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Our plan for lower carbon sustainable value creation

Investor Presentation

May 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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OutlineAbout UsOur StrategyMarkets, Contracting, and GrowthFinancial Strength & Capital Allocation2010 Outlook

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Highly levered to growthin Alberta market

Strategically positionedin the PacNW

Canada’s largest publically traded wholesale power generator

Sustainable & consistent shareholder value creation

2010 by the facts

2,032 MW of renewable energy;Canada’s leading provider

Balance sheet strength and investment grade credit ratios

Contracts

International27%

Western Canada

59%Eastern Canada

14%

Region MW

Renewables24%

Coal54%

Gas22%

Fuel Type MW

TransAlta

Long-term>5yrs

Medium-term3-5yrs

Short-term<3yrs

Open

5

Coal48%

Renewables29%

Executing on our strategy

2010 by the numbers

>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

Earnings growthReturn to double digit earnings and EBITDA growth in

2010

$850 - $950 millionCash flow from operations

$300 - $400 millionFree cash

*Analyst consensus estimate

$0

$200

$400

$600

$800

$1,000

2010e

Free CashFlow

Dividends

Sustaining Capex

$MEarnings per share Cash flow

Gas23%

2010e

EBITDA$1.16

$1.31$1.46

$1.12$0.90

2006 2007 2008 2009 2010e*

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UNITED STATES

CANADA

AUSTRALIA

271 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

Hydro under development 18 MW

Drive the base• Increase productivity• Drive operational stability• Optimize portfolio

Green our portfolio• Accelerate renewable investment• Advance natural gas combined cycle

development• Secure long-term natural gas supply

Strategic imperatives

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

Reposition coal• Execute on unit specific maintenance plans• Maintain options around coal sites• Participate in CCS technology development• Transition Centralia to reduce greenhouse gas emissions

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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 will drive load growth

(CAD$/MWh)

Figures as of May 17, 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

8

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 May 18, 2010

$30

$40

$50

$60

$70

$80

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

9

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

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

Total MWs

Approx. target contracting level 90%

PPAs, long & medium-term contracts

PPAs, long and medium-term contracts account for

~70% of generationAverage contract life ~12 years

Merchant contracting strategy targets 25% / yr

Protecting the value of TransAlta’s generation and investment grade balance sheet

10

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: $60 - $65PACNW: $50 - $55

~92%2010

Merchant Portfolio Contracted Price (As of April 2010)

Total Portfolio % Contracted

Year

Capacity adjustments

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Shift focus to natural gas combined-cycleManage lifecycle investmentsExpand run of river hydro investmentsCO2 offsets trading

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

Canadian Hydro acquisition accelerated growth of renewables Pan-Canadian approachShift focus to natural gas combined-cycleExecute LOI on Project PioneerAcquire CO2 offsets

Green our portfolio: Growth strategy

Growth strategy has shifted to accelerate near-term investments in renewables and focus on multiple options for long-term sustainability

Total Capital Spend: $2.0B – $2.4B

Short-term: 2010 - 2013

Medium-term: 2014 - 2017

Green coal with CCSRenewables in the PacNWPartner in storage hydro in Alberta

Long-term: 2018 - 2020+

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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Over 50% of installed base in Alberta is coal; vast economic coal reserves

Potential opportunities to retire older coal plants and replace with natural gas-fired generationCoal to play a longer-term role in Alberta with application of new technology

Sequestration capability provides potential to apply CCS on existing coal facilities

Energy Input (oil/gas)Energy Input (coal) CO2 returned

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 and Capital Power. FEED study to be completed by the end of 2010

Carbon Capture and Storage

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Demonstrating environmental leadership by working together with the state of Washington to reduce GHG emissions and provide cleaner energy sources

Only non-regulated coal fired generator in Washington state; no economic coal mining in state

Lack of sequestration provides no opportunity for CCS

Working with the state to transition Centralia to cleaner fuel sources and reduce GHG emissions

Repositioning coal - Washington

Memorandum of Understanding signed with the state of Washington on April 26, 2010 to negotiate an agreement on a transition plan for Centralia

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35%

40%

45%

50%

55%

60%

2006 2007 2008 2009 Q12010

0%5%

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

2006 2007 2008 2009 Q12010

012345678

2006 2007 2008 2009 Q12010

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

Credit Lines Utilized Credit Lines Available

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

Range:4 - 5x

Cash flow to interest

Range:20 - 25%

Financial strength

Range:55 - 60%

Debt to capital Committed credit lines

Mar. 31, 2009 Mar. 31, 2010

$B

Cash flow to debt

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NCI$200M

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

Dividends$750M

Announced growth capex

$500MSustaining capex$1B

Available$550M

Cash flow from

operations:~$3B

Sources & Uses of Capital 2010 – 2012

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Drive the base:• Targeting double digit comparable EPS and EBITDA growth• Approximately 92% of portfolio contracted for 2010 providing a high degree of earnings protection• Target 90% fleet availability for 2010• Energy trading expected to contribute between $50 - $70 million in gross margin

Green our portfolio:• Summerview 2 expansion (66 MW) completed on budget and ahead of schedule, Feb. 2010• Kent Hills expansion (54 MW) expected 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

Reposition coal:• Project Pioneer Front End Engineering and Design (FEED) underway, expected to be completed

by end of 2010• Lifecycle planning and flexibility provided by revising Alberta coal plants major maintenance

schedule on a unit by unit basis • Centralia transition planning underway to reduce greenhouse gas emissions and provide

replacement capacity by 2025

2010 Outlook

Well positioned to improve results in 2010

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Appendix

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Performance goals

Annual Metrics

4.6X

20.4%

54.9%

Annual Metric

$174 MM

$0.31

$8.00/MWh

Annual Metric

91.4%

Q1 2010

Annual Metrics

6.6X

29.9%

46.5%

Annual Metric

$83 MM

$0.18

$9.61/MWh

Annual Metric

86.4%

Q1 2009

Increased due to lower planned and unplanned outages at Alberta Coal, higher wind volumes from the acquisition of Canadian Hydro, and the increased ARO from the decommissioning of Wabamun

>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 Total Capital

Maintain InvestmentGrade Ratings

TBD

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

Comparable ROCETSRIRR

Deliver Long-termShareowner Value

Higher operating cash flow due to more favourable movements in working capital

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

TBD

Increased due to lower planned outages at Keephills and Sundance and lower unplanned outages at Sundance and Wabamun

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

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$212$249EBITDA

12,173

86.4

$0.29

$83

$0.21

$0.18

$42

$36

$85

$381

$756

Q1 2009

12,914

91.4

$0.29

$174

$0.31

$0.31

$67

$67

$134

$404

$726

Q1 2010

Availability (%)

Comparable earnings per share

Basic and diluted earnings per share

Comparable earnings

Operating income

Production (GWh)

Cash dividends declared per share

Cash flow from operating activities

Net Earnings

Gross margin

Revenue

Results ($M)

Q1 2010

21

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

$0.18

198

$36

(7)

$42

Q1 2009

219Weighted average common shares outstanding in the period

$0.31

$67

-

$67

Q1 2010

Earnings on a comparable basis

Earnings on a comparable basis per share

Settlement of commercial issue, net of tax

Net earnings

Results ($M)

Comparable earnings

Q1 2010

22

Net earnings

$67Net earnings, 20101Other

(7)Decrease in other income

(13)Increase in income tax expense

9Decrease in non-controlling interest

(15)

13

14

(1)

24

$42Q1 2010

Decrease in trading gross margins

Decrease in operations, maintenance, and admin costs

Decrease in depreciation expense

Increase in net interest expense

Increase in generation gross margins

Net earnings, 2009

Q1 2010

23

$(64)

(7)

(1)

(16)

(54)

(69)

$83

Q1 ‘09

$56Free cash flow (deficiency)

-Other income

-Non-recourse debt repayments

(14)Distribution to subsidiaries’ non-controlling interest

(59)Dividends on common shares

(45)Sustaining capital expenditures

Add (Deduct):

$174Cash flow from operating activities

Q1 ‘10($M)

Free cash flow

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$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)

1) Based on Mar. 31, 2010 FX rate of $1.0188 CAD/US

Debt profile supports balance sheet

1 1

11

25

$155 - 175

-

$35 - 40

$5 - 10

$115 - 130

$310 - 355

2011e*

-Centralia modifications

$150 - 170$140 - 155Major Maintenance

$40 - 50$25 - 30Mine

$5 -10$10 - 15Productivity capital

$115 - 130

$310 - 360

2012e*

$120 - 140

$295 - 340

2010e

Routine capital

Sustaining

($M)

Sustaining capex supports operational objectives

2010 Sustaining capital

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

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360 - 370*

$70 - 85

$0 - 5*

$70 - 80

Natural Gas and

Renewables

1,770 - 1,780

$130 - 140

$60 - 65

$70 - 75

Coal

2,130 - 2,150GWh lost

$200 - 225Total$60 - 70Expensed

$140 - 155

Total

Capitalized

($M)

2010 Major maintenance plan

* Natural gas fleet only

Major maintenance

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Delivering on growth and creating long-term shareholder value

$313$1233

$ 772

$1131

Total

Q1 2010

Q4 2009

Q4 2009

Completion Date

$15 - 25$8166Summerview 2

$6053Sun 5 uprate

185

66

MW

$15 - 25$228 Total

$87Blue Trail

2012e2010e 2011e2009Completed

$1.3B$68

$135

$9885

$484

$100

Total

41246

69

225

18

54

MW

Q4 2010$80 - 85$18Kent Hills 2

Q1 2011$40 - 45$4Bone Creek

Q2 2011$20 - 30$225 - 245$231Keephills 3

Q1 2011$95 - 105$27Ardenville

Q4 2011 & Q4 2012$20 - 30$25 - 35$5 - 15$2KI & K2 uprates

$20 - 30

2012eTarget

Completion:

$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 2009 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