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Our plan for lower carbon sustainable value creation

Investor Presentation

August 2010

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This presentation may contain forward-looking statements, including statements regarding the business and anticipated financial performance of TransAlta Corporation. All forward-looking statements are based on our beliefs and assumptions based on information available at the time the assumption was made. These statements are not guarantees of our future performance and are subject to a number of risks and uncertainties that may cause actual results to differ materially from those contemplated by the forward-looking statements. Some of the factors that could cause such differences include cost of fuels to produce electricity, legislative or regulatory developments, competition, global capital markets activity, changes in prevailing interest rates, currency exchange rates, inflation levels, unanticipated accounting or audit issues with respect to our financial statements or our internal control over financial reporting, plant availability, and general economic conditions in geographic areas where TransAlta Corporation operates. Given these uncertainties, the reader should not place undue reliance on this forward-looking information, which is given as of this date. The material assumptions in making these forward-looking statements are disclosed in our 2009 Annual Report to shareholders and other disclosure documents filed with securities regulators.

Unless otherwise specified, all dollar amounts are expressed in Canadian dollars.

Forward looking statements

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OutlineTransAlta Value Proposition & StrategyMarkets and Contracting2010 Outlook

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TransAlta value proposition & strategy

Canada’s largest publically traded wholesale power

generator & marketer

Value

Dividends, growth, share buyback, and portfolio optimization

Strategy

Investment grade credit ratios

Significant cash flow generation

Diversity of regions, fuels, & contracts

Environmental leadership

Deep pipeline of low carbon growth opportunities

Low to moderate risk profile

Yield, upside potential, and steady disciplined growth

Financial strength

Balanced & disciplined capital allocation

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Incumbent Alberta Generator

Strategically positionedin the PacNW

Low cost, predictable operations

Balance sheet strength and investment grade credit ratios

Sustainable & consistent shareholder value creation

Strategically focused in Western Canada and U.S.;renewable focus across Canada

Environmental Leadership

Strategic partner / supplier relationships

Strong competitive advantages for new lower carbon generation:

• Sites and resources already secured

• 100 years experience in renewables, 20+ years in natural-gas fired generation

• Leader in clean coal technology

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AUSTRALIA

UNITED STATES

CANADA

Low CarbonGeneration

Coal

Renewables17%

Coal50%

Gas33%

2009*$697 million

Diverse portfolio of assets; growing contribution from renewables

Portfolio Fuel Type

18 MWHydro under development271 MW

Generation Facilities:

Coal-fired under construction

Coal-fired plants

Gas-fired plants

Hydro plants

Wind-powered plants

Wind under construction

Geothermal

4,688 MW

1,843 MW

893 MW

950 MW

123 MW

164 MW

Biomass 25 MW

Net generation in operation 8,563 MW

Our assets and portfolio

Renewables24%

Coal48%

Gas28%

$743 million 2010*

Gross margin contribution

54%

24%

22%

*Six months ended June 30

Gas

Renewables

7

Coal48%

Renewables29%

Executing on our strategy

>50% EBITDA from low carbon generation

and growing; should lead to multiple

expansion

92% contracted for 2010, leverage to power price recovery in key markets

$800 - $900 millionCash flow from operations

$300 - $400 millionFree cash

Earnings growthReturn to double digit earnings and EBITDA growth in

2010

Earnings per share

Free CashFlow

Dividends

Sustaining Capex

$MCash flow

Gas23%

2010e

EBITDA$/share

*Analyst consensus estimate

$1.16$1.31

$1.46

$1.09$0.90

2006 2007 2008 2009 2010e*

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Capital Allocation Plan

Dividend

Provide shareholders sustainable dividend

growth

Share Buyback

Provide shareholders incremental return of

capital in absence of value-creating investment

opportunities

Growth Investment

Projects must deliver unlevered, free cash, after

tax IRR >10%

Portfolio Optimization

Divest or improve non-core and underperforming

assets

We remain disciplined in how we manage our balance sheet and allocate capital

Capital plan and funding

Sources & Uses of Capital 2010 – 2012

NCI$200M

Dividends$750M

Announced growth capex

$500M

Sustaining capex$1B

Available$550M

Cash flow from operations:~$3B

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Drive the baseEnhancing unit margins by improving plant performance on a sustained basis, driving productivity to lower costs, and optimizing contracts

Green our portfolioAccelerating our renewable investment and advancing natural-gas combined cycle development to provide our customers with electricity with less C02

Reposition coalPursuing technologies that reduce the carbon intensity of coal

Executing on our strategic priorities will drive near and long-term value

Focused and disciplined strategic priorities

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Portfolio optimization

Asset by asset focus for enhancing returns; renegotiated contract at Sarnia with the Ontario Power Authority (OPA)

Operational stability

Coal life-cycle optimized on a unit by unit basis to deliver operational stability and avoid potential of stranded capital

Targeting 89 - 90% fleet availability

Productivity investments used to offset inflationary pressures and improve performance

Organization, maintenance plans and spend aligned to low pricing environment

Increased productivity &cost reductions

Drive the base

Enhancing returns and delivering shareholder value

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12 Facilities Under Advanced Development:12 Facilities Under Advanced Development:

Strategy focus:

Wind

Geothermal

Hydro upgrades – Run of river

Natural gas combined-cycle

Green coal – Project Pioneer

Green our portfolio: Growth strategy

Accelerate near-term investments in renewables and focus on multiple options for long-term sustainability

Total Capital Spend: $2.0B – $2.4B

6 Facilities Under Construction:

Wind

Hydro

Coal

Net Capacity

123 MW

18 MW

271 MW

412 MW

Total Capital Spend: $1.3B

Hydro

Wind

134 MW

417 MW

Geothermal 87 MW

Net Capacity 638 MW

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TransAlta’s growth investments deliver long-term sustainable cash flow and earnings growth

15%+10%+10%+10%+10%+Unlevered after tax IRR

AlbertaAlbertaBritish ColumbiaAlbertaNew BrunswickLocation

Tracking

Merchant

Unit 1 - Q4 2011

Unit 2 - Q4 2012

$68 MM

46 MW (23 MW each)

Efficiency Uprates

Keephills 1 and 2 Uprates

Tracking

Merchant

Q2 2011(3)

$988 MM (3)

225 MW (1)

Supercritical Coal

Keephills 3

Tracking

LTC

Q1 2011

$48 MM (2)

18 MW

Hydro

Bone Creek

Tracking

LTC/Merchant

Q1 2011

$135 MM

69 MW

Wind

Ardenville

Tracking

LTC

Q4 2010

$100 MM

54 MW

Wind

Kent Hills 2

On time / On budget

Contract Status

Commercial Operations Date

Total Project Cost

Size

Type

Projects

(1) 450 MW gross size(2) Bone Creek’s capital spend prior to the acquisition was $23 MM which does not form part of our total project cost(3) Keephills 3 capital spend increased from $888 MM to $988 MM and its COD was revised from Q1 2011 to Q2 2011

Executing on our growth

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Repositioning coal - Alberta

Federal government mandating the phased end of coal-fired electricity generation in CanadaCoal-fired facilities to close at the latter of 45 years of age or PPA expiryOpportunities to replace coal with a mix of natural gas and clean coal technology

Strong competitive advantages in Alberta to navigate federal governments mandate to phase-out coal

Competitive advantages:

AB coal sites are ideal for development of large scale natural gas-fired generation and future clean coal

• Existing infrastructure; gas lines and quality water supply• Access to transmission capacity• Centrally located

20+ experience in building natural-gas facilitiesProject Pioneer - leading the world in carbon capture and storage (CCS)CCS supported by federal and provincial governments

Alberta coalfacilities

Alberta

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Over 50% of installed base in Alberta is coal; vast economic coal reservesCoal to play a longer-term role in Alberta with application of new technologySequestration capability provides potential to apply CCS on existing coal facilities

Advancing Canada’s first large-scale project to retrofit a power plant to capture and store 1M tonnes of CO2 by 2015

Repositioning coal - Alberta

Project PioneerLargest scale pilot in North AmericaAwarded over $770M of government fundingPotential to remove 90% of CO2 from emission streamPartners include: Governments of Canada and Alberta; Alstom, Capital Power, and EnbridgeFEED study to be completed by the end of 2010

Carbon Capture and Storage

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Demonstrating environmental leadership

Repositioning coal - Washington

Memorandum of Understanding signed with the state of Washington to negotiate an agreement on a transition plan for Centralia with the primary objective to reduce Centralia’s GHG emissions

Committed to maintaining power generation grid stability and protecting local jobs and investments in Washington state

Agreement to be cost of service with fixed and secure returns

Transition expected to commence in 2012; replacement capacity to include natural gas-fired generation and renewables

April 2010 2012 2025

MoU signed with state of Washington

Start transition based on defined schedule

Centralia fully transitioned to cleaner fuel sources

Transition planning underway Transition underway

Transition Timeline

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Markets & Contracting

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(2,000)-

2,0004,0006,0008,000

10,00012,00014,000

2007

2008

2009

2010

2011

2012

2013

0%2%4%6%8%10%12%14%16%

Additional Adjusted CapacityExisting Adjusted CapacityPeak Demand based Reserve MarginPeak Demand

MWsReserve Margin

Market outlook: Alberta

Forward prices are soft but longer-term fundamentals of the Alberta market remain strong; oil sands recovery is driving load growth

(CAD$/MWh)

Figures as of August 3, 2010

Reserve margins

Expect demand to grow at ~2.5% per year for the next three years

Power prices

Forward market driven off of soft natural gas pricesNatural gas prices likely to remain low out to 2011+ $1/GJ = ~ $8 / MWh

Actuals Current Market

$40$50$60$70$80$90

$100

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

18

15,00017,00019,00021,00023,00025,00027,00029,000

2007

2008

2009

2010

2011

2012

2013

2014

20%25%30%35%40%45%50%55%60%65%70%

Additional Adjusted CapacityExisting Adjusted CapacityAvg. Demand based Reserve MarginAverage Demand

MWsReserve Margin

Market outlook: PacNW

Reserve margins to increase in the short-term due to demand destruction; forward pricing continues to track natural gas prices

(USD$/MWh)

Forward prices track natural gas movements+ $1 / MMBtu = ~ $7 / MWh

Reserve margins Power prices

Expect demand to grow at ~1.5% per year for the next three years

Actuals Current Market

Figures as of August 3, 2010

$30

$40

$50

$60

$70

$80

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

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Alberta PPAs and long-term contracts provide solid base for stable earnings and support TransAlta’s low to moderate risk business strategy

Approx. target contracting level of 90%

Merchant contracting strategy targets 25% / yr

PPAs, long and medium-term contracts:

~70% of generation in 2010

Average contract life ~12 years

PPAs, long & medium-term contracts

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2010 2011 2012 2013

Contracted Open

Total MWs

92% contracted for 2010, leverage to power price recovery in key markets

20

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2010 2011 2012 2013

Contracted To be contracted Open

\

2010Contracts

2012 Contracts

2011Contracts

2010 Contracts

2011 Contracts

2010 Contracts

2009Contracts

2009 Contracts

Merchant MWs

Approx. levels only

Merchant MWs

Merchant hedging strategy designed to minimize impacts of adverse market conditions while allowing for upside potential

Approximate target level - 90%

~44%

~61%

~82%

Merchant Portfolio %

Contracted on Adjusted Capacity

AB: $65 - $70PACNW: $55 - $60

~81%2012

AB: $65- $70PACNW: $55 - $60

~86%2011

AB: $55 - $60PACNW: $55 - $60

~92%2010

Merchant Portfolio Contracted Price (As of July 2010)

Total Portfolio % Contracted

Year

Capacity adjustments

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Low case($5 NYMEX)

Medium Case($7 NYMEX)

High Case($9 NYMEX)

Earnings growth expected due to operational improvements and sustainable cost savings; outlook more positive with return of demand and higher natural gas prices

Leverage to enhanced price environment: 2009 - 2012

AB Prices: PNW Prices:

$45 - $55 $55 - $65 $65 - $75$35 - $45 $45 - $55 $60 - $75

Earnings per share:

$1.05 $1.10$1.25

$1.75

$2.50

$1.00

2009 2012

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Drive the base:• Targeting double digit comparable EPS and EBITDA growth• Approximately 92% contracted for 2010 providing a high degree of earnings protection• 89 - 90% fleet availability target for 2010• Cash flow from operations expected to range between $800 - $900 million• Energy trading expected to contribute between $40 - $60 million in gross margin

Green our portfolio:• New production expected from Kent Hills 2 (54 MW) expansion to come online in Q4 2010• Ardenville (69 MW) wind farm expected to come online in Q1 2011• Bone Creek (18 MW) hydro facility expected to come online in Q1 2011• Keephills 3 (225 MW) expected to come online in Q2 2011

Reposition coal:• Centralia transition planning underway to reduce GHG emissions and provide replacement capacity by

2025• Strong competitive advantages in Alberta to navigate federal government’s mandate to phase-out coal • Project Pioneer Front End Engineering and Design (FEED) underway, expected to be completed by end

of 2010

2010 Outlook

On track to deliver on our strategic priorities; well positioned for a strong second half of 2010

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Appendix

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Performance goals

Annual Metrics

4.8X

20.1%

57.7%

Annual Metric

$98 MM

$0.10

$8.76/MWh

Annual Metric

81.9%

Q2 2010

Annual Metrics

5.9X

24.7%

49.4%

Annual Metric

$57 MM

$(0.03)

$11.30/MWh

Annual Metric

82.8%

Q2 2009

Increased due to lower planned outages at Keephills and increased production from the acquisition of Canadian Hydro

>10%/yrComparable EPS Grow Earnings and Cash Flow

TBD$295 - $340Sustaining CapexMake Sustaining Capex Predictable

Maintained strong balance sheet, financial ratios and ample liquidity

4 - 5X

20 - 25%

55 - 60%

Cash Flow to InterestCash Flow to DebtDebt to Invested Capital

Maintain InvestmentGrade Ratings

TBD

>10%/yr>10%/yr>10%/yr

Comparable ROCETSRIRR

Deliver Long-termShareowner Value

Higher operating cash flow due to higher cash earnings

Decreased year-over-year due to less major maintenance activities in Q1 2010 and due to increased capacity

TBD

Decreased due to higher planned and unplanned outages at Centralia Thermal and the outage at Sundance Unit 3

2010 Goals

$850 – 950* MMOperating Cash Flow

90%AvailabilityAchieve top decile operations

1.0 by 2015Injury Frequency RateImprove Safety

Offset InflationOM&A/installed MWhEnhanceProductivity

Measures ReviewFinancial ratios

*Estimate revised to $800 - $900 million

25

35%

40%

45%

50%

55%

60%

2006 2007 2008 2009 Q22010

0%5%

10%15%20%25%30%35%

2006 2007 2008 2009 Q22010

012345678

2006 2007 2008 2009 Q22010

Execute our plan while maintaining long-term financial strength and stability

Range:4 - 5x

Cash flow to interest

Maintain financial strength

Range:55 - 60%

Debt to capital

Range:20 - 25%

Cash flow to debt

$0.0$0.5$1.0$1.5$2.0$2.5

Credit Lines Utilized Credit Lines Available

Committed credit lines

June 30, 2009 June 30, 2010

$B

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$354$431$142$182EBITDA

$285$374$94$184Funds from operations

10,201

81.9

$0.29

$98

$0.23

$0.10

$51

$21

$55

$353

$582

Q2 2010

9,656

82.8

$0.29

$57

$(0.03)

$(0.03)

$(6)

$(6)

$14

$346

$585

Q2 2009

21,829

84.6

$0.58

$140

$0.18

$0.16

$36

$31

$99

$727

$1,341

YTD2009

23,115

86.7

$0.58

$272

$0.54

$0.40

$118

$88

$189

$757

$1,308

YTD2010

Availability (%)

Comparable earnings (loss) per share

Basic and diluted earnings (loss) per share

Comparable earnings (loss)

Operating income

Production (GWh)

Cash dividends declared per share

Cash flow from operating activities

Net earnings (loss)

Gross margin

Revenue

Results ($M)

Q2 2010 - Highlights

27

(6)---Settlement of commercial issue, net of tax

$(0.03)

198

$(6)

-

-

$(6)

Q2 2009

$0.10

219

$21

-

(30)

$51

Q2 2010

1-Change in life of Centralia parts, net of tax

$0.16

198

$31

-

$36

YTD2009

219Weighted average common shares outstanding in the period

$0.40

$88

(30)

$118

YTD2010

Earnings (loss) on a comparable basis

Earnings (loss) on a comparable basis per share

Income tax recovery related to the resolution of certain outstanding tax matters

Net earnings (loss)

Results ($M)

Comparable earnings

Q2 2010

28

Net earnings

$51(4)

16

3

-

-

35

(15)

22

$(6)Q2 2010

$118Net earnings, 2010(10)Other

3Increase in income tax recovery

12Decrease in non-controlling interest

(15)

13

49

(16)

46

$36YTD 2010

Decrease in Energy Trading gross margins

Decrease in OM&A costs

Decrease in depreciation expense

Increase in net interest expense

Increase in Generation gross margins

Net (loss) earnings, 2009

Q2 2010

29

$(144)

(1)

(17)

(17)

(57)

(109)

$57

Q2‘09

$(36)

-

(13)

(29)

(123)

(143)

$272

YTD‘10

$(208)

(8)

(18)

(33)

(111)

(178)

$140

YTD‘09

$(92)Free cash flow (deficiency)

-Other income

(13)Non-recourse debt repayments

(15)Distribution to subsidiaries’ non-controlling interests

(64)Dividends paid on common shares

(98)Sustaining capital expenditures

Add (Deduct):

$98Cash flow from operating activities

Q2‘10($M)

Free cash flow

30

$0

$200

$400

$600

$800

$1,000

2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter

CDN MTN US Notes

1

Minimal debt refinancing over the short-term provides ample financial flexibility

(CDN $M)

Based on June 30, 2010 FX rate of $1.0529 CAD/US

Debt profile supports balance sheet

1 1

11

31

$155 - 175

$35 - 40

$5 - 10

$115 - 130

$310 - 355

2011e*

$150 - 170$125 - 140Major Maintenance

$40 - 50$20 - 25Mine

$5 - 10$10 - 15Productivity capital

$115 - 130

$310 - 360

2012e*

$120 - 140

$275 - 320

2010e

Routine capital

Sustaining

($M)

Sustaining capex slightly reduced due to changes in natural gas plant major maintenance schedule

2010 Sustaining capital

*Estimates provided at TransAlta’s 2009 Investor Day have not been updated.

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160 – 170*

$55 - 70

$0 - 5*

$55 - 65

Natural Gas and

Renewables

2,465 – 2,475

$135 - 145

$65 - 70

$70 - 75

Coal

2,625 - 2,645GWh lost

$190 - 215Total$65 - 75Expensed

$125 - 140

Total

Capitalized

($M)

2010 Major maintenance plan

* Natural gas fleet only

Major maintenance

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All projects tracking on time and on budget

$1233$15 - 25$8166Summerview 2

$ 772---$6053Sun 5 uprate

185

66

MW

$313$228 Total

$1131---$87Blue Trail

2012e Total2010e 2011e2009Completed

412

46

69

225

18

54

MW

$100$80 - 85$18Kent Hills 2

$484$40 - 45$4Bone Creek

$9885$20 - 30$225 - 245$231Keephills 3

$135 $95 - 105$27Ardenville

$68$20 - 30$25 - 35$5 - 15$2KI & K2 uprates

$20 - 30

2012e

$1.3B

Total

$445 - 495

2010e

$45 - 65

2011e

$282

2009

Total

In Progress

Growth capital

1. Blue Trail capital spend prior to 2009 was $26M2. Sun 5 uprate capital spend prior to 2009 was $17M3. Summerview II capital spend prior to 2008 was $25M4. Bone Creek capital spend prior to the acquisition was $23M which does not form part of our total project cost5. Keephills 3 capital spend prior to 2009 was $476M

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Advanced development

Over 600 MW of renewable energy in advanced development for TransAlta’s 2010 - 2013 pipeline

* TransAlta’s ownership** Based on initial estimates of Canadian Hydro

LOCATION PROJECT CAPACITY FUEL TYPE RESOURCE & TURBINE CAPEX RANGE PPA / MW SITE CONTROL Applied Secured SECURED $ MM LTC

Saskatchewan ANEDC 175 Wind TBD $420 - $470 PPA/LTCNew Brunswick NB - 1 54 Wind $100 - $155 PPA/LTCNew Brunswick NB - 2 54 Wind $100 - $155 PPA/LTCCalifornia Black Rock 1-3 87* Geothermal In Progress $450 - $500 PPA/LTCAlberta Dunvegan** 100 Hydro $500-$600 MerchantBritish Columbia Clemina Creek** 11 Hydro $30-$40 PPA/LTCBritish Columbia Serpentine Creek** 10 Hydro $30-$40 PPA/LTCBritish Columbia English Creek** 5 Hydro $10-$20 PPA/LTCOntario Royal Road** 18 Wind $35-$45 PPA/LTCOntario Yellow Falls** 8* Hydro $30-$40 PPA/LTCQuebec New Richmond** 66 Wind $180-$200 PPA/LTCQuebec St. Valentin** 50 Wind $150-$170 PPA/LTC

TOTAL MW : 638 TOTAL COST: $2.0 B - $2.4 B

20102010/11

TBD

TBD

TBD

TBD

2012

Projects in Advanced DevelopmentTARGET

COMMERCIALOPERATION DATE

2012

ENVIRONMENTAL AND PERMITS

20122013/14

2012

2012

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Macro issues impacting our industry

Having flexibility and options will create value given environmental, regulatory and technological uncertainties

Timing Wait for U.S. system to be determined Likely protracted process into 2010-11

Canada U.S.

StringencyAbsolute-based cap & trade with auctioningThermal fuel flexibility likely

Environmental protection under PPAs

Technology and efficiency for fossil plants, incl. CCS

Staged capital stock transition to cleaner sources

Timely offset acquisitions

Potential for EPA regulation with tough rule-based, prescriptive measuresSpecial consideration for coalWashington state executive order to reduce GHG emissions by ~50% by 2025

Commercial arrangements to manage merchant exposure

Fuel shifting at Centralia

Focus on geothermal growth

Response planning