11

TransAlta Corporation

Investor Presentation

December 2016

22

This presentation may include forward-looking statements or information (collectively referred to herein as “forward-looking statements”) within the meaning of applicable securities

legislation. All forward-looking statements are based on our beliefs as well as assumptions based on information available at the time the assumptions were made and on

management’s experience and perception of historical trends, current conditions, and expected future developments, as well as other factors deemed appropriate in the

circumstances. Forward-looking statements are not facts, but only predictions and generally can be identified by the use of statements that include phrases such as “may”, “will”,

“believe”, “expect”, “anticipate”, “intend”, “plan”, “project”, “forecast”, “foresee”, “potential”, “enable”, “continue”, or other comparable terminology. These statements are not

guarantees of our future performance and are subject to risks, uncertainties, and other important factors that could cause our actual performance to be materially different from that

projected. In particular, this presentation contains forward-looking statements pertaining to our business strategy and goals, including our strategy and position to grow gas-fired and

renewable generation; the anticipated benefits of shifting to a capacity market structure; the repositioning of our capital structure by pursuing project-level debt; anticipated future

financial performance, including as it pertains to comparable earnings before interest, taxes, depreciation, and amortization (“EBITDA”), comparable funds from operations (“FFO”);

the timing and the completion and commissioning of projects under development, including the South Hedland power project and its associated costs and benefits; the coal-to-gas

conversions of Sundance 3 to 6 and Keephills 1 and Keephills 2; development of a pump-storage project at Brazeau, including the anticipated benefits, total investment costs, the

increase to capacity and the timing of construction; attributes of coal-to-gas conversions, including the anticipated capital costs, investment life, reduction in emissions and operating

costs; expectations related to future earnings and cash flow from operating and contracting activities, including estimates of comparable EBITDA, comparable funds from operations

FFO, and comparable free cash flow (“FCF”); expectations in respect of financial ratios and targets, including dividend payout ratio; the Corporation’s plans and strategies relating to

repositioning its capital structure and strengthening its balance sheet, including the allocation of debt between the Corporation and TransAlta Renewables Inc. as well as the debt

reductions that are expected to occur; the potential drop-down candidates from TransAlta Corporation to TransAlta Renewables Inc.; and the Corporation’s ownership level of

TransAlta Renewables Inc..

Factors that may adversely impact our forward-looking statements include risks relating to: fluctuations in market prices and the availability of fuel supplies required to generate

electricity; our ability to contract our generation for prices that will provide expected returns; the regulatory and political environments in the jurisdictions in which we operate; adverse

regulatory developments, including unanticipated impacts on existing generation and coal-to-gas conversions; environmental requirements and changes in, or liabilities under, these

requirements; changes in general economic conditions including interest rates; operational risks involving our facilities, including unplanned outages at such facilities; disruptions in

the transmission and distribution of electricity; the effects of weather; disruptions in the source of fuels, water, or wind required to operate our facilities; natural or man-made

disasters; the threat of domestic terrorism and cyberattacks; equipment failure and our ability to carry out, or have completed, repairs in a cost-effective manner or timely manner;

commodity risk management; industry risk and competition; fluctuations in the value of foreign currencies and foreign political risks; the need for additional financing; structural

subordination of securities; counterparty credit risk; insurance coverage; our provision for income taxes; legal, regulatory, and contractual proceedings involving the Corporation;

outcomes of investigations and disputes; reliance on key personnel; labour relations matters; risks associated with development projects and acquisitions, including delays in the

construction of or increased costs associated with the South Hedland power project; and any market disruption, including any actions taken by the Balancing Pool as the buyer under

the power purchase arrangements. The foregoing risk factors, among others, are described in further detail in the Risk Management section of our Management Discussion and

Analysis and under the heading “Risk Factors” in our Annual Information Form. Readers are urged to consider these factors carefully in evaluating the forward-looking statements

and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this document are made only as of the date hereof

and we do not undertake to publicly update these forward-looking statements to reflect new information, future events or otherwise, except as required by applicable laws. In light of

these risks, uncertainties, and assumptions, the forward-looking events might occur to a different extent or at a different time than we have described, or might not occur. We cannot

assure that projected results or events will be achieved.

Certain financial information contained in this presentation, including comparable FFO and comparable FCF, may not be standard measures defined under International Financial

Reporting Standards (“IFRS”) and may not be comparable to similar measures presented by other entities. These measures should not be considered in isolation or as a substitute

for measures prepared in accordance with IFRS. For further information on non-IFRS financial measures we use, see the section entitled “Non-IFRS Measures” contained in our

Management Discussion and Analysis, filed with Canadian securities regulators on www.sedar.com.

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

Forward Looking Statements

333

Outline

Overview

Industry Changes

Strategic Objectives

Growth Strategy

2016 Outlook

Financial Strategy

TransAlta Renewables

Appendix

4

6

10

13

23

28

31

35

44

TransAlta’s Platform

Coal: 4,931 MW6 facilities in Alberta and the Pacific

Northwest

Gas: 1,323 MW

12 facilities in Canada and Australia;

also 270km pipeline

RNW owns an economic interest in all

Australian gas assets (425 MW) and the

506 MW gas facility in Ontario

Wind & Solar:

1,400 MW

27 facilities in Canada and the U.S

RNW owns ~90% of the wind facilities1

Hydro: 926 MW

27 facilities in Canada and the U.S.

TA owns the majority of the Alberta hydro

facilities

(1) Including TransAlta Renewables economic interest in the 144MW Wyoming wind farm and 98MW Le Nordais wind facility

55

Our Highly Diversified Portfolio

• Highly diversified cash flows from five fuel types with facilities located

in Canada, the United States and Australia

• TransAlta is Canada’s largest generator of wind power and the largest

generator of renewable energy in Alberta

• Gas-fired and renewable assets accounted for more than 65% of total

Free EBITDA(1) in 2015

(1) Free EBITDA = EBITDA less Sustaining Capital, and excluding Energy Marketing and Corporate segments. 2015 Free EBITDA from Canadian Coal excludes a $59 million

adjustment to provisions relating mostly to prior years

(2) As at Sept. 30, 2016

34%

40%

21%

5%

2015 Free EBITDA$755M

Coal Gas Wind and Solar Hydro

32%

41%

20%

7%

2016(2) Free EBITDA$608M

56%

17%

16%

11%

Net Capacity (MW)

666

Far-reaching

Industry

Changes

777

Far-Reaching Industry Changes in Alberta

Moving to a Capacity Market

Off-coal transition payments

• Total payment of $524 million comprised of annual payments of ~$37

million commencing in 2017 and terminating in 2030.

Support for renewables growth

Framework and support for transition to coal-to-gas

1

2

3

4

888

Capacity Market – A Stable Investment Environment

Consultation and implementation over next 3 years; first auction taking place in

2021 for 2024

Allows both existing and new dispatachable generation to compete for capacity

Provides price and cash flow certainty, resulting in access to lower cost of

capital

Government has committed that non-dispatacheable existing renewables will

not be economically harmed

TransAlta is well positioned to compete in the capacity market

1

2

3

4

5

TransAlta has advocated for, and is supportive of, a

Capacity Market structure

999

Transitioning Off Coal to Gas and Renewables

Coal-to-gas Conversions

Support for Renewable Electricity

• Fair treatment of existing renewable generation

• Value of renewable energy credits on existing generation

Opportunities under a Capacity Market

1

2

Memorandum of Understanding

Supports cooperation and collaboration with the

Alberta Government to advance initiatives

including:

3

101010

Strategic

Objectives

111111

Strategic Objectives

Deliver Operational Excellence

2 Increase Financial Flexibility

1

Strategically Grow our Portfolio of Contracted

Gas-Fired and Renewable Generation

3

A Prudent and Proactive Plan

1212

Executing Our Strategic Objectives

2015 2016

Operational

Excellence

• Reduced costs by ~$50 million

with cost saving initiatives at

Canadian Coal and Corporate

• Best ever safety (IFR of 0.75)

• Continued focus on delivering

strong operational, safety and

financial performance

Increase

Financial

Flexibility

• Raised approximately $1 billion

of capital through the use of

TransAlta Renewables

• Met 2015 guidance for

comparable EBITDA(1) and FFO;

exceeded FCF guidance

• Reposition our capital structure by

pursuing project-level debt

• Proactive planning for debt

maturities in 2017 and 2018

• Similar guidance ranges to 2015

despite continued challenging

market conditions expected in

2016 in Alberta and PacNW

Strategic

Growth

• Acquired 71 MWs of wind and

solar assets in the U.S.

• Received final approval to

construct and operate

Sundance 7

• Longer-term, prepare to capitalize

on opportunities in gas-fired and

renewable generation

(1) Excluding adjustment to provisions relating mostly to prior years.

131313

Growth

Strategy

1414

South Hedland Power Station

150 MW Combined Cycle Gas Power Station in Western Australia

• Commissioning expected on schedule and on budget in mid-2017

• Expected to generate ~$80 million of EBITDA on an annualized basis

• Project has been funded without increasing our debt levels (total

investment by completion of ~$585 million)

Total estimated project spend is AUD$570 million. Total estimated project spend is stated in CAD$ and includes estimated capital interest costs and may change

due to fluctuation in foreign exchange rates.

1515

Long-Term Investment Opportunities

Gas-Fired and Renewables

• Up to ~3,000MW’s of coal-to-gas conversions; extending life of

coal facilities

• Alberta’s Renewable Electricity Program – addition of 5,000MW

of renewable energy capacity by 2030

Brazeau Pump Storage

• 600 – 900MW’s expansion; bringing full site capacity to 955MW

1,255MW’s

• Perpetual assets

Alberta

Other Markets

• Expansion & acquisition opportunities in the United States &

Australia

• Saskatchewan renewable auctions

161616

Coal-to-Gas Conversion Attributes vs. Coal Generation

Lower Operating

Cost

• 40-50% lower operating & sustaining capital

• 65% lower carbon costs

Ease of Conversion &

Life Extension

Competitive Capital

Costs

• 60 days required to convert coal burners to gas

• Potential to add 15 years to Alberta coal fleet

• Utilizes existing capital, sites and transmission

• $125 - $150/KW cost for burner conversion

Flexibility• Similar ramping and lower minimum stable

requirements

Reduced Emissions• 40% reduction in CO2 & up to 70% reduction in NOx

• 100% reduction in Mercury and SOx

Critical path items include:

Securing fuel supply and regulatory approval for gas pipeline

171717

Coal-to-Gas Conversion vs Sundance 7

Coal-to-Gas

Conversion

New CCGT Facility

Cost $125 to $150/KW $1,500/KW

Investment life 15 years 30 years

Carbon Tax Higher Lower

Capacity Backup Baseload

Ramping Slower Faster

Coal-to-Gas conversions provide higher returns over a

shorter project life with less regulatory risk.

181818

Brazeau Pumped Storage Opportunity – Expanding Our Alberta Hydro Platform

Leader in Alberta with 834 MW across 17 units

600 to 900 MW pumped storage expansion

Increases Brazeau capacity to 955 to 1,255

MW.

Low cost alternative to greenfield build out

Investment of ~$1.8 billion to ~$2.5 billion

Targeting 2021 commencement of construction,

subject to long-term contract

1

2

3

4

Brazeau

5

6

191919

Brazeau Hydro – Looking Forward

1

New Dam

New Turbines1

2

2

202020

Brazeau Hydro – Benefits

Utilizes existing site and

infrastructure

Provides system support

as wind build-out occurs

Fast ramping

Perpetual assets –

existing fleet is 100 yrs.

old

212121

Brazeau Hydro – Our Action Plan

Expected to be operational by the mid-2020’s

Key Actions to support execution:

• Refine engineering and capital costs

• Initiate stakeholder consultation and permitting

• Develop and receive a long-term contract from the Alberta Govt

supporting the project

• Apply for development/construction funding and support from the

Federal government

222222

Alberta Renewables – Our Competitive Advantage

Wind sites in Alberta that are near existing transmission and in advanced

stages of development

300MW of renewable opportunities available for near-term AESO REP

Long-standing land owner relationships across Alberta

1

2

3

232323

2016 Outlook

242424

2016 Goals and Priorities

Secure a mutually beneficial coal transition arrangement

with the Alberta Government

Continue to reposition our capital structure

Continue to grow TransAlta Renewables Inc.

Continued focus on delivering strong operational, safety

and financial performance

2525

2016 Outlook Ranges ($M)Comparable EBITDA $990 $1,100

Comparable Funds from Operations $755 $835

Sustaining Capital (330) (350)

Pfd Share/Other Distributions (175) (185)

Comparable Free Cash Flow $250 $300

Comparable Free Cash Flow Per Share $0.86 $1.03

Annual Dividend $0.16 $0.16

Dividend Payout Ratio 19% 15%

2016 Outlook

Range of Key Assumptions

Power Prices

Alberta Spot ($/MWH) $ 29 - $ 33

Alberta Contracted ($/Mwh) $ 44 - $ 49

Mid-C Spot (US$/MwH) $ 22 - $ 26

Mid-C Contracted (US$/MWh) $ 40 - $ 45

Other

Canadian Coal Availability 87% - 89%

Hydro / Wind Resource - P50 -

2626

2016 YTD vs 2016 Guidance

$7

71

$9

90

$1

,10

0

$-

$200

$400

$600

$800

$1,000

$1,200

YTD Low High

Guidance

Comparable EBITDA

$5

35

$7

55

$8

35

$-

$200

$400

$600

$800

$1,000

YTD Low High

Guidance

Comparable FFO

$2

06

$2

50

$3

00

$-

$100

$200

$300

$400

YTD Low High

Guidance

86

% 87

%

89

%

80%

85%

90%

YTD Low High

Guidance

Comparable FCF CAD Coal Availability

2727

Contracted Portfolio Supports Stable EBITDA

Contract and hedging strategy underpin stable cashflows

Alberta• Well hedged through 2016

• Market shocks allow opportunity to further

hedge at prices higher than the current

market

Pacific Northwest• Puget Sound Energy and other long-term

contracts provide base of between

~280MW and 380MW

• Additional shorter-term hedges managed

dynamically to capture market volatility

Merchant exposure in Alberta and the

Pacific NW

2016 Hedge prices

AB ~$45 - $50/MWh

PacNW ~$40/MWh

2017 Hedge prices

AB ~$45 - $50/MWh

PacNW ~$45 - $50/MWh

Total portfolio contractedness1

MW88% 85% 73% 70%

(1) As of Sept 30, 2016

0

1,000

2,000

3,000

4,000

5,000

6,000

2016 2017 2018 2019

PPAs Long-term contract

Short-term contract /Hedges

Open Merchant

282828

Financial

Strategy

2929

Finance & Treasury Overview

Area of Focus Execution

Liquidity• Average liquidity of $1.3B since 2014; liquidity of $1.7B at

September 30, 2016

Area of Focus Execution

Financial Ratios• Consistently moved the mark on ‘Adjusted FFO to Adjusted Net

Debt’

Ratio Q4/15 Q1/16 Q2/16 Q3/16 Target

Comparable FFO before Interest to Adjusted Interest 3.8 3.7 3.7 3.9 4 – 5x

Adjusted FFO to Adjusted Net Debt 15.2 16.2 16.5 17.6 20 – 25%

Adjusted Net Debt to Comparable EBITDA 5.0 4.6 4.3 4.1 3 – 3.5x

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

Dec 31/14 Mar 31/15 Jun 30/15 Sep 30/15 Dec 31/15 Mar 31/16 June 30/16 Sep 30/16

C$

Bill

ion

Cash

Available

Liquidity

Committed

Credit Facilities

3030

TOTAL

C$B Recourse Non-Recourse RecourseNon-

Recourse

Current (March 31, 2016) $3.2 $0.1 $0.0 $0.7 $4.0

Project Financing $0.4 $0.6 $1.0

Debt Repayment (2016 - 2018)1

($1.0) ($0.2) ($1.2)

Projected $2.2 $0.5 $0.0 $1.1 $3.8

Repositioning our Capital Structure (2016 to 2018)

Debt attributable to

coal and Alberta hydro facilities

• Financing plan is expected to result in the appropriate allocation of

debt between TransAlta and TransAlta Renewables

(1) Includes repayment of intercompany credit facility

313131

3232

Leveraging TransAlta Renewables Inc.

TransAlta Corporation and TransAlta Renewables are strategically aligned

TransAlta Renewables

TransAlta Public

~60-80% ~20-40%

• TransAlta is the largest

shareholder of TransAlta

Renewables Inc. and will

maintain ~60-80% ownership

• Unlocks the value of long-life

contracted assets on attractive

terms

• Provides access to lower cost

funding

• Strong currency to support

accretive acquisition of third party

assets

3333

TransAlta Renewables (TSX:RNW)

• Provides stable, consistent returns through the ownership of highly

contracted power generation and other infrastructure assets

Enterprise Value¹ $4.5 Billion

Market Cap.2

$3.4 Billion

2016E EBITDA $365 - $390 Million

2016E CAFD $210 - $235 Million

Dividend Yield 6.4%

Net Generating Capacity (incl. South Hedland) 2,441 MW

TransAlta Corporation’s Ownership 64%

¹ Does not include capital required to complete South Hedland Project2 Based on closing price as of November 30, 2016 and including Class B shares

Wind Hydro Gas Fired Gas Pipeline Transmission

3434

Significant Drop-Down Inventory

Potential Drop-Down Candidates from TransAlta Corporation

Gas Fired

Generation

• ~400 MW in Alberta & Ontario including:

• 244 MW Poplar Creek facility in AB

• ~150 MW from 4 facilities through TA Cogen

• ~$140M EBITDA

Alberta Hydro

• ~800 MW from 13 units in Alberta, representing

90% of Alberta’s hydro

• ~$60 - $120M EBITDA

Other

Renewables

• 20 MW wind facility in ON

• 45 MW wind facility in AB

• 50 MW wind facility in Minnesota

• 21 MW solar facilities in

Massachusetts

353535

Appendix

3636

Financial Performance by Business Segment

Business

Segment

2011 2012 2013 2014 2015(1)

2016

YTD(2)

EBITDA ($M)

Canadian Coal $273 $373 $311 $389 $393 $295

U.S. Coal $211 $148 $67 $65 $67 $27

Gas $275 $312 $332 $312 $330 $270

Wind $163 $151 $181 $179 $176 $129

Hydro $105 $127 $148 $87 $73 $62

Energy Marketing $101 ($13) $58 $75 $37 $39

Corporate ($84) ($83) ($74) ($71) ($72) ($51)

Comp. EBITDA ($M) $1,044 $1,016 $1,023 $1,036 $1,004 $771

Comp. FFO ($M) $812 $788 $729 $762 $740 $535

(1) Canadian Coal is normalized for provision adjustment included in 2015 EBITDA of $59 million relating to prior years

(2) As at Sept 30, 2016

3737

Upcoming Debt Maturities

(1) Debt related to RNW.

(2) Includes USD$20 million of debt related to RNW.

$400

$520

$167

$400 $400

$0

$200

$400

$600

$800

2017 2018 2019 2020

USD CAD

(1)

(2)