Key source of ancillary provides attractive America services in Alberta investment opportunity • Not easily replicated

OWNED CAPACITY BY FUEL TYPE (MW) 2018 SEGMENTED CASH FLOW BY ASSET TYPE1

Coal Wind/Solar 24% Hydro 11% Energy and Wind and Solar Marketing 3%

Gas Coal 21% Hydro Gas 41% 0 1,000 2,000 3,000 4,000 5,000

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C termination payment. Gas segment includes the Mississauga 34 and Poplar Creek contributions. Coal and Gas Repowering ALBERTA • Represents approximately 19% of Alberta generation by capacity • Approximately 50 to 55 per cent of generation contracted through PPAs • All PPAs expire at the end of 2020 • Brownfield investments in the Alberta fleet will generate strong cash flows and returns

and extend life and cash flows to 2048 Keephills 2018 SEGMENTED CASH FLOW ($ MILLIONS)1

CENTRALIA Hydro $96 • Centralia in Washington has two units, Wind/Solar $211 Energy and totaling 1,340 MW of capacity Marketing $33 • Unit 1 retires at the end of 2020 Coal • Unit 2 retires at the end of 2025 Gas $185 $364 ⚫ 28% of capacity contracted in 2020; ~50% in 2021 - 2025 Conversion to gas will provide strong cash flows well into the future

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C termination payment. Gas segment includes the Mississauga 35 and Poplar Creek contributions. Hydro • OVERVIEW • Own and operate over 90% of Alberta’s hydro (834 MW) • Mix of both storage and run-of-river facilities • Brazeau and Bighorn facilities account for ~80% of ancillary revenue • Expecting continued green credits under new Alberta carbon policy

Ghost Dam • Expect significant increase in cash flows with 2018 SEGMENTED CASH FLOW ($ MILLIONS)1

the expiry of the Alberta PPAs (end of 2020) Hydro $96 • Critical back-up for wind and solar Wind/Solar $211 Energy and • Essential for market stability Marketing $33 • Immediate ramping Coal Gas $185 $364

Unique, reliable and perpetual

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C termination payment. Gas segment includes the Mississauga 36 and Poplar Creek contributions. Hydro – Realized Prices • Alberta PPA Hydro assets earn a POWER PRICES ($/MWH)

premium to energy market price $80 $70 Ancillary pricing ~60% of energy market • $60 pricing $50 $40 $30 $20 $10 $0 2018 20182019 YTD 2019 YTD Market Price Realized Hydro Price Ancillary Price

• AB hydro assets ideal for providing HYDRO VOLUMES (GWH) ancillary services to the grid 3,500 • Ancillary production consistently higher 3,000 than energy production which is limited 2,500 by hydrology 2,000 1,500 • Long-term averages 1,000 500 ~ • 3,000 GWh ancillary volumes - 2016 2017 2018 • ~1,500 GWh energy volumes Energy Volumes Ancillary Volumes 37 Hydro - EBITDA Currently Generated by TransAlta

2018 HYDRO BRIDGE ($ MILLIONS)

Hydro assets currently Opportunity to recover in generating ~$240 million of future through: EBITDA prior to payment of • An increased power price obligations to the Balancing • REC credits Pool TransAlta EBITDA excluding PPA Capacity Payment

Ancillary Obligation

Energy Obligation Capacity Payment

Assumptions: Other Revenue includes revenues from other hydro assets, transmission assets, and other services provided by the hydro facilities. The realized hydro energy price and ancillary price for 2018 were $59.25/MWh and $31.85/MWh, respectively. 38 Hydro - Impact from Higher Alberta Pricing • Due to the strong correlation between ancillary and energy prices, EBITDA from hydro assets is highly correlated to energy prices • A $5/MWh change in price equals ~$18 million in EBITDA

POST-PPA HYDRO EBITDA SENSITIVITY ($ MILLIONS)

$300

$250

$200

$150

2018 EBITDA $100

$50

$0 $50 $55 $60 $65 $70 Pool Price ($/MWh)

Assumptions: Annual ancillary generation of 3,000 GWh, energy generation of 1,500 GWh, ancillary price 63% of pool price, energy price 118% of pool price, $30 per tonne carbon price, and 0.37 CO2 tonne/MWh performance standard. Assumes other revenue to remain constant and TransAlta receives carbon offset credits. 39 Wind and Solar OVERVIEW • ~70% of generation contracted with an average capacity weighted contract life of 11 years • Canada’s largest generator of wind power and one of the largest wind portfolios in North America • Experienced developer and operator of wind

OPERATING MODEL Ardenville 2018 SEGMENTED CASH FLOW ($ MILLIONS)1 • Remote monitoring and operation Hydro $96 • Extensive data enables optimization Wind/Solar $211 Energy and • Able to leverage our knowledge and Marketing $33 customer relationships to develop new sites Coal Gas $185 $364

Highly contracted asset base

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C termination payment. Gas segment includes the Mississauga 40 and Poplar Creek contributions. Natural Gas OVERVIEW • Over 90% of generation contracted • 7 year weighted average contract life • Total owned capacity of 1,287 MW • 837 MW in Canada contracted to large industrials and energy producers • 450 MW in Australia for large mining operations and all revenue from capacity payments South Hedland CUSTOMER FOCUS 2018 SEGMENTED CASH FLOW ($ MILLIONS)1 Hydro • Sites designed and built to supply customer $96 Wind/Solar needs $211 Energy and Marketing • Excellent track record of extensions beyond $33

original contract term Coal $185 Gas $364

Long-term contracted cash flows

1) Adjusted to exclude the $157 million received during the first quarter of 2018 related to the Sundance B and C termination payment. Gas segment includes the Mississauga 41 and Poplar Creek contributions. Natural Gas Re-Contracting

SUCCESSFULLY RE-CONTRACTED GAS FACILITIES

Years Extended

Windsor (36 MW) 15

Ottawa (37 MW) 20

Fort Saskatchewan (35 MW) 10

Southern Cross (245 MW) 10

Parkeston (55 MW) 10

CURRENT FOCUS FOR RE-CONTRACTING

Sarnia • TransAlta’s current customer and IESO contracts extend to the end of 2022 and 2025 • In active discussions with the IESO, government, existing and prospective customers on contract extensions and new contracts

42 Contracted Cash Flow Base • Highly contracted portfolio

REMAINING CONTRACTED LIFE OF ASSETS1 (YEARS) CONTRACTEDNESS BY EBITDA IN 2021 (%)

Pingston, BC Southern Cross, WA Wind Sarnia, ON Merchant McBride Lake, AB Centralia, WA Average capacity Upper Mamquam, BC weighted contract Parkeston, WA life of ~11 years Misema, ON Hydro Melancthon, ON Wyoming Wind, WY Merchant Ragged Chute, ON Wolfe Island, ON Fort Saskatchewan, AB Moose Rapids, ON Appleton, ON Galetta, ON Poplar Creek, AB Long-Term Contracts Bone Creek, BC Kent Breeze, ON Thermal Windsor, ON New Richmond, QC Merchant Le Nordais, QC Ottawa, ON Mass Solar, MA Lakeswind, MN Big Level, PA Kent Hills, NB Antrim, NH Skookumchuck Wind, WA Windcharger, AB Windrise, AB South Hedland, WA Akolkolex, BC 0 5 10 15 20 25

1) Excludes Alberta coal and hydro assets currently under Alberta PPAs (PPAs expire at the end of 2020). 43 Role of Trading & Marketing

⚫ Balanced portfolio of real-time, Proprietary day-ahead and term trading in gas and power to assist in Trading price discovery and asset optimization

Market ⚫ Forecast pricing changes due to changing regulatory rules, Pricing technology trends and supply / & Trends demand fundamentals

Asset ⚫ Optimize Centralia, Ontario and Alberta merchant portfolio including Optimization environmental products, hydro, wind, natural gas and coal

⚫ Standard and customized products for wholesale, commercial and industrial Customer customers Solutions ⚫ Connect customer needs with growth opportunities

In-house Trading & Marketing provides unique optimization and customer opportunities 44 Conversion to Gas Well Underway

Wayne Collins Executive Vice-President - Generation

Brett Gellner Chief Business Development Officer

45 Key Messages - Gas Conversion Strategy

• Execution of strategy to convert the coal units to gas well underway • Significant benefits from converting to natural gas • Investments generate strong cash flows and returns • Positions the fleet to be highly competitive during all market conditions

Plan positions the fleet as a low-cost energy provider under an energy-only market 46 Targeted Conversion Plans • Base plan involves three boiler conversions in the 2020 to 2021 period, and two repowered into combined cycles straddled approximately a year apart • Keephills 1 and Sundance 5, the two future repowered combined cycle units, will either co-fire until repowered or potentially be converted to 100% gas via a boiler conversion, as the carbon savings are significant • Options for Sundance 3 and 4 will be evaluated in the 2020/2021 timeframe and be based on long-term market fundamentals • The plan presented assumes there are no delays in securing 100% of natural gas supply requirements that may result from regulatory or other constraints

Sun KPH KPH Sun KPH 6 2 3 5 1

2020 2021 2022 2023 2024 2025

Sun KPH LEGEND 5 1 - Boiler Conversion - Repowered Combined Cycle

- Co-fire or Boiler Conversion 47 Simplified Business Operations Through Boiler Conversions Coal Operation Transmission Mine Coal Supply Precipitator Turbine Generator

Boiler Mills Condenser Ash Plant Ash System Cooling Pond

Coal To Gas Boiler Conversion Transmission

Natural Gas Turbine Generator Complex mining and coal handling replaced with Boiler pipeline Condenser

Cooling Pond 48 Repowered Combined Cycle – Leveraging Existing Assets •FacilityNew repowered Integration combined cycle facilities will generate steam and electricity • Electricity will connect to the grid via the existing substation • Steam created in the HRSG1 will be sent to existing steam turbine • Existing steam turbine will spin associated generator creating electricity

New Infrastructure Existing Infrastructure

Transmission Transmission Natural Gas

Steam Generator Turbine

Generator Gas Turbine HRSG1 Condenser Air

Cooling Pond 1) HRSG – Heat Recovery Steam Generator 49 Repowering to Combined Cycle – Proven Success

• Eight coal units have been successfully repowered in North America with more currently underway • Below highlights one of these repowerings which has been successfully operating since 2009

XCEL ENERGY’S RIVERSIDE REPOWERED UNIT

Unit 4 Gas Turbine 147 MW

Unit 5 Gas Turbine 147 MW

Unit 7 Steam Turbine 160 MW

Total 454 MW

50 Timeline for the Repowered Combined Cycle Units

• Both units will be permitted concurrently • Construction will occur approximately one year apart to optimize construction schedule and provide flexibility if market fundamentals change

Regulatory Regulatory LNTP¹ FNTP¹ COD¹

Submission Approval

Unit Repowered Repowered Sundance 5 Sundance Construction 2020 2021 2022 2023 2024 2025

1 1 Construction

Unit Regulatory Regulatory

LNTP¹ FNTP¹ COD¹ Keephills Repowered Repowered Submission Approval

1) LNTP-Limited Notice to Proceed, FNTP-Full Notice to Proceed, COD-Commercial Operation Date 51 Capital Expenditures For Alberta Converted Fleet

• Normal turnaround maintenance work will be completed in parallel with conversions

ESTIMATED CUMULATIVE CAPITAL COSTS FOR ALBERTA CONVERTED FLEET (2020 – 2024) ($ MILLIONS)

$1,600

$1,400

$1,200

$1,000

$800

$600

$400

$200

$- One Repowering Two Repowering Sustaining Other Life Extension Boiler Conversions Repowering

52 Work Completed and Underway • Received regulatory approval to convert to gas for all Sundance and Keephills units • Pioneer Pipeline reached COD in last May, four months ahead of schedule • EPC contractor selected for Sundance units and Keephills 1 & 2 • Issued FNTP for boiler conversion at Sundance 6 • Issued LNTP for Keephills 2 • Request for Proposals underway for EPC contractor for Keephills 3 • Selected Owner’s Engineer for repowering of Sundance 5 and Keephills 1 • Entered into carbon cost benefit sharing agreement with the Balancing Pool for Keephills 1 & 2 until PPA expires December 31, 2020 • Discussions underway for additional pipeline capacity to provide reliability

53 Significant Benefits from Converting to Gas

• Attractive investment returns • Significantly extends life of the fleet • Significantly lowers operating, capital and carbon costs • Natural gas is in abundant supply and competitively priced

• Avoids significant expenditures on NOX and SOX • Low capital and outage time for boiler conversions • The brownfield repowered combined cycle has a capital cost 40 – 50% lower than greenfield combined cycle or cogen

54 Significant Extension of Asset Life • Conversion strategy significantly extends the life of the assets • The boiler converted units potentially can be repowered to combined cycle at the end of their regulatory lives, adding additional life to the fleet

ASSET LIFE

3,000 End of fleet life if remain on coal

2,500 Potential Future 2,000 Repowered Combined Cycle 1,500

1,000

500

One Repowered Combined Cycle Two Repowered Combined Cycle

55 Significant Expected Alberta Gas Conversion OM&A Reductions

• Converting to gas results in significant reduction in OM&A costs

OPERATION, MANAGEMENT & ADMIN COSTS ($ MILLIONS)

$200

$175

$150 Increase in OM&A costs in 2024/2025 due to planned commissioning of repowered combined cycle units $125

$100

$75

$50

$25

$- 2017 2018 2019 2020 2021 2022 2023 2024 2025

Assumes two repowered combined cycle units. 56 Significant Capital Reductions • Converting to gas also results in significantly lower sustaining capital requirements and eliminates mining capital

AVERAGE ANNUAL SUSTAINING AND MINING COSTS ($ MILLIONS)

$140

$120

$100

$80

$60

$40

$20

$- 2016 - 2018 Average Post Conversion Sustaining Mine

Assumes two repowered combined cycle units. 57 Gas Conversion Strategy – Key Objectives

• Balance between: • Establishing a portfolio of low marginal cost units; and • The amount of capital reinvested in the Alberta business • Previously pursuing only one repowered combined cycle when capacity market was being considered • Pivoted to two repowered combined cycle units with retention of energy-only market

Positions the fleet to generate strong cash flows and be highly competitive in the energy-only market over the long term

58 Competitive Variable Costs • TransAlta’s conversion strategy will result in a highly competitive fleet

VARIABLE FUEL AND EMISSIONS COSTS¹ ($/MWH)

$40 REPOWERED COMBINED BOILER CONVERSION CYCLE $35

$30

$25

$20

$15

$10

$- Coal $1.50/GJ $2.00/GJ $2.50/GJ $1.50/GJ $2.00/GJ $2.50/GJ Gas Price Gas Price Fuel Emissions¹

1) Analysis based on a sub-critical unit, $30 per tonne carbon price, and 0.37 CO2 tonne/MWh performance standard. Emission costs include carbon and, in the case of Coal, mercury, NOx and SOx. Analysis will vary by unit depending on heat rate and capacity factors. 59 Competitive Capital Costs

• Repowering of existing sites into combined cycle units requires significantly less capital than a new combined cycle or cogen plant

CAPITAL COSTS ($/KW) $2,000

$1,800

$1,600 Significant Capital Range $1,400 Advantage versus New Build $1,200

$1,000

$800

$600

$400

$200

$0 Boiler Conversion Repowered Combined Greenfield Combined Cycle¹ Cycle and Cogen²

1) Preliminary estimate only. 2) Sources: Sept, 2018 AESO Cost of New Entry Analysis report by The Brattle Group and Sargent & Lundy, cost of most recent combined cycle 60 projects in Alberta and recently announced new cogen plant in Alberta. Emission Savings Pay for Boiler Conversions in < 1.5 Years EMISSION COSTS PER MWH $25

$20

• ~$18/MWh CO2, NOx, SOx $15

and mercury savings from $10 converting from coal to gas $5

$- Coal Boiler Conversion - Gas Fuel

EMISSION SAVINGS AND PAYBACK – 400 MW UNIT • $25 to $50 million per year in emission cost savings for a $60 1.6 1.4 $50 400 MW unit 1.2 $40 1.0 • Savings pay off the capital $30 0.8 0.6 costs to convert in less than $20

($millions/year) 0.4 Payback Payback (years)

1.5 years EmissionsSavings $10 0.2 $- - • Lower operating & capital costs 40% 60% 80% going forward and avoids ~$40 Capacity Factor 400 MW Unit

million in NOx/SOx compliance Emissions Savings - Left Scale Payback (Years) - Right Scale capital 61 Repowered Combined Cycle is a Highly Attractive Investment

• Repowered units, compared to greenfield units, generate very attractive returns due to their low capital costs and equivalent heat rates

INVESTMENT TO EBITDA MULTIPLES

12.0x

10.1x 10.0x

8.0x 7.3x 6.7x

6.0x 5.0x 4.6x 4.0x 4.0x 3.4x

Investment EBITDA per 2.6x

2.0x

0.0x $40 $50 $60 $70 Energy Prices ($/MWh)

Repowered Combined Cycle Greenfield Combined Cycle

62 Analysis based on $2.00/GJ natural gas price. Significant Alberta Repowered Fleet EBITDA Potential • Once converted to gas, Alberta coal fleet is expected to generate strong cash flows

EBITDA WITH ONE REPOWERED EBITDA WITH TWO REPOWERED COMBINED CYCLE COMBINED CYCLE (BASE CASE)

$800 $800

$700 $700

$600 $600

$500 $500

$400 $400

$300 $300 EBITDA EBITDA millions) ($ EBITDA EBITDA millions) ($ $200 $200

$100 $100

$- $- $50 $55 $60 $65 $70 $50 $55 $60 $65 $70 Energy Price ($/MWh) Energy Price ($/MWh)

Boiler Conversion Repowering Off-Coal Payments Boiler Conversion Repowering Off-Coal Payments

2019 Expected EBITDA

1) Sensitivity analysis assumes $2.00/GJ natural gas price and $30/tonne carbon price. Analysis also assumes 16,000 GWh of production under the One Repowered case, and 18,000 GWh under the Two Repowered case. 63 PioneerPioneer Pipeline Pipeline Completed

• 130 km 20” natural gas pipeline from Tidewater Midstream’s Brazeau facility to TransAlta’s Sundance and Keephills facilities • Commissioned four months ahead of schedule • 50/50% ownership with Tidewater • TransAlta’s initial commitment: 139 TJ/day for 15 years • Pipeline has the capacity to deliver up to 440 TJ/day

FIRST GAS FLOWING 4 MONTHS AHEAD OF SCHEDULE PIPELINE CONSTRUCTION

64 Significant Gas Consumer • TransAlta’s daily natural gas requirements are expected to be in the range of 350 – 400 TJ per day on average once fully converted1 • In active discussions with various third parties regarding additional gas supplies and pipeline capacity to ensure long-term reliability and needs

PROJECTED AVERAGE DAILY GAS REQUIREMENTS (TJ/DAY) 400

350

300

250

200 Pioneer Pipeline 150 Commissioned

100

0 Jan - May Jun - Aug 2020 2021 2022 2023 2024 2025 2019 2019

1) Assumes two repowered combined cycle units 65 Summary • TransAlta’s strategy to convert fully to natural gas is on track • Existing infrastructure allows TransAlta to invest in very attractive returning opportunities • Pursuing two repowered combined cycle units straddled 12 months apart to provide decision and construction flexibility • Significant EBITDA and cash flow from fleet once the units are fully converted

Competitively positioned to provide low-cost, reliable power to Alberta consumers

66 Break

67 Renewable and On-site Generation Growth

Aron Willis Senior Vice President, Growth

68 Key Messages • Growth strategy remains disciplined and focused • Significant investment already advancing • Over $800 million of announced projects • 3 wind farms under construction, two expected to reach COD in late 2019 • 207 MW Windrise project in Alberta starting construction in 2020

• Competitive strengths position us to continue to succeed in target markets

Strong track record of growing fleet and positioned to continue to build on this success

69 Growth Focus

On-Site and Cogeneration Renewables Expand our fleet of on-site generation Focus our renewables growth efforts on the projects in Canada, the U.S. and Australia U.S. corporate market

⚫ Extensive history of on-site generation ⚫ Added five wind farms and a solar farm extends back to the early ‘90s in the U.S. over the last five years ⚫ Our experience and our team make us a ⚫ Demand for new wind in the U.S. strong partner as an on-site generation expected to grow ~10 GW per year in owner/operator the near term and ~5 GW onwards ⚫ Strong pipeline in place ⚫ Focus on growing and broadening ⚫ Leverage existing relationships to grow corporate PPA market with our customers ⚫ Continuously evaluate opportunistic acquisitions Current Pipeline Current Pipeline under evaluation – under evaluation – 900 MW 2,000 MW

Focus on Customers Building relationships through direct contracts to supply an identified need

70 Successful Growth Track Record

Developed South Poplar Creek Campeche Power Down 230 MW 252 MW Resources 114 MW 212 MW Acquired Windsor 72 MW Southern Pierce Saranac Cross 150 MW Sarnia 245 MW 245 MW 506 MW Keephills 3 Taranaki 495 MW 376 MW Yuma Ottawa Meridian 50 MW Genesee 3 Gas/Coal 74 MW 215 MW 495 MW Centralia Chihuahua III Solomon 1340 MW South Mississauga 259 MW 125 MW Hedland Fort Centralia Gas 108 MW Parkeston 150 MW Fort Sask. Nelson 228 MW 110 MW 118 MW 45 MW

1990 1995 2000 2005 2010 2015 2020+

Pingston Big McBride Wailuku 45 MW Ardenville Wolfe Level Lake 10 MW 69 MW Summer Island Wintering 90 MW 75 MW Hills view 198 MW Kent Castle Piedra del 70 MW Hills 2 88 MW Kent Wind River Hills 3 Charger Aguila Imperial Blue 24 MW 10 MW 44 MW 17 MW Trail Lakes 1400 MW Valley Melancthon wind 69 MW 327 MW II 50 MW 132 MW Wyoming Antrim 144 MW 29 MW Soderglen Mass. Solar New Le Nordais 71 MW 20 MW Richmond 99 MW Summer 66 MW Windrise view 2 Kent 66 MW 207 MW Kent Hills Breeze 96 MW 20 MW Melancthon Upper 68 MW

Manquam Skookumchuk Renewables 25 MW 67 MW CHD Small Wind 51 MW CHD Small Hydro 45 MW 71 TransAlta’s Competitive Advantage

On-Site and Cogeneration Renewables

An ideal site partner bringing over Early mover with one of the largest 25 years of exceptional safety and operating wind portfolios in Canada operating excellence to a customer’s site Extensive operating experience Deep technical design including a centralized remote operations expertise with a customer-centric and monitoring centre approach to solution design and delivery Experience across the entire Construction and operating project life cycle - development, capabilities allowing us to deliver “start design, permitting, construction and O&M to finish” solutions A history of strong customer Strong relationships with relationships on which to build a equipment suppliers make us flexible in portfolio of new projects optimizing technology selection

Supported by talented and highly experienced trading organization

72 U.S. Market Trends

Low Load Growth - Focus on efficiency slowing demand growth Decarbonization - Drive for global decarbonization firmly established Generation Transformation - Build-out of low to no emissions generation and shift away from larger baseload generation to modular scalable generation

CHANGE IN INSTALLED GENERATION IN THE US - 2017 TO 2030 (GW)

300

250 Wind 200 Solar 150

100 Combined and 50 Simple Cycle

0 Nuclear -50 Coal and Other -100

-150 Retirements Growth

Source: EIA Annual Energy Outlook 2019 73 Market Trends - Corporate PPA Activity

PUBLICLY ANNOUNCED CONTRACT CAPACITY OF RENEWABLE ENERGY PROCUREMENT IN THE U.S. (GW)

7.0 6.6 2018 Record Year: • Facebook: 1,895 MW 6.0 • 27 new buyers • 10 new developers, 5.0 including TransAlta

2019 expected to 4.0 exceed 2018 3.2 3.0 2.8

2.0 1.5

1.0

0.0 2015 2016 2017 2018

Number of 32 21 31 76 contracts

Source: Renewable Energy Buyers Alliance 74 Significant Growth Underway

Expect to invest $750 to $800 million in TransAlta and TransAlta Renewables in high returning projects

1) Represents TransAlta’s ownership of 49 per cent. 2) Capital investment represents TransAlta portion. 75 Existing Projects – Big Level

Location: Potter County, Pennsylvania

90 MW Capacity Asset funded by TransAlta Renewables

$225 - $240 Million Capital Cost

15-Year Contract with Microsoft

All Components Delivered to Site Construction well underway COD - Q4 2019 76 Existing Projects – Antrim

Location: Antrim, New Hampshire

29 MW Capacity Asset funded by TransAlta Renewables

$100 - $110 Million Capital Cost

20-Year Contracts with Partners Healthcare and New Hampshire Electric

Construction 90% complete COD – Q4 2019 77 Existing Projects – Skookumchuk

Location: Centralia, Washington

67 MW Owned Capacity TransAlta’s Share - 49%

$150 - $160 Million Capital Cost (TransAlta’s 49% share)

20-Year Contract with Puget Sound Energy

Construction underway COD – H1 2020

78 Existing Projects – WindCharger

Location: Summerview II Windfarm, Alberta

20 MWh Capacity 10 MW x 2 hours

Alberta’s First Utility Scale Battery Installation

$13 - $15 Million 50% of Capital Cost to be funded by Emissions Reduction Alberta

Battery order placed - Tesla COD – H1 2020

79 Existing Projects – Windrise

Location: Pincher Creek, Alberta

207 MW Capacity

$270 - $285 Million Capital Cost

20-Year Contract with Alberta Government

Detailed design phase, turbine order placed COD – H1 2021

Photos show a computer rendering of what the site will look like once constructed 80 Growth Projects EBITDA

EBITDA GENERATED BY NEW ASSETS ($ MILLIONS)

$50

$40

$30 Windcharger¹ Windrise¹ Skookumchuck¹ $20 Big Level/Antrim²

$10

$0 2019 2020 2021 2022

1) Windcharger, Windrise and Skookumchuck are potential drop-down candidates to TransAlta Renewables. 2) Antrim / Big Level EBITDA excludes tax equity Production Tax Credits (PTCs). 81 Financial Plan

Todd Stack Chief Financial Officer

82 Prudent Capital Management • Balance sheet well positioned to support strategy • Plan in place to fund conversion strategy and renewables growth • Prudent capital allocation strategy • New dividend policy

83 TransAlta Deconsolidated FFO

TRANSALTA 2018 DECONSOLIDATED FFO1 ($ MILLIONS)

1,2) Refer to Forward Looking Statements (slide 2) 84 Prudent Capital Allocation and Dividend Policy

Deconsolidated FFO¹

25 – 35% 6 – 8% 8 – 10% 10 – 15% 30 – 50%

Sustaining & • Clean energy Preferred Share Common Share investments Productivity Amortizing Debt Dividends Dividends • Debt Reduction Capital² • Share Buyback

New dividend policy

Dividend policy of 10 to 15% of TA deconsolidated FFO

1) Refer to Forward Looking Statements (slide 2) 85 Success in Reducing Senior Recourse Debt

• Targeted $1.2 billion of net senior recourse debt expected to be reached in 2020

TRANSALTA SENIOR RECOURSE DEBT ($ BILLIONS)

$3.4 $3.5

$3.0 $2.8

$2.5 $2.3

$2.0 $1.8

$1.5 $1.4 $1.2

$1.0

$0.5

$0.0 2015 2016 2017 2018 2019E 2020E

86 Deconsolidated Balance Sheet - Debt Metrics • Debt/EBITDA target of ≤3.0x achieved post PPA

TAC DECONSOLIDATED DEBT/EBITDA METRIC1

Achieve target with further debt 5x reduction and increased cash flows

4x Brookfield investment

Non-recourse debt Target 3x Debt/EBITDA Brookfield investment of ≤3x Preferred shares Non-recourse debt 2x Preferred shares

Net recourse debt 1x Net recourse debt

0x Today Post Hydro PPA

1) Refer to Forward Looking Statements (slide 2). TransAlta’s deconsolidated EBITDA can be calculated by subtracting the midpoint of TransAlta Renewables’ 2019 EBITDA guidance from the midpoint of TransAlta’s 2019 EBITDA guidance. 87 Deconsolidated Sources and Uses

DECONSOLIDATED SOURCES AND USES 2020-2023 ($ MILLIONS)

$3,000

DrawCash on Credit on Hand Facility NCI Distributions $2,500 Cash (Ending 2019) Amortizing Debt Share Buyback Preferred Dividend Debt Issuance1 $2,000 Common Dividend

Brookfield Investment 2020 Bond $1,500

2022 Bond RNW Dividend $1,000

$500 2 Adjusted FFO Growth Capital

$0 Sources Uses Minimal use of credit facility needed to bridge funding requirements of a two repowered combined cycle scenario

1) Assumes refinancing of 2022 debt. 2) Adjusted FFO is equal to deconsolidated FFO less sustaining and productivity capital. 88 Funding Plan – TransAlta Renewables

New projects supported by project-level debt

Tax equity will be utilized for U.S. projects that have tax credits

Opportunity to raise $400 - $600 million of additional debt against existing assets

Additional sources of capital include: • Excess cash flows • DRIP • Partnerships

89 Attractive Equity Entry Point • Market is assigning a very low multiple to TransAlta’s thermal fleet based on the current market prices for TransAlta Renewables and value of TransAlta’s Hydro assets • Merchant U.S. power companies trade closer to 6 – 8x EBITDA, implying a significant uplift in TransAlta’s current share price

TEV/2019E EBITDA MULTIPLES

12.0x

10.0x Trading multiples of U.S. merchant IPPs3 8.0x Implied 6.0x value lift of 10.1x $4 to $7 per share above 4.0x 8.7x 7.5x current share price 2.0x 2.9x

0.0x TA¹ RNW TA Excluding RNW TA Excluding RNW and Hydro

Annual EBITDA2 $925 $440 $485 $385 ($Millions)

Note: Priced as at September 11, 2019. Balance sheet numbers reflect Q2 2019 value. Hydro value assumed to be $2.5 billion. 1) Includes market value of TransAlta Renewables and book value of TA Cogen. 2) Annualized EBITDA represents mid-point of 2019 Outlook for RNW and TA, and historical 5-year average hydro EBITDA of $100 million. 3) U.S. Merchant IPP peers include NRG Energy and Vistra Energy. 90 Concluding Remarks

Dawn Farrell Chief Executive Officer

91 A Leader in Clean Energy

Growing renewables and on-site business

Solid funding Leader in plan in place sustainability

Attractive Investment

Competitive Disciplined Alberta capital business with allocation strong returns strategy

92 Visit us at the Investor Centre on TransAlta.com [email protected] 1-800-387-3598